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ABC Board Actions Enhance Magazine Variance Reporting and Audit Completion; Address Other Key Issues

SCHAUMBURG, Ill. (March 12, 2003) - At its March 5 - 8 meeting in Washington, D.C., the Board of Directors of the Audit Bureau of Circulations (ABC) considered the issue of consumer magazine variance reporting enhancements; made further progress on streamlining audit turnaround for ABC members; and also clarified the interpretation and application of several important rules and policies. What follows is a summary of actions taken at the meeting. Details of this Media Alert will be published in ABC’s March 2003 NewsBulletin and featured on ABC’s Web site at www.accessabc.com.

BUSINESS AND FARM PUBLICATIONS

Final Passage
The Board voted to create new Rule D2.2, Sponsored Educational Bulk Sales and to modify Rule D5.2(e), Business Analysis, effective immediately, so that advertiser-sponsored paid bulk programs for business publications may qualify as paid circulation so long as they are limited to the student/educational arena and adhere to specific guidelines.

First Passage
The Board approved a proposal designed to modify Rule D6.1(f), Renewals, so that when publishers promote a renewal percentage in media kits and other publicity items they must also declare a renewal percentage in their subsequent Publisher’s Statement and calculate that renewal percentage using ABC’s standard methodology. If approved at the July 2003 Board Meeting, this new language would take effect immediately.

First Passage
The Board approved a proposal intended to modify Rule D8.2, Premium Defined, eliminating subparagraph (d) so that a publication used chiefly for data/reference and included with another publication in a combination sale offer would not be considered a premium. As a result of this rule update, when directories or similar reference materials eligible for ABC membership are sold in combination with subscriptions or single issues, the purchaser would need to pay at least one cent for the subscription or single issue, plus one cent for the directory or reference product, for all copies to qualify as paid circulation. Rule D8.5, Subscription/Single Copy Sales in Combination would also be modified to remain consistent with this update. Should these updates receive final passage at the July 2003 Board Meeting, they would take effect immediately.

First Passage
The Board approved a proposal designed to modify Rule D2.1, Bulk Sales so that bulk circulation is more clearly defined in terms of distribution method; i.e., individually addressed copies versus collective distribution. In addition, Rule D2.2, Group (Mail Subscriptions Special) would be eliminated so that circulation currently qualifying as “group” is reported as “individual” on future ABC reports. To remain consistent with this change, Rule D5.3, Age of Source would also be modified to remove any reference to group subscriptions. Should these update receive final passage at the July 2003 Board Meeting, they would take effect immediately.

Effective Immediately
The ABC Board voted to implement qualification and reporting criteria for digital editions of business publications. Effective immediately, new parameters stipulate that:

1. The label “digital edition” will be used to describe all copies distributed via electronic and paperless means.
2. ABC reports will include a statement of the digital edition’s delivery methodology
3. A digital edition will be defined as a publication delivered digitally that is consistent in content, layout, and pagination with the print version of the publication.
4. Acceptable means of distribution include both “push” and “pull” methods. As a result, notifying the subscriber of the publication’s online availability qualifies as delivery.
5. Bounce-backs may be included in qualified circulation for a limited interval, provided the bounce back subscriber is purged from the subscriber file within the following timeframes:
   

   Daily	10 issues
   Weekly	4 issues
   Biweekly	2 issues
   Monthly	1 issue

   
   Digital editions must be reported separately in all areas of ABC reports using the following format:
   • Print only
   • Digital only
   • Print and digital (unduplicated)
   • Total
6. All other pricing and qualification criteria applicable to print editions must be satisfied.
7. Paid bulk sales and license agreements are reported as qualified circulation in ABC reports so long as the purchaser pays at least one cent for each subscription.

First Passage
The Board approved a proposal designed to update qualification and reporting standards for ABC Farm Publications so that:

1. Paid circulation would be defined as a subscription, regardless of term, or single copy sold at any price (i.e., one cent or more).
2. Net average price for subscriptions sold would be reported on an optional basis. If net average price is reported, then reporting a gross average price is optional.
3. An analysis of paid subscription production sold in the reporting period would be made within Paragraph 5, Authorized Prices, of ABC reports, and would correspond to the following five tiers:
   Basic and higher than basic
   75% - 99% of basic
   50% - 74% of basic
   25% - 49% of basic
   Less than 25% of basic
4. An analysis of any price point that generates 5 percent or more of the total subscriptions sold in the reporting period would be made in Paragraph 11, Explanatory, of ABC reports.

The Farm Publication report format would also be updated so that members have the option to include a cover image of their publication on the front page. Should these parameters receive approval at the July 2003 Board Meeting, they will take effect with the December 2003 reporting period.

MAGAZINES

Final Passage
The Board voted to update Rule F7.2, Back Copies, effective immediately, to eliminate existing eligibility restrictions on consumer magazine copies intended for export internationally.

