The magazine racket.

Andy Giordano, general manager of Yankee News - a magazine wholesaler that supplies newsstands throughout Connecticut - approaches magazine Nirvana. With a grand gesture, he sweeps open the door of Greenwich, Connecticut's Avenue News. "This," he says, "is the cream of the crop." Fifty covers form a bright grid in the window display. Inside, owner Nick Kurji glides across the 20-foot newsstand with an automatic grace, straightening a stack of Countryside, tucking copies of Senior Golfer in back, pulling stacks of Omni up front. Browsers move about with silent intent: magazines are thumbed, flipped through and brought to the register in a steady stream.

More magazines move through here than at almost any of the other 900-odd stores serviced by Yankee. It's here that Yankee trucks bring in 3,000 copies of 250 different titles each week. "I go other places, those guys got four feet of rack and can't be bothered." Giordano says. "With these guys, it's boom - the truck pulls in, they're pounding on the door, they can't wait to get to the magazines."

So how many of these magazines actually sell at this publisher's paradise - before the next issues arrive? Ninety percent of the copies? Seventy?

Try 50. Half the magazines trucked in here leave the same way, loaded back on trucks, piled into Yankee's warehouse, then fed through the shredder. And 50 percent "sell-through" is about as good as it gets in the magazine newsstand business.

Poor sell-through means big waste. Even if the top 130 newsstand titles sell six out of 10 of their newsstand copies, they're still shredding an average of 52 million magazines per month, or nearly four billion pages. A year's worth of unsold newsstand copies nationwide adds up to about 600,000 tons, according to the Magazine Publishers of America (MPA). That's a considerable chunk of the four million tons of coated paper used each year to print magazines.

And the waste continues to build. Magazine sell-through has been dropping for years and shows no sign of improving. The best of the single-copy sellers, like checkout standards Cosmopolitan and TV Guide, once sold eight or nine of every 10 copies on the newsstand. They now sell just six to eight. For TVGuide alone, which sells about eight million newsstand copies of each issue, the difference between a 70 and 80 percent sell-through is about a million copies per week. As for the rest of the 3,000 or so titles on 180,000 newsstands nationwide, sell-through is three to five out of 10 copies, hitting bigger only with the occasional Charles-and-Di, swimsuit or "10 Best" cover hype.

This begs an obvious question: If sell-through is dropping, why can't publishers just put fewer copies on the newsstand? The short answer: They can try - but it frequently doesn't work.

The magazine newsstand is a business of Byzantine complications, where sales vary with every shift in newsstand rack placement, cover design, customer mix, store tidiness - even, some publishers might swear, planet alignment. Publishers can target their subscription offers in junk mailings with rocket-science precision, but newsstand sales are still crystal-ball stuff, handled in the most unscientific manner: volume. Since no one knows who will buy the next issue of Hot Rod or Country Living, publishers print and distribute anywhere from two to three times what they expect to sell. It may sound wasteful, but to most publishers, wholesalers and retailers, it's simply the cost of doing business. To understand, take a look at the economics:

To publishers, newsstand sales are money in the bank. They collect 40 to 50 percent of the cover price for copies sold at newsstands. But subscriptions, which usually sell, at best, for half the cover price, also cost publishers postage and endless renewal notices to boot.

Advertisers also prefer newsstand buyers, who are generally more discriminating readers than bargain-hunting subscribers. Advertisers like to see big newsstand sales in a publisher's "rate base" statement describing the title's circulation. The bigger the rate base (which does not include unsold copies), the more a publisher can charge for an ad - so they will push newsstand sales to the brink.

National distributors and wholesalers like Yankee News also push for big sales. (Distributors, such as Curtis Circulation and Hearst, act as go-betweens for the publishers and the 350-odd wholesalers who deliver magazines to newsstands in their regions.) Since each party is paid on commission, the bigger the newsstand sale, the more money they make. National distributors get five to seven percent of a magazine's cover price, while wholesalers, who have greater labor costs, earn about 20 percent.

