*Demise of Sweepstakes Affecting Direct Mail

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American Family Enterprises said it is taking its company in a new direction after stopping its American Family Publishers sweepstakes mailings earlier this year.

AFE sent its last sweepstakes solicitation in the United States -- which featured Ed McMahon -- in August because "the response to the sweepstakes had been declining pretty rapidly over the past couple of years and had reached a level at which profitability was pretty marginal," said Brian Wolfe, president/CEO of AFE, Jersey City, NJ. The company is jointly owned by Time Inc., New York, and a group of other investors.

The company is still sending out mailings internationally, Wolfe said.

AFE also decided to stop sending the mailings because "more sweeps names had been pulled off the marketplace because of lack of response, so there wasn't a large name universe to mail to anymore," he said.

In addition, Wolfe said, the legal environment "has just continued to be more and more restrictive in the sweepstakes area, and we felt it was going to continue to be more restrictive."

AFE's filing for Chapter 11 in 1999 -- to enable it to resolve several dozen class action suits that have been consolidated into one federal court case in Newark, NJ -- had nothing to do with the shutdown, he said.

As for the bankruptcy, Wolfe said, "It is progressing, and we hope to be out of bankruptcy in the next three months."

Publishers are saying it's too soon to tell how the shutdown is affecting them, but in general they have stayed away from AFE's sweepstakes mailings over the past couple of years because subscription volumes from the company had rapidly declined.

Wolfe also said that stopping the mailings will allow AFE to concentrate on other projects.

For example, in late September AFE began testing standard nonsweeps direct mailings for multititle magazines at low rates to names in its current database and from lists.

"The mailing is pretty straightforward and basic, but since we have the great rates, this will make it viable for people," he said.

AFE also began testing affinity mailings in late September. AFE selected consumers based on known interests from its own consumer database and lists, then created catalogs with low-cost magazines and product merchandise, targeted to those interests.

AFE also is exploring the school-plan business, where it will allow children trying to raise money for their schools to sell magazines. Wolfe said that AFE "already has a relationship with a company that creates brochures that have products in them that kids can sell for fundraising, and we are going to be added into that brochure."

AFE is entering into cause-related marketing, Wolfe said, where "we will sell magazines at a great rate, and part of the money will be contributed to a particular charity." Wolfe said that these last two programs will be tested by year-end.

"We have very good direct marketers working here, we have good relationships with them and we have multititle fulfillment capabilities, which is not present in very many places," Wolfe said.

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