Effective Immediately
The ABC Board voted to amend interpretation of current qualification parameters to stipulate that, effective immediately, transactions involving a fundraising effort or donation will be governed under Rule F2.6, Partnership Sales, provided the program in question carries a 501.C3 charity designation.

Effective Immediately
The Board voted to modify the current periodical FAS-FAX format to promote consistency with the elimination of ABC’s desert sand Publisher’s Statement (which takes effect with the six months ending June 30, 2003). Effective immediately, the updated print and online FAS-FAX format will:

• List all magazine publications regardless of percent paid within a single section of the report, thereby eliminating the current three-part structure printed on different colored paper to reflect degree of paid/non-paid circulation. The updated report will be printed on pink paper throughout.
• Alphabetize each entry by title regardless of paid/non-paid proportion
• Report Total Subscriptions, Single Copy, Total Paid, Analyzed Non-Paid and Total Paid and Analyzed Non-Paid for all magazine publications, eliminating detail by type of analyzed non-paid (i.e., direct request, other than direct request, other non-paid).
• Clearly identify the rate base as being paid, non-paid and/or combined.
• Include single copy price reporting.
• Include a “notes” section to reflect other services in which the publication may participate.

These updates will take effect with the June 2003 FAS-FAX issue.

First Passage
The Board acted on a proposal designed to enhance ABC’s current consumer magazine Audit Report format by presenting both publisher circulation claims and audited data, as well as differences between Publisher’s Statement claims and audit figures, in Paragraph 1, Total Circulation, and Paragraph 4A, Circulation by Issues. Over the next several months, ABC will gather additional member input on these proposed reporting modifications. Should they receive final passage at ABC’s July 2003 meeting, new format enhancements would take effect for audit periods ending June 30, 2003.

Progress Update
ABC’s Board continues to oversee an initiative to further reduce audit completion times for ABC publisher members. As part of this initiative, ABC’s auditing staff is working diligently with publisher representatives and fulfillment operations to achieve a seven- to 10-month audit completion interval in the foreseeable future. Currently, nearly 85 percent of December 2001 audits have been completed by December 2002; and ABC’s auditing staff is on track to complete between 90 - 95 percent of June 2002 audits by June 2003. Specifically, three broad elements are being addressed to reach this streamlined goal:

• Data acquisition
  ABC’s staff continues to work with fulfillment operations and publisher representatives to develop standardized reporting materials that will ultimately act as the basis for publishers to submit, on a six-month basis, data containing source-level information necessary to initiate the audit process.
• Single copy
  ABC continues to confer with primary and secondary single copy locations to develop and expand procedures for electronic receipt of information; and to review current parameters dictating when an issue is considered to be “final.”
• Credit cancels
  ABC’s staff will continue to review alternate methods of identifying copies cancelled for non-payment, thereby helping publisher members submit final figures to ABC auditors more quickly.

The Board will reconsider this important issue at its July 2003 meeting, at which time it will analyze key recommendations and continue to move forward.

NEWSPAPERS

Rule Interpretation
The Board suggested that ABC’s auditing staff re-emphasize interpretation of Rule C3.1, Employee, Correspondent and Agent Copies, which states that a newspapers may include in “Average Paid Circulation” copies served to employees, retired employees, correspondents and agents so long as all rule parameters are observed. Implicit in this rule is the stipulation that each employee, correspondent or agent may only receive one copy of the publication that is counted toward paid circulation. All such copies must be reported separately in the Other Paid Circulation section of ABC Publisher’s Statements and Audit Reports.

First Passage
ABC’s Board approved a proposal designed to modify Rule C3.3, Third Party Sales to more clearly govern the qualification of third party sales involving an advertiser. Specifically, new rule language would stipulate that newspapers and their associated cost must be identified separately when sold in conjunction with an advertising contract for copies to qualify as paid circulation. Publishers may utilize any of the three following methods for disclosing the cost of the newspapers:

1. Show the advertising agreement and newspaper purchase agreement on separate contracts
2. Include specific language regarding newspaper purchase price within the contract when the agreement includes both advertising and newspapers
3. Identify the newspaper purchase price as a separate line item within the contract when the agreement includes both advertising and newspapers

Should this update receive final passage at the Board’s July 2003 meeting, it would take effect immediately.

Member Input Requested
ABC’s Board is considering the potential modification of reporting standards so that ABC member newspapers would be required to report circulation averages by day of week, instead of simply daily and Sunday. The Board will further examine this issue at its July 2003 meeting. In the interim, member input will be encouraged and ABC’s Newspaper Buyers Advisory Committee (NBAC) will work to identify elements in newspaper Audit Reports and Publisher’s Statements that might gain added clarification and specificity from day-of-week reporting.

