No holding back rate cuts

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It should come as no surprise in a soft economy that magazine advertising rate discounts are getting steeper, according to the third survey of print media buyers conducted by Advertising Age over the last five years.

The average rate card discount went up to 30.8%, from 29% during the last survey in 2000 as publishers gave more concessions to media buyers. But what's surprising is how many magazine categories held discounts down despite continued consolidation among major media buying agencies and one of the toughest ad environments in recent history.

The survey was conducted among eight U.S. media buying agencies that gave estimates of the discounts they routinely achieve in 34 different magazine categories. The survey's results consist of the average of these discounts in each magazine category. Although the survey reveals greater elasticity in discounts, the number of pages required to earn top discounts increased to 5.8 from 4.8 two years ago. Media buyers who previewed the survey's results said that page commitments matter less these days and may vary widely from one media buying agency to the next, based on each agency's corporate rates and the size of individual clients' budgets.

"We're seeing a lot of flexibility in the number of pages required in order to get a discount-there is no way we'll get penalized for reducing our commitment later in the year in this environment," says Robin Steinberg, VP-print for Aegis Group's Carat North America, New York.


Certain categories showed sharper increases in discount rates than magazines as a whole. Rate card discounts among mass-circulation (Sunday newspaper) magazines, for instance, shot to 43.6% in the survey from 28% two years ago. Newsweeklies and business magazines, on the other hand, have reduced their discounts, according to the survey.

Special-interest magazines continued to offer media buyers the lowest discounts, the survey found. At 13.3%, the hobby magazine category had the lowest rate card discount in the survey; gay magazines had an average 18% discount rate, and magazines targeting African-Americans came in at a 20% average discount. And the automotive category gained ground since 2000, pulling back up to its 26% discount from a 45% discount in 2000.

Three upscale magazines for women-Martha Stewart Living Omnimedia's Martha Stewart Living; Hearst Magazines' and Harpo Productions' O, the Oprah Magazine; and Time Inc.'s Real Simple-with an average discount rate of 22.2% were separated in the survey from general women's service books, whose discounts averaged 52% according to survey participants.

Although most media buyers admit that overall it's more of a buyer's market this year, some gripe that basic rate cards-the price where ad negotiations begin-are set artificially high. "Although we're getting better rates overall than we were a few years ago, I would argue that in many cases print [media] is still priced too high for what it's worth, and it's a problem," says Jon Mandel, co-managing director of Grey Global Group's MediaCom, New York.

Media buyers also are wary about how publishers are going to react to the Audit Bureau of Circulations' new rules on publishers' statements, which this year will allow magazines to count issues sold at any price as paid subscriptions. The first crop of publishers' statements under the new rules is expected to arrive this month.

"We're already seeing some magazines coming in with higher rate bases," says Debbie Solomon, senior partner and Chicago-based group research director for WPP Group's MindShare. "And I'm concerned that we're going to see some publishers taking advantage of the new rules by selling some highly discounted subscriptions in order to pump up their rate bases."


Publishers bristle at such talk.

"I don't believe we'll see magazines playing games with the ABC rules to boost their rate bases; it doesn't make economic sense," says Jerry Kaplan, president of Meredith Corp.'s magazine group. "What magazines are going to do is try to maximize profitability in delivering on a specific rate base, and they're going to do it efficiently."

Although some media buyers believe rate card discounts haven't hit bottom yet, several publishers say they're more likely to abandon negotiations with media buyers than they were two years ago if agencies refuse their rates.

"We're more likely now to walk away from business when people are demanding we cut our rates," says Kevin Lynch, senior VP, Sunset Publishing. "You can't drop your rates as a special deal to one customer and not expect that to become the starting point for next year's negotiations, especially in today's environment of fewer agencies controlling more clients' money."

Officially, Conde Nast Publications continues to take a hard line against offering discounts to media buyers. But several media buyers, who didn't want to be named, say they negotiate with Conde Nast in much the same way as other magazines; Conde Nast tends to compensate advertisers with additional pages and bonuses instead of straight rate card discounts.

"We do not discount off magazine rate cards," says Maurie Pearl, Conde Nast senior VP-corporate communications. "But in the corporate sales area for very large advertisers we have a different structure."

"Rate cards are increasingly unimportant," says Carat's Ms. Steinberg. "We prefer to negotiate off of the previous year's [cost per thousand], plus a lot of research about an individual title's performance in the marketplace."

Many publishers agree that rate cards are less relevant than ever.

"Media agencies operate off of unique measurements, and magazines have their own unique pricing systems so it's very hard to compare apples with apples in rate cards," says Chris Allen, publisher of Cooking Light, part of AOL Time Warner's Time Inc. "Magazines are a lot more than pages-we're line extensions, books, Web sites, events-and it's hard to compare us with other media."

But media buyers don't see it that way.

"In today's media universe, print is just one more element in the mix, and it ought to be priced accordingly," says Mr. Mandel. "Print cannot set itself apart with different rules and values; it has to be accountable to what it delivers like any other media."

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