September 25, 2020

Media Decoder Blog: Led by Celebrity Titles, Magazine Newsstand Sales Slide

5:00 p.m. | Updated As the magazine industry continues to suffer from declining circulation, celebrity gossip magazines and young women’s titles have taken some of the biggest hits.

According to data released by the Alliance for Audited Media on Thursday morning, overall paid and verified circulation of magazines declined slightly by 0.3 percent in the second half of 2012. But newsstand sales – which are often viewed as the best barometer of how well a magazine is doing – dropped by 8.2 percent.

These figures were far worse for celebrity magazines, which largely suffered double-digit declines. People’s newsstand sales dropped by 12.2 percent while US Weekly experienced a 14.6 percent decline. In Touch Weekly declined by 14.8 percent and Life Style Weekly suffered a 19.1 percent drop on newsstands.

Some young women’s magazines like Cosmopolitan and Glamour, which often attract an overlapping audience as celebrity magazines, also suffered major hits. Cosmopolitan had an 18.5 percent decline in newsstand sales while Glamour’s newsstand sales declined by 14.5 percent.

John Harrington, an industry consultant, said that both categories are suffering because young women can access a lot of similar content online.

“They’re fighting all the social media and information that’s just available in so many places,” said Mr. Harrington about the kinds of pressures these magazines are under. “Some of the same factors are that their audience are people who are digitally adept and tend to go to social media.”
While all magazines reported a rise in digital subscribers and the number of average digital magazine copies more than doubled from the year before, these numbers still make up less than 2.4 percent of the entire magazine industry’s average circulation.

Still, some magazine executives were pleased that subscriptions had held up and that there was growth in digital subscriptions. David Carey, the president of Hearst Magazines, said that his company has had to become progressively less dependent on newsstand sales and more on subscriptions. He said in ways technology has made it easier and less costly to target new subscribers.

“With the newsstand, I don’t want to say it’s unimportant because it’s a key avenue for us. So we continue to do a lot of innovation and investment at the newsstand,” said Mr. Carey. “The newsstand is a priority. But in terms of a litmus test, it means far less today than it did five or 10 years ago.”

Industry experts said that magazines also suffered from what was and was not happening in the world. Steven Cohn, editor of the Media Industry Newsletter, said that celebrity weeklies didn’t benefit from the boom that comes from celebrity weddings, births or deaths in recent months. He expects that business prospects may improve for these titles in the second half of the year after Prince William and Kate Middleton have their first child.

“In the second half of 2012, there was no royal wedding. There was no tragedy like the death of Michael Jackson,” said Mr. Cohen. “They should get a bump by the royal birth.”

Mr. Cohen added that Hurricane Sandy also may have hurt newsstand sales. He noted that even during an election year, Time Inc. experienced a decline in newsstand sales. Newsstand sales for the magazine declined to 58,776 in the second half of 2012 from 76,555 from the same time in 2011.

“I think Sandy is a factor,” said Mr. Cohen. “It certainly hurt newsstand in New York and New Jersey, which is the biggest market in the country.”

While Family Circle and Woman’s Day both noted rises in their newsstand sales, Mr. Harrington said that both magazines had cut back their frequency of publication to 12 times a year from 15 times a year. Both magazines also are relatively inexpensive.

“That helped their average newsstand sales and they’re still relatively lower priced items,” said Mr. Harrington.

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DealBook: 2 Defendants Sentenced in Insider Trading Case

Zvi Goffer received a 10-year sentence, among the longest insider trading sentences ever.Andrew Kelly/ReutersZvi Goffer received a 10-year sentence, among the longest insider trading sentences ever.

Two of the more colorful characters caught in the government’s vast insider trading investigation were sentenced on Wednesday, three weeks before its central figure — Raj Rajaratnam — was set to learn his fate.

Zvi Goffer, a former hedge fund trader, received a 10-year sentence from Judge Richard J. Sullivan in Federal District Court in Manhattan, among the longest insider trading sentences ever.

“This will be used to send a message to Wall Street,” Judge Sullivan said. “These crimes are not going to be tolerated.”

Three hours later, in the same courthouse, Winifred Jiau, a former technology industry consultant, received a four-year term from Judge Jed S. Rakoff.

Insider trading, said Judge Rakoff, “strikes at the integrity of the marketplace, which is a very important asset of the United States.”

