Sweeps Losing Edge for Magazines

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The cloud of bad publicity is weighing on sweepstakes companies. Both Publishers Clearing House, Port Washington, NY, and American Family Publishers, Jersey City, NJ, saw lower subscription rates for their magazine customers last year than in 1997, according to a study to be released this week.

CircTrack 1999 is the second annual research study of the consumer magazine circulation industry and is published by Capell's Circulation Report, Ridgewood, NJ. Preliminary numbers were introduced in June at a meeting of the Magazine Publishers of America.

Ninety percent of the 135 consumer magazine companies surveyed reported lower volumes from year-end 1998 mailings by the AFP and PCH stampsheet houses vs. the previous year. In addition, subscription response rates from the 1997 year-end mailings to 1998 were down 37.4 percent for magazines sold through AFP. For magazines carried by PCH, subscription rates dropped 29.2 percent. The stampsheet houses typically rely on their year-end mailings to generate the bulk of their annual responses.

"Consumers know the government is investigating sweepstakes and that hurts response," said E. Daniel Capell, a magazine circulation analyst and publisher of the report. "Stampsheeters are creatively toning down their promotions because of the government review, and the response goes down because of this as well."

AFP and PCH officials had no comment on Capell's study.

In general, Capell's survey found that direct mail performance in the consumer magazine industry last year was lukewarm. While respondents said they generated 23 percent of all new business from direct mail -- a respectable number -- more than 80 percent reported losing money on subscriptions when marketed via direct mail. The average loss per order was $14.39, with 20 percent reporting a loss of more than $20.

"Response rates are going down while packaging costs are going up," Capell said. "In addition, in the magazine business there are many tired, soft offers going out -- such as sweepstakes and premiums -- which have been around for 20 years. There has not been a uniquely new magazine offer in a long time."

The study also found that there has been a steady decline in pay-up performance and that there may be a connection with promotional mailings. Of the people who respond to a publisher's direct mail option, 42.5 percent pay when there is a sweeps offer involved, 46.5 percent pay when a premium is offered and 39.9 percent pay when offers involve a comp magazine. Pay-up rates for hard offers, or offers without any promotional materials, was 61.4 percent.

What this means, Capell said, is that gimmicks bring on people who are not really interested in subscribing to magazines, "but when you just send somebody an offer that says it's 12 issues for $14.97, thank you very much, people pay for these offers."

Other highlights from the survey:

* More than half use premiums or sweepstakes on renewal efforts, and 60 percent use telemarketing as part of their renewal activity.

* 60 percent reported higher list rental income in 1998 vs. 1997. The average annual list rental income per paid subscriber in 1998 was $1.15.

* More than half are on the Web, but only 37 percent think that interactive subscription selling will be a significant source for them.

* The average annual fulfillment cost per name is $1.12 for outside fulfillment vs. $4.78 for those doing their own fulfillment.

* The most important issues facing the industry are newsstand sales decline, government regulations, direct mail costs and response.

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