FIRMS GIVE BETTER THAN THEY GET\Sweepstakes companies see sagging profits.

Byline: Barry Meier The New York Times

These are dark days for the prize patrols.

The give-away guys at the two major magazine sweepstakes companies - Publishers Clearing House and American Family Publishers - may dole out as much as $21 million this week. But behind the hype surrounding the handouts, there is a far less upbeat tale: both companies, long profit engines fueled by the lure of instant riches, apparently are sputtering.

Last year, magazine subscriptions generated by the two companies dropped an estimated 20 percent to 30 percent, according to several marketing consultants and magazine executives. Experts offer various theories for the falloff, blaming such possibilities as the rise of legalized gambling, the distraction of the O.J. Simpson trial and even consumer boredom with sweepstakes. While sweepstakes company executives play down the subscription decline, they too acknowledge that the last two years have not been the best of times.

"I cannot remember this kind of across-the-board falloff," said Dan Capell, publisher of Capell's Circulation Report, a trade publication that covers the magazine industry. "The big question is whether everybody is all sweepstaked out."

The hard times have only intensified the stiff rivalry between the two industry giants.

In a bid for added publicity, the privately owned Publishers Clearing House began last year to give away its $10 million top prize at the end of the Super Bowl. Not to be outdone, American Family, owned equally by Time Warner Inc. and private interests, recently bumped its largest award up to $11 million. It will announce a winning number later this week.

For years, the two companies have routinely snooped on each other, tried to persuade magazine publishers to give them exclusives, battled for first crack at mailing lists of sweepstakes devotees and sent prize amounts soaring.

But while they have spent fortunes bombarding television viewers with promotions, few consumers can tell them apart, marketing experts say. Publishers Clearing House is the one with the Prize Patrol, which surprises winners with giant-size checks. American Family uses Ed McMahon and Dick Clark as its pitchmen.

"There is not much we can do to each other to steal share except to have more exciting promotions," said Robin Smith, the chief executive of Publishers Clearing House, which is based in Port Washington, N.Y.

Marketing experts generally agree that Publishers Clearing House is the larger of the two companies. But neither discloses financial data and Time Warner does not break out American Family's contributions to its earnings.

Behind the garish mailings sent out by both companies lies some simple economics. For magazines, subscriber volume determines advertising rates and the sweepstakes companies provide magazines with a cheap way to get new subscriptions because they don't have to lay out any cash for the promotions. For their part, the sweepstakes companies keep 75 percent to 90 percent of a publication's subscription price. The Magazine Publishers Association estimates that such companies bring in about 23 percent of new subscribers.

The ideal consumer targeted by sweepstakes companies is a married, middle-age woman living in the South or Midwest who has some college education and may work part time, Smith said.

But the people sweepstakes companies sign up are fickle, accounting for only 7 percent of those who reorder, according to the publishers group.

"Any subscriber that goes in on a sweepstakes is a sweepstakes freak, not a reader," said Joan Throckmorton, a direct marketing consultant in Pound Ridge, N.Y.

Publishers Clearing House, which had been founded as a magazine distributor 14 years earlier, got into the sweepstakes business in 1967. At the time, Reader's Digest, which still runs sweepstakes, was using a similar technique.

DON'T QUIT YOUR DAY JOB

Here are the answers to some frequently asked questions about the sweepstakes conducted by Publishers Clearing House and American Family Publishers:

Do I need to make a purchase to win? No.

What are my odds of winning? Astronomical. In their biggest contests - the ones with multimillion-dollar prizes - the companies send out tens of millions of entries to consumers and may repeat such mailings frequently during the life of a contest, thus further increasing the odds.

How are the winners selected? Rather than pick winners from those who enter, the companies select a potential winning number from the entries mailed out. That means the "winning" number may not be returned.

So, do the companies really give out those big prizes? Yes, but if the winning number is not returned, they take different approaches. Publishers Clearing House will immediately give away its big prize through a random drawing of entrants. American Family Publishers randomly hands out a smaller award, waiting as long as another year to award its top prize.

SOURCE: The New York Times

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Box DON'T QUIT YOUR DAY JOB (See text) Photo Robin Smith, chief executive officer of Publishers Clearing House, whose profits have been fizzling of late, is framed by boxes of mail. The New York Times