The one-penny war

The six months from January to June have seen sales of Hello! and OK! shoot into the millions. And no, it's not a computer error. So how did they do it? By practically giving copies away. But as Jessica Hodgson reports, the industry is taking steps to ensure it won't happen again.

Magazine ABC figures are a little like ice-skating scores. To the outsider they are almost indecipherable, beyond the fact that a good result imbibes the winner with a vague aura of success. To those in the business, the importance attached to them borders on the pathological.

At the tail end of last week, the spin coming out of the magazine publishers would have made Alastair Campbell blush. Minute percentage-point growth becomes a heroic triumph-against-the-odds story. If your sector is in general decline, this shows you're "punching your weight in a competitive market".

In an average ABC period there are only a handful of circulation changes that stand out. Six months ago, Heat - which added an amazing 138% to its circulation - was the only story in town. This time there are two ABC figures that really shout out, and they've caused the ABC, which is made up of publishers, to take a long, hard look at how they audit the figures.

During the January to June audit period, sales of Hello! and OK! magazines went through the roof. From their previous audited circulations of 502,679 and 586,176, their sales have shot up to 2,324,223 and 4,514,071 respectively. The difference is so huge that one might put it down to a virus in the ABC computer.

The huge numbers are in fact the result of a vicious trade war that would not be out of place in 1920s Chicago. The (relatively) gentlemanly British magazine industry is still reeling from the impact of Richard Desmond's acquisition of the Express and promotional tactics that Desmond has brought to bear in a bid to boost the paper's circulation, which have had a knock-on effect on his magazine OK! and its competitor, Hello!.

Earlier this year, armed with an astronomical marketing budget, he began giving copies of OK! away for 1p with every copy of his new Express. Hello! retaliated in a hurriedly arranged marriage with the Daily Mail, giving away coupons in the Mail and Mail on Sunday allowing readers to claim a copy of Hello! at 1p, and ensuring the abnormally high sales figures of both magazines.

The impact on an industry which last year was still debating whether sticking flip-flops and lip-gloss on a magazine amounted to dirty tricks, is hard to exaggerate. Publishers have made it clear that as far as the established rules of engagement go, Hello! and OK!'s tactics are, frankly, not cricket. IPC's chief executive Sly Bailey didn't mince her words at a briefing for the press last week, describing the strategy as "Hello! and OK! trying to kill each other". "Bulks have always been part of the magazine landscape," says Bailey. "The issue here is that they are huge and not well targeted."

"Bulking" - the practice of selling copies of a newspaper or magazine to hotels, fast-food outlets, airlines or, in this case, through a tie-up with another publisher for volume delivery - has become a standard marketing ploy. While observers claim this, along with covermounting, is a cynical way of massaging sales figures, publishers insist - with some justification - that it is a valid way of trying to get your product into the hands of readers who would not normally consider buying it.

Under the previous ABC rules, as long as a consumer paid some money for a magazine, that purchase was considered an "active sale", even if the price paid was as low as 1p. But earlier this year, after war broke out between Hello! and OK!, the ABC decided it was time to act.

"We were forced to ask ourselves, 'What value does a 1p magazine purchase actually bring?', says the ABC's chairman, Chris Boyd. The "value" he is referring to is to advertisers. "My view, and it was the view of most people in the industry, is that if you want to measure the success of a magazine, active purchase is the most meaningful way to do that." It was agreed that 1p could not reasonably be considered an active purchase. So from the next ABC period, a consumer will have to pay a minimum of 20% of the cover price of a magazine to make the purchase count as an active sale.

Hello! publishing director Sally Cartwright made a statement after the figures were released, saying that although Hello! welcomed the high circulation, the magazine's publishers regarded "irregular, full-price newsstand and subscription sales as the real mark of active purchase and progress", a tacit indication that Hello! wants to call a truce in the sales war.

