High circulation costs stymie magazine growth opportunities

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Circulation will be the magazine industry's largest challenge in the next few years.

Both the subscription and single-copy sides of magazines face challenging external influences that will severely affect publishers' economic structure.

Single-copy outlets such as grocery and discount chains, which deal with middlemen wholesalers to get the most recent copies of magazines, have streamlined their operations.

With magazine retailers insisting on limiting the wholesale companies to a short list, the number of titles sent to newsstands has been cut.

LOSING DISTRIBUTION

As a result, magazines seem to be losing the distribution levels they once took for granted. More outlets are being controlled by a smaller group of companies, making it harder for new titles to get to the newsstand.

Subscription marketing, meanwhile, has grown more expensive. The cheapest source of new subscriptions -- stampsheet marketers Publishers Clearinghouse and American Family Publishers -- are besieged with lawsuits and new federal laws restricting their activities.

According to a recent Magazine Publishers of America analysis, 81% of publishers reported losing an average of $14.39 on every new subscription order.

For most magazine publishers, direct mail is unprofitable. The average direct mail campaign has risen 27% since 1990 while the average cost of a one-year subscription has fallen from $26.90 in 1990 to $22.57 in 1998.

These scenarios explain why media analyst Veronis, Suhler & Associates forecast marginal growth for consumer magazine unit sales through 2003.

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