25th Anniversary Issue: Magazine Costs Rise, Circulations Fall

The magazine world has changed since DM News debuted in 1979: from direct mail to the Audit Bureau of Circulation rules, wholesaler consolidation to pricing, from the collapse of the stampsheet agents to the rise of the Internet and e-mail.

Direct Mail

In 1979, direct mail was a powerful source for magazine circulators. Soft offers were just coming into play, and the double postcard had yet to arrive. Rosalie Bruno, a longtime circulation executive and founder of Circulation Specialists, remembers that when she was at Psychology Today in the 1970s, the magazine was among the first to use a soft (free issue) offer. Circulation consultant Stuart Jordan says the soft offer can be attributed to direct mail legend Dick Benson, who brought the concept over from book marketing.

A few years later, the First-Class double postcard was married to the soft offer, and it became all the rage. The soft offer became the dominant offer for magazine direct mail. Since then, our mailboxes have grown more crowded, costs have risen and response rates have softened. Direct mail remains an important source for most magazines but, according to circulation consultant Dan Capell, direct mail-sold subscription volume has declined more than 30 percent in the past 10 years.

The popularity of the double postcard has waned, though the tactic is still very much alive. For a while, the double postcard billboard (a double postcard in a clear pouch mounted to a magazine cover-size backer) format was gaining in popularity, but this seems to have been short-lived. The hot new format is the voucher or statement of benefits package. It has led to the return of the hard offer, which may have surpassed the soft offer as most popular for direct mail. So from an offer standpoint, things have come full circle in the past 25 years.

Subscription Pricing

For all the moaning about subscription pricing, which has flattened in recent years, this ploy has come a long way since 1979. Jordan recalls that when he started working at CBS Publishing in 1979, Field & Stream sold one-year subscriptions for $3.97 and raising the price to $4.97 was a big deal. He also remembers that most magazines sold for less than $10 back then.

Stampsheet Agents and Sweepstakes

Publishers Clearing House and American Family Publishers were huge producers for the magazine industry 25 years ago. Ed McMahon was not yet spokesman for AFP (he started in the early 1980s), and stampsheet agents produced tens of millions of subscriptions yearly. Many publishers also ran their own sweepstakes. But after legal action in the late 1990s, AFP closed and PCH is no longer a major player in the magazine business.

Publishers also pulled back on using sweepstakes in their own promotions. Since 1995, the number of subscriptions sold with sweepstakes has dropped by more than 60 million a year, including the stampsheet and publishers’ own sweepstakes.

One agent that came up with creative new ways to sell subscriptions was Synapse Group. Founded in 1991, Synapse devised a subscription program using credit card statement stuffers with automatic credit card renewal offers. It followed this with other new and unique programs like selling subscriptions for frequent-flier miles and on the telephone with inbound catalog calls, as well as getting BPA-qualified requested subs online for trade publishers.

The Internet Changes Everything

It would be many years after DM News debuted that the Internet would become an important medium for direct marketers. Though many soothsayers predicted the Internet would be a Garden of Eden replete with subscribers, this has not been the case for magazines.

According to Kable Fulfillment, the nation’s second-largest magazine fulfillment bureau, only 10 percent of subscription orders it receives come via the Internet. And the vast majority of Internet subscriptions sold come from publishers’ own Web sites, not via cold e-mail promotions, online advertising or online subscription agents.

Despite a slow start, Internet subscription sales now make up 10 percent of subscription sales. Though results vary widely, many magazines have seen their online subscription business grow over the past 10 years into a strong incremental source.

A quarter century ago, magazine customer service was conducted by phone or mail. This is one area the Internet has proved to be a dominant force, and change has come quickly. Subscribers now can go online to handle their own customer service. This has brought cost savings for publishers and faster service and problem resolution for subscribers. According to Kable, 40 percent of customer service transactions now take place online.

Digital Magazines

In 1979, there were no digital editions of magazines. Today, digital editions are the new “wild west” of the magazine industry. They have gotten mixed reviews because of technology limitations such as downloading large files, improvements needed in hardware devices for reading digital editions and a wait-and-see attitude from the ad community.

