FOLIO: BLOGS Baird Davis

Newsstand Difficulties Persist, But There Is Hope

Matt Kinsman — Thu, 18 Aug 2011 09:57:12 -0400

The speed of the newsstand sales slide is intensifying. And that's very scary. In the first half of 2011 the unit sales of audited consumer magazines fell 10.7 percent to 329.7 million and retail revenue declined 10.6 percent to $1.272.0 million. Since 2001 unit sales have declined 47 percent and retail revenue has fallen 30 percent.

The decline is breath taking, but by now it's certainly not news. The newsstand channel is seriously troubled, but even in its darkest hour there's opportunity for publishers that are not faint of heart. There will be rewards for publishers that can read the tea leaves, properly interpret the trends and act decisively. Let's look at some recent developments as a means of achieving future insight.

Hearst and American Media Increase Their Newsstand Commitment
Hearst buys the Hachette publications and increases its newsstand revenue market share by over 10 percent. American Media takes control of Source Interlink's two soap publications (Soap Opera Digest and Soap Opera Weekly) and acquires OK! Weekly from Northern & Shell and increases its revenue market share to 16 percent. These two market leaders have made major newsstand commitments-certainly positive signs for a troubled industry.

The Pace of Publisher Consolidation Continues to Rise
The six major newsstand publishers (Time, Inc., American Media, Bauer, Hearst, Wenner, Conde Nast) now control 78 percent of all unit sales of audited consumer titles, up from 71 percent a year ago. The newsstand channel influence of these six companies will only increase in the years ahead. But other publishers can survive on the margins if the bigger players do the heavy lifting necessary to effect much needed newsstand channel reform.

Weekly Celebrity Titles Losing Appeal
These titles previously helped sustain newsstand sales. But in the last year they have lost some of their appeal. Their combined unit sales were down 15.7 percent in the first half of this year. But their market influence is still big. They have a massive 30 percent share of the audited consumer magazine market so their recent sales decline has had a huge dampening effect on the market as a whole. However, in the newsstand's zero sum environment it's very possible they have left room for other titles to prosper.

Rise of Low Priced Women's Titles
Three low cover priced (less than $2.50) women's titles (Woman's World, First and All You) have prospered in this down market. They now represent a significant 15 percent of all audited publication unit sales. In the first half of the year their aggregate unit sales were flat and their retail revenue increased 1 percent. They are a model of how to prosper in this market and their low price appeal is an indicator of the price sensitivity of this market.

Checkout Versus Mainline Sales
Checkout sales (68 titles) fell 10.5 percent, slightly below the market average, while mainline sales decreased a little more than 14 percent. As bad as things were at the checkout they were even worse on the mainline. Retail chains concentrate their efforts at checkout to the detriment of the mainline. More publisher effort in developing new retail outlets is required in order to reverse this trend.

Male Titles Suffer the Most
Male oriented titles now represent only about 20 percent of total sales, down from 27 percent ten years ago. The decreasing demand for male titles has helped accentuate the decline of mainline sales. This is a stark reminder that the newsstand is primarily about selling women's titles.

Electronic Editions Beginning to Impact Newsstand Sales
Wired is, perhaps, the best example of this new phenomenon. It's believed that Wired per issue newsstand sales were about 67,000 to 68,000 in first half of this year. But they showed single copy sales of 82,000 on their ABC report. This might be an extreme example, but clearly replica edition sales are going to start eating away at the newsstand sales of many other titles.

Wholesalers in Cost Containment Mode
Wholesalers are concentrating on reducing costs to the detriment of sales. Publishers should be cognizant of how their actions affect sales.

Computer Assisted Distribution Systems Hold Promise
Publishers are discovering new opportunities for improving efficiencies by using computer assisted distribution systems driven by MagNet and/or wholesaler direct data. These systems are available at all national distributors and in some instances used directly by publishers. Their use is in its infancy and it's expected that they will be much more effective over time. They hold out the real possibility of significantly increasing the industry efficiency levels, which would be a huge boost.

