The problem is publishers are classifying subscriptions that a consumer receives through, for instance, an affiliation with a club or business-but gets addressed directly to that consumer-as "individually paid" when in fact the club has paid for the subscription. Media buyers consider an individually paid classification to be a more valuable part of a title's circulation file.
"ABC, in the audit process, discovered that there were some magazines that were mis-reporting-mis-classifying-sponsored subscriptions as individually paid," said one magazine executive who was involved with the process. "Sponsored" subscriptions are, for instance, subscriptions to woodworking magazines given to preferred customers of a lumberyard.
Several executives familiar with the matter said the current situation started in '02 after an audit of some of Primedia's bigger consumer titles, although realization quickly took root that the practice encompassed consumer magazines across the entire industry. A spokesman for Primedia declined to comment. And executives at many major publishing companies refused to speak about this issue on the record.
ABC rules require flagging such third-party sales prominently on reports if they account for more than 5% or 10% of total circulation. Media buyers believe publishers have grown adept at keeping such categories just below the cut-off points so bulk sales are buried deep in circulation statements.
Advertisers looking for restatements on past audits though, won't find them. ABC suspended any potential reclassification of circulation over this issue until the six-month reporting period ending Dec. 31, 2003. If publishers exceed the 5% or 10% threshold for all third-party circulation, it will be disclosed via a new line in circulation statements for "individually addressed/sponsored copies," said Michael Lavery, Audit Bureau president.
Sponsored and third-party sales are typically picked up from subscription agencies-which one ABC executive said would now also be subject to closer scrutiny. The changes "might mean going a little deeper into the [subscription] agency end of things than in the past," said the spokesman.
The decision to make the changes effective for the second half of '03 was reached by ABC last month.
The move re-ignites a long-simmering dispute between publishers and media buyers over how to value circulation and total audience.
"We ideally want the circulation that we know a reader truly wants," said Bonnie Barest, exec VP-managing director of Optimedia International, New York. However, Ms. Barest allowed that fitness magazines sent to health clubs, for instance, were an instance when third-party circulation "is valuable."
But publishers are beginning to express their own frustration. "We are getting into such detail when it comes to circulation and distribution practices of magazines-it's in no way comparable to any other media," said one senior-level magazine executive, who questioned whether media buyers check to see how much consumers pay for their cable subscriptions.