Don’t fall victim to US disease, Dennis urges magazine industry

The UK’s magazine industry faces disaster if it goes down the same route as the US, magazine mogul Felix Dennis has warned.

The founder of Maxim, who has arguably had more success in the US than any other British publisher, last week sounded the alarm during a coruscating speech to a subscriptions conference organised by the Periodical Publishers Association.

At times shouting, he told the audience at the Grosvenor House Hotel in London that the magazine industry is in danger of “a painful, lingering death” at the hands of “the American disease”.

Dennis warned that US magazines have been so desperate to meet rate base (RB)– the level of circulation they promise to advertisers – that they have ended up paying huge sums to retailers for shelf space and allowed thirdparty subscription agents to take most of the subscription fee just for delivering readers. He said: “There is only one rule in magazine circulation departments in the US – meet RB or die.”

In the US, warned Dennis, publishers pay an ever-escalating retail display allowance (RDA) just to get the titles in the shops.

He said: “All publishers were forced to pay RDA programmes to ensure the chains would accept their magazines at all. Today the whole RDA structure, worth millions, is paid for by publishers for no service whatsoever – it is little more than institutionalised blackmail and robbery.”

But he warned that trying to cut out the retailer and drive subs through subscription agents instead was just as hard, with a reliance on “sleazy junk mail organisations”.

He added: “It’s a shameful, rotten and wearying practice that we must avoid. I have been wrestling with it in the US for 30 years.”

He said: “Virtually every magazine in the US pays vast amounts to these subscription agents to take away our magazines and resell them. There are some magazines who have reached the staggering proportion of 85%of their entire circulation through subscription agents.

The owner of that magazine has no idea to whom they are sending – or if they are arriving.”

Magazine players this week took up Dennis’s warning. Jim Bilton, managing partner at Wessenden Marketing, which has compiled a report on subscription marketing for the PPA, said that while the UK industry didn’t yet mirror the US situation – with the US far more reliant on advertising revenue – it still needed to act now to protect its future.

He warned: “We’re in danger with retail consolidation that the market either becomes very restrictive for specialist titles as big multiples edit ranges down, or more expensive by charging for display or promotions.”

“There are a large number of retailers who don’t make much money selling magazines. As they already have big market share, the fear is they will force through extra payment. We already pay for in-store promotion, but it’s becoming more expensive and that could translate into RDA.”

He said subscriptions were an obvious alternative route, but added: “It’s a long-term strategic commitment. The problem is publishers are driven by the six month ABCs.”

And Nicola Rowe, head of circulation at the PPA, said it was becoming increasingly difficult to meet retailers’ demands.

She said: “You’ve got a tendency by multiple retailers to do hard ranging, where they are defining the range of titles they will take.

It’s the specialist titles that are struggling, but there’s a knock-on effect on everybody.”

Leah Annett, press manager for Starcom Motive, warned that readers with highly discounted subscriptions were potentially of less value to advertisers.

She said: “People are trying to drive subs through discounts and offers. We don’t know how big the discount is and if you don’t know, you can’t measure the value.

“I used to look at the subs, now I look at the news-stand, I need to know it’s surviving against the competition.”

But Vivien Matthews, circulation director at Condé Nast and a speaker at the conference, was positive about subscriptions. “We appreciate the value of a direct relationship with our readership and we are investing a lot in subscription promotions,” she said.

“However, subscriptions marketing is costly and we are not carrying out unsustainable discounts.

We do a lot of testing on subscriptions offers to keep a close watch on revenue and have a different strategy for each title.”

And Dawood Khan, whose company, Care, sells subscription management systems, said the industry should fight to control its own subscriptions. He said: “If you’ve got a third party handling all your data you potentially lose the control.”

Retailers join PPA campaign

The Alliance of Independent Retailers has warned that newsagents could be killed off by Government plans to open up the newspaper and magazine supply chain to unregulated competition to come in line with EU competition laws.

Writing in the group’s publication, the Independent Retailer , AIR secretary Len Griffin questioned the wisdom of making changes that would benefit the large multiple retailers.

“Given the disparity in market share between a small independent and, say, Walmart, one must at least question whether the existing market is free and efficient in the economic sense,” he said.

The AIR joins the National Federation of Retail Newsagents and the PPA in opposing a Department of Trade and Industry proposal to deregulate the supply chain.

Ian Locks, chief executive of the PPA, said: “We are delighted AIR has given its support to the campaign.”

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