'A BLESSING IN DISGUISE' WEANED OFF SWEEPSTAKES OFFERS, MAGAZINES BUILD CIRCULATION VIA INNOVATIVE WEB AND BONUS DEALS

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Publishers anxious to move beyond the use of sweepstakes to drive subscription sales have aggressively developed new methods to move circulation.

The innovations are prompted by the decline in subscriptions derived from direct-mail agent stampsheets. The numbers -- in decline for several years -- dropped 30% last year, according Dan Capell, editor of Capell's Circulation Report.

MAGAZINE-OF-MONTH CLUBS

Publishers are trying magazine-of-the-month clubs; two-year subscriptions for the price of one; and Internet offers that include free trial copies via the magazine's Web site or through services such as Quality School Plan and New Sub Services.

Meanwhile, at least one expert offers a tempered perspective on the drop in sweepstakes-generated circulation.

"Subscriptions [overall] are not declining," says Kim Mac Leod, managing director at DeSilva & Phillips, a media investment banker. "What has changed is the sources of subscriptions. The sweepstakes and subscription agents have been going through changes both self-regulated and externally dictated. The result is that one source has forced publishers to look at other circulation sources to offset the source that has diminished."

The decline -- started in late 1997 as debate erupted over consumer confidence in sweepstakes subscription offers -- sent some publishers off in a frenzy as they scrambled to find additional ways to prop up their circulation. But it was also a wake-up call.

"It's a blessing in disguise," says Jeremy Koch, president of Time Consumer Marketing, who notes that Time Inc. publications suffered more than a 50% loss in sweepstakes volume from 1997 to 1999.

SUFFERING A SETBACK

"There is no question the decline in sweepstakes volume was a setback for us, but it has forced us to get much more creative and really get at ways to reinvent our business," he adds.

"I think it's scaring [publishers]," says Mr. Capell. "There aren't a whole lot of alternatives to go to and replace that volume quickly."

According to Mr. Capell's 1999 CircTrack report, 90% of magazine publishers reported lower volumes from yearend 1998 mailings by Publishers Clearing House and American Family Publishers. Respectively, average fall-off to yearend mailings (compared with yearend 1997) was 37% for AFP and 29% for PCH.

New Sub Services, which puts ads on the back of credit-card envelopes, had a 38% increase in volume last year, according to CircTrack. The increase reflects increased activity with its Magazineoutlet.com service, as well as its continuous service program.

FISHING VIA WEBSITES

Magazineoutlet.com, launched in September, works with publisher Web sites and other sites to attract subscribers.

"For example, if you were in virtualvineyards.com, we would show Wine Spectator," says Marti Schiff, president of Magazineoutlet.com and VP-new commerce at New Sub Services.

Several Meredith Corp. publications offer subscriptions through magazineoutlet.com, enews.com and Magazines.com.

"Though subscriptions are available on a number of Web sites, we are putting a heavier emphasis on selling our magazines through our own Websites," says Chris Little, president of Meredith Magazines.

REPLACED ALL LOST BUSINESS

Meredith's Better Homes & Gardens has replaced all of its lost stampsheet business through online ventures, in-house cross-selling, gift subscriptions and other sources -- as have all Meredith publications, he says.

"The percentage stampsheets have represented has been decreasing for several years in a row and is not as important to us as our own database, which has 60 million names," says Mr. Little.

Though the direct mailings from publishers are expensive because only one magazine at a time is promoted, the payoff can be rewarding.

According to data filed with Audit Bureau of Circulations, BH&G's ordered-by-mail and direct request subscription sales, which had gone down 2.3% from 1997 to 1998, grew 8.9% the first six months of this year, compared with the same period last year, whereas circulation has remained a steady 7.6 million for nearly a decade.

CircTrack reports that for 1998, first-time renewal rates received on the publishers own renewal series was 41.3% for the direct mail category (and 56.2% for gift subscriptions, another source Meredith pushes.)

TRIPLING SUBS

Time Inc. magazines have seen growth from Internet deals.

Since the reorganization of Time Inc. New Media when each magazine was given control over its own Web site instead of the umbrella Pathfinder.com site, visitors have been increasingly subscribing.

"Net subscriptions from online sales is 150,000 so far this year and we expect to triple it next year," says Mr. Koch.

"The volume of subscriptions sold through Money online is up 411% from 1998," says David Gilbey, VP-consumer marketing for Time Inc.'s personal finance group.

Mr. Gilbey attributes part of the growth to affinity relationships.

"We have co-marketing programs with companies such as [Charles Schwab & Co.] and Citibank where we include a subscription offer that is consistent with their own marketing objectives," he says.

"We also have moved all of our direct mail from sweeps to non-sweeps," Mr. Gilbey says.

But Michael Pashby, exec VP at Magazine Publishers of America, holds out hope for the beleaguered sweepstakes.

"I'm not sure its fair to say sweepstakes are on the decline," Mr. Pashby says. "Once legislation is passed to give the consumer confidence, consumers' trust in

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