AAM Impact of Frequency Reductions

Introduction

Many magazine publishers are looking for ways to restructure their business model in response to tough economic conditions. Some are implementing or considering a frequency reduction as one way of reducing costs.

A frequency reduction is defined as a decrease in the number of print issues published annually, resulting in an extension of current subscribers’ expiration dates.

When AAM publisher members contemplate a frequency reduction, attention must be paid to the qualification and reporting impact of the subscription circulation affected. This includes the following:

See also: AAM Rule F 9.3 Extensions Because of Reduction in Frequency.

Extension of Subscription Term

A publisher may choose to extend the expiration dates of their paid subscribers because of a frequency reduction. AAM does not require this, rather it is a strategy the publisher may wish to implement. The copies served as a result of the extension may be eligible for inclusion in paid circulation, provided the new expire date is limited to fulfilling the delivery of the same number of issues originally ordered and promised to the subscriber.

For example:

  • Yesterday magazine currently publishes 12 issues per year.
  • Jane Smith ordered and paid for a one-year, 12-issue subscription. She has been served five issues and has a copy liability of seven issues left on her account.
  • Yesterday magazine decides to reduce their frequency to 10 issues per year.
  • The magazine may decide to extend the expiration date on Jane’s account to complete service of the seven issues still due to her. The issues served to Jane as a result of the extension may qualify and be classified as paid circulation on AAM documents.

If a publisher decides to increase the frequency of the magazine before the extended accounts reach their new expiration date, then these extended accounts must be readjusted upward so the total number of issues served reflects the increase in frequency.

If you plan to reduce your frequency and therefore extend the expiration dates of current subscribers, please notify your Publisher Relations manager at AAM in advance. Your PR manager will be sure to communicate this change to others at AAM to ensure audit testing is properly planned for the audit period affected. See the section on audit records and additional costs below.

Impact on Average Price

The calculation used for annualizing the average price element of a Publisher’s Statement is based on the number of issues published in a specific one-year time frame. A frequency reduction only affects determining the annualized average price by reducing the annualizing factor used for the reporting period.

For example:

  • Tomorrow magazine planned to publish 12 issues during the 12-month sales period of July 1, 2008, to June 30, 2009.
  • On January 1, 2009, they decided to reduce their frequency to 10 issues, five in the first half of 2009 and five in the second half of the year.
  • For the December 2009 publisher’s statement:
    • The average price period covers July 1, 2008, to June 30, 2009.
    • There were six issues published from July to December 2008 and five issues published from January to June 2009.
    • The frequency used for the annualized average price calculation is 11 issues.
  • For the June 2010 publisher’s statement:
    • The average price period covers January 1, 2009, to December 31, 2009.
    • There were a total of 10 issues published in 2009.
    • The frequency used for the annualized average price calculation is 10 issues.

Audit Records and Additional Cost

When subscription expiration dates are extended because of a frequency reduction, the following documents should be retained for the auditor’s review:

  • A mail galley for the issue published immediately before the extension in expiration dates occurs. This should reflect the original expiration dates. AAM prefers this information be retained in an electronic format for auditor review.
  • A mail galley for the first issue published that reflects the extended expiration dates. As an alternative to the galley, you may retain a list indicating the dates to which each subscription is extended. AAM prefers this be retained in an electronic format for auditor review.
  • All typical subscription data reviewed during the audit—original media, account history, payment, etc.

There is an additional flat fee of $1,800 in the audit year the extension occurs. This cost covers the effort to review the subscriber file prior to the frequency change and test the file after the change of expiration dates to ensure they were properly extended.

A Note About Double Issues

Some publishers may choose to reduce the frequency of their magazine by offering double issues.

  • If the double issue will reduce the copy liability on a subscriber’s account by two issues, then the frequency has not been reduced.
  • If the double issue will reduce the copy liability on a subscriber’s account by only one issue, then the frequency has been reduced and issues served as an extension due to this reduction may qualify and be classified as paid circulation on AAM documents.

Summary

If a magazine publisher reduces its frequency and extends the expiration date for current subscribers, the circulation associated with that extension may qualify and be classified as paid circulation. It is important to notify AAM in advance, accurately apply the extension to the subscriber accounts and maintain documentation for the auditor that will support the extension.

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