Buyers Get The Jump On Magazine Rate Negotiations

With long-term demand for magazine ad inventory still uncertain, major print- buying agencies have begun negotiations with publishers for 2004 rates. The talks are surprisingly early and unlike the TV advertising marketplace, where early negotiations usually presage strong ad demand, the expectations from big print buyers is that magazine rate cards will be flat next year or will see only minor increases at best.

"Magazines are in a horrible position right now," says Audrey Siegel, senior VP-director of client services at TargetCast TCM. "Unlike other media, publishers have very little leverage to hold over the agency's head. In the magazine world, there's no such thing as, 'We'll run out of space.' And the agencies know it."

"There's a lot of bravado out there," says Brett Stewart, senior VP-director of print services at Universal McCann. "If you listen to publishers talk, you'd think that they deserve to get healthy increases because of all the price increases that the television people have been getting. But magazines are different than television. There's no fear that they're going to sell out."

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In fact, while TV rates have been rising at double-digit price increases, average magazine ad costs have increased at relatively moderate single digit rates. According to a MediaDailyNews analysis of data from Nielsen Monitor-Plus, the average cost per magazine ad page rose 7% through the first half of 2003 (see table below). In July, the average magazine ad page cost was up 5% over July 2002.

What makes the timing of this year's magazine deals all the more unusual is that it precedes the release of Conde Nast's 2004 rate cards, the traditional benchmark for annual magazine rate negotiations.

"Conde Nast normally announces its rates after Labor Day, so the fact that agencies are trying to get in before that indicates they are trying to set the market," says Valerie Muller, head of Rowayton, CT-based Valerie Muller Marketing & Media. Muller says the release of the Conde Nast rate card has traditionally served as the start of magazine rate negotiations, because "they're the only ones that 'don't negotiate.' Once they come out, Hearst, Gruner & Jahr and the others will come out and try to stay within a point or two of them."

Other top buyers, however, say the release of such rate cards are purely symbolic, especially in a marketplace where buyers hold such sway.

"We do negotiations on our clients' time tables not when publishers need to get things done. We don't need to wait for Conde Nast to do that," asserts Karen Jacobs, executive VP-director of the print investment group at Starcom.

By taking the initiative, Madison Avenue effectively is seeking to gain control over the rate-setting process. And indications are that it could have a devastating impact on 2004 ad rate plans for some publishers.

During last year's negotiations, most publishers failed to get more than modest increases in their rate cards. Based on the posturing of agencies this year, they would be lucky to get any increases for 2004.

"If I were coming out now, I'd be going for zero," says TargetCast's Siegel, adding, "because you can get it. And that's the bottom line."

While consumer magazine publishers brace for tough 2004 negotiations, trade publishers are finally getting some relief from their protracted ad recession. In June, ad spending in business-to-business magazines rose more than 6% and ad pages rose slightly as well, according to Gordon Hughes, president-CEO of American Business Media. That's a major improvement from year-to-date spending, which rose only about 2%. As a result, Hughes says the ABM is sticking by its prediction of 3% gain in B2B ad spending for the year.

July & Year-To-Date Magazine Ad Stats


July Year-To-Date
Magazine Ad Pages: -3.0% +4.9%
Magazine Ad Dollars: +1.9% +12.2%
Cost Per Ad Page: +5.0% +7.0%
Magazine Advertisers: -2.1% +1.4%
Avg. Magazine Ad Budget: +4.1% +10.7%

Source: Nielsen Monitor-Plus (www.nielsenmonitor-plus.com)
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