Frustrated by new rules passed two months ago by the Audit Bureau of Circulations , circulation directors charge that the industry group has failed to adequately explain the changes, which they believe are largely unnecessary in the first place.
The rules pertain to sponsored sales;copies or subscriptions purchased by third parties to promote their businesses. The ABC board, hoping to reinforce advertiser confidence about circulation figures after a string of public overstatements, narrowed the definition of an eligible sponsor to organizations that directly sell goods or services to consumers and said that sponsors must actually pay more for a subscription than any refunds or advertising credits they might receive in return for their purchase.
Neal Lulofs, ABC’s vice president of corporate communications, says it’s simply about making sure that circ from these partnerships has an appropriate sponsor. “Some sponsor programs haven’t always had that in place. They’ve had a third-party sub-agent or a financial relationship with either a publisher or agent. What the buyers, not the auditors, have been pushing for, is a tightening of that rule to ensure that the sponsor has a legitimate marketing purpose.”
In a separate action that will cause circulation revisions at more than 100 magazines, ABC also disqualified sales by agents, EBSCO Consumer Magazine Services and InFlight Newspapers and Magazines Inc., because their transactions lacked either proof of payment or qualified sponsors.
Magazines Vent Over New Rules
“I hate the new rules,” says Michael Sheehy, circulation director for Wenner Media, which publishes Rolling Stone , US Weekly and Men’s Journal , none of which will revise their circulation totals. “They’re terrible for publishers because our goal is to be able to put our product in as many hands as would want to read it and pay for it.”
For the same reason, Sheehy says, the new rules also are a bad deal for advertisers, the group, according to ABC, that has called for the changes. “The only institution that these rules are good for is ABC, who’d like to be able to neatly and cleanly account for everything under the circulation sun,” he says. “It has been frustrated because public-place copies are not neatly tied up [in audits]. The whole industry has understood that.”
The rules on sponsored subscriptions are particularly tough on Brook Holmberg, consumer marketing director for Yankee, because between 10 percent and 20 percent of its 500,000 circulation comes from publicly placed copies. “The rules aren’t necessarily the problem, it’s how they’re being communicated and implemented,” Holmberg says. “They could be more deliberate and less reactionary. The vendors who distribute waiting-room copies are completely in dark about this.” Without easy access to sponsored sales, he says he’ll have to spend more now on direct mail or insert cards to manage his rate base.
An extra hurdle is juggling two different timetables. For sponsorship programs in place prior to July 18, circulation may continue to be reported as “paid sponsored” for issues up to June 30, 2006. But agreements reached after July 18 must comply with the new rules beginning Jan. 1.
And, there’s one more complication with the rule on sponsored sales: Those that do not meet the new definitions may be classified under a new “qualified” circulation category on the publisher’s statement next June, but the ABC board still hasn’t figured out all the details.
“We’re in a panic about some of those things. It’s not clear what kind of sponsors are acceptable,” says Rebecca Sterner, a circulation consultant who’s advised Utne and Yankee magazines as well as Ehlert Publishing .
Punishing All For Actions of Few?
“The [ABC] board has been embarrassed by people who broke the rules,” Sheehy says. “There hasn’t been a problem with the rules, it’s been with compliance, and in some cases with general honesty.”
Lulofs, however, counters that ABC is channeling the industry’s wishes, not the other way around. “These aren’t changes being made by a group of auditors in Illinois, this is an industry forum. The entire organization is built to facilitate this discussion, and the changes are a result of that debate and frankly driven by advertisers because they have been placing more demands on circulators to be more transparent.”
The rising cost of ABC audits;Sheehy says they’ve jumped as much as 40 percent to 50 percent over the past few years;has some publishers contemplating a change, despite the perception that ABC is the auditor of consumer titles, while BPA Worldwide is b-to-b-centric.
Business Week decided last year to use both auditors. The magazine, which had to revise its 2004 audit last month by 58,121 subscriptions because of the EBSCO disqualification, says it wants to improve transparency of its circulation data and complete audits more quickly, citing BPA’s record of finishing 97 percent of its reviews within six months of circulation statement filings.
Lulofs says an ABC audit can last six months to a year depending on the records available and whether a publisher wants to question any adjustments at a board meeting. While the ABC board would like to speed up the process;it has increased its full-time audit staff by 15 percent in recent years to about 150;the 2002 Sarbanes-Oxley law has required some practices to be more rigorous, and that takes time.