LET’S MAKE A DEAL
Byline: Lisa Lockwood
It’s ugly out here.”
That’s how one magazine executive described the wheeling and dealing that’s going on these days between magazines and advertisers. In an extremely difficult environment, publishers are pulling out every trick in their bags to entice advertisers to increase their ad pages, give them the lion’s share of their ad budget and convince them not to go into their competitor’s titles.
The tactics vary. Some magazines are going off-the-radar, relying on innovative added-value and marketing programs in exchange for more advertising while others are simply slashing their rate cards faster than Freddie Kruger.
“I don’t think there are any groups, including Conde Nast and Fairchild (Fairchild is publisher of W, Jane and Details, as well as WWD), who are not discounting,” said Robert Triefus, executive vice president of worldwide communications at Giorgio Armani. “Conde Nast/Fairchild has the corporate buy, but the result is the same thing. It’s across the board. Everyone is suffering and is doing deals.”
Not surprisingly, publishers aren’t inclined to divulge the deals they’re making, but advertising sources revealed some of what’s going on behind the scenes. For example, sources said, Cosmopolitan is offering incentive deals — some say at least a 15 percent discount — not to advertise in Glamour; YM is aggressively making deals to build its growing market share; In Style is offering some clients last year’s rates and discounted pages if an advertiser ups its buy; Harper’s Bazaar is going off the rate card as much as 35 percent, and Elle continues to deal off the rate card.
All these maneuvers haven’t exactly helped business. According to Media Industry Newsletter, through May, Elle’s ad pages are down 27.6 percent, In Style’s ad pages declined 17.6 percent; Harper’s Bazaar’s ad pages are off 23.5 percent, Glamour’s ad pages have dropped 16.2 percent, and Cosmo’s are off 15.1 percent. But all that discounting and value-added (not to mention a new editor) are clearly working for at least one magazine — YM’s ad pages were up 14.2 percent from January through May, following a 38.4 percent increase in ad pages in 2001.
Some magazines are offering to print inserts for advertisers, and charging them for eight pages, when there are actually 12. One source said Esquire was charging an advertiser for two regional ads and one national, and running them as three national ads, which amounts to at least a 50 percent discount. And there are some smaller magazines that will throw in a free page in January or July — typically slow advertising months — as part of a package.
Sources said magazines such as The New Yorker and some of the travel magazines build three-page advertorials around one full-price page of advertising, and give price breaks on the advertorials; Glamour, which had decreased its advertorial business a few years ago, is getting back into them, and as one ad agency put it, “The Seven Sisters are going crazy” with their discounts.
As for advertorials, they’re more addictive than ever. Those multipage advertising sections on everything from Cyprus to Lycra are being used more heavily than ever to bulk up ad pages. “Advertorials have become the crack cocaine in the industry,” one executive said.
Discounting pages may be a Band-aid in this tough environment, but as one source put it, “Once you start going down that path, you can’t go back.”
Cindy Lewis, publisher of Harper’s Bazaar, acknowledged she tries to help advertisers in a difficult economy, but believes that once the economy rebounds, she’ll get tougher on rates. “Things are tough economically…I think everybody has cooperated in whatever ways they can,” she said. “People understand you weren’t doing it out of desperation, but out of cooperation. You have Bergdorf doing “Friends and Family.” That kind of practice will be forgiven. Hotels are offering packages and restaurants are offering dining packages. You can’t continue to do this [discounting] when the economy comes back. That’s very shortsighted.”
As one ad agency executive put it, “What you’re finding is the second- and third-tier magazines and second- and third-tier companies, such as Primedia and Gruner + Jahr, are doing a lot more of it because they don’t have the top magazines. In Style and Conde Nast are holding pretty well. They’re staying firm and packaging a lot of creative elements.”
But it’s no longer about just taking an advertiser out to lunch and writing the order. Magazines continue to entertain clients in lavish ways to build loyalty and increase the business. For example, to reinforce the joys of shopping, Lucky took 20 clients on a shopping spree at Bergdorf Goodman, where they were each given $150 to spend. It then awarded a $250 gift certificate to the client who bought the best “Lucky” item. Conde Nast Traveler offers advertisers a full-day spa event at the Peninsula Hotel, and Travel & Leisure treats clients to a weekend at the Ritz Carlton New York in Battery Park. A full day at the Peninsula Spa runs about $427.70 for treatments and lunch, while a two-night stay, excluding meals, at the Ritz Carlton New York can range from $750 to $1,030, depending on the room.
Then there is the plethora of events that allow advertisers to mingle with editors — two groups that can be like oil and water — like the “Let’s Dish with Jane” night at Jane vice president and publisher Eva Dillon’s apartment, or a private book signing with Dominique Browning, editor in chief of House & Garden, at Barnes & Noble. Real Simple will treat female clients and their “best girlfriend” to a getaway in June at a country inn in Vermont, where the visitors will take private cooking classes at the Vermont Cooking School, given by Jane Kirby, Real Simple’s food editor.