What Does It All Mean For Publishers?
The newsstand market is shrinking and morphing in some unexpected ways. But publishers, like Hearst and American Media, that stay committed to the business and are able to adapt to changing conditions are likely to prosper at the newsstand in the years ahead.

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Market Bellwethers Point to a New Consumer Magazine Era

Wed, 14 Jul 2010 09:19:43 -0400

Contrary to popular belief the sky is not falling on the consumer magazines business. It might not be all peaches and cream, but industry performance markers have fallen into a symmetrical pattern that describes a permanently smaller industry, one that is now properly sized and prepared to meet the competitive media challenges of a new era.

Market Bellwethers Converge

A strange thing happened to the consumer magazine busidness near the end of 2009. The three major market bellwether performance indicators (circulation levels, newsstand sales, advertising sales), which had been sending mixed signals in recent years, simultaneously aligned.

Circulation Levels: In the year 2000 the circulation of audited consumer magazines peaked at 312 million. At first the circ level declines were gradual. But in the last few years the decreases have become much more acute. By the end of 2009 the circulation of audited consumer magazines had plunged to 251 million, a drop of 22 percent.

Newsstand Sales: Newsstand unit sales have been steadily declining for decades, but revenue remained stable, at about $3.2 billion, for the 8 year period prior to 2008. But in the last two years industry newsstand revenue of audited consumer magazines fell to an annual level of approximately $2.7 billion—off about 16 percent.

Advertising Sales: Advertising revenue of audited consumer magazines also declined, by just over 20 percent in the last two years.

I’ve used PIB data for this calculation. Although PIB revenue can’t be taken at face value, the year over year percentage change data is a useful measuring tool. Additionally it should be noted that PIB does not report on all audited consumer magazines, but it remains a reasonably representative industry sample because the 188 continuously audited consumer magazine titles reported by PIB in 2009 accounted for 81 percent of the circ of all audited consumer magazines.

The chart below (in 000s) compares 2008 and 2009 PIB advertising revenue for all the continuously* audited consumer magazines, including the “Big 4”—Time, Inc. Conde Nast, Meredith and Hearst.

(* “Continuously”refers to publications that reported advertising sales to PIB in all four quarters of both 2008 and 2009. It excludes 21 titles that discontinued publishing and/or did not report ad sales in all four quarters of 2009. By excluding non-continuing PIB publications from this analysis it provides a more representative (less skewed) picture of the industry’s true advertising sales performance.)

