Focusing on circulation is key to surviving weak ad market

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One morning last week, after paying $4.44 for my daily latte (I really needed the extra shot of espresso), I went into the office, grabbed a stack of magazines and began shaking them to get at the subscription cards. A random sample of the offers that spilled out on my desk: Family Circle, $1 per issue; Time, $1.19 per issue; U.S. News & World Report, 68 cents per issue; Spin, 83 cents per issue; Child, $1 per issue. The shining stars of my unscientific survey: Seventeen, at $2.08 per issue, and Town & Country, at $2.33.

True, my cup of coffee is not partially subsidized by advertising. But there's still a valid point in the comparison, which is that the rules of engagement for buying and selling magazine ad space have created an environment where publishers are afraid to charge a fair price for their products. And the industry's continued inability to confront the problem is the reason many magazines still find themselves disproportionately vulnerable to a slowdown in advertising spending.

The industry's over-dependence on one stream of revenue was made clear during the recession of the early '90s when the media landscape was littered with the carcasses of literally dozens of failed magazines. Every week, it seemed, another glossy would bite the dust: Connoisseur, Egg, Episodes, L.A. Style, M, Manhattan inc., Memories, Men's Life, Metropolitan Home, Model, New England Monthly, New York Woman, Regardie's, Sassy, 7 Days, Spy; Taxi. Some were third-tier titles that deserved their fate, others terrific editorial products with less-than-viable business models (I'll leave it to you to decide which was which). While shakeouts often claim innocent victims, they also have a cleansing effect, washing away marginal products and ultimately strengthening an industry.

Already we've seen a number of magazines put up for sale in this weakened economy, while others are being repositioned. A shakeout is inevitable, and necessary. According to the National Directory of Magazines, there were 17,815 magazines being published in the U.S. last year, up from 12,797 in 1989 (although down from a peak of 18,606 in 1998). The boom economy of the last few years clearly kept afloat weak magazines that will now sink below the surface without a trace.

Those magazines that hope to thrive during a downturn must focus more on the circulation side of the equation. It's a fairly ugly rock to turn over, revealing major messes in both subscriptions (which make up about 70% of total magazine sales) and single copy. According to the Magazine Publishers of America, the average one-year subscription price for a member magazine is $24.83, which works out to a per-issue price of $2.07 for monthlies. But that number is actually down from a decade ago, when the average price was $27.11, or $2.26 per issue.

Magazine ad pages suffered their steepest decline in 30 years in 1991, and there was lot of industry soul-searching. Publishers talked of a permanently altered landscape in which they had to quickly adapt to new ways of doing business. Circulation profitability was a hot button. A 1992 story in Ad Age noted, "Publishers now say they must base frequency and circulation decisions less on advertiser demand and more on consumer demand." That never happened. When advertising bounced back, circulation was once again neglected.

Publishers still artificially inflate circulation so they can charge more for advertising. Media buyers implicitly encourage the practice, even though it means their clients are paying to reach marginal readers. One media buying executive recently told me he thinks it's insane how publishers will pump up their numbers at any cost. A moment later he confessed that he still sees it as a sign of weakness if a magazine reduces its circulation guarantee.

The system is broke, but it won't change unless both buyers and sellers commit to fixing it.

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