"As the new team, one of the first things we did was analyze the circulation status," said Eva Dillon, president of the RD Inspiration division and group publisher of Reader's Digest. "We quickly came to the conclusion that while we are delivering our rate base effectively, it makes more sense from a profitability and value proposition to adjust."
No longer a distress signal
Rate-base reductions used to function as distress signals for magazines. Back when Publishers Clearing House delivered a steady flow of subscribers, nobody looked into circulation quality very carefully and reader engagement wasn't a priority. But the last couple of years have seen a reversal of that situation, partly because unscrupulous subscription agents and fraudulent publisher's reports drew the whole area under new scrutiny. Rising postage and paper costs that make direct-mail subscription solicitations increasingly expensive have also played a big role.
"It makes sense for us because it's cost efficient and it makes sense for advertisers because it's more relevant and loyal readers," Ms. Dillon said.
Now media buyers tend to view rate-base cuts, especially if they are done from a perceived position of strength, as a means toward more loyal readership and better-engaged audiences. Paid-circulation cuts have come recently from magazines as diverse as Time, Woman's Day, TV Guide, Playboy and BusinessWeek. Even celebrity weekly Star has a cut planned; on July 1 it will become the first of its peer group to reduce paid circulation by 10%.
The Reader's Digest Association, which publishes Reader's Digest along with Every Day with Rachael Ray and other titles, went private last March in a $2.8 billion deal that installed Mary Berner as president-CEO. The new leadership has already scaled back a planned rate-base increase for Rachael Ray.