In 2008 PIB revenue for continuously audited consumer titles fell an estimated 8 percent and in 2009 it dropped 13.8 percent. In the last two years the decline of PIB ad revenue for audited consumer magazines has been approximately 21 percent.
The pace of the advertising decline was slower to manifest itself, but by the end of 2009 its descent (21 percent) fell right in line with industry circulation level and newsstand revenue decrease rates.
Touching Bottom: Defining New Industry Parameters
The simultaneous convergence of the three major bellwether indicators, along with signs of a modest advertising recovery in 2010, flattening newsstand sales and the success of a major new publication (Food Network), provide persuasive evidence that the consumer magazine industry is no longer searching for the bottom. The industry appears to have weighed anchor on a smaller business—whose parameters are 20-25 percent smaller—but one that’s ironically, perhaps, more vibrant than the bloated environment they have vacated.
New Directions for Consumer Magazines
As a result of its bruising descent the industry is battle scarred and less arrogant. But it’s also leaner, wiser, a more effective consumer and audience development marketer, less advertising-centric and better prepared to cope with the demands of new media and the startling advances in technology.
These developments have conspired to change the consumer magazine publishing business in significant and subtle ways.
Industry Consolidation: The ravages of the last two recessionary years have not fully worked their way out of the system. This means that further industry consolidation can be expected.
Influence of the “Big 4”: These four supersized companies control (end of 2009) 56 percent of consumer magazine advertising revenue (60 percent in the 4th quarter of 2009). Their circulation, newsstand and advertising dominance is likely to increase in the future. Because of their scale, strong product lines and abundant human and financial resources they are well advantaged to successfully transition to a publishing model that is less advertising driven. Still to be determined, however, is how responsibly they’ll act to protect the industry’s open business environment and shared resources (i.e. the newsstand channel).
The Big Get Bigger, The Small Get Squeezed: The business climate has become increasingly unfriendly for smaller publishers. They’ve enjoyed somewhat of a free ride in the past, but now they’re being squeezed harder than ever by most magazine service providers—postal, fulfillment, national distributor, printing/paper and banking. Their operating expenses are rising and at the same time it’s become more difficult for them to attract the skilled personnel necessary to provide the array of new consumer marketing services and information demanded by advertisers. Judging from advertising sales the last two years and the record number of small magazine closures it appears as if smaller titles (especially those that are male oriented) are increasingly vulnerable when competing with alternative electronic media sources for both readers and advertisers. Finally at the newsstand retailers are looking to reduce the number of “underperforming" titles, which will definitely restrict the future newsstand distribution of smaller titles.
Publication Preference Change: The prospect of publication preference changes will probably be most dramatically illustrated by the growing divide between female and male oriented titles. Female publications generate two times more advertising revenue and circulation than male publications. In 2009 female oriented publications further distanced themselves. It’s estimated that the advertising revenue of the 69 continuing PIB male oriented titles declined 21 percent, while the PIB advertising revenue of female oriented titles declined at a much lower—11 percent—rate.
In the women’s field the best advertising performance was reserved for those titles whose advertising featured products/services for the home, including food and health. The often disparaged traditional women’s titles (BH&G, Good Housekeeping, Family Circle, Woman’s Day, Ladies Home Journal, Redbook) were the only significant sized consumer magazine category that was able to post positive advertising results in 2009—advertising revenue up 4.4 percent. The advertising shift toward “for the home” publications will probably be accompanied by a commensurate change in reader product preferences.
For most male categories the news was universally grim. Advertising revenue declines of 20 percent or more were the norm. There were 25 continuously audited consumer titles that registered PIB ad sales gains in 2009, but only two (Muscle & Fitness, Flex) were male oriented.
Ascendancy of Consumer Marketing: The advertising decline of the last two years has muffled the appeal of the advertising-centric management approach that pervaded most consumer magazine publishing companies for the last two decades—so much for conventional wisdom. Publishers now recognize that to more effectively compete with new media sources they must demonstrate greater consumer awareness. This has precipitated renewed emphasis on developing strong consumer and audience development marketing skills. This is a major change; one publishers are just now coming to grips with.
The Future
The consumer magazine business of the future will be; smaller, more “Big 4” dominant, increasingly women focused, less kind to smaller publishers, multimedia sensitive and more consumer oriented.
After nearly a decade of trial and error, the industry now appears ready to confidently face the future. Nobody has articulated the essence of this remarkable change better than Mr. Charles Townsend in his recent address at the MPA/PBAA Retail Conference. And who better than the head of Conde Nast, a company that has, arguably, been the most chastened by the advertising turndown, to verbalize this dramatic change. Mr. Townsend spoke of the death of the advertising-centric publishing philosophy and the renewed emphasis on the consumer. Most importantly Mr. Townsend, using the iPad as metaphor, spoke of publishers finally getting beyond their fear of electronic media. He suggested that new technology, like the iPad, should be embraced, rather than feared by publishers. He described it as a means of attracting new readers, with very few adverse ramifications.

My calculations, observations and beliefs confirm that Mr. Townsend probably has it right. The stars and the bellwethers have aligned and I believe history will show that 2010 marks the start of a new, and exhilarating, era for the consumer magazine business.
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The Changing Face of Top 10 Checkout Titles

Wed, 11 Mar 2009 15:23:44 -0400

Many titles are sold on the newsstand, but it’s the performance of 10 publications—the top 10 checkout titles—that define the market.
Eight years ago, the top 10 titles accounted for nearly half (46.8 percent) of the unit sales of all audited publications. In the second half of 2008 the top 10 titles still accounted for about half (46.3 percent) of unit sales for all audited publications.
The unit sales impact of the top 10 titles has remained stable, yet the makeup, frequency and cover pricing of these publications has dramatically changed.

