Live from DMI Co-op: Magazines Face Renewal Falloff

A surge in free subscription programs is having an unanticipated consequence on the magazine industry.

While the programs devised by agents to help meet rate base guarantees to advertisers, have been helpful, the influx of free offers is changing consumer buying behavior. These free takers, who put no money up front for a magazine subscription, are often difficult to renew.

“The challenge is to get buyers who didn’t pay to get the subscription, to renew,” Mary S. Rynecki, senior vice president of circulation at Newsweek, told a crowd at the Direct Media Inc. 2002 Mailer’s Conference & Co-op in White Plains, NY. “We can meet the rate base guarantee but renewal rates are plummeting. We want repeat buyers.”

Adding to the difficulties is the fact that much of Newsweek’s print content, like many other magazines’, appears for free online, she added.

“Once you’ve given people something for free, it’s difficult to then go back and start charging,” she said.

Coupled with plummeting ad revenues, these problems have prompted some publishers to consider lowering rate base.

“It would be smart for all of us to take a look at rate base,” she said.

Meanwhile, magazines like Newsweek and Time found an abundance of readers in the wake of Sept. 11.

Newsweek, last year, posted the highest profit margins in its history in circulation because of the intense interest in Sept. 11 news coverage. And for the first half of this year, Newsweek had to cut 100,000 subscriptions from its marketing plan to bring its rate base back to an acceptable level. Rynecki expects that interest to soften at some point.

Another problem facing the industry is at newsstand.

A scan-based trading initiative being considered by some of the major retail chains could cause huge financial losses for publishers.

Retailers want to pay publishers only for the magazines that are scanned at the register, a change that shifts the financial absorption of shrinkage away from retailers to publishers. “The retailers would take no responsibility for inventory, only copies sold,” Rynecki said. Negotiations are ongoing.

Joining Rynecki on the panel were Todd Simon, senior vice president of Omaha Steaks International Inc. and George Mosher, president of National Business Furniture Inc. Ray Schultz, editorial director of DIRECT and DIRECT Newsline, moderated the panel.