Monday, September 24, 2007

Time Inc. Gives In to Issue-Specific Guarantees

BoSacks Speaks Out: This is an inevitable and correct move on the part of Time Inc. I have been prophesizing its necessary introduction for years. This is one part in a series of new business models that will actually help our industry. Some will be threatened by this move, but fear not, it is an intelligent and unconditionally important decision for the vitality of ink on paper.

The generation of random numbers is too important to be left to chance.
Robert R. Coveyou, Oak Ridge National Laboratory

Time Inc. Gives In to Issue-Specific Guarantees

Orders All Its Publishers to Sign Up for Rapid Report
By Nat Ives

NEW YORK ( -- Publishing giant Time Inc., breaking with long-held conventions of the magazine industry, has agreed to report circulation sales figures in nearly real time and give advertisers circulation guarantees for each issue in which they buy an ad.

Time Inc.'s new plan, which executives proposed to publishers earlier this month and settled on this week, protects magazines from taking hits on the smallest shortfalls.

It's a sign of the power that marketers have accrued during the rise of digital media; there are simply too many options beyond traditional advertising for media owners to set the agenda any more.

Likely to end old system

The industry has traditionally only provided circulation data to its advertisers twice a year and guaranteed a level of circulation averaged across multiple issues. That standard has looked increasingly brittle as digital media delivered new options for advertisers as well as almost instantaneous results. But Time Inc.'s defection from the norm seems likely to effectively end the practice of a rate base based on a six-month average.

"This is what the advertisers really want," said one Time Inc. publisher, who, like others at the company, discussed the new plan on condition of anonymity. "So at the end of the day what are you going to do?"

That's a departure from the position Time Inc. and other publishers held in May, when the powerful media agency MediaVest publicly threatened to pull its clients' ad spending from any magazine that wouldn't give an issue-specific promise.

Time Inc. wasn't eager then to adopt the more stringent standard. Publishers would have to pump up print runs to make sure not one issue falls even a percentage point shy of its rate base, John Squires, senior exec VP at Time Inc., said in an interview that month. "They want all guarantees and all protections at all times," he said. "That just kind of forces a completely unrealistic expectation on our business. We do have to concentrate on some efficiencies."

No credit for overdelivery

He and many others also pointed out that publishers don't get any credit when they sell more copies of an issue than they promised their advertisers. "Penalties for underdelivery without bonuses for overdelivery is untenable," a rival publisher would later say. Issue-specific guarantees are a waste of industry time and capital anyway, some said, because missing rate base is so rare in the first place.

But MediaVest argued that as long as averages remained the benchmark, magazines looking to make up one shortfall had an incentive to make it up next issue by increasing the copies left around doctor's offices, hair salons and other public places. Although that kind of circulation has strategic value, advertisers don't like to see its use rise abruptly in the middle of their ad buy.

And Time Inc.'s new plan, which executives proposed to publishers earlier this month and settled on this week, protects magazines from taking hits on the smallest shortfalls. The revised policy will only credit advertisers when an issue misses its promised circulation by more than 2%.

To get its circulation figures out to advertisers more quickly, Time Inc. is ordering all its magazines to join Rapid Report, the online service introduced last summer by the Audit Bureau of Circulations.

What others are doing

Adoption of both Rapid Report and issue-specific rate base until now has been uneven at best. Hachette Filipacchi Media U.S., which publishes magazines such as Woman's Day and Elle, has chosen to enter all its titles into Rapid Report but to set a general policy of guaranteeing only averaged circulations. Condé Nast has two titles in Rapid Report and doesn't want to talk publicly about its approach to rate base. Rodale has most of its books on Rapid Report; but when the publisher of one, Men's Health, said he was giving some marketers issue-specific guarantees, Rodale quickly made clear that he spoke only for himself.

Alpha Media, under the new management of CEO Kent Brownridge, is adopting both issue-specific guarantees and Rapid Report for Maxim and Blender. (Just last week, Mr. Brownridge went so far as to call other publishers "wimpy" and "pathetic" for not adopting issue-specific guarantees and Rapid Report.)

Now Time Inc.'s sheer size is likely to tilt the landscape irrevocably toward the faster, more precise metrics advertisers have asked for in negotiations. Its two dozen magazine brands in the U.S. include People, Time, Sports Illustrated, InStyle, Entertainment Weekly, Real Simple, Golf, Money, Sunset, Essence and This Old House.

Reached for comment, a Time Inc. spokeswoman confirmed that the company was entering its titles into Rapid Report by the end of the year. "We look forward to offering our advertisers the most up-to-the-minute circulation data as it becomes available," she said.

She declined to comment on the issue-by-issue circulation guarantees.

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