MPA Speeches - Jack Kliger, DMA Circulation Day 2008

February 12, 2008

Jack Kliger
President & CEO
Hachette Filipacchi Media U.S., Inc.

DMA Circulation Day
Keynote Luncheon Speaker
Marriott Marquis, New York, NY
February 12, 2008

Good afternoon, everyone, and my thanks to the DMA for inviting me here today. 

Some of you may have previously heard me speak about the need for change in the U.S. magazine business.  Much of this has focused on the advertising sales part of our business.  But, magazines are an extremely interconnected business, where changes in one area have major impact on the other key parts of our business.

U.S.magazines have traditionally been viewed as being divided into three areas – editorial, circulation and advertising.  Editorial being the creative side, and circulation and advertising the business sides.

I believe the magazine industry needs to reorder its view of its business so that the editorial and circulation departments are jointly focused on the consumer while the circulation and advertising departments are jointly focused on the business side.

To do that, we need a stronger focus and better understanding of magazine readership for both consumer and advertising strategy.

And this will make direct marketing a more strategically important element for the US magazine business than ever before.

Unlike most magazine markets around the world, U.S. magazines can’t work without direct marketing to acquire and retain subscribers, because our editors would have much smaller communities of readers to write for, our advertisers would have much smaller audiences to advertise to, and, very importantly, Tom Masterson and I would have to take big pay cuts.

The need to attract and retain readers, whatever the platform we use to serve them, will not change.

But, how we attract those readers, measure the level of readership, and manage the reader’s engagement with our content, that can change, and I am here today to tell you that it must change.

The MPA has been working on changing magazine readership measurement. This change is one advertisers believe in, and in fact, are welcoming.  The new readership measurement metrics will change the way advertisers buy magazine advertising, and the way we sell magazine advertising, and it will substantially change the way our consumer marketers and direct marketers attract readers and measure success.

Today, magazine publishers send out millions of pieces of carefully calibrated mail, and success is considered a three or four percent return. That’s a business that is no friend of trees, or the people who hug them. And make no mistake; the magazine industry is committed to instituting environmentally responsible business practices.

We live in a world where consumer expectations about marketing are evolving and today’s consumers expect to be able to control how they receive marketing messages both online and offline.  We want to honor those expectations in a way that does not destroy the source.  So therefore, Hachette and many other publishers are favorable to industry self-regulation that allows the consumer to choose the frequency of mailings he or she receives from responsible mailers. 

Moving advertising to a readership measurement metric will be a big factor in enabling magazines and direct marketers to move closer to this goal.

For over 75 years, well before radio and television began the concept of media audiences, the driver of magazine distribution strategy has often been circulation guarantees to advertisers, particularly for national magazines. These guarantees, in turn, are used to determine the pricing of magazine advertising, which is, and will continue to be the industry’s biggest revenue stream. Today, magazine advertising is still bought based on the number of copies in circulation.  I believe that these circulation rate base guarantees are today’s biggest single enemy of effective magazine subscription direct marketing.

But the truth is that, until a credible new model is adopted, advertisers and their agencies will continue to purchase advertising on circulation metrics. But our industry believes that using readership metrics is a better model, not only for advertisers but for our magazines’ relationship with their readers.

For today’s magazine consumer marketing executives, the current model pushes production to the level needed to reach the rate base number.  .  . to do it as efficiently as possible and with little regard to the level of readership engagement.

The advertising selling side says we need this many copies to sell advertising and circulators have to figure out the most efficient way to get to that number. In fact the circulation department often performs as a subcontractor based on the requirements set by the advertising department.

As entrenched and embedded as this model is in our business, it doesn’t change the fact that it is, as we say in pig Latin, “bass ackwards.” 

It is time for a business model that puts things in their proper order. A model that makes it possible for advertisers to buy based on who reads our magazines, not the number of copies we distribute. This model has worked well for the cable television business from the beginning. Cable TV focuses on building subscriptions profitably and at the same time, on building the audience of viewers advertisers want to reach.

Because the problem with U.S. magazines is not whether we have enough distribution, the problem is having enough readership, and knowing what readership our magazines have.

In competing for advertising market share versus other media, magazines ad representatives usually don’t get into a discussion of whether magazine adverting is effective in moving customers in the same way the internet can, the way television is trying to, and most importantly, the way advertisers are looking to get a return on their investment. The reason is quite simple.

