By Published on .

Most Popular
It's far from an industry secret, but when it comes to magazine rate negotiation, industry executives still act as if they are part of a closed-door society. They admit it goes on, but don't like to talk about it.

It's almost as if the community tries to hold magazines in a position above and beyond the fray of crass media haggling.

That, as any print negotiator can tell you, is far from the truth.

In fact, a new survey by Advertising Age reveals the extent to which rates are negotiated in an environment where published rate cards are at best a starting point.

In the most competitive categories, ad page costs are regularly discounted by more than one-third. Not surprisingly, women's service magazines, a field crowded with aggressive rivals, offer the steepest average discounts-47%. African-American magazines offer the lowest average discount at 16%.

The reality is that while some publishers, notably Conde Nast Publications, do refrain from negotiating rates, virtually all major consumer magazine categories have become quite negotiable. And negotiations are increasingly based not on published rates, but on such benchmarks as historical category costs and profits per page.


To gauge the price elasticity of the major consumer magazine categories, Advertising Age polled a small but influential group of leading print buyers representing more than $2 billion of consumer magazine spending. The panel included five of the 10 largest magazine buyers, according to Ad Age's 1998 Agency Report, as well as several other large and small agencies.


The buyers were supplied with a list of titles comprising each of 33 key magazine categories and were asked to estimate the average industry discount off the one-time open page rate, as well as the number of pages on which the discount estimate was based. The survey found that categories demanding a higher commitment of ad pages generally yielded greater discounts than those requiring a smaller commitment from buyers.

While there were some notable exceptions to this rule, the results suggest there is no overall publishing industry norm and that the negotiability of each category is subject to its own natural marketplace forces: demand, competition, perceived value, relationships, etc.

The types of advertisers buying women's service titles have plenty of places to spend their money, for example, while those seeking African-American consumers have far fewer print options.


"Budgets for women's service books just aren't as large as they used to be. Before, if you worked for a large package-goods advertiser, you may have advertised in all Seven Sisters. Now you may only advertise in three of them. So the pressure on them has increased to compete for your business," explains Anita McGrath Peterson, director of magazine strategy and negotiation at New York-based DDB Needham Worldwide's Optimum Media.

In the African-American field, on the other hand, "even though there are several magazines in the category, most of them have a unique niche of some form. So, if that's the niche a marketer is looking for and they need to reach that audience, they will be willing to take less of a discount," says William Reynolds, senior VP-media director of Henderson Advertising, Greenville, N.C.

"A category like women's services, on the other hand, is perceived as more of a commodity," he said. "The old joke is that if you take their covers off, you can't tell them apart. The same thing appears to be true if you take the covers off their rate cards."

Several women's service publishers declined to comment.


While there are many factors influencing the negotiability of each magazine category, supply clearly is an issue for the newsweeklies. There may only be three titles in the category, but they publish every week, and buyers say frequency goes a long way toward satiating demand and creating a perception of abundant inventory.

While acknowledging that the newsweekly category rates have grown more negotiable overall, Time Publisher Jack Haire says his strategy is not based on operating within a category but is based on generating increased volume for Time.

"We do over $500 million worth of PIB ad revenues," says Mr. Haire, "so there is a lot of room for negotiation."

However, he added that discounts are always tied to increases in volume, such as Time's "Century Plan," which provides rate breaks based on volume increases of 5% or more each year.


Some print buyers believe publishers may unwittingly be feeding the perception that they are commodities by not presenting strong enough research about the unique role their titles play in readers' lives. Publishers, on the other hand, insist there's plenty of research but complain that it's often ignored by buyers.

"One of my frustrations as a buyer is that publishers aren't taking advantage of a tremendous opportunity to do research that would help us understand a little more about the relationship between a magazine and its audience. That is something that would help differentiate one title from another, but magazines have been loath to do that for competitive reasons," says Ellen Oppenheim, senior VP-media director of Foote, Cone & Belding, New York.