Finally, retailers also profit from big sales. Magazines are the only products in the store that sell on consignment, so retailers don't worry about overstock: whatever isn't sold gets returned for credit. And wholesalers do all the work - stocking the racks, removing unsold copies and completing the paperwork. Retailers just keep the rack neat and pocket 20 to 30 percent of the cover prices of the magazines sold. (Which explains, incidentally, why many stores carry lots of skin magazines: The titles are often two or three times as expensive as other magazines, and two to three times as profitable. They sell fast, and buyers don't care about the cover date.)

Magazine waste is annoying. Publishers, after all, pay to print those extra copies; wholesalers must lug them around; and retailers often pay for deliveries up front, collecting credits on unsold titles only after they're returned. But the waste hasn't been annoying enough yet to change radically what is, for most parties, a profitable venture. "There are some publishers who can live on 15 to 20 percent sell-through and make money," says Frank Herrera, president of Hearst.

But magazine sales have been so poor in recent years that industry executives are starting to take waste more seriously. In fact, the MPA, which has 1,200 magazine members, recently called a private meeting of 25 wholesalers to discuss newsstand erosion. "I don't want to say it's a crisis, but whenever there's a slow continual decline in sales, one has to be concerned," says Michael Pashby, MPA senior vice president. Throughout the recession, cover prices haven't increased. And with unit sales declining, revenues are going down. "That in and of itself has made people really sit up and say we have do something."

So far, talk has proven easier than action. There are plenty of reasons why newsstand sales have been dropping, and none of them are a quick fix.

For one, there are too many magazines. Recession or no, magazine entrepreneurialism continues unabated. Last year, according to Samir Husni, a consultant who studies magazine launches, publishers fired up 679 new titles, most landing on newsstands already bursting with hundreds of magazines. "In the 80s, there were 1,700 titles handled by wholesalers," says John Harrington, president of the Council for Periodical Distributors Association, a wholesalers' organization. "Today it's 3,300." While the number of titles has nearly doubled, he notes, the amount of rack space per store has barely nudged.

Take a look at your local supermarket "mainline" rack. Titles overlap, jammed together a foot deep, with barely a logo exposed. That's hardly conducive to an impulse purchase, and 60 percent of newsstand purchases are unplanned, says newsstand consultant Ron Scott. Clutter also causes more frequent "turns," as wholesalers and retailers prematurely return magazines to put out something new. Many titles don't stay on the shelf long enough to sell out. And as these new titles proliferate, sales for veteran titles nosedive. According to MPA's Pashby, sales of the top 300 newsstand titles have dropped from 95 million copies in 1980 to 70 million today.

The lack of rack space is a problem, but so, ironically, is the abundance of newsstands. Walk into your average mega-market and you'll see 20, 30, even 40 checkout lanes - each, most likely, with its own magazine rack. That means in one store alone, Elle, say, has to hold a pocket on dozens of racks, since one never knows which checkout lane the Elle shopper may use. Multiply those dozens of pockets by the hundreds of newer chain supermarkets, drugstores and discount stores, and you'll get a picture of waste. The Elle shopper might be buying her mascara at Wal-Mart, CVS or Safeway - so Elle has to be everywhere she might be. "It used to be that a famous title like Cosmo sold 90 percent every month," says Harrington. "Today, you've got about the same number of copies that sell, but the [sell-through] is in the 60s. To get coverage, they've had to put many more copies out there."

Publishers also shoot down their newsstand sales by chasing too many subscribers. Although it's true that publishers like the profits from newsstand sales, they also like the reliability of subscriptions. Many of them dangle low-priced subscription offers to readers, and "convince people that newsstand prices are ridiculous," says Scott. Those offers kill off serious browsers who might otherwise buy six or more single copies per year. As it is, the rule of thumb is that the average, say, Hot Rod newsstand buyer might buy three of 12 issues per year - and there's no telling which three.

To top it all off, some magazine retailers, particularly in large metropolitan areas, are also dealing with outright theft. It happens when a wholesaler's truck driver "taps" magazine bundles - usually porno titles or comic books - shorting each one by a few copies, which he or she then resells privately to newsstands. Sales of these "phantom" magazines, according to one estimate, could account for a third of all magazine sales in the New York area - "but nobody really knows," says Lisa Scott, vice president of Eastern News Distributors. Bundle-tapping is akin to stealing a stick of gum from every candy store in town; it's easy to hide, hard to prove, and quickly adds up.

