Meredith Reveals Circulation Problems at Acquired Titles

Says Any Pre-Purchase Magazine Liabilities Are Gruner & Jahr's Problem

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NEW YORK (AdAge.com) -- Advertisers who used Family Circle, Parents or Child magazines under their previous ownership learned again today that they did not get what they paid for.

Photo: Hoag Levins
'Family Circle,' 'Parents' and 'Child' magazines, which Meredith recently acquired from Gruner & Jahr, had lower circulation than previously declared.

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During Meredith Corp.'s presentation at the 33rd UBS Global Media Conference in New York, President-Chief Operating Officer Stephen M. Lacy said the Audit Bureau of Circulations is expected to release new audits of those magazines, which Meredith bought from the American division of Germany's Gruner & Jahr this summer.

None met promised levels
The audit bureau will revise the titles' official circulation figures downward for the last half of 2003 to show that none met the levels that G&J had promised advertisers, Mr. Lacy said.

That is not a huge surprise, given the reputation for substandard circulation practices that G&J acquired in recent years. The audit bureau already found that Family Circle overstated its circulation during the first half of 2004.

Advertisers or their media agencies generally seek compensation from the publishers when their guarantees, called rate bases, are not met. But as Mr. Lacy pointed out, Meredith acquired those three titles on the condition that any pre-existing circulation problems would not become problems for Meredith. "Any liability prior to June 30, 2005, is the financial responsibility of Gruner & Jahr," he said.

Of course, Gruner & Jahr USA folded up shop after divesting its portfolio this year, leaving advertisers to dun an overseas company.

Meredith's business
"If Meredith wants us to do business in 2006, Meredith will make it their business to collect that money from G&J," said George Janson, managing partner-director of print, Mediaedge:cia. "They have to."

A Meredith spokesman said the company will indeed help advertisers in the process.

Under G&J, mega-magazine Family Circle reported average paid circulation of 4.64 million during the six months that ended Dec. 31, 2003, beating its rate base of 4.6 million. Parents reported average paid circulation during that time totaling 2.07 million, above its 2.05 million rate base. And Child reported average paid circulation of 939,186, also higher than its 920,000 rate base.

Meredith has reduced the rate bases at Family Circle and Child since buying the titles.

Meredith executives spent most of their time at the conference, however, discussing the strong growth they said their publishing and broadcasting groups were experiencing. In the most recent quarter, the company collected revenue of $390.3 million, 35% more than the quarter a year earlier. Excluding the G&J acquisitions, the company had revenue of $306.9 million, up 6% over the quarter one year prior.

"We are off to a good start to fiscal 2006," said William T. Kerr, chairman-CEO. "We have successfully completed the integration of our new magazines and are converting them to our direct-to-consumer publishing model."

That integration has also meant merging the database files kept by G&J with Meredith's own lists. The company now has a database of 85 million names, which it said leads the industry.

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