Wednesday’s proceedings served as something of an undercard for the main event — the sentencing of Mr. Rajaratnam, the former head of the Galleon Group hedge fund whom the government calls “the modern face of insider trading.” Mr. Rajaratnam’s sentencing before Judge Richard J. Holwell, originally scheduled for Sept. 27, was pushed back without explanation on Wednesday to Oct. 13.

Federal prosecutors have asked the judge to sentence Mr. Rajaratnam to up to 24 years, a term that would be the longest insider-trading sentence ever.

Like Mr. Rajaratnam, both Mr. Goffer and Ms. Jiau fought the government’s charges, took their cases to trial and lost.

Mr. Goffer, who briefly worked at Galleon under Mr. Rajaratnam, was convicted of leading an insider trading ring that earned millions of dollars in illegal profits by receiving advanced word of big mergers from corporate lawyers. Ms. Jiau, a consultant for the Silicon Valley expert network firm Primary Global Research, was found guilty of leaking secret information about technology companies to hedge fund traders.

The United States attorney in Manhattan has brought insider trading charges against 54 people, 44 of whom have pleaded guilty. All six defendants who have taken their cases to trial have been convicted.

The prison terms handed down on Wednesday highlighted the disparate approaches that judges take to sentencing, and could offer some insight into the sentencing of Mr. Rajaratnam.

In the case of Mr. Goffer, his 10-year sentence was effectively at the low end of the recommended range suggested by nonbinding federal sentencing guidelines. In the case of insider trading crimes, the guidelines are largely based on the dollar amount of the illegal gains. The government had suggested a range of 121 to 151 months for Mr. Goffer.

Ms. Jiau, however, was sentenced to four years in prison, a term well below the range of six and a half to eight years suggested by the guidelines. Judge Rakoff has long been a critic of the guidelines.

“There’s no way I’m going to impose a guideline sentence in this case,” Judge Rakoff said. “The guidelines give the mirage of something that can be obtained with arithmetic certainty.”

The proceedings also illustrated judges’ different approaches in sentencing defendants who take their cases to trial versus defendants who plead guilty and cooperate with the government. Judges have shown leniency in sentencing insider trading defendants who have admitted wrongdoing. Under the guidelines, defendants can shave time off their sentences if they accept responsibility for their crimes.

Judge Sullivan told Mr. Goffer that there were negative consequences to fighting the government’s charges and not accepting responsibility until after the fact. “You decided to gamble with your future,” the judge said. “And you lost.”

In contrast, Judge Rakoff said during Ms. Jiau’s proceeding that it was important not to draw a negative inference from a defendant who went to trial.

“Every American has the right to put the government to its proof,” said Judge Rakoff. “Even though we want to give credit for acceptance of responsibility, we don’t want to place such a premium on it that we discourage people from exercising their constitutional rights.”

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Federal Reserve Will Require More Banks to Submit Capital Plans

Bank holding companies with at least $50 billion in assets would be required to adopt “robust, forward-looking capital planning processes that account for their unique risks,” the Fed said in a statement.

Banks also would need to submit plans to raise dividends or repurchase stock as part of the Fed reviews, to begin early next year, the Fed said. Banks whose plans were rejected would have to get approval before distributing capital.

Some investors welcomed the tougher supervision, saying it was long overdue.

“This amount of oversight is something that has been lacking in the corporate board room in most banks,” said Joel Conn, president of Lakeshore Capital in Birmingham, Ala.

In March, the 19 largest banks, including Wells Fargo and JPMorgan Chase, completed capital reviews that allowed many to increase dividends or buy back shares. The new reviews are part of a broader effort, which includes the Dodd-Frank financial regulation legislation, to tighten supervision of financial companies and reduce the risk of another crisis.

Before the recent crisis, “many bank holding companies made significant distributions of capital, in the form of stock repurchases and dividends, without due consideration of the effects that a prolonged economic downturn could have on their capital adequacy,” the Fed said in its proposed rule.

The initiative may compel banks to hold additional capital and reduce profitability measured by return on equity, said Bert Ely, an industry consultant based in Alexandria, Va.

“There will be tremendous pressure to downsize,” he said, or have “financial engineers to come up with new forms of shadow banking” by moving activities outside commercial banks.

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