Should a magazine's total circulation reported on its publisher's statement-distributed in ABC's twice-a-year Fas-Fax reports-exceed ABC's audit by 2%, then that magazine's circulation is flagged on variance reports that are included in mailings to members three times a year.
The loophole is this: Should a publisher's newsstand numbers be overstated in ways that don't affect total circulation by 2%-perhaps, say, combined with under-reported subscription sales-no attention is called to it. In order to see the discrepancy, interested parties must extract the relevant numbers from ABC's audit and then refer back to ABC's historical data on what magazines filed in their publisher's statements-a backward-looking exercise owing to the yearlong delay between the issuance of Fas-Fax and ABC's audit report.
Two magazines that recently significantly overstated newsstand sales in ways unmentioned on variance reports are Dennis Publishing's Stuff and Meredith Corp.'s Ladies' Home Journal. For the first half of '01, Stuff claimed single copy sales of 474,707; the audited figure was nearly 10% less, at 433,426. For the first half of '01, Ladies' Home Journal claimed newsstand sales of 387,500; the audited figure turned out to be 281,526. (Gruner & Jahr USA Publishing's YM overstated its newsstand sales by 196,293 copies for the second half of 2001 and had overall circulation readjusted by over 2%. [AA, Jan. 27, P.1])
Both magazines are in hotly contested categories. Stuff grapples with Emap USA's FHM for second-place bragging rights to category leader-and Stuff's corporate sibling-Maxim. (Both Stuff and FHM made Ad Age's A List, a ranking of top magazines, in 2002.) Ladies' Home Journal-with newsstand sales a smaller component of its total circulation than Stuff's-is a mainstay of the traditional women's service category.
Mark MacDonald, general manager of Stuff, points out that Stuff delivered substantial circulation bonuses above its rate base for the period in question. "We focus on rate base," he says, adding, "No advertiser had expressed concern over the newsstand discrepancy."
Jerry Kaplan, president of Meredith's magazines, says his company based newsstand numbers reported to Fas-Fax on previous-year performance. "We are not out there selling [based on] how we are beating someone's brains out on the newsstand," he says. "I don't think this is much of a story."
Still, newsstand sales are an industry barometer of vitality, and declining newsstand sales are often grounds for an editor in chief's dismissal.
Asked if single-copy sales factor into advertisers' buying decisions, Mike Drexler, CEO of Optimedia International, says they could, although his main concern for magazines is "if they hit rate base." Another media buyer similarly identified newsstand sales as one component influencing some client buys.
An executive at a title competing with a magazine that overstated newsstand numbers put it more bluntly when asked if ad dollars shifted owing to those figures: "Absolutely. They did."
Dave Leckey, senior VP-consumer marketing for Hachette Fillipacchi Media US and an ABC board member, says there "should be a flag of some type" alerting ABC members to magazines with significant newsstand variance between publisher's statements and what ABC audits. Mr. Leckey, whose company publishes Woman's Day, wouldn't comment on specific competitive issues with LHJ.
Teresa Perry, a VP at ABC, says members expressed concern over newsstand circulation overstatement only after Ad Age called publishers and media buyers about it. One ABC insider points out rule changes were dependent on its members. "There's nothing [ABC] can do," the insider says, "unless someone sends a letter saying, `We challenge this kind of thing."'