"Newsstands are jammed," noted direct marketing guru Dick Benson, chairman of the Benson Organization, Fernandina Beach, Fla. But the flow of profit from the direct mail spigot also appears to be slowing.
Long term, magazine prices will have to rise to make up for the increased cost of acquiring subscriptions, predicted Mr. Benson, a direct mail magazine subscription pioneer.
When it comes to the volume of direct mail that magazines send to prospective subscribers, he said, "If we haven't plateaued, we are very close to it."
Last year, only about 15% of magazine circulation directors said they made money on their direct mail programs, according to a report from New York-based direct marketing consultant Vos, Gruppo & Capell. Sixty-five percent of the 100 consumer magazine circulation directors contacted for the survey said they lost money on direct mail as a generator of new business.
The annual spring survey conducted for the past 12 years concluded that magazine renewals are strong but new-business sales have gotten tougher. That's placing renewed emphasis on keeping customers once they've been hooked.
More than 90% of the respondents use a soft offer such as a premium, sweepstakes or complimentary copy on their new-business direct mail. And a majority, some 60%, report using soft offers on renewals.
With a postal rate increase looming in 1995, newsstand and subscription prices are likely to increase this year, Managing Director Dan Capell said. That's a big change from the recent recession-ravaged years when most publishers were forced to hold the line. Only about 20% of the industry raised newsstand or basic subscription prices in the past year, Mr. Capell found.
Some circulation experts feel the price increases are long overdue.
"As an industry, we better figure out ways to get our prices up on subscriptions," said Hal Oringer, VP-circulation at Des Moines-based Meredith Corp.'s magazine group.
Declining newsstand sales were a big reason two years ago to cut the rate base on Meredith's flagship Better Homes & Gardens by 5% to 7.6 million. Today, he said, more than 90% of the magazine's circulation is derived from subscriptions.
Among the so-called Seven Sisters of women's service magazines, the newsstand vs. subscription battle has been particularly intense.
At The New York Times Co.-owned Family Circle, as recently as 1988 the magazine derived 1.7 million, or 28%, of its 5.9 million circulation from subscription sales. Today, the magazine has a rate base of 5 million, and according to the Audit Bureau of Circulations, through the six months ended Dec. 31, it was deriving 2.1 million, or 42%, of its circulation from subscriptions.
has refused to cede the checkout counter to archrival Woman's Day, the Hachette-Filipacchi flagship, with a rate base of 4.8 million.
Last year, the two engaged in a costly newstand battle when matched a Woman's Day cover price reduction to 99 cents.
But even in the midst of the checkout counter battle, both magazines continued building their subscription base through direct mail. In the six-month period ended Dec. 31, Woman's Day saw subscriptions increase 19.9% to 1.7 million while newsstands sales skidded 6.7% to 3.2 million, vs. the year-earlier period.
More and more magazine companies hope to parlay their direct mail into an active database marketing tool. Highly successful companies such as the Reader's Digest Association and Rodale Press long ago transformed their magazine subscription lists into active sources of revenue for other company products from books to videos.
In fact, so successful were Rodale and the Reader's Digest Association that the direct mail side of the businesses eventually overtook the magazine side in revenue and profit.
Noted Greg Coleman, VP-group publisher for the Reader's Digest Association special interest magazines including American Health, Family Handyman, New Choices and Travel Holiday: "When we look at a [profit and loss statement] for our magazines, we'll look at an operating [profit and loss] as well as a [profit and loss] that looks at the name that each magazine brings into our database."