A comparison of top the 10 titles from the second half of 2000 to the second half of 2008 helps illuminate the effect of these changes. Several distinct developments should be noted:

1. Cover Prices Increased Dramatically
In 2000, eight of the top 10 titles, were priced below $3. In 2008 only one title was priced below $2.99 (Woman’s World). The average price of the top 10 titles surged 67.3 percent from $2.02 to $3.38. This compares to more modest price increase rates of 21.3 percent for other checkout publications and 20.4 percent for all the other audited titles during this period.

2. Publication Frequency Increases
In 2000, seven of the top 10 titles were weekly and three were monthly frequency. Their average annual frequency was 41 issues. In 2008 only one monthly title (the mighty Cosmopolitan) remained in the top 10. During this eight year period the average annual frequency of top 10 titles rose from 41.0 to 47.6 issues—a frequency increase of 16.1 percent.

3. Unit Sales of Top 10 Titles Decline in Equal Proportion to the Market
Between 2000 and 2008, unit sales of the top 10 declined 28.9 percent, approximately the same rate of sales decline experienced by all other audited titles.

4. Revenue for Top 10 Titles Rises, All Others Decline
Unlike unit sales, the revenue of the top 10 and all other titles diverged. The revenue of the top 10 rose 18.8, but the revenue of all other publications declined 12.4 percent.

Lessons Learned from Top 10 Title Sales Trends
There is much to be learned from the changes occurring among the top 10 newsstand titles.

1. Weeklies Are Preferred
At the checkout, weekly frequency publications now clearly dominate. Among other things the shift to weeklies has adverse processing and handling ramifications for wholesalers and retailers.

2. Higher Cover Prices Are the Norm
Although higher cover prices have undoubtedly precipitated the unit sales decline, they have become the new checkout sector norm.

3. Checkout Sector Is Zero-Revenue Based
High cover prices have helped increase revenue for the top 10 publications. Conversely this has translated into lower revenue for all other titles in the checkout sector. This helps confirm the belief that the checkout sector (indeed, probably the entire newsstand market) is zero-revenue based. That is, individual title revenue can rise or fall, but the sector/market revenues will remain unchanged.

4. Higher Cover Prices Mean Fewer Multiple Title Purchases
Higher cover prices for the top 10 titles has meant less multiple title purchases. This has contributed to the unit sales decline.

5. Strong Titles Benefit from Higher Competitive Pricing
Strong titles (number one or number 2 in the category) will benefit from higher pricing by their competitors. People magazine is a good example.

6. Monthly Frequency Titles Have Been Marginalized at Checkout
As the influence of weekly titles has grown, it has adversely affected the sales of monthly publications, especially the more mature women’s titles.

7. Publications with High Newsstand Circ Ratios Ascend
All the top 10 publications have newsstand to subscription circ ratios greater than 40 percent and high subscription pricing—this was not so eight years ago. It now appears as if there is no longer room at the upper echelons of the newsstand market for titles whose circ is top-heavy with deeply discounted subscriptions.

Top 10 Checkout Titles: 2nd Half 2000
1. People
2. TV Guide
3. National Enquirer
4. Star
5. Woman's World
6. Cosmopolitan
7. Globe
8. Soap Opera Digest
9. Woman's Day
10. Family Circle

Top 10 Checkout Titles: 2nd Half 2008
1. People
2. US
3. In Touch
4. Star
5. Woman's World
6. National Enquirer
7. Cosmopolitan
8. OK! Weekly
9. Life & Style
10. Globe
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Analysis: Second Half 2008 Newsstand Sales Vanish

Wed, 11 Feb 2009 17:22:40 -0500

In the last week the fragile newsstand distribution system has essentially broken down. Two of the four major wholesalers have, in effect, exited the business. Publishers and the remaining wholesalers are scrambling to pick up the scattered pieces. If this wasn’t enough, the recently-released second-half 2008 ABC and BPA newsstand sales data revealed (based on a preliminary analysis) that the unit sales of audited publications fell a devastating 14.9 percent and the revenue declined a record 6.7 percent.

