Are Buyer Mandates Replacing Market Dynamics?

The latest magazine buyer / seller brouhaha here in the States centres squarely on denial of two seemingly undeniable realities: the audience of every media property — print, broadcast, online, other — fluctuates, and a metrics system that fails to address this in a logical, mutually acceptable way is not functional.

As you’ve no doubt already surmised, this most recent contretemps has its roots in the aberrant US practice of buying and selling magazine (and newspaper) advertising based on circulation rate base guarantees.

But before you flip the page in exasperation, please consider three points. One, rate base issues are now unavoidable in nearly any discussion of the US consumer magazine industry because, in tandem with the internet, their bottom-line implications are increasingly determining the shape and future of this industry.

Two, if your companies do business in the US or plan to, you’re more than likely to be affected by the spiraling ramifications, though it’s premature to speculate about exactly how or when.

Three, regardless of direct involvement in this market, you might, like me, find yourself wondering whether in this global economy, the outcomes of the metrics battles being waged here - and a possible acceleration of the shift in core-business strategy among traditionally print-based US media companies - might create precedents that ultimately have some influence beyond these borders.

The deadly serious issue de jour involves the possibility that the media buying community could be moving in the direction of widespread rejection of the once-standard premise that magazines that deliver their promised circulation levels on average, across all issues in a given audit reporting period, have met their rate base guarantees.

Some media buyers have been pushing individual publishers for by-issue guarantees for years, and some have succeeded in making quiet one-on-one deals along these lines.

However, the situation is coming to a head because one powerful agency, MediaVest, has issued a blanket declaration that, starting next year, it will no longer place its clients’ ads in any magazine that refuses to guarantee circulation on a by-issue basis.

What we have here is another Hobson’s choice for publishers: knuckle under to MediaVest and essentially invite other media buyers to follow suit, or refuse and risk becoming road kill under the wheels of more compliant competitors.

What are the implications?

This latest scenario raises more contradictions and questions than can possibly be tackled in this space, but I’ll throw out a few out for starters:

The ostensible rationale for trying to mandate by-issue guarantees is that some publishers are loading verified / nonpaid circulation into selective issues in order to make rate base for a six-month period. And it would be just another form of denial to pretend that some publishers haven’t used this tactic.

However, is the assumption that the preponderance of publishers are both utterly heedless about the long-term health of their businesses, and inept at running them? Is it inconceivable that most can and will (if allowed to) create overall circulation profiles that both deliver real value to advertisers (allowing them to compete effectively within their markets) and enable them to have a vestige of control over their circulation P&L’s?

On a broader level, when did competition and other market-economy behaviour-drivers become obsolete? Is there really a need for imposing across-the-board policies (on top of ever-more granular auditing rules), instead of letting sellers succeed or fail within a competitive marketplace on the basis of their own operating and marketing decisions? Has it suddenly become untenable for the people with the money to simply assess the facts provided in black and white (or black and pink) and refuse to buy from (or demand recompense from) those individual sellers who are not delivering sufficient value?

If the metrics / payment terms for all other media are designed to reflect fluctuating audience levels, why can’t a similarly logical system be devised for print?

This one’s more facetious than rhetorical: in return for penalising magazines that fail to meet a by-issue rate base, would advertisers agree to fairly compensate sellers in the much more common scenario wherein magazines over-deliver on rate base?

Fortunately, some media buyers still seem to think that traditional buy / sell dynamics work, and that accountability to clients can be achieved through case-by-case assessments / negotiations.

But if by-issue guarantees prevail, publishers could, of course, respond by reducing rate bases to "can’t miss" levels - assuming that those levels would be sufficiently competitive in their markets, and that potential CPM consequences don’t outweigh lowered circ cost benefits.

Or, they could use one of two options already being exercised more and more frequently: Shutter the brand, or kill the print version in favour of an online-only presence. (Although you might not guess this based on marketers’ behaviour, many do benefit from advertising in magazines — and over time, magazine casualties just might begin to make a significant dent in advertisers’ print options. Even major brands are not impervious to continual onslaught.)

Then again, since the "flexible" average guarantee may be the only crutch enabling the fatally flawed rate base system to limp on, perhaps there’s a slim hope for a real, guns-blazing showdown that would put this system out of its misery… and force the industry to hammer out a functional solution.