It’s Time to Change the Way We Approach Circulation!
By Rebecca McPheters

The value of a magazine lies is in its audience. For most U.S. publishers, the value of circulation lies in its ability to generate an attractive audience for advertisers. Yet circulators are most often incentivized solely on the basis of circulation economics, i.e. the revenues and the costs associated with meeting ratebase – often to the detriment of a magazine’s bottom line!

A more holistic approach to consumer marketing is needed where the basic tenets of circulation economics are changed to reflect advertising - the other, usually primary, revenue stream. Such an approach would reflect this central fact:

• More advertising revenue is allocable to some copies than to others because they generate more readers or more desirable readers.

While the dynamics differ for individual titles, some copies generate more readers than others. In general, single copy sales generate a higher reader-per-copy than subscriptions and some public place distribution generates a higher reader-per-copy than single copy sales.

Additionally, some readers are worth a lot more (or a lot less) to advertisers than others. For example, affluent readers are generally more valuable than the less affluent; people likely to buy a new car are more valuable to carmakers than those who are not, and female readers of Playboy are not credited towards CPM calculations for most advertisers who use the publication to reach a male target.

The differential value of readers with varying characteristics is subject to quantification by relating ad revenues to ad targets. By factoring ad revenues into the mix, circulators can make more appropriate business decisions based on the cost and the benefits of reaching desirable readers. This approach will enhance the value and the profitability of the publication.

One of the major ironies of our business is that in the drive to maintain ratebase, publishers often spend the most to acquire subscriptions among the least desirable segments of the population. These subscriptions are unprofitable for publishers and offer minimal value to advertisers. (In yet another irony, some advertisers incorrectly perceive this circulation to be of high quality because the subscribers paid a high average price – of which the publisher typically receives none.) While a disconcerting number of publishers are willing to pay dearly for circulation that has no underlying economic value, others are unwilling to incur “the high cost” of distributing their titles on airplanes. Yet airline circulation can be highly profitable because it can generate a large number of demographically desirable readers.

Most magazines are meant to be profit-making organizations. In reality, there is only one bottom line. It is the one on which circulators should be focused. The day-to-day decisions made by editors and circulators profoundly influence a magazine’s audience. The misplaced focus on circulation economics as opposed to magazine profitability results in decisions that adversely affect audience size and quality, while diminishing the underlying value of many publications.