The story behind the dysfunctional newsstand distribution business is so convoluted that it makes Tim Geithner’s stimulus plan explanation seem clear by comparison. But regardless of its complexities one thing is sure—there is plenty of blame to go around for the collapse of the distribution channel. It includes wholesalers seeking massive unilateral price increases and a ranting former channel partner that apparently would rather sue than try to find a reasonable solution. Equally culpable are the publishers and their National Distributor representatives that have allowed, largely for competitive considerations, channel conditions to reach these devastating proportions.

However, the second half sales data shows there are other considerations besides a crumbling infrastructure that are troubling the newsstand industry. Prior to the recent distribution system meltdown, the sales declines reached epic scale in the second half of last year. In the last decade unit sales have fallen an average of about 3 percent per year while revenue decreased only about 0.3 percent annually. In the first half of last year the pace of unit sales decline began to accelerate at a slightly faster rate. This deterioration can be traced to record cover price increases, especially those initiated by Bauer, the industry’s unit sales leader. But in the second half of last year the relatively minor sales erosion trend turned into an avalanche. There is no doubt that poor economic conditions have acerbated the situation But dramatic cover price increases, which grew by a record 9.7 percent (from an average of $3.52 to $3.86), have accelerated the sales decay. Publishers who are keenly aware of the inelasticity of subscription pricing seem to have ignored that principle in regard to cover pricing. The lack of cover pricing discipline has come back to bit publishers in the behind.

Checkout Titles Get the Worst

The sales slide in the second half of last year affected nearly every publisher and every magazine category. However, the adverse effect was most pronounced among checkout titles. Checkout sales, which account for about 70 percent of the newsstand revenue of audited publications, drive the newsstand market. Within the checkout sector, the sales of celebrity titles have the greatest influence.

Over the last five or six years, celebrity titles have lead a newsstand sales surge. But the celebrity sales bubble may be ready to burst. In the second half of last year the unit sales of the six major celebrity titles (People, US, In Touch, Star, OK!, and Life & Style) declined 20.3 percent, and experienced its first ever revenue fall—6.9 percent. Among the celebrity titles People sales were the anomaly. Its unit sales were relatively stable (declined only 0.8 percent), but the sales of the other five titles in the celebrity category fell a combined 27 percent. This decline appears to be a result of the 2007 mega-price increases (50 percent) for the two Bauer celebrity publications In Touch and Life & Style.

These pricing changes have been a market catalyst for reducing the number of multiple title purchases and concentrating sales on People to the detriment of the other celebrity publications. This, in turn, appears to have had an adverse impact on the sales of non-celebrity checkout titles, whose unit sales fell a steep 15.9 percent. Among the 68 checkout titles only 6 reported unit sales gains—In Style, Time, Newsweek, Vanity Fair, Vogue and the beleaguered Entertainment Weekly. The newsweeklies, which have struggled for the last few years at the newsstand, were helped in the second half of last year by the intense interest in the Presidential campaign and the Obama-effect (Economist was also one of a handful of titles whose unit sales rose).

The sales of publications sold on the mainline, however, declined only a relatively modest 5.3 percent in units and 2.9 percent in revenue. This performance, although not robust, was inline with recent mainline sales results. Mainline sales were helped by the fact that its publications only increased average cover price by 2.5 percent in the second half of last year. This compares to the massive 11.5 percent cover price increase for checkout titles.

