Class-action suit accents circ debate

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A class-action lawsuit alleging several major magazine publishers and the Magazine Publishers of America conspired to artificially prop up subscription prices spotlights an ongoing industry debate over how to measure paid circulation.

The complaint, filed in U.S. District Court in New York June 30 by attorney Bruce Gerstein on behalf of three "subscribers to magazines" living in three different states (Florida, New Jersey and Pennsylvania), said "the centerpiece of Defendants' conspiracy is an agreement among Defendants and their co-conspirators not to offer or sell magazine subscriptions at more than a 50% discount to the magazine's `basic' or list price."

The timing of the suit is ironic in that publishers are already pushing to change the rules irking the plaintiffs, if for different reasons, and, said circulation executives, the suit could energize efforts to do so.


The 50% rule refers to Audit Bureau of Circulations requirements that subscriptions must not be discounted more than 50% in order to be counted as paid circulation. As newsstand sales weaken and stampsheet subscription sales have dropped drastically--producing 70% to 90% fewer subscriptions than they did last year--publishers and the MPA have begun talks to reform the rules that govern what counts as paid circulation (AA, June 5).

Named in the lawsuit were Conde Nast Publications, Gruner & Jahr Printing & Publishing, Hearst Corp., International Data Group, Meredith Corp., Newsweek, Primedia, Reader's Digest Association, Rodale Press, Time Inc., TV Guide and Ziff-Davis. One week following the complaint's filing, several magazine publishers declined comment on the grounds that they had not yet been served with court papers.

"We believe there's no merit" to the suit, said MPA Exec VP Michael Pashby, promising a "vigorous" defense. In a prepared statement, the MPA said the impetus for the 50% rule originated with postal regulations mandating how publications may qualify for second-class mailing rates.


Some curiosities appear in the filing. Ziff-Davis is named as a defendant, but that entity no longer publishes magazines, having sold them in April to a company now called Ziff Davis Media. In addition, the Audit Bureau, which established the 50% rule in 1914, is not named as a defendant. Mr. Gerstein was vacationing and could not be reached for comment, and other attorneys involved with the suit did not respond by press time.

At least one circulation executive saw a silver lining, suggesting the suit "could be a catalyst for getting rid of the 50% rule" by compelling publishers to pressure the MPA to step up negotiations with the Audit Bureau over the matter. "It's all a leadership issue," the executive said. The MPA would not comment on the possibility of changing the 50% rule.

However, some ad buyers may not go along quietly.

"I'm not so sure I like this suggestion," said Allen Banks, executive media director for Saatchi & Saatchi North America. "It's important that the reader step up and pay" for subscriptions, so magazines are "not just reliant on advertising to carry the load for what the reader gets."

Another ad buyer conceded some aspects of the 50% rule may be outmoded.

"I'm guessing it needs an amendment" though not wholesale change, said Valerie Muller, director of print services for Grey Worldwide, New York. But she cited concerns if "less than half of your circulation was bona fide--whatever we choose to define that as."

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