Not Yet At the Bottom

An analysis of first-half 2009 circulation levels of audited consumer magazines reveals that the end of the circ decline is nowhere in sight.

By Baird Davis
Monday, January 4, 2010

In the first half of 2009, paid and verified circulation of audited consumer magazines (this excludes titles whose circulation is derived primarily from “association” circ sources, e.g., AARP The Magazine) fell an unprecedented 6.3 percent from 273.8 million to 256.5 million. This is believed to be the steepest circulation level decline in more than 40 years. And there are no signs that consumer magazine circulation levels have bottomed out.

To the contrary, there are strong indications that the deep circulation level hole the industry dug for itself, as it eagerly embraced the advertising-driven circ model philosophy, still has more subscription circ to discharge before it arrives at a more optimal circulation level.

However, the steep circ declines reported in the first half of 2009 appear to be a kind of industry cathartic turning point—a moment in time when publishers finally seemed to realize the seriousness of the “over-circulated” condition they have built for themselves.

In this article we’ll review some of the causal reasons for the steep circ level decline in the first half of this year, while discussing the six key circulation trends which point to the continued circ decline of audited consumer magazine circ levels.

Total Audited Consumer Magazine Circulation
1st Half 2009 Vs. 1st Half 2008 (millions)

Source: Consumer titles audited by ABC and BPA International. Titles excluded are 100 defined as “association” publications and those primarily sponsored or verified, those with international circulation and those with paid circulations under 5,000. Data represents 499 consumer titles in the first half of 2009 and 545 consumer titles in the first half of 2008.

1. Newsstand Circ Continues to Dramatically Decline
Newsstand circ fell from 45.5 million a year ago to 37.0 million in the current period—a staggering 18.7 percent decline of 8.5 million circ. As a result, newsstand circulation’s share of total verified/paid circulation fell to 14.4 percent. This compares to a 20.7 percent ratio just 8 years ago.

TREND POINT: The continuing decline of newsstand sales and the drop in the newsstand circ share of total circulation are key indicators that the industry’s circ levels are not optimal.

2. Number of Audited Consumer Titles Continue to Rapidly Decline
Newsstand circ was a big contributor to the industry’s circ level decline, but the largest contributor was the loss of 69 titles that were discontinued or ceased being audited. The number of audited publications fell by 8.4 percent—from 545 titles a year ago to 499 in the first half of 2009. These discontinued titles accounted for 16.2 million circ. Twelve of these titles reported circ of more than 500,000 in the year previous. This group included; Cosmo Girl (1,400,000), Country Home (1,272,000), Domino (1,115,000), Blender (952,000), Vibe (876,000), Home (829,000), Hallmark Magazine (749,000), Figure (724,000), O at Home (704,000), PC Magazine (646,000), Electronic Gaming (603,000) and BestLife (508,000).

The record title losses were only slightly mitigated by the addition of 23 titles to the auditing ranks. The newly audited titles added 5.1 million circ. However, these newly audited titles (Country, Reminisce, and Birds & Blooms) published by Reader’s Digest accounted for the majority (4.3 million) of the new circ. It should also be noted that these three titles are not newly launched publications, but rather are part of a cadre of unaudited titles Reader’s Digest purchased from Riemann several years ago. The other 20 newly audited titles all had relatively low circulation profiles—less than 150,000 circ.

The net “lost” circulation (newly audited titles, less departing titles) was 11.1 million, which accounts for a major portion of the industry’s 17.3 million circ fall.

TREND POINT: The trend toward a reduced number of audited titles is likely to continue and it will help accelerate industry circ level declines.

3. More Cautious Circ Level Management Leads to Lower Circ Levels
In the first half of 2009 there were 183 publications that decreased circ five percent or more. This compares to 142 in the year previous and 101 two years ago. Partially offsetting these declines were a record low 41 publications that increased circ five percent or more versus 76 the year previous.

In the first half of 2009 thirty-six publications reported circ decreases of 50,000 or more of which 19 reduced their circ 100,000 or more and six titles that reported drops of more than 200,000—U.S. News (462,000), National Geographic (353,000), TV Guide (339,000), Country Weekly (298,000), Reader’s Digest (289,000) and Playboy (248,000).

There were only 16 titles increasing circ levels 50,000 or more in the first half of the year. This compares to 24 titles in this category a year ago. However, the paid circ increases for three of these titles—FamilyFun, Gamer Informer and Parenting—involved merely substituting analyzed non-paid circ with paid circ. Five of these titles (all relatively new titles) reported increases of more than 100,000—Women’s Health (338,000), People Stylewatch (188,000), Taste of Home (105,000), All You (104,000) and Everyday Food (102,000).
In this period the net level impact of the big gainers and big losers produced an industry circ decline of 3.1 million.

TREND POINT: The growing trend of more cautiously managing circ levels will continue to push publishers toward seeking more optimal circ levels.

4. Announcements for More Discontinued Titles and More Circ Level Reductions Are Waiting in the Wings
There are at least 11 audited titles, whose circ was reported in the first half of 2009, which will be discontinued by 2010. They include Gourmet, National Geographic Adventure, Nickelodeon, Metropolitan Home, Cookie, Fortune Small Business, Southern Accents, Giant, Modern Bride, Nick, Jr. and Fit Pregnancy Moms. Combined these titles reported 5.3 million circ in the first half.

During the second half of this year five publications announced rate base/circ level reductions of 300,000 or more that will take effect in 2010. The effected titles include—Reader’s Digest (2.6 million), Newsweek (1.1 million), Playboy (900,000), Prevention (500,000) and Good Housekeeping (300,000). These reductions account for 5.4 million circ.

