Thursday, October 25, 2007

A Progress Report: Verified and Other Par. 6 Circ Sources

A Progress Report: Verified and Other Par. 6 Circ Sources
By Baird Davis

It doesn't appear as if the advent of verified circulation and the accompanying increase in circulation source transparency (ABC Statement paragraph 6) have had any appreciable impact on total paid/verified circulation levels. However, there has been a significant shift in paragraph 6 source distribution in the last year -- one that should be of interest to publishers and circulators. Let me explain.

The amount of verified circ employed by audited consumer magazines in the first half of this year was 10.8 million, or 3.9 percent of total paid/verified circ. This is almost exactly the amount of verified circ used (10.7 million) in the year previous period. But here's the change: it's down substantially from the amount of verified circ employed (12.4 million) in the second half of last year.

What's caused this rather significant fluxuation in verified circ usage?

It can only be explained by reviewing verified circ usage in context with all other ABC reported paragraph 6 sources. In order to facilitate this comparison, I compiled data on paragraph 6 source usage for the 22 companies with more than 2 million paid/verified consumer magazine circ.

This provides a representative industry sample, accounting for 74 percent of the consumer magazine industry's total audited paid/verified circ. (Anyone who would like a copy of this paragraph 6 data chart can contact me and I'll send it to you).

The data revealed an interesting phenomenon. It confirms the verified circ use slide (down 16 percent), but interestingly, it shows that the rise in other paragraph 6 sources-paid sponsored, partnership, loyalty and combination circ-balanced the verified circ decline.

The net effect is that total use of paragraph 6 circ sources in the last two six-month periods is nearly equal: 13.0 percent of total paid/verified circ in the first half of 2007 and 12.8 percent in the second half of 2006.

The sharp increase in verified circ, in the second half of last year, appears largely to be a result of a change in ABC regulations regarding partnership non-deductible circ. What happened is partnership non-deductible circ, previously reported as partnership circ in paragraph 6, was re-designated (and reported) as verified circ in the second half of last year.

However, this change alone does not reveal the entire paragraph 6 source distribution story. In the first half of this year, partnership circ usage sharply rebounded, reporting a 28 percent (1.1 million circ) increase over the previous six month period. It should be noted that "paid sponsored" circ usage also increased, although not as dramatically as partnership circ.

Some of the increase in partnership and paid sponsored circ in the first half of the year can be attributed to publishers anticipating the affect of yet another ABC rule change. This one will take effect with the first half 2008 ABC statements and involves the paid sponsored source.

In short, the consequences of this audit bureau change are that all paid sponsored circ designated as "public place," will instead be reported as verified circ. The relatively small portion of paid sponsored circ that is "individually addressed" will remain (for the time being) classified as paid sponsored circ.

The sponsored circ redefinition change could cause another temporary spike in verified circ, similar to the one precipitated by the partnership regulation change. However, the significant increase in other paragraph 6 circ source use in the first half of this year is a good indicator that publishers will try to avoid major verified circ increases by replacing a majority of any paid sponsored (public place) circ losses with circ from other paid paragraph 6 sources.

Paragraph 6 source use varies from publisher to publisher and title to title, but it now appears as if the consumer magazine industry has, at least temporarily, settled on a paragraph 6 usage ratio of about 13 percent of total paid/verified circ.

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