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crisis for magazines
Big is no longer better. Now convince advertisers.
By Jeff Bercovici
Ever since magazines began carrying advertising, publishers have faced a dilemma.
Is it better to pitch your magazine to a small but dedicated audience?
Or do you adopt a lowball cover price and hawk subscriptions to every goober looking to hide the rings on his coffee table?
For a long time the answer was obvious. More was better.
For most publishers, the cost of acquiring additional subscribers was more than offset by the increased ad revenues those new readers brought in.
But these days that is far less the case. With the economy sinking ever deeper into what certainly feels like a recession, publishers are increasingly staggering under the burden of maintaining circulations that many now confess are in fact bloated.
More and more, magazine analysts are seeing what amounts to a genuine circulation crisis, one that won't heal with the ad economy.
The factors behind this crisis include the declining effectiveness of direct-mail solicitations, a succession of postal rate increases, and a long-term trend that has consumers spending ever less time with print media.
The question now becomes: Will the present situation provide the necessary impetus for a critical mass of publishers to kick the junk circulation habit?
And, if so, what will they need to do to convince advertisers that bigger is no longer better?
It would seem an insurmountable challenge. The ultimate currency of magazine sales--the cost to reach 1,000 readers, or CPM--is set by circulation. Weaning circulation of marginal readers can only raise CPMs, making the publication a harder sell on cost against competitors.
The sales force must persuade advertisers of the value of reaching a higher-quality readership, but that higher quality is much harder, if not impossible, to quantify.
The forces responsible for the crisis have, in fact, been at work in the magazine business for years, says Dan Capell, publisher of Capell’s Circulation Report.
"It's come to the fore only because ad revenues are off," says Capell. "When the business is having boom years, it covers up a lot in circulation. When the ad revenues are not there, any ugliness is going to come out."
But as much as the ad slowdown, what has brought matters to a head is the sheer growth of the industry in the past few years. Capell notes that the number of consumer magazines on the newsstand has doubled over the past decade.
"The bottom line is there are too many magazines," he says.
In that regard, Capell expects that the problem will, to some extent, fix itself. Already, in the last two months, more than 25 magazines have gone out of business.
Still, a reduction in the number of titles doesn't mean that the ones remaining will necessarily be healthy.
"I think circulation levels are much too high, and most consumer magazines are underpriced," says Capell. "For them to be healthy they would have to raise prices and let circulation fall to get a more solid readership base."
But that is easier said than done, says magazine consultant Martin Walker.
"Advertisers have not yet accepted or acknowledged the fact that it doesn't matter if the rate base goes down if you're only losing tertiary-type readers," says Walker. "Publishers haven't won that war yet."
Winning it has become harder as advertisers and media buyers have come to rely increasingly on numerical formulas in making their decisions.
"With advertisers becoming very price conscious, CPMs have become very important, and the way magazines tend to be priced within the competitive sets, the larger the magazine the lower the CPM."
But if ever there was a moment to coax advertisers out of this mind-set, this is it, says Richard Kinsler, president of Stephen L. Geller and a former publisher of Playboy and Mademoiselle.
"This is the perfect time because everybody is faced with a new economic model now," says Kinsler.
"Advertisers would understand now that magazines are going out to eliminate tertiary or secondary readership just for their own economic scale, and in turn the upside of that is advertisers are now going to get a purer reader of that franchise."
The trick, he says, is to get them thinking more about measures such as renewal rates and the average price readers pay per copy--indices of so-called "wantedness."
Also key to bringing about a shift is for publishers to provide advertisers with more detailed demographic information about their readers, in order to convince them that smaller really is better, says Dr. Leo Kivijarv, director of publications for Veronis Suhler.
"The difficulty there is that, in order to prove to advertisers that they have this quality audience, they need sophisticated demographic information from the audience, and right now I think a lot of readers are a little bit gun-shy in terms of giving out information," he says.
In the interim, Capell suggests another way publishers can confront the circulation crisis. It is worth noting because media buyers will likely see it come into use by more and more magazines.
Publishers can increase their bulk distribution--free copies sent to airports, hotels, doctors’ offices and the like--at the same time that they raise their subscription prices. They will end up with the same number of gross subscribers, which means they will be able to maintain their CPMs for advertisers.
November 6, 2001 © 2001 Media Life
-Jeff Bercovici is a staff writer for Media Life.
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