Technology magazines are leading the charge. The top 10 publications audited by BPA Worldwide with the highest number of digital subs are technology publications. However, others such as The New Republic get good results, too.

Automatic Renewals

Automatic credit card renewal did not come into play until the past 10-15 years. The concept has been hyped to the sky, but the reality is less impressive. Most publishers have found it difficult to get a meaningful portion of subscribers onto a credit card auto-renewal program.

There are pockets such as inbound phone calls and retail outlets where publishers like Time Inc. have tapped a vein and met with success through some of their large partnership arrangements. Synapse has achieved enormous success using a continuous service business model. Automatic billing without credit cards, an idea that has been around since 1980, had a surge a few years ago. It seems to have fallen off, but reportedly works for Reader’s Digest, Rodale, Hearst and Condé Nast.

ABC Revolution

The half-basic rule was the law of the land for 87 years at ABC. To count as paid circulation toward the ABC audit, subscriptions had to be sold for at least half the basic (full) subscription price. But in 2001, the board ruled that any subscription sold for a penny or more would count as paid, and the half-basic rule was dead. One of the most amazing things about that change was how little it changed things. Publishers mostly still promote at the prices they were promoting when the half-basic rule existed.

The new ABC rules allowed all sorts of new opportunities for magazines to partner with other companies. They could sell their magazines bundled with other products, but still count the subs on their ABC statements. It turns out that building successful partnerships can be costly and time consuming and not the quick fix it was touted to be. However, Time Inc. and some other publishers have mastered the ins and outs, making it a viable circulation source.

Newsstand Sales

Things have gotten rough on newsstands since 1979, when fewer than 2,000 titles sold at newsstand in the mass market. Now, 3,400 compete for this space, according to newsstand expert John Harrington. Bookstore chains have upward of 5,000 titles. Harrington also says the efficiency for the industry has dropped from 53 percent in 1980 to 33 percent today, a staggering statistic. In response, wholesalers have pushed for better efficiency and fewer titles. The result has been higher costs and lower draws, and many smaller independent magazines have been pushed off the newsstand.

Wholesaler consolidation has been a major trend in the past 25 years. There were almost 400 individual owner groups in 1979, but around 40 today, including the four large wholesaler groups – Anderson, Hudson, Levy and The News Group – which represent 80 percent to 85 percent of dollar sales, Harrington said.

Some of the decline can be attributed to increasing cover prices. Other factors include the economy (newsstand sales dipped when the Internet bubble burst); the sheer number of titles, which has made it difficult for any to stand out; and a decrease in consumer demand, given all the other forms of media competing for the public’s attention.

Despite the doom and gloom, the number of magazine launches in 2003 rose 21 percent to 948. That is the largest percentage increase in the 25 years Samir A. Husni, professor of journalism at the University of Mississippi, has tracked start-ups. The number of ABC-audited titles also has skyrocketed in this period. ABC audited 434 member magazines in 1979, and 773 today.

Circulation Outsourcing Takes Hold

There was no circulation outsource business 25 years ago, save for individual consultants handling circulation for clients on an ad hoc basis. In 1987, Bruno “invented” the concept when she founded Circulation Specialists. Park Avenue Publishing was her first client with a publication called Contest Newsletter, which was founded by Benson. At its peak, it had more than 1 million paid subscribers and was the nation’s largest paid newsletter.

Outsourcing has taken off in recent years, with many large firms outsourcing all sorts of functions that traditionally were handled in-house. The movement also gained strength in publishing. As technology has improved publishers can have remote offices work together seamlessly.

What’s Ahead

Magazines probably are in for more tough times but will be part of a thriving industry for many years to come. Digital magazines and online “magazine-like” content will grow, as will online circulation sources. But print magazines will still dominate the industry for the foreseeable future.

Magazines are a unique proposition, with a strong and loyal consumer following. I don’t think they will be replaced or suppressed easily. Almost every year we see fabulous soaring debuts that capture the public’s imagination as well as ad dollars.

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