Rate Bases Threatened As ABC Tightens Grip On Magazine Publishers

"Confusion and panic," was how one circulation executive characterized the reaction of publishers to news issuing Tuesday from the ABC.

View Slideshow
NEW YORK — "Confusion and panic."

That was how one circulation executive characterized the reaction of publishers to news issuing Tuesday from the Audit Bureau of Circulations, the chief organization monitoring newspaper and magazine sales in the U.S.

"Confusion" because, while ABC's board decreed major changes in the way certain types of subscription sales will be classified moving forward, it failed to spell out many of the particulars publishers will need to know before they can come into compliance.

"Panic" because, depending on what ends up in the fine print and how auditors choose to enforce it, the impact could include higher consumer marketing costs, lower advertising revenues, fines, censure or even legal action.

The actions taken by ABC's board at its meeting last weekend were principally aimed at tightening its rules for how and when subscriptions delivered to consumers and underwritten by a third party can be claimed as paid. These are so-called sponsored sales, typically handled by an independent agent. The new rules constitute an attempt to clean up one of the murkier areas of magazine circulation, one that has been the source of several recent circulation scandals and has even drawn attention from the U.S. Department of Justice.

That attention, along with the heightened atmosphere of corporate scrutiny ushered in by the 2002 Sarbanes-Oxley Act, provided the impetus for the rule changes, said Michael K. Moran, ABC's executive vice president of auditing services, in a telephone press conference Tuesday.

"I think it's fair to say the ABC board is aware of the environment in which all businesses are operating now, and of how accounting and being accountable has become an area of high sensitivity," he said.

The cost to publishers of this new transparency remains to be seen, but it will be significant for many. "They're going to have to change the way they do business and do it fast," said one publishing executive with close ties to ABC. "The circulation directors are really going to have to scramble."

The rules announced yesterday, which go into effect with January 2006 issues, mandate that, to qualify as paid, sponsored subscriptions must be sold by publishers for a positive price "net of all considerations." Current rules make it possible for publishers to claim as paid virtually all sponsored subscriptions, even if the publisher pays more in marketing fees than it gets back in subscription revenue. The new rules also restrict eligible sponsors to companies that market directly to consumers.
View Slideshow
Page:  Next »
load comments


Sign in using your Facebook or Twitter account, or simply type your comment below as a guest by entering your email and name. Your email address will not be shared. Please note that WWD reserves the right to remove profane, distasteful or otherwise inappropriate language.
News from WWD

Sign upSign up for WWD and FN newsletters to receive daily headlines, breaking news alerts and weekly industry wrap-ups.

getIsArchiveOnly= hasAccess=false hasArchiveAccess=false