First Passage
The Board granted preliminary approval to a proposal designed to modify Rule C9.1, Supplemental Analysis, to permit ABC to audit non-paid newspapers in Canada so long as they are owned and/or operated by and ABC member newspaper. The non-paid newspapers need not be primarily home delivered to qualify. Should this rule update be granted final passage at the Board’s July 2003 meeting, it would take effect immediately.

Rule Interpretation
The Board suggested that ABC’s auditing staff reiterate interpretation of Rule C2.7, Days Omitted from Averages, to emphasize that the rule is designed to limit the number of holiday days that may be omitted from circulation averages to ten holidays, plus the day before and the day after the holiday, plus either the preceding Sunday or subsequent Sunday surrounding the holiday. As a result, newspaper publishers may omit up to 40 days per year (including Sundays) that stand to impact newspaper sales on holidays and/or days within a holiday week. Each “option” holiday taken in conjunction with a request for an omitted day by another newspaper, however, is counted as one of the ten-holiday limit currently imposed, not accrued to the total of 40 days.

As an example, if Newspaper “A” opts to eliminate Thanksgiving day as an “option” because its competitor has already requested that day as a “holiday” date, ABC would count the day as one of the ten holidays for both newspapers involved.

B2B/CONSUMER MAGAZINES/NEWSPAPERS

Effective Immediately - Consumer Magazines and Newspapers
First Passage - Business Publications
ABC’s Board voted to modify existing ABC rule language and reporting formats to incorporate new standards governing combination sales of newspapers, consumer magazines and business publications. Effective immediately, with regard to “forced combinations” - which occur when two or more different publications are offered to new subscribers for a single price that is less than the cumulative basic price of each publication that comprises the offer - updated rules stipulate that:

1. Forced combination sales of two or more newspapers qualify as paid circulation when the offer price is at least 25 percent of the basic price of each newspaper involved in the offer.
2. Forced combination sales of a newspaper and a business publication and/or consumer magazine qualify as paid circulation when the offer price is at least 25 percent of the newspaper’s basic price, plus a qualifying price (at least one cent) for the business publication and/or consumer magazine included in the offer.

Combination Sales - Add-On Subscriptions

For consumer magazines and newspapers, in situations where an additional publication is offered to either an existing continuous service contract or an existing subscriber (i.e., renewal), the subscriber must be notified of this addition and given the clear opportunity to opt-in to (i.e., affirmatively choose) the added publication. This may be accomplished in one of two ways: via the payment of an incremental dollar amount or the offer of a reduced price should the subscriber elect not to receive the additional publication. When reporting average price, publishers would assign either the incremental dollar amount being charged (in situations where the publication is accepted) or the amount by which the subscriber may reduce payment (in situations where the publication is refused).

For business publications, the subject of add-on transactions will be considered at the July 2003 Board Meeting, pending further input from the appropriate liaison committees.

Rule Updates

To reflect the updates mentioned above and clarify new parameters, the following rule language will be modified. For consumer magazines and newspapers, updated rule language is effective immediately. For business publications, modified rule language received first passage and will be considered for final passage at the July 2003 Board meeting.

Business Publications
Rule D8.4, Premiums with Combination Sales and Rule D8.5, Subscription/Single Copy Sales in Combination

Consumer Magazines
Rule F8.3, Premiums with Combination Sales and Rule F8.4, Subscriptions/Single Copy Sales in Combination

Newspapers
Rule C5.3, Premiums with Combination Sales; Rule C5.4, Subscription/Single Copy Sales in Combination; and Rule C5.5, Newspapers Distributed Together

Other Developments

In other March 2003 meeting developments, the Board ruled that ABC should immediately adopt relevant corporate governance principles of the recently enacted Sarbanes-Oxley Act, which is intended to enhance and strengthen key aspects of financial reporting, corporate governance, auditing and federal securities law. This includes the establishment of an audit committee of the Board of Directors, which will function to oversee the financial audit and auditors.

The Board also continued its consideration of ongoing task force input regarding the potential impact of updating Rule F8.14, Credit Subscriptions, effectively shortening the seven-month window currently permitted for the collection of consumer magazine credit cancels so as to streamline audit completion turnaround. Additional recommendations will be considered at the July 2003 Board meeting.

Additionally, the Board considered the ongoing efforts of ABC’s Insert Verification Task Force, which continues to solicit industry feedback, discuss opportunities and evaluate alternatives for verifying delivery of newspaper inserts; and to discuss scan-based trading and its potential impact to ABC members.

With nearly 4,300 members, ABC is in its 89th year as the first and largest circulation-auditing organization in the world, maintaining the world’s foremost electronic database of audited-circulation information and a growing array of verified readership, subscribership and online activity data. ABC offers reports and services in a variety of flexible formats, including print, spreadsheet, CD-ROM and online at http://www.accessabc.com.