The Reader’s Digest Association Inc. will cut 100 positions as part of a restructuring effort within its North American Books and Home Entertainment operations. It will also trim its mail promotion volume by 40%, eliminating “direct mail campaigns that are not generating acceptable contributing profits,” the company said.
The positions eliminated will come from the U.S. division of its North American Books and Home Entertainment division, and in other departments with associated functions, according to a statement from the company. All 100 positions eliminated were in the Pleasantville, NY headquarters, which had employed 1,000 people. The staff level for the entire company was 5,000 people.
Some of the terminations were effective immediately, while others will be kept on until the end of the current quarter, according to spokesperson William Adler. Diane Silverman, list manager of circulation marketing, is among the employees included in the layoffs. Silverman will continue to work for the company for the next three months.
The company will also discontinue several product lines. For example, it will exit the video business (with the exception of children’s videos); eliminate its unprofitable All Products catalog and some of its continuity series and general books; and consolidate its Home and Health business units.
The continuity series slated to be closed are those that relied on sweepstakes-related direct mail, such as its music club, Adler said. But music sold through other channels, specifically direct response television, will be unaffected, he continued.
In its second quarter 2002 financials, Reader’s Digest said that revenue for North American Books and Home Entertainment dropped 14%, to $211 million, from $246 million a year earlier. Operating profit for the segment fell 41%, to $22 million from $38 million, as a result of lower sales volume, the introduction of new series products and investments in new marketing channels, including telemarketing.
The company attributed the declines to lower sales of general books and reduced mail quantities for video and music products, as well as required changes in sweepstakes promotions and the impact of Sept. 11’s events and anthrax contamination in the U.S. postal system.. At the time, the company said that it had reduced its mail volume due to changes in laws governing sweepstakes and softness in the U.S. economy.
In late March Reader’s Digest announced that it would purchase Reiman Publications LLC, a publisher of cooking, gardening, country lifestyle and nostalgia magazines and books, for $760 million. One goal of the acquisition is to “further reduce our dependence on sweepstakes promotions,” Thomas O. Ryder, chairman and CEO of Reader’s Digest said at the time. The deal is expected to close by June 30.
While Reiman will not be integrated into Books and Home Entertainmant, the two division will be working closely together and exploring cross-marketing opportunities, according to Adler.
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