Circulation/ad picture remains healthy - includes related article

Circulation/ad picture remains healthy

New York City--The magazine industry is basically healthy. Share of media ad dollars is stable, circulation revenues are spiraling past advertising income, and magazines' ability to deliver targeted audiences ensures a rosy future.

But those same ad dollars are being split among more magazines; rate card negotiations are continuing to grow along with postal, paper and production costs; and advertisers are increasingly skeptical about the effectiveness of their ads.

These are the views of Sandra Rifkin, editor in chief of Marketing & Media Decisions, and Donald Kummerfeld, president of Magazine Publishers of America (MPA), who spoke about the state of the magazine and advertising industries at the recent Mergers & Acquisitions Conference cosponsored by the MPA and FOLIO:.

Though circulation revenues shot past ad income in 1987 as the biggest contributor to magazine profits, Rifkin and Kummerfeld warn that readership is not necessarily higher, and single-copy sales are down--perhaps dangerously so.

"While it is clear Americans are buying more magazines than ever before, it isn't so clear that they are reading more," says Kummerfeld. "In fact Simmons and MRI data show a general decline in readers per copy."

That's bad, because "advertisers want to see high subscription rates at full cost before they commit to buying space," says Rifkin. She predicts that efforts to attract readers will raise production and paper costs in the future.

There's also strong evidence that while circulation revenue is growing faster than ad revenue, magazines "are more dependent than ever on advertising for their profits," according to Kummerfeld. This, he says, is partly because the cost of acquiring and maintaining subscriptions has grown faster over the past few years than any other item for magazines, and also because ad revenues are up.

Ad revenues were relatively flat in 1985 and 1986, but grew 5.5 percent in 1987 and 8.7 percent in 1988, according to Publishers Information Bureau (PIB).

And while revenues are up, market share has remained stable. Magazines have hung onto a consistent 21 percent of total media ad dollars over the past five years, according to Rifkin. But "this 21 percent is getting stretched across an ever-widening band of books." The number of new titles--more than 400 last year, according to MPA figures--is one sign of the industry's vitality, according to Kummerfeld--but that means heightened competition for ad dollars, says Rifkin.

Smaller circulation magazines have gained more share than the mass vehicles, according to a Young & Rubicam study cited by Rifkin. In 1981, the study found, 53.5 percent of ad dollars were placed in magazines under one million circulation. By 1987, the figure stood at 58 percent. "This only underscores advertisers' desire to make contact with specific constituencies," Rifkin says. In the future, she adds, "advertisers will be attracted to groups that can offer them a network of smaller and mass titles.

Can strong growth last?

The future may hold steady, though unspectacular, prospects for growth, according to the speakers. Conservative projections by McCann-Erickson and the MPA estimate annual ad growth in consumer magazines of 6.3 percent for the next several years, reaching $7.5 billion by 1992, according to Rifkin. (Seven percent ad growth is predicted in a recent study by investment bankers Veronis, Suhler & Associates.)

Dampening such growth may be the flattening of new products in packaged goods, a source of much advertising, Rifkin says.

The continuing decline of cigarette and liquor ads will also hurt magazines in the long term, she says. Ironically, cigarette advertising this year is on the rebound, up 33 percent over last year, according to Kummerfeld. Other categories currently doing well: toiletries and cosmetics business and consumer services, apparel and footwear, travel and direct response.

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