A PENNY FOR YOUR MAGAZINE

EBay’s Bargain-Basement Subscriptions Harm Brands

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NEW YORK (AdAge.com) -- Unauthorized vendors are using eBay and other sites to sell magazines at discounts so deep that a penny will fetch three years’ worth of Blender or two years’ worth of Cargo.
“If an individual consumer pays one penny, they likely won’t actually receive the publication, which creates added customer-service issues. And if they do receive the magazine, what is the real value of that reader to the advertiser? It hurts everyone.”
-- Bridget Wells, a former Hearst executive who's proposed establishing a nonprofit group to police such sales.

Bargain hunters can also scoop up 1-cent, one-year subscriptions to major titles like Hearst Magazines’ Seventeen and Conde Nast Publications’ Golf Digest. Then there is the penny package of one year of Glamour (Conde Nast) and three years of Shape (American Media). They do get you a little on the shipping and handling: $5.95 or less.

Though buying dirt-cheap magazines is surprisingly fun, their sale devalues brands, sows doubt among advertisers about circulation numbers and undermines authorized subscription drives, according to circulation agents and media buyers.

Cheapens monetary value
“It points to the fact that magazines’ monetary value is sometimes less than a candy and a bottle of soda,” said George Janson, managing partner and director of print at Mediaedge:cia. “And that’s pretty troubling.”

The problem is “exceedingly upsetting,” said Bridget Wells, a former Hearst director of partnership marketing, agency and Audit Bureau of Circulations services. She recently proposed establishing a not-for-profit group to police such sales.

“Advertisers are buying both the editorial content and the reader of a publication,” said Ms. Wells, who is now managing member of a new subscription agency, Subscription Source. “If an individual consumer pays one penny, they likely won’t actually receive the publication, which creates added customer-service issues. And if they do receive the magazine, what is the real value of that reader to the advertiser? It hurts everyone.”

Unauthorized online market
Then again, the unauthorized online market persists because of the way the magazine business works. Publishers seeking more revenue usually think of advertising first, and one way to justify higher ad rates is to increase circulation. The pressure to boost circulation has led to scandal over the years, like the infamous overstatements at Gruner & Jahr USA.

Although the industry has cleaned up a lot, the Web keeps getting in the way, said Andrew Degenholtz, president at ValueMags, a legitimate online retailer. “When the Internet first burst on the scene, everyone thought it would be the next big thing for magazine subscriptions, but it never panned out because it’s like the Wild West,” he said. “Anyone who can open a Yahoo store or an eBay account, which is anyone, can start selling magazines.”

And anyone who starts selling magazines only needs to find a friend among the subscription agents that publishers pay to help grow circulation. The unauthorized vendor can pay the agent small fees -- less than the vendor collects from new subscribers -- to get subscriptions fulfilled by publishers.

'Cannibalization'
“What you’re seeing is the cannibalization of the publishers’ acquisition and retention efforts,” Mr. Degenholtz said. “You’re seeing an end-user who is completely confused from a pricing standpoint.”

If you wonder how the unauthorized agent makes any money off the scheme, go back to those shipping and handling charges. The eBay seller isn’t really the one shipping the consumer anything. The $5.95 is actually money the eBay seller splits with the subscription agent, who then passes an even smaller amount back to the publisher so the subscription can be fulfilled.

Publishers also can tell agents they are looking for “no remit” subscriptions, meaning they aren’t asking for any of the new subscription revenue, so agents and eBay sellers can split all of the fees collected. The publishers view these subs as sampling and a way to get more names in their databases, but are not allowed to include those subscriptions in the “paid” column on Audit Bureau of Circulations statements. Even if the agent returns just a penny per subscription to the publisher, however, it can count as paid.

Rogue agents try to keep their heads low. A how-to guide (bought on eBay for 99¢) reminds would-be players not to mention eBay when recruiting official agents to act as middlemen. Eight eBay vendors approached via e-mail declined to comment or did not respond.

But the Audit Bureau of Circulations may move to improve oversight of even legitimate agents. Its board is considering a program that would require more scrutiny of agents’ practices, programs and payments, and the topic is on the agenda for its March 8-11 meeting in Sarasota, Fla.

Right now, it isn’t clear how many subscriptions come from illicit sales. Mr. Degenholtz said the scope is “massive.” Ms. Wells called it “damn big.”

But Chip Block, the veteran circulation executive who recently retired from USAPubs, said rogue sales were few. “Nobody is getting thousands of orders from this,” he said. “If it were a real epidemic the publishers would be the ones hopping up and down.”

Hunting the sellers
David Leckey, exec VP-consumer marketing at American Media, said the volume of off-market subscriptions was much smaller than the perception problem they create. “It’s a problem because it’s very visible,” he said.

American Media and other publishers said they do their best to stop it. “Our policy is to pursue through legal channels any agent or person who attempts to sell our magazines without authorization,” a Hearst spokeswoman said.

A spokesman for Dennis Publishing, whose Blender magazine sells three-year subscriptions on its site for $19.97, said cut-rate, unapproved pricing has grown in step with the Web. “When these offers are found, we do attempt to find the individuals or firms behind the offers and legally contact them with cease-and-desist notices,” he said. “The Internet makes it easier to find these offers, but it is also makes it easier for these rogue sellers to post unauthorized offers.”

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