Reader's Digest Association announces initiatives to recast business

By Caroline Salls

Pittsburgh, July 10 - The Reader's Digest Association, Inc. announced a series of initiatives designed to dramatically recast its business as it prepares to emerge from Chapter 11 bankruptcy in the coming weeks, according to a company news release.

The company said the plan of reorganization approved by U.S. Bankruptcy Court for the Southern District of New York on June 28 will transform it into a stronger, revitalized company with a greatly simplified structure, significantly less debt and a renewed focus on its most profitable businesses.

The strategic initiatives are designed to capitalize on this refocused mission and to help ensure a successful future, the company said.

"We have taken decisive actions to realign our business focus and put our company on a stronger path for the future," Reader's Digest president and chief executive officer Robert E. Guth said in the release.

"We have rethought our business practices and shed legacy industry conventions that were no longer good for our business or our customers so that we can redirect our resources towards making better, more compelling and relevant products."

North American business

The company said its new business model will focus on its profitable North American print business. At the same time, Reader's Digest said it will continue to meet the opportunities of the digital era with a growing digital presence.

Highlights of the North American business will include:

• Focus on brands that reach more than 141 million consumers in North America;

• Both Reader's Digest and Taste of Home will continue to deliver critical mass with print rate bases of more than 3 million, respectively;

• RDA North America brands will continue to deliver digitally with RD.com, Tasteofhome.com, Familyhandyman.com and the company's enthusiast brand websites collectively delivering 20 million unique visitors in May, showing significant growth versus last year; and

• A rejuvenated books business with a new, multi-channel marketing effort.

In connection with the books business, the company said it will look to capitalize on the business model that made its recent Digest Diet franchise a success and will continue to choose products more closely correlated to consumers' desires and market them via multiple channels.

New advertising approach

The company said it is also taking a new approach to the way it does business with its important advertising partners, offering them a richer experience.

The cornerstone of the new strategy is consumer economics, focusing on the value of marketing to the company's most engaged readers, shedding circulation that does not contribute to magazine profitability and eliminating unprofitable subscription offers, the release said.

The new advertising approach will include the following:

• Reader's Digest magazine will introduce limited exclusivity by category for its advertising partners, promising an 80/20 editorial to advertising ratio, delivering these partners a premium and showcase presence;

• Effective immediately, Reader's Digest will shed as much unprofitable circulation as possible, dropping verified circulation levels, increasing the proportion of direct-to-publisher sources and limiting the use of agent-sold subscriptions.

The company said the Alliance for Audited Media qualified circulation will decline over time, and the rate base guarantees for the second half of the year will be an average of circulation served by issue throughout the second-half 2013 period.

As a result of the new strategy, effective with the January 2014 issue, Reader's Digest will lower its rate base guarantee for advertisers to 3 million; and

• Reader's Digest will introduce a more profitable subscription pricing structure while maintaining price stabilization for existing customers. The company said it will discontinue its unprofitable introductory offers and eliminate some of the price confusion around subscription pricing for its products.

"The new rate base strategy will deliver a more profitable, sustainable business for the brand, a better experience for the consumer and a more effective environment for our advertisers," Guth said in the release.

"More than ever, we want to take smart, decisive actions that will put our business on a stronger path for the long-term, and this means rethinking business practices and questioning accepted industry convention.

"Now our partners can more effectively reach our most engaged readership, our readers have an improved experience, and [the company] will have a more sustainable business."

Customer pledge

Building on its decision to increase the publication of Reader's Digest magazine from 10 to 12 issues annually, the company said it has plans to enhance its pledge to its customers with premium products and improved services on a number of fronts, including a significantly more favorable editorial/ad ratio than the 50%/50% average for the competitive set.

In addition, the company will enhance its customer offer in the following ways:

• Beginning in the winter of 2014, Reader's Digest will have a refreshed, modern look;

• The company will continue to add new products and enhancements to its Taste of Home upgrade.

• Reader's Digest moved its customer care centers back to the United States for all English-speaking customers, improving its ability to interact live and digitally with customers; and

• As of emergence the company will have licensed operations in Iberia, the United Kingdom, India, the Nordic and French regions, Hungary, Poland and Romania.

Reader's Digest said it continues to focus on new marketing approaches, including digital and business-to-business campaigns for all of its websites and partner websites, and on the improvement of its content offerings.

The company said it is also building new tools to support its ongoing customer-centric focus, with the first software tools to be introduced in Brazil in September.

Reader's Digest, a subsidiary of RDA Holding Co., is a media and direct marketing company based in New York. The company filed for bankruptcy on Feb. 17 under Chapter 11 case number 13-22233.

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