Sales Erosion Wide-Spread Among Publishing Companies

The sales decrease was greatest among checkout titles, but nearly all publishing companies suffered sales difficulties. Among the top 50 newsstand companies only three—Newsweek, Economist and Lindy’s—reported unit sales increases. In many instances the sales declines were huge. For example, among the top 10 companies everyone experienced a unit sales decline. Six of the top 10 companies reported declines of more than 20 percent—#2 Bauer 22.9 percent, #4 Hearst 25.5 percent, #5 Wenner 22.4 percent, #7 Source Interlink 22.8 percent, #8 Meredith 21.5 percent and #9 Northern & Shell (OK!) 20.8 percent. The units sales of #3 American Media were off 14.3 percent and #6 Conde Nast reported a 10.0 percent decline. Only #1 Time, Inc. and #10 Rodale came through relatively unscathed with modest declines of 2.4 and 4.5 percent respectively. These results clearly show that size alone does not provide protection against the ravages of a volatile market.

Put Differences Aside

Cavalier cover price increases and harsh economic conditions lead to record sale declines in the 2nd half of 2008. But those declines will look small in comparison to the havoc that is likely to ensue as a result of a partially collapsed newsstand distribution channel. The distribution system is precariously close to imploding. It’s now up to National Distributors to put petty differences aside and demonstrate the leadership to find a more permanent solution for stabilizing the magazine newsstand distribution channel. There’s a lot at stake here – the time for rescuing the toxic newsstand channel assets, without government intervention, is now.
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Distributor’s Threats of Armageddon Leave Publishers in Uneasy, Defensive Position

Wed, 21 Jan 2009 15:24:18 -0500

Thank goodness for the Anderson family. Their Anderson News Company can be counted on for keeping the fascinating newsstand fable alive with their periodic threats of Armageddon. What would the industry do without them?
Well, the magazine industry might soon have to face that reality—and it’s an unpleasant one.
Truth be known, many of Anderson’s wounds are self-inflicted. In the 1990s, the Andersons saw the dramatic changes occurring in the magazine distribution landscape as an opportunity to greatly expand their successful regional wholesaling operations. They were banking on synergies of scale and a core belief in the superiority of their operating practices. Instead, they discovered that regional success does not necessarily translate on a larger scale and retailers, not wholesalers, dictate the channel rules. The grand Anderson strategy has been a big disappointment. They have since pulled back from their most far flung geographic excursions. Overall, it has been a humbling lesson in business hubris.
Anderson’s actions have always been defined by a strange naiveté about both the magazine and retail industries which they serve. Their latest initiative is no exception. In it, they “mandated” an across-the-board price increase (with no publisher quid pro quo) and in classic Anderson fashion included an ominous threat about closing their magazine wholesaling doors if a significant number of publishers don’t go along with it.
This latest Anderson broadside, no matter how crude, has left publishers in a very uneasy defensive position with a Hobsonian choice. Yes, there does seem to be some sentiment among national distributors and publishers to call Anderson’s bluff.
However, an Anderson family departure from the magazine wholesaling business would leave a gaping hole in the distribution pie. Many of the major retail chains currently serviced by Anderson can probably be accommodated (over time) by other wholesaler organizations. News Group, Source Interlink and Hudson News are undoubtedly waiting anxiously in the wings for the chance. But make no mistake, an Anderson departure would be a traumatic blow for publishers.
While Anderson was struggling, the self-absorbed brotherhood of publishers (i.e. national distributors) failed to address the gravity of channel conditions. It’s almost as if publishers were in a time warp—trapped by a nostalgic yearning for yesterday. They have been unable to adjust to the unalterable fact that magazine distribution ground rules have changed dramatically in the last decade. The major chain retailers now set most of the industry's operating and financial parameters. Wholesalers, for the most part, have agonizingly adjusted to the new channel order.
But national distributors have chosen to ignore the effect of change, often blaming wholesalers for their own woes. As a pragmatic negotiating ploy, this might be considered good strategy. But the tough-guy stance of national distributors now appears to be a relic of the past—one that’s caused publishers to miss a critical opportunity to direct much needed channel reform to their advantage.
The classic struggle between retailers, wholesalers and publishers is nearly as old as time. The Greek Aesop’s fable, "The Lion’s Share," captures the essence of this conflict. In it, the lion (in this case, the retailer), the fox (wholesaler) and the jackal (publisher) go hunting, kill a deer and divide it into 4 pieces. The lion (retailer) takes three quarters and leaves the fox (wholesaler) and jackal (publisher) to fight over the remaining quarter. The battle for the remaining quarter is a test for survival in the treacherous, yet nourishing, forest.
That’s the Aesop question—can wholesalers and publishers, like the fox and the jackal, find a way to equally divide the remaining quarter? If they can’t, they’ll soon find that life outside the forest is less appetizing.
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Why a Dramatic Cut in Newsweek’s Rate Base Makes Sense

