"A lot of this was precipitated by the latest postal increase, which is 11.7%," said John J. Miller, president-chief operating officer, American Media. "We are expecting as an industry another increase a year from now and that's a huge part of our subscription expense. So based on that we looked at the pricing, how much we get remitted from our agents and decided to reduce the unprofitable subscriptions."
"We've talked to all our advertisers," Mr. Miller said. "They like the transparency. They like that we're focusing on sources that are valuable to us because those are sources that are valuable to them."
Other titles have reduced paid circulation guarantees recently; the most prominent among them is Time magazine, which decided to cut its rate base by almost 20%, to 3.25 million, as part of sweeping changes intended to invigorate the book and increase efficiency.
But Star has already missed its current 1.5 million rate base on eight out of 11 issues this year, according to the most recent information available through the Audit Bureau of Circulations' Rapid Report system. It's also part of the hottest category in magazines, where growth is the norm.
Mr. Miller said Star sells against an average paid circulation, so 11 issues is not a good sample. And because approximately half of its sales come on the newsstand, he added, there will always be some volatility in the numbers. As for the celebrity weekly category, Mr. Miller said competitors priced at $1.99 are "impacting" the market.
American Media told its bondholders in February that it had a plan to increase revenue and reduce expenses with moves including layoffs, cover-price hikes at some titles and a "circulation adjustment" for Star.
When the company finally filed long-overdue financial restatements in March, it reported a fiscal 2006 net loss of $160.9 million. That was mainly the result of a $147.5 million impairment charge that American Media took to reduce the value on its balance sheet of some trade names -- including Star -- and the goodwill of Star and Weekly World News.
Last week American Media said it was cutting 20 positions, including 12 at Star, as part of the drive to spend less.