Why McCall's break rates - McCall's magazine - column

Why McCall's breaks rates

My personal opinion is that all magazines should be sold on rate card, and all advertising buyers should simply accept or reject the published rates of each magazine; the buyers should never attempt to negotiate an off rate card price concession for themselves or their clients. This is the perfect world that was and should be again. Unless advertisers, agencies and publishers collectively return to that structure, we will ultimately destroy the magazine industry as we know it today, and reduce ourselves to the chaotic state of publishing that now exists in the United Kingdom and Europe.

My media career spans 30 years. It includes both broadcast and cable television, as well as trade publishing and outdoor advertising. But most of those years have been about magazines--all kinds, both here and abroad. Like most FOLIO: readers, I live and love magazines.

I read my first novel in a magazine. It was Thunderhead, by Mary O'Hara, and was serialized in my mother's subscription to McCall's. I remember waiting impatiently for the postman to arrive at our door in Wisconsin with each exciting new issue. And then I began reading my parents' subscription to The Saturday Evening Post. I loved the adventures of Commander Hornblower and Tugboat Annie.

A few years later, as a freshman at the University of Wisconsin, I remember the first issue of Playboy being passed along in my fraternity house. I also remember the spectacular debut of Sports Illustrated and how excited we all were when a friend, the sports editor of our Daily Cardinal, was appointed to SI's staff upon his graduation.

Later, in the early sixties, I remember the Otto Storch and Herb Mayes redesign of McCall's. Their new type-faces and layouts astonished Madison Avenue and everyone in the magazine business. I was publishing a city magazine in Minneapolis then. We all tried to copy McCall's in those days. It was beautiful, and Mayes and Storch were our heroes.

Dangers of contagion

But price erosion had already set in. And the old adage, "You get what you pay for' has never been truer than it is in magazines. A very popular practice today is to play one women's service magazine off against another to gain price concessions, and the practice is spreading to other categories. This can only erode the overall quality of those magazines and our industry in general. We all will lose by it--not only publishers, but advertisers and their agencies as well.

What makes us different in magazine publishing is the great pride and respect we feel for the reader. That special bond is what leads us constantly to reinvest almost everything we earn in making the magazines better--a critical factor that is totally overlooked by our advertisers and their agencies.

The same is nor true in television. The proof of this can be seen in the profit margins of each medium. Over the past 10 years, magazines have generated pre-tax margins in the 10 percent range, while television has enjoyed margins of 20 percent to 30 percent-- and sometimes as much as 50 percent. This allows TV a greater cushion for negotiation, without ever touching the quality of their product. Furthermore, television stations incur virtually no incremental costs if they choose to throw in more commercial spots for advertisers, while magazine publishers must bear the incremental costs of additional paper, printing and postage to accommodate each additional page.

When I arrived at McCall's in January 1987 after the Working Woman /McCall's Group was formed with my partner Time Inc., I came face to face with the reality of price negotiation in magazines. At Working Woman, and at Working Mother, dealing does not exist; advertisers rarely even ask. But even before we had set one foot in the door, we knew the situation to be quite different in the women's service field. What we hadn't known was the debilitating effect that the price bidding was having on the morale of the salespeople, both at McCall's and at other books in the field. And we couldn't live with the hypocrisy of signing an insertion order telling a client that nobody was getting a better rate for a page when, in fact, somebody was.

The unknown turf of "let's make a deal' has become very familiar to me now that I have seen all its intricacies and ramifications. My first inclination after initial analysis of the problem was to print a rigid rate card in the weekly trade press to which I would sign my name. But not being the volume leader in the field, we realized this would only afford a price point for our competitors to beat.

Ending the hypocrisy

The leaders in this category (or any category) must set the standard. Because they haven't, we have been forced to take an independent position to end the hypocrisy. If we have to negotiate, it will be from a position of strength, not weakness; out in the open, not under the table. And that's working. Our salespeople are reenergized and being well received--and they're also selling a magazine that's having the largest percent increase in newsstant sales in its category. And we've gotten a very favorable response from both ad agencies and clients.

In spite of that, the truth is that flexible rate cards and negotiated rates are not good for any of us in the long run. If it were legal for the publishers of all the mass women's service books to hold a "Seven Sisters Summit' to set policy and price, that would put an end to the problem in a hurry. Short of that, each individual publisher may be forced to go to the floor of his profitability. The realization that there is no profit contribution for publishers coming from pages that are discounted from an already low CPM should have stopped this downward spiraling by now. But it hasn't.

In a recent Marketing & Media Decisions poll of agencies, 85 percent of respondents said they believe other magazines will eventually follow McCall's lead. I don't think that's the answer for my colleague publishers. We took our position to bring the issue out into the open, and to force the industry to examine this long-standing problem in greater detail. The discussion has been healthy, and the results have been positive for McCall's.

McCall's is showing growth everywhere. Editor in chief Elizabeth Sloan has created a new contemporary look for the magazine that has struck a responsive chord with our readers. Our newsstand sales are up 13.3 percent for the first six months of 1987, the largest percentage increase in the field. Our average revenue per page is holding, and January through October pages are up 1 percent over last year in the same period. We are also delivering a 350,000 bonus circulation for the second half of the year, just as we did for the first half.

Our plan is working and we will negotiate for as long as the marketplace forces us to. But we are not concerned just with ourselves. In the final analysis, the leaders in this category will have to set the standard by firming up their rate cards to preserve these magazines as editorial sanctuaries--not magazines that are sold as commodities. If that happened, we'd go back to a traditional and firm rate card at McCall's. Nothing would please us more.

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