Golden Tabloids p.

By: George Garneau

Supermarket tabs are scoffed at by some for thriving on scandal and sensationalism but they are bringing in bundles of cash sp.

"HALF-HUMAN HALF-fish found in Florida" proclaims the Page One headline over a picture of a fish with human legs.
Stories like that recent gem in the Weekly World News give Enquirer/Star Group Inc. executives barrels of laughs?and bundles of cash.
Enquirer/Star, the owner of such national treasures as National Enquirer, The Star, and Weekly World News, dominates a lucrative niche on the fringes of the newspaper industry by providing readers with weekly reportage on movie stars' private lives, cancer cures, diets, and visiting space aliens.
The "supermarket tabloids" operate in a strange journalistic netherworld blending fact, gossip and farce. Nothing?and that means nothing?is too outrageous, bizarre or incredible.
Most mainstream journalists would probably agree that the tabs thrive on scandal and sensationalism, appeal to baser instincts, and play fast and loose with the facts.
"We are in the field of personality journalism," says David Galpern, Enquirer/Star executive vice president and CFO.
In that genre, competitors include the tabloid The Globe and People magazine.
But Enquirer/Star executives are flattered by what they see as a trend of being imitated by the very same mainstream papers that ridicule the tabs. They point to front-page reporting, even in the nation's most respected journals, of the William Kennedy Smith rape trial and the breakup of Charles and Di?to say nothing of the dailies' increasingly prominent "people" columns.
"The differences between . . . personality journalism and the rest of journalism have narrowed dramatically over the last 10 years," Enquirer/Star vice chairman and COO Michael J. Boylan said. "When Zsa Zsa Gabor slaps a Beverly Hills cop, we now have to fight the networks and the newspapers to cover the story."
"We have a large and loyal reader base, and I think other publishers are starting to recognize the vitality and interest in personality journalism," Galpern said.
Geneologically linked to confessional and movie magazines and to sensational tabloid newspapers, the supermarket tabs thrive in a market of less-educated readers who seek escape, fantasy and entertainment, said Everette Dennis, executive director of the Freedom Forum Media Studies Center in New York.
Their social cachet is such that some people are ashamed to be seen buying them, but the tabs enjoy "the best traffic pattern of any medium in the country" at the nation's supermarket checkout counters, Dennis said.
He agrees that the mainstream press has strayed into the supermarket area by picking up stories from the tabs that formerly would have been ignored, including the Star's story last year about Gennifer Flowers' affair with Bill Clinton and the Enquirer's 1988 revelations of Gary Hart's affair with Donna Rice.
"I think they have a greater legitimacy due to competition, not related to their veracity," Dennis said. "It's kind of a degrading of the mainstream press, part of a process in which the tabs are serious players in setting the news agenda. It's a setback in terms of setting standards . . . I don't see even the New York Times completely avoiding this area."
Mainstream journalists can debate, dismiss or guffaw at the supermarket tabs' brand of reporting till the aliens come home. Their economics, on the other hand, are hard to argue.
For the fiscal year ended last March, the Lantana, Fla.-based company whose tabloids draw over seven million readers a week, posted $115.8 million in operating profit on revenues of $283.7 million.
That computes to an operating profit margin of 41%?in a down year?enough to make most mainstream dailies, themselves comparatively high-profit enterprises, pale by comparison.
In contrast, two years of profit declines have left the nation's general-interest newspapers earning 12% profit margins in 1991, according to the latest report by Veronis Suhler & Associates in New York. A Scripps Howard survey pegs average newspaper profit margins between 15% and 30%.
Boylan says his company sells 400 million copies a year and they are read by one of six adult Americans.
How do they do it?
At their most basic level, the tabs "satisfy a basic and enduring consumer demand," Galpern told investment analysts at the PaineWebber Media Conference in New York in December.
Boylan said that Enquirer/Star's business rests on three principles: Editors have a knack for what sells; the tabs are cheap to produce; and they dominate product display at supermarket cash registers.
Unlike daily newspapers, which rely on advertisers for the bulk of their revenue and charge readers a fraction of the cost of producing the paper, the tabs see advertising as a high-profit sideline, supplying just 12% to 15% of revenues, compared with about 80% of the revenue stream for most dailies.
The company's jewel is the colorful Enquirer. With a circulation of 3.5 million, including 3.1 million in single-copy sales at 99? each, the Enquirer is second only to TV Guide in national weekly circulation, but exceeds the tv book in revenues, said Boylan, a former New York Times graphics editor and US magazine managing editor.
