ABC audit reclassifies 'PC Magazine' figures

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The Audit Bureau of Circulations distributed controversial and delayed 2002 and 2003 audit reports for Ziff Davis Media's PC Magazine late last month.

The numbers were indisputable: The 2003 audit report reclassified a significant portion-an average of almost 260,000-of PC Magazine's circulation from "paid" to "analyzed nonpaid." The magazine fell an average of 21% short of its paid rate base at the time of 1.2 million, according to the audit report.

But the interpretation of the audit numbers differed significantly. Ziff Davis had one take; International Data Group's PC World, PC Magazine's chief competitor, had a different spin.

The circulation flap apparently started with, a subscription agent Web site operated by Synapse, which is owned by Time Warner. Subscriptions to PC Magazine, which were free to visitors but paid for by a third-party sponsor, were offered on in 2002 and 2003.

In its audit of PC Magazine, the ABC discovered that the subscriptions had not been paid for within the organization's required seven-month time frame and thus disallowed them as paid. But because Synapse's Web site gathered information about the subscribers, the circulation was classified as "analyzed nonpaid."

"This is about a mistake that a Ziff Davis vendor made; it's not Ziff Davis' fault," said Robert Crosland, managing director of media investment bank AdMedia Partners.

The audit reports appear to support PC Magazine's contention that it delivered on its total circulation. It said the reclassification of some subscribers to "analyzed nonpaid" is nothing but a technicality that didn't affect the quality of the circulation. "Advertisers understand that it's a reclassification, and they understand that we delivered value," said Tim Castelli, senior VP-publisher of the PC Magazine group.

IDG contends PC Magazine's audit report shows a magazine cutting corners to maintain circulation. For one thing, PC Magazine relied heavily on digital editions, which reduce postage and printing costs. IDG said its internal experiments with digital editions showed that few are downloaded and actually read. While PC Magazine has about 160,000 digital subscriptions listed on its latest audit report, PC World had only 2,375 listed on its latest publishers' statement.

IDG CEO Pat Kenealy also contends that PC Magazine relied too heavily on sponsored subscriptions and transfers from defunct Ziff Davis publications. "They cut circulation expenses a little too much it looks like to me," Kenealy said.

Tracking the growth of PC Magazine's "analyzed nonpaid" circulation appears to show the depth of the publication's reliance on subscription agents. In January 2002, the audit classified 18 subscriptions at "analyzed nonpaid." Two years later, in December 2003, that figure had ballooned to 350,000, or nearly one-third of the magazine's subscribers.

PC Magazine's paid circulation shortfall will likely pose problems for the publication when it deals with advertisers and media buyers, who may come to the negotiating table with demands for rebates or discounts. "You are getting value, but there's the question as to the degree of value relative to what you thought you were buying," said Tyler Schaeffer, a media strategist at Foote, Cone & Belding, New York. "You should definitely discuss with magazine management, depending on each advertiser's situation, whether this could involve reduced costs or remuneration or future negotiations."

Ziff Davis spokesman Randy Zane said, "We're not giving any rebates back."

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