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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.

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Consumer marketing sources say the vast majority of sponsored subscriptions currently claimed as paid — anywhere from 80 to 95 percent — will not meet the new, more rigorous definition. Such subscriptions will henceforth have to be claimed as qualified rather than paid, a category that advertisers have tended to regard with skepticism.

One consumer marketing director estimated that most major consumer magazines now report sponsored sales of anywhere from 25,000 to 150,000. Not surprisingly, the titles with the most sponsored sales are the ones frequently found in public places such as doctors' waiting rooms and beauty salons. Topping the list are magazines such as Newsweek (296,000), Time (284,000), Elle (130,000), Glamour (104,000) and Allure (100,000). In fact, nearly a quarter of Time's circulation of 4 million consists of copies sold through sponsorships, marketing partnerships and frequent-flier programs.

Brian Wolfe, president of Time Consumer Marketing, said Time Inc.'s magazines, including Time, will respond to the new rules by changing the way they sell some, but not all, of their sponsored copies. "With the stuff that's not public place, our intent would be mainly to get sponsors that have an affinity with the magazine and from whom we can get at least a penny per copy," he said. "Our intent would be to move the public place stuff into the qualified [i.e. non-paid] line and vigorously defend it as quality circulation. Our feeling is that, even though those subscriptions are not paid for by an individual, for an advertiser they are very high quality as they get a high number of readers per copy."

Another circulation executive agreed. "If you're an advertiser in Allure magazine, what could be better than having a woman sitting there reading it in a beauty shop?" But whether advertisers themselves will see it that way remains a question.

In addition to mandating rule changes going forward, ABC's board also voted to disqualify sponsored subscriptions sold through two different agents, EBSCO Consumer Magazine Services and InFlight Newspapers and Magazines Inc. The board voted at its March meeting to censure EBSCO for inadequate recordkeeping, while InFlight is the subject of a federal probe.

More than 80 consumer magazines will be affected by the decision to disqualify EBSCO-sold subscriptions reaching back to 2003. Many of those titles had applied for "exceptions," or exemptions, allowing them to claim the disputed copies as paid, but the board voted to deny those exceptions, and to rescind exceptions already granted to Business Week and the Canadian edition of Reader's Digest. According to a source close to ABC's board, the decision was made after scrutiny of EBSCO's records showed some publishers knowingly collaborated with the company to get around ABC rules.
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