She notes Conde Nast recently began developing such research, and said it could help that publisher maintain its position in the market, and somehow continue to keep its titles above the fray of negotiations. Conde Nast, in fact, officially does not discount; and buyers say that is a big factor influencing the discount averages for several categories.

"If Conde Nast is heavily represented in a category, the average discount is going to be lower," says Ms. Oppenheim, citing the women's fitness category as an example.

"You'd think that fitness and health would have similar discount levels, but a lot of the women's fitness titles are Conde Nast books and that is influencing the average," she says.

The health category, on the other hand, is a little less healthy when it comes to holding up its rate card.

At an industry average discount of 38%, the health category was the third-most negotiable after women's services and newsweeklies.


Health, however, had one of the widest ranges of discount estimates generated by the survey.

The range was from a low of 15% to a high of 42%. The greatest ranges were in the parenting and the science categories, which had discount variances of 10% to 50%. The lowest range was for the hobbies category-25% to 28%-followed by African-American magazines, at 10% to 20%.

"We know we're in a world of negotiation," concedes Prevention VP-Group Publisher Ken Wallace. He adds, however, that "We will walk away from business to keep a reasonable margin, and we have."

Ms. Oppenheim agrees publishers have gotten much more sophisticated-indeed scientific-about the way they negotiate. She notes a simple look at average discounts obscures what is evolving into a yield management process.

"My belief is that publishers are looking more at profit per page sold," she says. "If they understand what makes that work, they can work things in a way that we on the buying side might not understand. What we see is a discount. What they are seeing is increased profits."

That may explain why in some cases, publishers may actually require fewer page commitments for a greater discount. While that approach may seem counter-intuitive, it actually makes economic sense because a publisher can afford to give a bigger break to a smaller advertiser representing less of a magazine's overall revenue than to a big advertiser.


Publishers say they do this to attract smaller, contingent accounts that otherwise would not run in their books. However, the process penalizes a publisher's biggest and best accounts. But the belief is that such "endemic" advertisers have to be in the magazine, and therefore, will tolerate less of a deal.

"It seems counter-intuitive, but if you think about it from the publishers' perspective, they see it as a way of keeping business they would not otherwise get," says Mr. Reynolds. "It's just like the grocery store business. If you think about it, they reward their worst customers and penalize their best customers with express checkout lines. Express lines should be for people who spend a lot of money at the store, not the least amount of money, but they look at it that the convenience customer might go somewhere else if the store becomes less convenient. The same is true in publishing."

In fact, many buyers say the whole notion of volume discounts and even rate card-based negotiations has become a misnomer and increasingly is no longer applied.

"What I'm finding is that discounts aren't even based on pages any more. They're based on who you are and what your relationship is with the magazine," asserts Ms. Peterson. "You might negotiate a rate for 5 pages, or 7 pages. As the year goes on you might cut one or two pages out, but the publisher won't change your discount. They just want to keep you happy for next year. Recently, I'm finding they just give you a rate, but it's not based on a page level."


Many of the buyers surveyed say they rarely depend on magazine rate cards as the basis of negotiations and instead track historical costs for the category. At least one major print buyer says she no longer "thinks" discounts and now simply references negotiated rates with most of her clients.

"Discounts don't mean anything to my clients," she says. "All they want to know about is what they paid and how much that cost relative to someone else in the category."

In effect, she says, magazines are becoming much more like conventionally negotiated media, such as TV. She predicts that within several years, the magazine industry will convert to negotiated rates as the basis of page costs.

"The truth is that magazines are becoming more like other media," concurs Neil Ascher, senior VP-group media director of D'Arcy, Masius, Benton & Bowles, New York. "They are becoming based more on natural marketplace forces and less on rate card discounts."


The competitiveness of those marketplace forces, however, are also breeding some detestable publishing trade practices, says Mr. Ascher

"Many publishers are playing a game that is cutting their own throats," he charges. "They've become obsessed about [Publishers Information Bureau reports] and who can be reported as a page gainer. So they are willing to take losses on some accounts, just to brag that they have their business. In the long-run, that's got to hurt their overall value in the marketplace."

Mr. Mandese is editor of The Myers Report.

In this article: