Perhaps none has been more public about its plans for scrutiny than Kraft General Foods, rumored to have rebudgeted $30 million in ads slated for Hearst pages into other print media.
While Kraft executives and their agencies declined to confirm the magnitude of the reallocation, a statement issued this week by VP-Media Services David Braun said: "When a publisher comes to us with rates that are non-competitive, we have no choice but to take our advertising elsewhere. We have more than enough alternatives, and we are not dependent on any one magazine or group of magazines to reach consumers with our message."
Hearst in July announced it would raise ad rates 5% across the board, while reducing rate bases effective Nov. 1. Cover prices also will be raised, in what the publisher said was a campaign to "eliminate marginal readers" in an age of rising paper and postage costs (AA, July 31, et seq.). At the time, Hearst acknowledged an advertising falloff of 5% to 10% was "conceivable."
"Hearst underestimated the reaction in the advertising community," said Rich Hamilton, senior VP-media and administration, D'Arcy Masius Benton & Bowles, New York. DMB&B works with Kraft brands such as Maxwell House coffee products and Entenmann's baked goods.
An agency insider said, "It wouldn't surprise me if this decision costs them 20% of their [overall] page volume."
For 1994, Hearst Corp. publications reported 12,621 ad pages and ad revenue of $790.6 million, according to Competitive Media Reporting. Through August this year, the magazines have sold 7,998 ad pages and gained revenues of $541.2 million.
Industry rumors that Hearst budged on the new prices for clients Procter & Gamble Co. and Philip Morris Cos. were floating about last week, but Hearst Magazines President D. Claeys Bahrenburg said P&G's ads were purchased at comparatively lower rates because they were part of a buy on a July-June fiscal year. Spokesmen for both Philip Morris and P&G refused to comment.
Both Mr. Bahrenburg and Good Housekeeping Publisher Alan Waxenberg said Hearst books are healthy and that Good Housekeeping was up 30 pages for November, when the rates take effect.
"We're sticking to this as a program for healthy economics in the magazine business," Mr. Bahrenburg said. "We're seeing strong support from cosmetics advertisers, as well as beauty, fashion and automotive."
Meanwhile, analysts and media buyers have called the company's strategy symptomatic of both nervous economics and crisis management.
Hearst is running a series of page ads about magazine branding from August through November. The ads-from Landey & Partners, Grounds Morris, N.Y.-appear in The New York Times, Inside Media and Advertising Age.
"We've come to understand that it's the magazine business' [job] to manage their circulation, but this is unprecedented in terms of all the magazines across the board, coupled with this price increase," said Matt Schwach, planning director at the Media Edge, New York.
Indeed, Hearst isn't alone. Conde Nast Publications has announced it will increase its cost per thousand by 9.5% on Jan. 1.
"You can see that this has set the precedent and given the green light for....publishers to move in and use some language that's quite similar" to Hearst's, one agency media planner said.
Jeffery D. Zbar contributed to this story.