PUBLISHERS PLAN MODEST RATE HIKES OF 3% TO 5%: POSTAL INCREASE OFFSET BY FALLING PAPER PRICES TIED TO ASIA ECONOMY

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With paper prices falling and postage costs rising slightly, consumer magazine publishers will raise their ad rates modestly in 1999.

Most major magazine groups estimate an average increase in published rates of 3% to 5%.

Paper costs, a major factor in determining rate increases, are falling, due largely to a drop in demand related to the Asian economic crisis. Mail costs, another leading factor, will rise in January by about 4.5%, the first increase in three years. That's a relatively easy percentage for most consumer publishers to absorb, however.

At Times Mirror Co., President Efrem Zimbalist III anticipates a rate increase of 3% to 5% for his titles, which include Field & Stream and Popular Science. He cited postage as a major factor in the decision.

"A postage rate increase is huge because it affects not only the mailing of our magazines, but also all our subscription and renewal mailings," he said. "So the cost really gets multiplied to a big number, which then affects our profits."

OFFSETS POSTAL

The rise in mailing costs, though, is offset by the decline in paper prices.

"We're seeing softness in the paper market with some prices being cut for grades of paper we use most often," said Robert Teufel, president of Rodale Press, parent of Men's Health and Prevention.

He said his company's increases will fall into the 3% to 5% range.

"As long as the economic situation continues in Southeast Asia, it will remain a real buyer's market," Mr. Teufel said. "Most of the publishers are looking forward to moderate, if any, price increases."

Hachette Filipacchi Magazines, is also expected to raise advertising prices between 3% and 5% on its titles, including Woman's Day, said John Fennell, chief operating officer. Cathleen Black, president of Hearst Magazines, said preliminary planning calls for Hearst titles such as Good Housekeeping to raise ad rates by an average of 5%.

Conde Nast Publications, publisher of Vogue and Vanity Fair, and Time Inc., parent of Time and People, are also expected to boost rates in the same range.

ADVERTISER RESISTANCE EXPECTED

However, some industry executives cautioned that even modest increases might be difficult for advertisers to swallow if the economy falters. Since a magazine's published rates are usually negotiable, media buyers tend to turn a close, skeptical eye on any cost increases.

"When business is very good, the tendency is to launch new magazines and increase rate bases of established magazines and the expectation is that ad revenue will be there to make that investment worth it," said John Heins, president-CEO of Gruner & Jahr USA Publishing, also looking at increases of 3% to 5%. When the outlook is uncertain, publishers will put off changes, he added.

Gruner & Jahr's titles include Family Circle and McCall's.

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