Wednesday, October 21, 2009

Playboy Reduces Rate Base: Why It Matters -- and Why It's Good

I'd heard the news was coming for months, but it was rather funny to read the first official notice in a tweet by Hugh Hefner, founder and editor of Playboy magazine. At 3:31 pm on October 20, Hefner tweeted: "We're reducing Playboy magazine's rate base to increasingly focus on quality over quantity as we did half a century ago."

A minute later, he tweeted ("twoth"?): "Playboy continues to be the most popular, most influential men's magazine in the world with 27 foreign language editions." and then: "Playboy magazine is the flagship of a brand now recognized around the world, reaching the largest audience in its history."

So what happened? 

(Actually, I rather liked his tweet later in the day: "After 25 years as CEO at Playboy, daughter Christie is now a frequent presence on MSNBC & CNN. Makes a father proud.")

For you non-magazine-geeks, the "rate base" is the minimum number of copies sold (and subscribed) that a magazine promises to advertisers. If you say you deliver at least 1 million copies and the actual amount falls below that number, then you usually have to provide a make-good (rebate) to the advertiser. Lots of magazines have been reducing their rate bases in recent years. Newsweek did it earlier this year, and in the process revented itself a bit to play in the thought-leader place dominated by The Economist of late. Others have, too, such as TV Guide.

Mediaweek reports that Playboy is slashing its rate base by 38 percent, down to 1.5 million. Not only that: The January and February issues will be combined, as it did with the July and August issues. As an editor/publisher who had to combine his July and August, and November and December issues, I can sympathize with that (hopefully) short-term measure in these economic crisis times. But what about the rate-base drop? Don't all publishers want their circulation to be as high as possible?

Sure. If I had a magazine that could attract more than 7 million buyers, as Playboy did at its very height in the early 1970s, I could charge advertisers a market premium. But this isn't the 1970s; many magazines are in crisis, and everyone who used to buy magazines but who didn't really want to has fled to the internet. Or to Sarah Palin. But everyone who appreciates magazines -- and the number is significant, and not necessarily decreasing, as some claim -- wants a magazine they can really read, that delivers value, that brings in-depth writing and pictures to them. When Playboy is good, it is really good in that sense. When Playboy is not good in that sense, it's just another normal magazine.

I remember a copy of Playboy I bought from a used bookstore a few years ago. It was from the very late 1950s or early 1960s; I don't remember which. Either way, long before I was born. But it was a copy intended to be included in an ad kit (a package sent to lure potential advertisers), and it included a bound-in special message from the magazine boasting to advertisers that Playboy charged a relatively high cover price -- and buyers paid it -- because the magazine wasn't afraid to make its readers pay for what they get. This is part of the never-ending argument in the magazine industry over whether magazines should get their revenue primarily from advertising or from circulation; I fall in the latter category. What Playboy was really saying those many decades ago, when advertising was beginning to pour into that publishing phenomenon, was that it was going to have its cake and eat it, too: It wasn't selling the magazine cheaply to readers, and advertisers wouldn't reach those readers cheaply, either. Gotta respect a magazine that goes right for the throat like that.

So, even though publishers would almost always prefer a higher circulation, a smaller one can work for it if it sells it the right way: quality over quantity, indeed.

Playboy's stock has been rising in the past couple weeks. It's not at stratospheric levels in any way, but it's out of the danger zone, where it was earlier this year when it had to release a statement acknowledging that it was placed on notice by the stock exchange for falling below $75 million in market cap. And today, after the announced rate base cuts, the stock rose again, just a smidgeon. Some of its recent rise probably has to do with the huge amount of media attention received by the November issue of the magazine, due to its featuring cartoon character Marge Simpson on the cover (and in a PG-rated pictorial inside). But that's what covers should do: Bring people to the magazine and the brand.

And if there's a Steven King poem inside, that's just all to the better.

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