The Star, also in color and focusing on Hollywood stars and their private lives, adds 3.1 million circulation, again mostly from single-copy sales for 99?.
Weekly World News, the least factual and most farcical of the trio, for 85? serves up fantastic tales of aliens, fish people, vampire bartenders, pointy-eared batboys, reincarnated movie stars and other life forms?often illustrated with pictures as proof to the skeptical.
Boylan describes WWN as a "throwback to the old days of tabloids," and differentiates the black-and-white 694,000-circulation tab from the serious personality journalism of its celebrity-oriented sisters.
WWN's relationship to objective reality, as understood by most journalists, is implied in its staff box, where the tab calls itself "a journal of information, opinion and entertainment" published "strictly for the enjoyment of our readers."
"Even though we laugh about it, we enjoy it," Boylan said.
He ought to. With a staff of 20, WWN cranks out cash flow of $5 million to $6 million a year.
"Pound for pound it's America's most successful publication," Boylan said.
"We recognize [WWN's] entertainment value, which is vastly different from how we perceive the Enquirer and Star, which are very professional journals that both inform and entertain," he said.
The Enquirer would never print a rape victim's name, as the New York Times and other papers did in the Kennedy rape case, Boylan said with some pride and irony. Increasing competition from general-interest papers?including USA Today?may be simply a "natural evolution," Boylan said.
Besides the tabs, a dozen special issues a year focus on burning issues to which other "newspapers" give short shrift: astrology, diet, weddings of the stars, homes of the stars. Add another 500,000 to 800,000 sales for each.
Rounding out the stable is Soap Opera magazine, which was launched last year for less than $1.5 million and is breaking even at 300,000 circulation.
Plans call for a new "major" weekly every 12 to 15 months.
The company acquired the Enquirer in 1989 from the Pope family for $412.5 million. A year later it picked up the Star from Rupert Murdoch's News Corp. for $400 million. It went public in 1991 and is 54% held by McFadden Holdings and Boston Ventures, 40% held by the public and the rest owned by managers.
Enquirer/Star has aggressively cut costs and raised prices. After the Star acquisition it cut $10 million in expenses, reducing the cost per paper to 10?, from between 13? and 17?.
It has no printing presses or press operators. Printing is contracted to seven printers?six domestic and one in Switzerland that services up to 60,000 U.K. readers. It paid nothing for its color pagination system, which was provided by its service bureau, American Color.
However, at the same time that they touted their low costs, Enquirer/Star executives boasted that they employ "the best-paid print journalists in the world by about 50%." Reporters earn $50,000 to $100,000 a year and editors can make several times that, Boylan said.
Enquirer/Star employs about 500 people full time, including about 225 reporters and editors who scour the world for news largely without leaving their offices.
At the same conference, daily publishers were talking about "cost controls," trimming full-time employees, and meager pay increases.
Its marketing subsidiary, Distribution Services Inc., employs 700 part- and 130 full-time employees. It also places Hearst and Hachette magazines, Newsweek, Rolling Stone and others into 180,000 supermarkets, convenience stores, drug stores and newsstands.
Control of display racks at supermarket cash registers is critical in luring shoppers who are spending $100 for a cart of food to plop down another 99? on "impulse" for a tab.
That control is based on a relationship that is profitable all around. Out of a 99? sale at the supermarket checkout counter, Enquirer/Star gets 64?, the supermarket gets 22?, and the wholesaler/distributor gets 14?.
"That's why we're attractive to retailers," Boylan said.
The tabloids have been hurt by recent economic conditions, but not as much as many dailies.
Enquirer/Star lost 6% of its single-copy sales over two years. Ad revenue fell $8 million to $9 million, or 15%, over nine months last year.
Advertisers include mass marketers such as the Franklin Mint and Campbells Soup and cigarette companies. Procter & Gamble withdrew last year.
Meanwhile, the tabs are testing price hikes of 10%, to $1.09, which would lower circulation by 1% but raise revenues $20 million. They were also planning to test a cover price of $1.25.
"We think we have a substantial upside on pricing," Boylan said.
The Enquirer and Star also have about 800,000 mail subscribers. A Star promotion offered subscriptions for "3 easy payments of $12.48 each." That's $37.44 for 52 issues.
Libel and invasion-of-privacy suits are a "modest cost of doing business," Boylan said, adding that the Enquirer "lost" only one case, and that was 15 years ago to comedian Carol Burnett.
In the last three fiscal years total legal costs?including libel insurance, settlements and prepublication review? were $11 million, most of it spent on prepublication review, Galpern said.