Reader's Digest Slashes Rate Base as Parent Nears Exit From Chapter 11

Part of a Series of Moves Meant to Return Company to Profitability

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Reader's Digest Association is slashing guaranteed circulation at its flagship Reader's Digest magazine, nearly halving it to 3 million from 5.5 million, the company said Wednesday. The cut is part of a series moves intended to help Reader's Digest Association, which plans to emerge from its latest bankruptcy at the end of July, return to profitability by 2014.

Reader's Digest had a rate base of 10 million as recently as 2007.
Reader's Digest had a rate base of 10 million as recently as 2007.

Large circulations long helped magazines attract the largest advertisers, which wanted efficient ways to reach many potential consumers at once, but competition from new media and rising costs for paper, printing and distribution have changed that equation. The latest cut at Reader's Digest, which had a rate base of 10 million as recently as 2007, will help the magazine find a more engaged audiences, according to Reader's Digest Association President-CEO Robert Guth.

"A business model that treats consumers as fodder for advertising bases isn't one that gets your customers as engaged as any of us would like," Mr. Guth said. "To really be relevant in this age we want to have a much more direct relationship with customers."

"By truly declaring what our business model is going to be, we have a lot of confidence that we can begin to grow our customers," he added. "It's not about constant retreat."

Reader's Digest Association filed for Chapter 11 protection in,February and received approval for a reorganization last month.,It previously filed for bankruptcy protection in 2009 and emerged in 2010.

The circulation cuts will also let Reader's Digest,do away with unprofitable introduction subscription offers, the company said today.

Reader's Digest will also begin to offer category exclusivity for advertisers, meaning participating products won't face rivals' ads; adopt more straightforward subscription pricing for consumers; and introduce a redesign by winter 2014, the company said.

"The reason we will return to profitability in 2014 is that we're just very focused on our core publishing business," Mr. Guth said. "It's a good business. We're not afraid."

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