"Effective in September 2000, American Family Publishers will no longer mail sweepstakes promotions," reads an Aug. 17 letter mailed to a major consumer magazine publisher. The letter, signed by Senior VP-Publishing Services Paul Mahler, said AFP will focus resources on developing new ways to sell subscriptions -- some of which may skip direct mail.
BLOW TO INDUSTRY
Even though AFP's subscription stream dwindled to a trickle during the past year, the abruptness of its decision is a blow to an industry that once counted on sweepstakes to generate as much as 1.4 million subscriptions a year at very low cost.
The move surprised one top circulation executive at a major magazine company: "It's not about an evolution, it's `We're going to stop right now this thing that was our bread and butter forever to try something new. But we don't know what that new thing is.' "
AFP and rival Publishers Clearing House have lost as much as 90% of their volume since the mid-'90s, according to circulation executives, following legal and legislative controversies over their marketing practices. In late August, PCH spent $18.5 million to settle an array of lawsuits in 24 states.
A PCH spokesman declined comment on AFP's move, but said PCH had "absolutely no plans to cease using sweepstakes."
AFP has settled all of its legal actions, including the latest in August by paying $8.1 million to 48 states and the District of Columbia. Brian Wolfe, president-CEO of American Family Enterprises, the parent company of American Family Publishers, said, "Clearly, the legal environment played a role" in AFP's move. AFP will continue to use sweepstakes in Canada and the U.K.
Chip Block, vice chairman of direct marketing company USAPubs and a longtime circulation executive, said AFP's contribution to magazines is now "marginal." He said he expected the biggest titles' volume of AFP subscriptions to reach the low six figures.
Although that's not huge for titles with multimillion circulations, it may be hard to make up during a time of newsstand pressures coupled with no proven new model to attract subs.
"I don't think it's any secret that the sweepstakes environment hasn't been really responsive," said Mr. Wolfe. "We didn't feel like sweeps was the direction of the future for us to reach our goals."
American Family Enterprises filed for Chapter 11 in October, but Mr. Wolfe said there is a "high probability" the company would emerge from bankruptcy protection in the next two months. The last AFP sweepstakes mailing, totaling less than 1 million pieces, went out in mid-August.
The bigger question for AFP is one shared by publishers: Which, if any, new method for attracting subs will work?
"I don't know whether any of the [non-sweepstakes] sources has shown any promise," said USAPubs' Mr. Block. "If something had popped up that was really working well, I think publishers would be talking about it."
"I wish them all of the best, especially since we own 50% of [American Family Enterprises]," said Jeremy Koch, senior VP-consumer marketing for Time Inc. "They were very, very big and now they're starting from scratch. It's a major challenge."