And it's the bestsellers that get hit, says a wholesaler. "You're not gonna steal Civil War Times."

It sounds like petty crime, but it creates big havoc for publishers. For instance, if a retailer receives 100 bonafide Playboys and 25 stolen ones, then sells 50 and returns 75, Playboy sees only a 25 percent sale, even though actual sales were 40 percent. And Playboy ends up giving credit for magazines that shouldn't have been at the dealer in the first place. Naturally, publishers and distributors try swatting at this thievery, but usually hit dead air. "There's a whole trail of paperwork you can follow," says a wholesaler. "You can check on dealers, you can check quantities, you can cheek on-sale dates. But it's like finding a needle in a haystack."

The magazine newsstand business makes for a grim picture: overstuffed racks, overwrought publishers, undersold magazines, outright corruption. But the solution doesn't lie in blocking checkout lanes or sabotaging competitors. The best way to stop newsstand waste, say observers, is store by store, title by title.

Take Danbury (Connecticut) Hospital's newsstand. Here, Yankee magazine (no relation to Yankee News) sells 70 percent of the copies put out month after month. Anywhere else, it's closer to 40 percent, says the local wholesaler. Why so high? Danbury uses a restricted, authorized list of titles. Store clerks closely monitor what's selling and who's buying; they keep the shelves uncrowded and neatly arranged; they tell the wholesaler exactly which magazines they want each month, and how many copies.

It sounds simple, but few retailers bother scrutinizing their magazine sales. They would rather move milk, meat and other dated products that must either sell or get thrown out. So retailers usually take whatever magazines wholesalers give them and ignore the overstock, since they get credit for unsold copies anyway.

Even better than attentive retailers would be more rack space, or fewer, better selected titles. "Retailers are putting up to 400 titles in a space designed for 200," says Hearst's Herrera. "Retailers are screaming about [sell-through], but they're not aware of what's causing it." If they would devote more space it would mean more cover display and neater racks, which lure readers and increase sales. It would also discourage retailers from pulling copies prematurely in order to put up new titles, giving magazines a chance to sell through right to the end of their cover date.

Publishers, for their part, could better tune their "draw," the number of magazines they place in a store. But that's easier said than done. Many small magazines sell so few copies per store, they can't afford to cut their draw. For example, a mass-market title like Glamour can count on selling a fairly large number of copies, issue after issue. So, a retailer can put out 100 copies, sell 70 percent of them, and still have enough copies to ensure good visibility on the rack. But take a title like E Magazine. In that same newsstand, E might sell three copies per month. To get the 70 percent sell-through rate of Glamour, it would have to put out just five copies, right? Wrong. Five copies would disappear under the myriad other titles on the rack, so potential buyers might miss it altogether. So most small magazines usually have to put out seven to 10 copies to sell any at all.

Still, Susan Allyn, Time Inc.'s director of marketing information, says small publishers can cut waste. While at Bon Appetit, she tracked sales month by month, store by store in top markets. Then, she simply put more copies in stores during the popular months of November and December, and dropped the magazine altogether from some stores during the slower sales months. As a result, she says, monthly sales rose from about 110,000 to 127,000 copies, while sell-through surged from 36 percent to 47 percent in one year. "We printed fewer copies and sold more," she says. "What a concept!"

Magazines like Audubon have also cherrypicked their retailers, forgoing the myriad two-copy sale outlets and building up stores where sell-through is better. Wholesalers perform "make-alikes," placing, say, Audubon in stores that have good sales of Sierra. But giving up sales outlets, no matter how small, takes a lot of courage for a publisher. After all, if 25,000 outlets sell one or two copies per month - a highly likely seenario - that's up to 50,000 missed opportunities for a sale.

But the surest, simplest and most difficult way for publishers to cut magazine waste is this: Offer better magazines.

Consider the recent lesson learned by K-III Communications, giant parent of Seventeen, Premiere, New Woman and other high-flying checkout magazines. Last fall, the company developed True News, a tabloid cross between the worst of National Enquirer and the best, so to speak, of the gruesome Weekly World News. K-III loaded the racks with the tabloid bait, then stood back to collect its $1.49 from an expected 300,000 target females nationwide.