And of course, there are Cosmo’s Fun Fearless Female luncheon, Teen People’s Jingle Ball sponsorship and the much-coveted invitation to Vanity Fair’s Oscar party, which has become the ultimate ad-fest with all the trappings, such as dinners, hotel, private screenings and a car and driver at one’s beck and call. Sources estimate the extravaganza costs VF alone more than $1 million — not to mention all the freebies contributed by the co-sponsors of the event.
While most advertisers are offered incentives for incremental business, some are given perks for maintaining their business. Jane, for example, gave Guess — which kept its schedule steady at 24 pages this year — a chance for its retail customers to compete in a casting call at a Guess store and then fly to Los Angeles to meet with the Guess casting agent. Harper’s Bazaar gave 100 Richard Avedon books to Ellen Tracy to be distributed at the designer’s discretion. Each book costs $100, putting the value at $10,000.
Of course, there are still some advertisers who don’t ask for anything from the magazines — and still advertise. Gap, for example, does nothing with the magazines, no added-value program or parties, said a Gap spokeswoman. Yet it still ran an exclusive 24-page advertising insert (as well as two spreads and the back cover) in the December Lucky, and for the fourth consecutive year, babyGap was the sole sponsor of Martha Stewart Baby.
For the Lucky insert, Gap will get an insert rate and volume discount based on its corporate business at Conde Nast. Martha Stewart Omnimedia offered Gap a multi-dimensional cross-platform promotion with online links between marthastewart.com and babyGap.com, and related content on marthastewart.com that promotes baby-related products featured on Martha Stewart Living Television, marthastewart.com online chats and the “ask Martha” newspaper column.
Although Conde Nast claims it doesn’t go off the rate card, advertisers said the added-value programs compensate for that. They also describe Conde Nast’s corporate rate for volume advertisers as “very generous.” But as one source put it, “If you can’t get into five Conde Nast books, you have no power to negotiate.”
However, Conde Nast has lost clients over its refusal to negotiate, including General Motors’ highly publicized decision last year to yank its advertising out of all Conde Nast magazines. (In 2000, GM spent $28 million in Conde Nast magazines, according to Ad Age) That move was reportedly based on a collision between GM’s aggressive stance and Conde Nast’s refusal to negotiate rates. GM is back in Conde Nast for 2002.
Giorgio Armani pulled all its ads from Vogue this spring, but its decision was based on the coverage it believed it was getting or, rather, not getting. “This spring we took out no ads in Vogue,” confirmed Triefus. “We tend to buy on an annual basis to secure positions for the year. In May, we’ll revisit that.
“At the end of the day, we have a clear understanding of the [magazine’s] readership. Is our brand going to be right in that environment? If an editor is trying to develop an identity for the magazine, and it’s not mirroring our idea, we don’t advertise in it. If the fashion team of a magazine is not covering our product, or it’s aiming for a different reader who may not be our customer,” Armani doesn’t advertise, said Triefus.
Conde Nast has been known to spend an enormous amount of money on marketing and promotional events such as the Vogue/VH1 Fashion Awards, which sources said costs well over $1 million, and Vogue Takes Manhattan, Aspen, Chicago, Beverly Hills and Miami, which can cost upward of $500,000 in total. Glamour offers advertisers an encompassing beauty program with Bloomingdale’s, which is valued at $175,000, and an in-store, in-book and online promotion with Wal-Mart valued at $380,000.
Hearst Magazines, Time Inc., Gruner + Jahr and Hachette Filipacchi are not as deeply entrenched in added-value programs, but still offer advertisers plenty of multi-platform programs and similar opportunities, such as Elle Underground, an in-book and subway advertising opportunity; Bazaar On Air, which gives incremental and exclusive advertisers a TV opportunity; Teen People’s What’s Next Event, a themed issue with a live event at the Hammerstein Ballroom, sponsorship packages and an online and event presence, as well as a network TV special on WB; YM’s annual MTV issue with a big party at the Whiskey at W Times Square for 1,000 people, including MTV executives, teens, advertisers, and in-book opportunity; Marie Claire’s “Haute” card, which is a laminated card bound into the magazine, where readers can get special offers, and Elle Decor’s Dining by Design Benefiting DIFFA, which is a lavish event and in-book opportunity. “Fifteen years ago, value added was a throw-in. Now it’s an integral part of what advertisers are buying. It’s a real apparent trend,” said Richard Beckman, executive vice president and chief marketing officer of Conde Nast.
“Added value is not about writing a check. Any idiot can write a check,” said Beckman. “We put together programs and integrated marketing strategies for advertisers who commit to a certain level of volume.” Although he wouldn’t say what that level of volume was, he noted, “The investment we make back is proportionate to what they invest in the company.” Sources said for a corporate buy, an advertiser must run more than 18 pages in three magzines, and for a superbuy, it must run over 108 pages in three or more books.
Publishing executives agree that the bottom line for advertisers today is all about moving merchandise at retail.
“I find that everything we do is for the consumer,” said Michael Clinton, executive vice president, group publisher and chief marketing officer of Hearst Magazines. “We’re trying to drive the consumer to the point of purchase and stimulate retail sales. The days of throwing a party for the sake of a party are long gone.”