Does a computer visit Google? No, the people operating that computer do. When looking at ESPN’s audience numbers, does a media buyer wonder how many TV sets were turned on? In the same way, a copy of a magazine doesn‘t buy a car, or plan to buy one, the readers of that magazine do. And that’s readers, plural, not just the first person to get that copy. 

Advertising effectiveness measurement in all other national media, whether measuring brand awareness, purchase intent, driving customers to the web, or consumer actions taken, is derived from an audience, viewership or readership metric, not a distribution metric, and the price of advertising in all other national media, except magazines, is based on audience.

Basing the magazine advertising pricing model on the number of copies distributed is out of date, forcing magazines to operate in advertising isolation, and most importantly is out of sync with the way clients and agencies are demanding advertising effectiveness measurement and accountability.

To bring our business model up to date, the time has come to make a simple yet revolutionary change. Readership, not distribution, should become the currency of magazine advertising.  Publishers need to get themselves out of the advertising ghetto by providing advertisers this currency based on the quantity and quality of readership, not the number of copies distributed.

What is this change likely going to mean in terms of circulation practice and strategy?  It will mean that we will focus circulation strategy on the two pillars of distribution profitability and readership development.

We will unleash our consumer marketers to focus on distributing copies at the right level, at a profit and at the same time, focus on growing the readership which comes from the right distribution strategy. That makes good business sense for the editor, the publisher, the advertiser, and most importantly, the reader.

It makes it possible to measure magazine advertising exposure relative to the audience as other media do.   And it will make consumer marketing more relevant to what our editors are trying to convey, and what our consumers want to see and read.

In order to do this, we must address how readership is measured. And as I said, the MPA and its members are taking the necessary steps in exploring and developing that process.

Right now, magazine audience numbers are not stable or timely enough to be used for advertising buying.  When the proverbial rubber hits the road, magazine ad buyers make the buy based on circulation data from ABC statements.

This practice will not change unless a viable alternative is developed, meaning reliable audience metrics that are timely, stable, and ultimately, comparable to the way other media audiences are measured.

I can tell you that when publishers and advertisers can move to audience based measurement metrics it will be a major step forward for the industry. It will change for the better the way advertisers think about and buy magazines. And will not only get magazines into the game, but on a much more level playing field versus other media when it comes to measuring advertising effectiveness.

The opportunity to measure our audiences will be opened up to a larger number of suppliers, creating a healthy competition that produces new models, new thinking, and fresh approaches to measuring and reporting not only how many people read our magazines, but their level of engagement with the magazine’s content.

In terms of timeliness, other media are measured at the latest on weekly audience accumulation while magazine circulation, and currently, audience, is reported on a six-month figure.

Going forward, we will be working with companies to develop readership measurement data delivered on a faster timetable within 8 weeks of issue distribution. 

To do this, those who measure our readership will be able to employ the reach and rapidity of the internet. Digital measurement of readership is not only essential it is possible right now. And any company who can’t or won’t figure out how to use online measurement, as part of effectively measuring magazine readership, will have a very hard time meeting the timeliness needs of such studies.

In short, any new model must deliver an audience measurement stable and timely enough for advertisers to confidently buy magazine advertising based on readership, not distribution. If it’s not timely and not credible, it will be unacceptable, to us, and it will be, and should be, unacceptable to our advertisers.

Yet I believe the most important benefit of all this will be a better understanding by editors and consumer marketers of the level of engagement our magazines have with their readers. Focusing circulation strategy on readership development will attract a more targeted reader, an individual already predisposed to receiving our content and the way we present it.

This change is beginning as I speak. The wheels are in motion to create a measurement model more beneficial to editors, to publishers, to advertisers and most importantly, more beneficial to the readers.

This new model will affect how we execute direct marketing and our ability to model for successful strategies. There will be tremendous opportunities as we better understand readers’ needs and behavior through improved measurement tools and direct marketing materials which will become even more targeted to what readers want.

We will be able to execute this strategy because magazines have a distinct advantage over almost all other media, a difference which is more important than ever before. Consumers are willing to pay for magazines, in an era where it is often believed that content based media should be free. As long as we have that pillar, we will continue to build strategies with direct marketing as a core discipline. I can’t see a future in which U.S. magazines will operate without direct marketing. In fact, I think we’re about to unleash incredible power in that area.

Thank you very much.