Word: digestants
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...fast. While Reader's Digest still boasts the world's largest magazine circulation--more than 27.8 million monthly copies sold in 19 languages--its feel-good stories and aging readership (average age: 47 and rising) have kept it out of step with the competition. Even before oral sex became a dinner-table topic, the Digest had lost resonance with generations of today's readers. The U.S. subscription base has decreased by a million since 1993. That's not terrible, but to maintain circulation levels, the magazine must add 5 million new subscribers a year. Not an easy task...
...Digest, while it accounts for only 26% of the company's revenues, provides the brand name that has been used as a front door to roll out a range of books, music and videos, sold mostly through direct marketing. These home and entertainment divisions bring in the bulk of the sales and profits. Recent attempts to move into new markets through joint ventures with Avon (to sell magazines with makeup) and Microsoft (to create CD-ROMs) have been unsuccessful. At Digest's immensely profitable overseas businesses, which accounted for 57% of its revenues last year, sales have fallen from...
...company's strength has become its weakness. Reader's Digest has been unable to exploit its greatest core asset: a monster database. Despite 100 million households logged in and millions of dollars spent maintaining the data, the company has yet to find an effective way to match products with new consumers. "They are wedded to the past," says Minow...
...that's exactly where Grune is headed. After reclaiming his office, he axed three top executives and replaced them with managers who had worked under him previously. On his earlier watch, the company did indeed hum. He dumped unprofitable subsidiaries and added new specialty magazines. He took Digest public in 1990, and in three years revenues shot up, to $2.9 billion from $2 billion. But when he left in 1994, the company's descent had already begun...
...then dismantled much of what Schadt had set in motion. Two weeks after Grune returned, the company pulled the plug on a costly Internet search engine called LookSmart. "Over the last few months Grune has basically disowned everything his predecessor did," says Dennis McAlpine, an analyst with Josephthal & Co. Digest says it is just returning to basics. "In the last few years we drastically reduced our testing," says Thomas Gardner, vice president of U.S. marketing. "Our general philosophy was to focus on new initiatives and not on our core business...