Target females, however, resisted in astonishing numbers. At 391 Connecticut newsstands carrying 2,960 issues of True News, exactly 211 copies left the racks, while the other 2,749 went to the shredder. And that's healthy compared to December, when only 151 readers coughed up. K-III, after paying its national distributor, wholesaler and retailer, collected less than $200 and shredded 5,500 magazines during its 6,000-copy blitz.

The real culprit in the sell-through dilemma is often the magazine itself. As Ron Scott explains, "A publisher will tell me, |I have terrible sell-through.' I'll say, |What was your best-selling issue?' He'll say, |Well, we had one issue that sold 55 percent.'

"Now, whose fault is that?" Scott asks. "The system worked fine when the reader wanted to buy it!"

What,

Me WASTE?

Every year magazines publish a public notice of their bottom line on copies printed and sold. In 1993, Mad magazine reported that it produced almost 1.6 million copies of an average issue and sold less than 600,000. Over one million copies sat unwanted on newsstands until their distributors returned to dump or recycle them. These numbers don't mean that Mad lost money - some magazines make a profit by selling only 15 to 20 percent of their copies. But don't get mad at Mad - it's the same all over.

[TABULAR DATA OMITTED]

Subscribe to Your Magazine Principles

Want to help eliminate 600,000 tons of yearly magazine waste? Here's an idea: Eliminate newsstands. After all, if every reader subscribed to his or her magazines, publishers would print only what people would read. No waste!

It works for some magazines, particularly "trade" magazines, like Poultry Digest or Modern Jeweler, and specialty titles, like Guitar Player. But they usually have tiny circulations of dedicated readers - unlike the hundreds of "impulse" magazines. Of 479 magazines measured by the Audit Bureau of Circulations - which tracks about 80 percent of the business - 90 percent of all titles are sold on the newsstand, and 40 percent earn more than one-fifth of their sales that way.

Besides, subscriptions aren't the cure-all for waste. They produce plenty of their own garbage: renewal notices, invoices, brown paper or plastic wrappers - and catalogs and other items from junk mailers who rent the subscription list. And it's fruitless to think that magazines will give up newsstands even if most of their newsstand readers become subscribers. After all, newsstands lure subscribers in the first place by introducing new readers to the magazine.

Newsstands may produce plenty of unsold copies, but most of those copies will get recycled by the wholesalers who pick them up. That's because a relatively new market has opened up for recycling coated paper into newsprint. This year, about two dozen U.S. paper plants have begun using "flotation technology," which typically combines 30 percent coated magazine paper with 70 percent newsprint to generate recycled newsprint. Wholesalers now truck about 75 to 85 percent of their shreddings to these processing centers, says Nancy Risser, who runs an environmental consulting group.

There's one big exception. Some book chains, like Waldenbooks and Barnes & Noble, often use "independent" magazine distributors instead of wholesalers - and they generally do not pick up returns. These chains return only the magazine covers for credit and throw the body of the unsold copies into the dumpster, leaving recycling up to the local collector.

But even assuming all unsold newsstand copies end up recycled, that still leaves about 3.4 million tons of magazine paper to be dealt with annually - much of it wasted by consumers who read their magazines and throw them away. If you're a magazine lover, what do you do?

Recycle your magazines (starting with this one) and junk mail. Given the new market for coated paper waste, most transfer stations now have a recycling area for junk mail, catalogs and magazines. You may also check with your local bookstore chain to see if their dumped magazines actually make it to a processing center.

If you subscribe to a magazine, you can prevent junk mail in two ways. Renew early, eliminating five to seven renewal notices over the course of your subscription. And request to have your name removed from lists rented to direct marketers and catalogers. Write the Direct Marketing Association to add your name to its Mail Preference Service. Reputable direct marketers use this list to purge the names of people who do not want unsolicited mail. Send a name and complete address to: Mail Preference Service, Direct Marketing Association, P.o.box 9008, Farmingdale, NY 11735-9008.

Finally, if you're a diehard newsstand browser, you might check out the local library, which generally offers as many titles as an average store. The best part is, nobody there will make you buy a magazine in order to read it.