Rules & ResourcesConsumer Magazine Support Center
Sponsored Sales/Eligible Purchaser—Modification to Rule 2.1 – (Effective November 2005)
(see italic bold for July 2006 board action update)
Effective at the July 2006 ABC board meeting, publishers must collect payment on all sponsored sales within four months of start of service of the sponsored program effective on January 1, 2007.
For ABC pre-approval on any sponsored sales programs, you must complete and submit the ABC "Pre-Qualification Form" (Microsoft® Word® document) for sponsored sales.
In July 2005, the ABC board unanimously voted to strengthen the rules governing how third-party consumer magazine sponsor programs may qualify as paid circulation. The amended Rule F 1.1 - Paid Circulation Defined and Rule F 2.1 - Sponsored Sales require that the amount a sponsor pays for subscriptions must meet the definition of paid circulation after considering other items. This includes any marketing and distribution fees, advertising credits, and other refunds or rebates paid by the publisher or its agent to the sponsor. In other words, the sponsor must be “out of pocket” a qualifying amount for the program to meet the standards of paid circulation. The board also narrowed the definition of eligible magazine subscription sponsors by requiring that sponsors sell their products directly to consumers.
Effective September 7, 2005, following an interim meeting of the Consumer Magazine Committee, the ABC board unanimously agreed to amend the guidelines for sponsorship programs in place prior to the rule changes. The updated board action includes: For agreements entered into prior to July 18, 2005, circulation will be considered under the previous ABC sponsored-sales rules and may continue to be reported as “paid sponsored” through the term of the agreement (but not later than June 30, 2006 issue). All circulation served subsequent to the June 2006 issue, must be in accordance with updated rules.
As previously announced following the July ABC board meeting, new sponsored-sales agreements entered into July 18, 2005, or later must comply with amended ABC rules beginning with January 2006 issues.
1. Qualified Sponsor – (Updated November 2005) A qualified sponsored shall be considered any business or organization where the primary activity is to sell or provide services or products to the consuming public. This rule application allows organizations having a consumer presence such as retailers or drug manufacture companies to be qualified sponsors as well as charities, consumer information Web sites, local governments and schools.
Companies such as advertising agencies, marketing companies, companies who service delivery of publications to recipient room locations, list rental organizations or other similar firms are examples of companies who typically do not meet this criteria as an eligible sponsor.
Note: Organizations who are affiliated to or have a financial relationship with a publisher are not considered eligible sponsor. This includes, but is not limited to, third-party subscription selling organizations and their subsidiaries and other similar publisher vendors.
2. Price Qualification – A qualifying price must be paid for each copy sold, net of all other considerations. Therefore, for copies to qualify as paid sponsored, at least one cent must be collected per subscription or single copy from the sponsor. Any monies paid to the sponsor or credits provided for services related to the purchase will be considered in this qualification equation.
In all cases, the amount identified as being used for the purchase of consumer magazines must be in accord with the Rule F 1.1 Paid Circulation Defined.
3. Contract for Purchase – The transaction for the purchase of the magazine must be separate from any other financial agreement with the sponsor and the magazine or their agent. A clear audit trail must be present to validate that a qualifying amount was paid by the purchaser for the sponsored sale.
When sponsored sales are purchased in conjunction with an advertising contract, the requirements for billing and/or invoicing needs to meet one of the following:
- The advertising agreement and magazine purchase agreement are shown on separate contracts; or
- The advertising agreement includes specific language regarding the magazine purchase price within the contract when the agreement includes both advertising and magazine subscriptions; or
- The purchase price of the magazine subscription is a separate itemized line item within the contract when the agreement includes both advertising and subscriptions.
5. Reporting – Average paid circulation from sponsored sales shall be reported separately in ABC reports. View the reporting format to be effective with the June 2006 reporting period. (PDF*)
For sponsored sales not meeting the updated definition of qualified paid circulation, a publisher may have the opportunity to report this circulation under the newly created category of circulation labeled “Qualified.” For additional information on this reporting option, reference information regarding the updated Publisher’s Statement to be effective with the June 2006 filing period.
6. Notification of Sponsor - In situations when the publication provides notification to the recipient of the identity of the sponsor, such notification will not be considered advertising if notification is limited to simple language such as “Compliments of…” or “Provided to you by…” with the sponsor’s name, address, city, state, ZIP, telephone, fax, URL, email. Such notification may be made through the attachment of a sticker or message on the cover of the publication, or through a simple statement within a communication vehicle. Promotion past this simple notification would be viewed as advertising and would be subject to being charged at normal adverting rates by the publication.
7. Attestation to be executed by the publication-
For Sponsored Sales involving an agent/broker
All publishers will be required to submit a letter of attestation from their Chief Financial Officer (CFO) on an annual basis coinciding with the ABC audit period. The attestation must stipulate that the purchase of magazine subscription by __________ represents a “stand-alone” transaction and is not related to any other relationship between __________, you or the publisher – that is, that there were no other factors such as refunds, rebates, reduced advertising, rates, etc. that influenced __________ in making these purchases.”
For Direct to Publisher Sponsored Sales
All publications will be required to submit a letter of attestation from your Chief Financial Officer (CFO) on an annual basis coinciding with the ABC audit period. The attestation must stipulate that the purchase of magazine subscriptions by __________ represents a “stand-alone” transaction and is not related to any other relationship between you and __________ - that is, that there were no other factors such as refunds, rebates, reduced advertising, rates, etc. that influenced ___________ in making these purchases.
There needs to be one attestation per audit period, per title for all sponsored sales that were performed in the period.
8. ABC Pre-Qualification Process - A pre-qualification review of your program may be received through ABC's publisher relations staff by filling out the form attached (Microsft Word document) before submission.
9. For Audit – At the time of audit an auditor will need to have proof of purchase, and proof of payment, along with the above attestation from bullet number 7.
ABC, as may be required due to the program specifics, will request additional information, as necessary.
For additional clarification regarding this rule change, members are encouraged to contact their publisher relations manager at ABC headquarters.
A white paper on this subject can also be found online. (PDF*)
Updated August 21, 2006