Most industry observers welcome the rule change, but some believe that it doesn't go far enough. Martyn Gates, the ABC's director of newspapers and consumer magazines, warns that even the excessive use of bulks can "muddy the waters" for magazine publishers, adding that Hello! and OK!'s promotional tactics could inadvertently damage their full-rate sales.

But the ABC considers the growing dependence on bulking and other "sampling" tactics as worrying enough for it to spend the next few weeks look ing into whether the rules should be changed further, to give greater clarity in understanding the way magazines are promoted and sold.

Does the ABC's move add up to an admission that these promotional tactics are anti-competitive? "They could distort the figures and make it unclear for ad buyers," says Boyd, diplomatically. "The figures are clearly broken down so ad buyers understand the difference between full-rate sales and total sales including promotions. But they still look at the top-line figures first and foremost."

But the rest of the industry is clear about the impact of the promotions war. Jane Ennis, editor of Now magazine - IPC's celebrity weekly which this month overtook Hello! and OK! on full-rate sales for the first time - says the ownership structures of Hello! and OK! mean that promotional tactics are open to these companies that are not available to the established magazines industry.

"Most British magazines don't have these entrepreneurial gamblers at their helm," says Ennis. "In the traditional corporate environment of magazine publishing, you don't have one single person controlling all the budgets, editorial, marketing, advertising. If you're Eduardo Sanchez or Richard Desmond, you can spend half a million a month on an issue of that magazine. If there's a Spice wedding on, great. If there isn't, you've still got that budget to spend on cross-promotion."

The furore over Hello! and OK! threatened to upstage some real success stories in the still roaringly healthy celebrity magazine market, which has seen circulation lift by 68% year on year. IPC's Now is selling 518,322, meaning that discounting the 1p sales and bulks it has toppled Hello! and OK! in the sales wars. Meanwhile, Emap's younger celebrity magazine, Heat, which nearly died last year, is still storming up the charts, selling 235,450 copies a week.

Glamour, Condé Nast's new pocket book of sex and shopping, has made a storming debut, coming from launch to within 1,000 copies of knocking Cosmo off the top slot, a development which National Magazines' deputy md Duncan Edwards indicates he is "not complacent" about. Industry observers are taking bets on which women's glossy will copy Glamour's A5 size next.

Glamour, Time Inc's In Style and the BBC's Eve are the only survivors of the high-profile women's launches from the past year, with plummeting ad spend claiming the scalps of IPC's relaunched Nova, Eve Pollard's Aura and Dennis's PS, to name just three. Meanwhile, the growing interest in celebrity has hit the more traditional women's glossies. IPC Southbank publishing director Rita Lewis admits that the fact that 31% of women now buy a celebrity weekly has put pressure on the sector.

Marie Claire suffered from a combination of the launch of Glamour and a turbulent handover from Liz Jones to Marie O'Riordan, posting a further 30,000 fall in circulation. But some areas of the women's sector, after a turbulent previous period, are showing signs of renewed vigour. Emap Elan has had some notable success stories, with Red and New Woman posting circulation increases.

But just don't mention the men's market. Of the 15 magazines classified in the men's lifestyle sector, 11 have posted year-on-year declines, with the previously invincible FHM levelling off at just over 700,000 sales a month, Loaded losing 13% of its circulation in the last six-month period and Maxim posting its first ever decline.

Mike Soutar, the ebullient chief of IPC's men's and music division ignite!, tried to put a brave face on things last week with quips about "feeling Felix Dennis's hot breath on my chin" - a reference to the fact that Loaded outsells Maxim by only a few hundred copies. Soutar rightly points out that the market is simply levelling off after the public's love affair with the men's mag in the 90s. But the figures suggest that the testosterone levels that generated its growth curve are flagging.

Nevertheless, despite a culling of magazine dead wood, and a general battening down of hatches, the overall market for consumer magazines has grown by 13% year on year, with 58% of magazine sectors growing, according to the Periodical Publishers' Association. "A recession does tend to focus the mind," says Chris Boyd. "But it's still a very vibrant market".


Jessica Hodgson

The GuardianTramp

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