The circulation levels of audited consumer magazines for the second half of
2008 was relatively stable—down less than one percent (to 275.8 million) from the same
period in 2007. This is one of the lowest rates of descent since 2000,
the year industry circ levels peaked.

Although the industry’s circ level remained surprisingly flat, it
should be noted that Reader’s Digest introduced four magazines for audit
with a combined total of 4.5
million circ. Excluding the effect of the four newly-audited titles, the industry circ level would have declined 2.3 percent,
which matches the average annual circ erosion since peaking in 2000.

Circ Levels Remain Too High

The slight decline does not seem nearly enough for an
advertising-depressed industry still, in many instances, clinging to an
advertising-driven model for setting circ levels. To be sure, some
publishers are demonstrating circ level discipline. There were nearly
three times as many publications whose circ levels decreased by 5
percent or more than those that rose by a similar amount, and there
were 33 titles that decreased circulation by 50,000 or more in the second
half of 2008, including major decreases at Reader’s Digest (1,154,000),
U.S. News (454,000) and Newsweek (407,300).

But the positive signs of circ level caution were mitigated by the
industry’s rising appetite for verified and other
circulation sources, especially partnership, loyalty, combination and
paid sponsored circ. Based on a review of the 23 top circulation
companies (which account for 76 percent of the magazine industry’s circ) it’s
estimated that industry use of verified and other so-called "Paragraph 6" circ
increased by 8.5 percent, or nearly 3 million, in the second half of

The consumer magazine industry generally remains conflicted about
how to establish optimal circ levels. Many titles are in the beginning stages of applying greater circ level discipline. Yet many others
continue to thirst for alternative sources
while holding on to bloated circ levels.

Measuring Optimal Circ Levels

There, of course, is no fully accurate means of measuring optimal
circ levels for all audited publications. Optimal level criteria can
vary by publication, market and competitive circumstances. However,
there is sufficient public information available to develop a
preliminary circ level test for individual titles that provides a
“ballpark” circ level stress test result. In that regard I’ve developed
a simple circ stress test employing the four basic criteria:

1. Newsstand Sales Performance the Last Two Years. Red flag alert for sales declines of 20 percent or more.
Paragraph 6 Source Usage.
Red flag alert for titles with greater than 25
percent of their total paid/verified circ from paragraph 6 sources
(industry average usage is 14 percent).
3. Average Subscription
Red flag alert for monthly (and less frequent) titles with
average subscription prices that are less than $1 per issue. For
fortnightly and weekly publications the red flag alert sign is 80 cents per
4. Excessive Verified/Paid Circ Levels. Red flag alert for
publications whose circ levels are more than 20 percent higher than
others in the category.

One red flag might indicate cause for circ level concern. Two or
more red flags indicate that a title is probably a good candidate for
closer circ level evaluation.

Stress-Testing the Top 5

There are five companies with aggregate audited paid/verified
circulation of 19 million or more: Time Inc, Meredith, Hearst, Condé Nast and Reader’s Digest. They reported a combined 126 million
paid/verified circ in the second half of last year, and accounted for 46
percent of the industry’s total audited paid/verified circ.

These companies have an immense influence on how consumer magazine
circ is practiced in the United States. However, they have not always
been prudent in their circulation practices. These companies are, in
effect, the standard bearers for the advertising-driven model for
establishing circ levels that still pervades the industry.

I found, not to my surprise, that a number of the titles published
by these companies earned red flags. A total of 48 out of 72 titles
received at least one red flag, 17 of which earned two or more red
flags. Those with multiple red flag titles are listed below with their flag
criteria definition shown in parenthesis:

1. Hearst: Good Housekeeping (newsstand sales decline,
excessive circ level), Redbook (newsstand sales decline, low sub
price), Smart Money (newsstand sales decline, excessive para 6 source
usage), and Town & Country (newsstand sales decline, excessive para
6 source usage).

2. Condé Nast: Allure (newsstand sales decline, excessive Paragraph 6 source usage, low sub price), Details (excessive paragraph 6 source
usage, low sub price), Golf Digest (newsstand sales decline, excessive
para 6 source usage), Golf Week (excessive para 6 usage, low sub price)
and Lucky (excessive para 6 source usage, low sub price).

3. Meredith: Better Homes & Gardens (low sub price, excessive circ level),
Family Circle (low sub price, excessive circ level), Ladies Home
Journal (newsstand sales decline, low sub price) and Midwest Living
(newsstand sales decline, low sub price).

4. Time Inc.: Entertainment Weekly (excessive Paragraph 6 source
usage, low sub price), Money (newsstand sales decline, excessive Paragraph 6
source usage) and Time (low sub price, excessive circ level).

5. Reader’s Digest: Reader’s Digest (newsstand sales decline, excessive circ level).

All five companies have some “two red flag” titles. However, two red
flags doesn’t necessarily mean the publication is a circulation basket
case or that it’s a prime candidate for extinction. Rather, it indicates
that the title is probably “over-circulated” and that a circ level
reduction should be considered.

Excesses Coming Home to Roost

Consumer magazine
circulation levels, much like credit card debts, were pushed too high.
The reality of those circulation excesses are now coming home to roost.
Many publishers are trying to come to grips with rectifying their
advertising driven circ level philosophies with the realities of a
diminished advertising market. Our simple circ stress test partially
revealed the extent (especially among America’s largest magazine
publishers) of the number of publications that remain candidates for
circ level reductions.

Decisions to lower circ levels can be excruciatingly difficult, but
current market conditions should help facilitate the ease of making
those decisions. If the inherent edit and business characteristics of a
publication are strong, the benefits of reducing circ levels could be
very positive—increased subscription pricing, less use of alternative
circ sources, improved circ profitability and, perhaps most importantly,
delivering advertisers a more targeted and better qualified reader.