Impact on Advertisers Cited : Magazines Concerned as Store Sales Decline

For magazine publishers, 1984 was a time to uncork the champagne. By happy coincidence, Summer Olympics, national elections and economic recovery all occurred in the same year, stirring advertiser interest and lifting industry ad revenues by 13% to a record $4.68 billion.

But the year was also memorable for less happy landmarks, as newsstand sales dipped to an all-time low and returns of unsold magazines edged to a historic high. This year, the two trends have continued, and with signs that ad revenues are softening, publishers are growing more concerned.

They say newsstand sales are threatened by a number of factors, including competition from videocassette recorders, rising cover prices, and the proliferation of new magazines that compete for display space on retailers’ shelves.

To be sure, rising subscriptions have more than compensated for the decline, and total industry circulation continues to climb. But publishers and distributors say that the industry needs strong sales in stores, too, to lure new readers and assure advertisers that their messages are reaching their intended targets.

More Desirable

Advertisers believe that readers who take the trouble to buy a magazine at a newsstand are more desirable, because they are likely to pay closer attention to the contents than those who buy a mail subscription and read it only casually. In addition, newsstand sales are more profitable for magazines than subscriptions, which are usually offered at a heavy discount and include postage expense.

“There’s not one cause here, but a whole number of them that are hard to separate,” says Richard Smith, executive vice president of Playboy Enterprises in Chicago. In combination, “they’ve made life tough, and all this doesn’t seem about to go away.”

Newsstand sales have been on the skids since 1978. Among the 473 magazines monitored by the Audit Bureau of Circulations, the industry’s impartial circulation auditor, newsstand sales declined 12% between 1978 and 1984, to a combined average circulation of 81.8 million copies.

By contrast, subscription sales totaled an average of 231.8 million, up 4.7% from the year before. Audited circulation figures for the first half of 1985 won’t be available for several weeks, but publishers say they expect further softening in magazines sales from news racks.

In the past decade the number of magazines has risen about 50%, to 2,800, and the share that are returned from the retail racks has risen 10%, to more than half, according to the wholesaler trade group called the Council for Periodical Distributors Assns.

Publishers ship more magazines than they can sell partly on a theory that by inundating retailers that can win better display on retailers shelves, said Dan Pipp, head of newsstand sales for Meredith Corp., the Des Moines-based publisher of Better Homes & Gardens.

“The waste involved in destroying half of what you produce is shocking,” Pipp says. “But if magazines are an impulse buy, as everybody agrees, you’ve got to get as much space as you can in front of peoples’ eyes.”

Many publishers fret that the “video revolution” is taking a bigger chunk of the consumer’s leisure time and recreation dollars that might otherwise go to magazines.

“Some people say VCRs are no more than a new toy, and that the fascination will fade,” Playboy’s Smith says. “When I hear that a quarter of all households with TVs also have VCRs, I think this is a permanent change that will affect us.”

Publishers say that while the ills of the newsstand have touched magazines of all kinds, the greatest effect is on those that most depend on rack sales, including women’s magazines, the tabloids, and erotic magazines.

Cassetes Cheaper

Many agree that magazines such as Playboy and Penthouse--the so-called “men’s sophisticates”--may be most affected by the popularity of VCRs. After all, Playboy’s cover price of $3.50 is higher than what some stores charge for the rental of an X-rated videocassette.

“For those who bought Playboy for the titillation, maybe they can now get that somewhere else,” Smith acknowledges. But he contends that the magazine also is also bought for its fiction and journalism, and he maintains that the recent softness of street sales seems exaggerated by comparison with last year’s strong showing.

Playboy blamed the weakness of industrywide newsstand sales, along with rising costs, when it reported a loss of $346,000 in its third fiscal quarter ended last April. Since 1980, Playboy’s newsstand sales have declined by one third, while total circulation has fallen 16%, to about 5 million.

Magazines have taken various steps in their efforts to counter the trend.

George Edwards, senior vice president of the New York Times Magazine Group, says the company is promoting its Family Circle magazine, which traditionally has been sold only at newsstands, on radio and television and has begun a small mail subscription program. The 6.9-million circulation magazine is second-ranked in newsstand sales among ABC-audited periodicals, behind TV Guide. But since 1980, it has lost 11% of its retail-rack circulation.

Fewer Outlets

Edwards includes among causes of the news rack sales declines the shutdown of many neighborhood newsstands and corner drug stores, and the consolidation of supermarkets. Over the last 15 years, the A&P; chain alone has closed or combined 4,000 of its stores, leaving about 1,000, he noted.

“Many of the remaining stores are a lot bigger than the old ones, but there’s still a net loss in the amount of magazine display space,” Edwards says.

The continuing decline has put publishers at odds with magazine wholesalers, who are angry at publishers for flooding the market with new titles, and for the expensive promotion of subscriptions.

Among their peeves are the multimillion-dollar promotional efforts of Time magazine, which offers prizes and deferred-payment to new subscribers, and the sweepstakes promotions of Publishers Clearinghouse and American Family Life Publishers.

They are also rankled by publishers’ increasing use of the “blow-in” cards that are inserted in magazines and offer subscriptions discounted at up to 50% of newsstand prices. A trade group magazine recently denounced the cards as “psoriasis” and “the dandruff of the newsstand.”

Greatest Fear

“What these cards say to the purchaser is, ‘You dummy--you paid 50% more than you had to’,” said Harry Tobias, president of wholesaler Interstate Periodical Distributors in Madison, Wis.

Perhaps the greatest fear of publishers and wholesalers is that store sales will fall so low that convenience stores and supermarkets will find it more profitable to turn their display space to other products. In particular, they say they cannot afford to lose space at the checkout lines of supermarkets, which account for an estimated 40% of retail magazine sales.

The Magazine Publishers Assn. has recently formed a committee to consider ways of boosting retail sales, including special promotions, and a campaign to persuade retailers to expand magazine display space. But publishers and wholesalers alike insist that the threat from declining news rack sales can be overstated.

“There were prophecies of doom when television started, too,” said Edwards of the New York Times. “We’ve survived some tough spots.”