Tue, 09 Dec 2008 15:17:29 -0500

RELATED: Newsweek Mulls Dramatic Drop in Circulation
As we all know by now U.S. magazine circulation has been greatly expanded over the last 20 years to meet rising advertising opportunities. This growth has been achieved largely by acquiring a much greater percentage of "non-renewable circ" than publishers had previously employed. The expansion of "non-renewable circ" combined with reduced reader demand (read: Internet) has lowered circulation profitability and reduced "reader quality" for nearly all U.S. magazines. However, the effects of these rather dramatic changes were partially camouflaged by a strong advertising climate. When the advertising bubble burst in '08—coupled with a steep increase in paper and postal expense—the industry's circ weaknesses were starkly exposed.

The question now facing many publishers, including Newsweek, U.S. News and Time, is to find circ levels that are more commensurate with reader demand. Many publishers will be forced to reduce their circ levels and this will initially involve lowering their dependence on "non-renewable circ." Typically this could mean reducing subscription agent orders, whose prices per order range from $1 to $5/$6 and convert at 5 percent or less. In the first year this would enable most publishers to substantially lower levels. In succeeding years most publishers will then have to increase their percentage of direct sold/renewable subscriptions (direct mail, Internet, inserts, renewable agent orders) in order to create a more favorable subscription source mix. A possible benefit of lowering circ levels by decreasing dependence on "non-renewable" subscriptions would be a positive impact on newsstand sales.
By the Numbers

A review (based on ABC first half '08 Publisher's Statements) of the Newsweek circ situation revealed some difficulties, especially when compared to Time. Newsweek has employed a high percentage of so called "paragraph 6" (loyalty, partnership, sponsored, verified) circulation. This excludes the combination source, which is also reported in paragraph 6. In the first half of the year, Newsweek reported 452,000 in circulation from these sources (16.5 percent) of their total paid/verified circ level. This heavy paragraph 6 usage compares to Time's relatively modest 225,000 (6.6 percent) of their paid/verified level.
Another concern is Newsweek's newsstand circ—a good barometer of reader demand—which has fallen to 83,000, down from 147,000 four years ago. Time's newsstand circ has also fallen to 96,000, down from 163,000 four years ago. Another possible sign of Newsweek circ distress is their very high estimated average subscription term—22 months—compared to 14 months for Time.
In this case Newsweek's emphasis on long term subs is probably an indicator, compared to Time, of greater dependence of "non-renewable" circ. It should also be noted that Time is advantaged by being part of larger publishing group than Newsweek. This provides Time a natural advantage because of such company assets as ownership of subscription agencies (Synapse, Quality School Plan) and the scale provided by a large cadre other titles. The advantage of scale has, among other things, partially enabled Time to attract 234,000 "combination" orders (which are generally considered "renewable" orders) during a period in which Newsweek reported no circ from this source.

The comparison of Publisher's Statement data seems to indicate that Newsweek would have to reduce their circ at least 600k (maybe more) to achieve a subscription source mix ratio of "renewable" and "non-renewable" circ that is equal to what Time reported in the first half of 2008.
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