Circ scandal rips through magazines

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Martha Stewart Living, Family Circle and House Beautiful are the latest titles to be swept up in a circulation scandal that is tearing through the industry like "an apocalypse," as one worried publisher dubbed it.

By one estimate, one of every three of the 300 or so leading consumer magazines that claim rate bases could be affected; others said the hit could disqualify as many as 2.5 million to 5 million copies previously classified as paid.

"It calls into question the integrity and credibility of many magazines," said George Janson, managing partner- director of print at Mediaedge:cia. "It's incumbent on us as buyers to take a tough stance. It's incumbent on media buyers to speak with their dollars and pocketbooks and shift dollars away from those media companies that aren't being forthright about subscription shortfalls that they know about."

Martha Stewart Living is getting ready to restate circulation due to its former use of Ebsco Consumer Magazine Services, the now-disallowed subscription agent. The audit bureau will soon revise the title's 2003 audit, deducting 1.8% of the previous reported total, said Elizabeth Estroff, spokeswoman at Martha Stewart Living Omnimedia.

The title surpassed its rate base by an average of 1.1% in 2003, but five individual issues fell short. Circulation after 2003 will not be affected, she said.

Ebsco-related reductions are also pending for 2004 circulation at Family Circle, Child and Parents, magazines that Meredith bought from Gruner & Jahr USA earlier this year. Those revisions should be released in September.

An audit of Hearst Magazines' House Beautiful released last week eliminated subscriptions from an agent called American Collegiate Marketing, meaning it missed rate base in six of the 12 months ending June 30, 2004. Overall the title missed rate base by a slim average of 0.6%.

That bad news came two weeks after the bureau revised a Business Week audit, stripping out Ebsco circulation from the "paid" column to reveal that the magazine missed its 975,000 rate base every week during the 12 months ending June 30, 2004-by an average of 4.5%.

One publisher said it was vital for the industry to "put it behind us" by being upfront with advertisers. "It certainly doesn't do the industry any good to have this drip, drip, drip."

Kent Brownridge, senior VP-general manager, Wenner Media, said he wanted all the "cheaters" to get caught, "But I'm being a little shortsighted, because when they get caught it's going to so badly pull down the reputation of ABC, which I rely on, too."

In July, most publishers downplayed the impact of the decision to throw out paid subscriptions from Ebsco and InFlight Newspapers and Magazines. (Advertising Age was also affected by the Ebsco ruling.) Then the audit bureau said that the Ebsco and InFlight disqualifications affected more than 80 consumer magazines, but would not identify them or estimate the extent of the damage.

"Nobody knows the scope," said Daniel Capell, editor of newsletter Capell's Circulation Report. Of the 300-odd magazines that claim rate bases and belong to the audit bureau, probably 80 to 100 will lose circulation to the ABC rules change, he said. He declined to guess how much they would lose.

The recount could end with more whimper than bang, others said. "I don't think we have a crisis," said Susan Allyn, consumer marketing director at FHM, part of Emap. Ms. Allyn said she would be surprised if more than 10 magazines missed rate base because of disqualified circulation.

Time Inc. said its "exposure is expected to be minimal," but declined to be more specific. Conde Nast said it expects no revisions to its magazines' statements. Hearst said it does not expect any other titles beyond House Beautiful to reissue circulation statements or receive revised audits from the bureau. Hachette Filipacchi Media U.S. and Fairchild Publications were unable to provide answers by press time. Wenner Media said its circulation is "clean."

ESTIMATED LOSSES

Mr. Brownridge huddled with his circulation experts to estimate the impact of the restatements. Their collective guess: The industry has previously reported as much as 2.5 million in paid circulation that will have to be stripped out of the "paid" column as auditing progresses. A media agency executive who declined to be identified estimated the eventual hit to paid circulation at up to 5 million.

But most experts declined to estimate at all. "It can as easily be overstated as understated," said Chip Block, president, USAPubs, a subscription marketer. "Publishers are already under a cloud. The industry doesn't need that kind of speculation."

The audit bureau is acting entirely properly, even though that means waiting for accurate information, he said. "It's not their role to disclose gross numbers. Their role is to audit individual publications."

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