Hearst’s Clinton cited a program he instituted with Chrysler and Brookstone, where they generated 14,000 test drives for Chrysler. “Customers could get a $50 coupon for Brookstone if they test drove a Chrysler.”
Clinton said Hearst will offer programs to advertisers “if they leverage more business, or if they give us market share or exclusivity.”
“Many advertisers will pay for the added-value. They’ll use promotional or marketing dollars. It’s not unusual for a company to pay for it,” he said.
Overall, advertisers readily admit they are getting good deals.
Take the case of one fashion advertiser who said she was offered open rates at various fashion magazines, and when she turned them down, they came back with rates that were as much as 35 percent off the rate card. For example, she was offered a 35 percent discount off the retail rate at In Style, which kept its prices flat to 2001; a 35 percent discount off the open rate at Harper’s Bazaar, and a page in Elle for $28,000 (a four-color 1x ad in Elle is $59,055). Even Town & Country, which has an open rate of $38,000, offered an ad for $27,000. At In Style, she was quoted an $87,000 rate and got it for $56,000. “I didn’t even have to negotiate,” she said.
“You can have anything you want,” said Charlie Rutman, president of Carat U.S.A., a media agency. “These guys want the pages. If you’re not obnoxious, you can write your own deal.”
But big problems still loom.
“The biggest issue is the so-called advertising recovery will be way slower and the magazine industry as a whole will see the recovery later than other media. The recovery is coming at a much slower pace than the press would like to believe. Reinstating budgets will come very slowly as different media recover,” said Rutman.
Peter Gardiner, executive vice president of media services at Deutsch Inc., the ad agency here, said, “We’ve seen a pretty wide array of things for clients, Revlon and Almay. People are getting very creative, from TV shows to in-store promotions to inserts, onserts and outserts.
“It’s very driven by people who are trying to maintain or grow their share,” said Gardiner. “Most magazines are packing more stuff into it to drive ad pages. They’re doing that more than discounting. People doing that [added value] are doing better,” he said.
Pattie Garrahy, president of PGR Media, which does media buying for clients such as Tommy Hilfiger Corp., said, “Magazines are totally willing to negotiate. We set pricing CPMs, and look at whether the circulation is up or down. We’ve been able to look at the core readers. Mostly every publishing house has been willing to work around those parameters. They give corporate discounts. They’re calling it different things. They’re all negotiating to the standards we’ve set, in addition to value added.”
She said when she negotiates she’s looking for lower price, premium position and events. “This year we’re pressing for it all. All of our clients and competitors have pulled back,” she said.
“The rate card is now a paper airplane that can be thrown around the room,” said Ross Klein, senior vice president, corporate marketing at Polo Jeans. “You can’t hold on to your rate card as the Holy Grail. All the magazine companies — Hearst, Conde Nast and Hachette — are scrutinizing their corporate buys and putting more muscle into it. Merchandising and added-value used to be a counter card with an ad on it. Then it became 0.5 to 1 percent of the page value. Publications are looking at their margin situation. What I demand from merchandising exceeds 1 percent of the page rate and we are getting it.
“If you do Vogue Takes Beverly Hills, for example, they’ll throw a party for you,” said Klein. “Very few big brands are overwhelmed by a party. I would like them to help me to be smarter in research and by using their mailing lists. I want them to execute my programs, not their programs.
“One thing people are losing focus on is while magazines are scrambling to provide candy and incentives, they’re not paying attention to their own brands. I want them to have the best product and healthy circulation and the best buzz around their brands, so I get a bonus. My first question used to be: what could they do for us? But now it is: what are you doing to market your brand and increase circulation?”
Some advertisers prefer to have better positioning and rates than any of the bells and whistles they’re offered.
Armani’s Triefus said, “The interesting thing is we’d rather take a better position. We’d rather have better rates and less merchandising credits. These merchandising credits you accrue for added-value benefits. We prefer to get the better rates.
“Every publishing group is facing declines of 20 to 30 percent based on this period last year. We’re seeing much more late availability. We get calls every day with late offers. This is the first season advertisers held their money on a month by month basis…they’re left with a hole on the back cover so you get ‘offers’ for late availability,” he said.
“Market share as a concept for magazines has become a really big deal,” said Kim Vernon, senior vice president of global advertising and marketing at Calvin Klein Inc. “Overall ad page growth is down, and budgets are flat. The only thing they can do in this market is to fight for market share.”
One of the promotions CKI participated in this winter was the GQ Lounge in Hollywood. “They’ve gotten a few top advertisers to add a branded element to it. It’s brand promotion in a subtle way. GQ decorated the cabana areas and re-dressed it. Models were serving you in our clothes,” she said.
“Everything’s negotiable,” said Dee Salomon, senior vice president, marketing and corporate communications at Anne Klein. “All magazines are different. There are many variables — price, positioning. Each magazine has areas they’re willing to give and take.” Salomon said she uses merchandising dollars “to touch the customer.” Whether she’s dealing with Elle, In Style or Vogue, she wants to bring the customer into her selling environment. “Ultimately, it’s all about sales,” concluded Salomon. “Advertising helps brand recognition if we can get people to the clothes.”