In addition, a number of publications announced frequency reductions, including Fortune, Jet, Ladies Home Journal, Reader’s Digest and Playboy.

TREND POINT: These announcements are likely to be a precursor of more title closings and circ level reductions to follow in the next year or two.

5. Use of Verified and Other ABC Paragraph 6 Circ Sources Continue to Grow

Verified circ (this includes sponsored circ reported by BPA audited titles) usage declined from 13.9 million to 11.4 million. Its percent of total paid/verified circ fell from 5.1 to 4.4 percent.

Verified circ is the most visible alternative circ source reported in paragraph 6 of ABC statements. But it’s certainly not the only one. In order to gain a complete picture of the use of alternative circ sources it’s necessary to review all the sources described in paragraph 6 of ABC Statements. For this report I have assembled ABC paragraph 6 source usage data for the top 25 circulation companies (see chart on page 33 by clicking here). This is a large sample, accounting for 79 percent of the industry’s ABC paid/verified circ, and is believed to be representative of the overall industry’s use of paragraph 6 circ sources.

The review reveals that total paragraph 6 circ usage, for these 25 companies, increased in the first half of this year—escalating from 13.7 percent to 14.8 percent of total paid/verified circ.

Five paragraph 6 circ sources produced approximately 99 percent of paragraph 6 volume for consumer magazines. The chart below (in 000s) shows the rather dramatic circ usage changes of these five sources in the last year:

Overall the use of paragraph 6 circ sources by these 25 companies grew 5.5 percent. But what’s significant is the change in the use of individual sources. Most notable is the rapid growth of partnership circ usage.

Partnership circ usage, for the first time, now exceeds the use of verified circ. Two years ago verified circ usage exceeded partnership circ by nearly a 2-to-1 ratio. In the second half of 2008 things began to change. Since then, partnership circ usage by the top circulation companies has risen from 5.0 million to 9.1 million, an 82 percent jump.

It’s clear that publishers are still enamored of paragraph 6 circ sources; witness its rise in overall usage. What’s different is the usage change of the various sources. There has been a dramatic shift to partnership circ and a commensurate reduction in verified circ. It has also involved slightly greater use of the award (previously called loyalty) and the paid sponsor sources and a little less use of the combination source.

TREND POINT: The growing use of paragraph 6 circ sources is another indicator that the industry remains short of optimal circ levels.

6. In the Top Five Circulation Companies, Many Titles Appear ‘Over-Circulated’
In the first half of 2009, the top five circulation companies accounted for 121 million, or 47 percent of the industry’s total of 256 million circ. These five companies have an inordinate influence on the practice of consumer magazine circulation, but have not always been the bastions of prudent circ practices. They are, I’ve also found, a worthy proxy (for good and bad) for evaluating the industry’s complete circulation level status.

In my industry circulation analysis of the 2nd half of 2008 I suggested four criteria for “stress testing” the circ of consumer magazines—newsstand sales performance, average subscription prices, excessive circulation and the use of ABC paragraph 6 source circ. I still believe these stress test criteria are applicable. However, I’ve discovered that by analyzing paragraph 6 circ source usage that a person can make some very good preliminary judgments about the relative circ status of a given publication.

Therefore, in the chart below, I’ve recapped the paragraph 6 circ source usage of the top 5 circulation companies (in 000s), including a count of the number of titles whose paragraph 6 use exceeds 20 percent of total circ:

Note: The overall paragraph 6 circ source usage of the top 5 circulation companies in the first half of this year (14.4 percent) compares very closely to the 14.8 percent use by the top 25 circulation companies. Four of the five companies (excluding Reader’s Digest) increased their use of paragraph 6 circ usage in the first half of this year. Of the 80 ABC audited titles published by these companies 27 (34 percent) of them reported paragraph 6 circ usage greater than 20 percent—a percentage figure believed to be the demarcation amount for flagging titles that might qualify as being “over-circulated.”

The thirstiest user of paragraph 6 circ sources was Conde Nast. In fact, its 25.5 percent paragraph 6 circ use is exceeded only by Bonnier’s 29.5 percent among the top 25 circulation companies. In all, 67 percent of its publications reported paragraph 6 circ usage of 20 percent or more. Reader’s Digest’s use of paragraph 6 circ sources was much less (6.1 percent) than the other four publishing companies. It has always shunned the agent and alternative circ sources, preferring to support its subscription circ levels primarily with a large amount of direct sold subs, offered at relatively low prices. The paragraph 6 circ usage of Time, Inc., Meredith and Hearst were generally the same. But the review revealed that all three potentially have some titles with circ difficulties, witness they all have a number of titles with more than 20 percent paragraph 6 circ source usage.

TREND POINT: Paragraph 6 circ source usage by the top 5 circulation companies, a proxy for the industry, reveals that a number of their titles (those with more than 20 percent paragraph 6 circ source usage) are good candidates for circ level reductions and in some cases for closure.

Optimal Consumer Magazine Industry Circulation Level
The six circulation trends—falling newsstand circ, fewer audited consumer magazines, more cautious circ level management, further publication closings and major rate base reductions in 2010, increased use of paragraph 6 circ and the belief that the top 5 circulation publishing companies still have titles with circ levels that are too high—support my belief that the industry circ levels are heading lower.

TREND POINT: Based on these trends, the aggregate consumer magazine circ level could drop another 10 to 15 percent in the next several years until it reaches a more optimal level of 220-230 million in 2011 or 2012.

The process of paying for the circ level excesses of the past is going to remain painful for many publishers. But inevitably the title reductions and lower circ levels will be good for an industry that’s in need of gaining increased credibility with advertisers, by delivering more highly qualified readers.