Pulling Back The Curtain on Rate Base Inflation
For the last twenty years I have been publicly critical of the process and accountability—or lack thereof—of rate base, yet it never occurred to me to write an article about it. The truth is, I don't recall anyone writing an article about rate base from a positive or negative viewpoint.
From my perspective, rate base is a convoluted tool designed to produce distorted circulation figures. Yes, auditing is an attempt to verify with some precision and prove to the advertisers that a certain number of people may have picked up and read your magazine. But imbedded in this arcane system is a potential for trickery and a temptation to abuse the well-meaning audit results to achieve what amounts to some meaningless readership number.
Since I wanted to express more than just my opinion on this topic, I reached out to industry leaders from all segments of our noble franchise. Most of the people I spoke to in the research for this article focused their observations on the abundant abuse of rate base and its antiquated nature.
I spoke to magazine media pundit and Publishing Executive columnist D. Eadward Tree and started by asking, "What is the problem with rate base?" He says, "I think we should define the problem clearly: Is it circulation audits? Rate base in general? Or inflated rate bases? I don't see a problem with the concept of rate base in general: We make a promise to our advertisers about who will see their ads, then verify that they got their money's worth by having the circulation audited. What gets us into trouble is inflated rate bases, which force publishers to do desperate, stupid things like offering $5 annual subscriptions, using negative-remit agents, and getting into trouble with the Federal Trade Commission."