Ratebase guarantees: get real! - Brief Article

Folio: The Magazine for Magazine Management, March 1, 1994

Magazines have to keep unreal, unprofitable circulations to maintain their ratebases, often by delivering free copies ("gracing"), turning to poor sources and/or making very soft offers. While many magazines are lowering their ratebases to avoid such tactics and improve the bottom line, advertisers are sticking with their demand that magazines meet a predetermined circulation each issue.

This expectation is totally unrealistic and unfair, according to consultant John Klingel. "We need a flexible, or floating, ratebase," he says. "Almost every advertiser wants magazines to hit the ratebase every issue. We guarantee a ratebase, but advertisers don't pay if we go over. Still, we have to have insurance." Ratebases started out as an annual average, Klingel explains. Then the guarantee was changed to every six months, on average. Now it's every issue. "We've bent over backwards," says Klingel. "The stupidity of not allowing seasonal fluctuation when |advertisers'~ product sales fluctuate all over the place is ridiculous," he said at a Magazine Publishers of America seminar. Some of Klingel's heat comes from a lack of cooperation with the advertising community. Asked if he's tried to change the ratebase guarantee tradition, he concedes: "It's been discussed, but we haven't gotten anywhere."