In 1998, under the leadership of new CEO Thomas Ryder, Readers Digest Association (RDA) announced a re-engineering strategy, to increase profitability and create long-term growth opportunities by building on its core strengths. As a part of this, RDA decided to revitalize RD’s franchises, focus on health, home, faith, family and finance (areas of high interest to consumers), focus on new marketing channels apart from sweepstakes and direct mail, and continue geographic expansion. Following this, RDA focused on efforts towards leveraging the RD brand, building editorial expertise and direct-marketing skills, and attaining a large customer database and global reach. Ryder announced a three-phase plan – management restructuring, cutting costs and finding new revenue growth to achieve these objectives. By the mid-2000s, Ryder had successfully put in place all these plans by employing new staff (mainly editorial staff), cut costs through exiting the video business and by acquiring new businesses such as Books Are Fun, which offered display marketing for books and gifts for other organizations or schools. In early 2000s, RDA focused on reinvigorating RD following which it put in place many strategies. Unlike the earlier years, when RDA focused only on direct mailing campaigns that mostly included sweepstakes, the company now began focussing on other marketing channels such as newspapers, catalogs, direct response television (DRTV) and the Internet. The company decided to reduce its focus on sweepstakes1 because of increased regulations on sweepstakes in 1999 (in the US) and the cases filed against the company in few parts of the US, in 2000, on grounds that the company was using misleading statements in its sweepstake offerings. To address the issue of finding new avenues for revenue growth, RDA decided to increase the number of advertisements featured in RD. This was also necessitated by the fact that there had been a drastic reduction in sweepstakes related subscriptions. The anthrax threat severely affected the direct mail market in the US, and hence, RD’s subscription as well. Thus, RDA seemed to have had little choice but to focus more on increasing revenues through more advertisements. Drastic changes were made on the editorial front as well. It had been a general practice of the company to elevate RD’s top editors from within the magazine. (This was based on the premise that those editors understood the fundamental values on which RD was built). In January 2000, this practice was broken, when Ryder appointed Eric Schier (Schier), from Time magazine’s health publication division, as Editor-in-Chief of RDA. Under its magazine re-engineering plans, the look and content of the magazine was changed in a major way for the first time. The age old tradition of RD to honor ordinary people on their achievements by featuring their picture on the cover page was dropped in early-2001. From March 2001, RD featured the pictures of most popular/beautiful faces in the world such as Muhammad Ali, Tom Hanks and Princess Diana, to make the cover page attractive. RDA also used the Internet to extend the reach of its existing businesses across the world. In 2002, it had 40 Websites reaching to millions of customers across the world. RDA promoted and marketed its products through its websites. On the content front, RDA reduced the number of hard-news stories and focused more on mini-articles that did not take much time to read or much thought to process. As a part of its content redesigning, while features such as ‘Mugged by the Law’ were dropped, others such as ‘That’s Outrageous,’ (dealing with bureaucratic abuse and cultural rot) were given lesser space. In July 2002, RDA brought some more changes in the design of the magazine, in order to broaden its target audience base, appealing to younger generations, as against its average customer age group of mid-50s. It changed the quality of its paper (cleaner paper) in July 2002, to improve its visuals. The issues (content) covered in the magazine also were changed as they focused less on first-person tales and nostalgia trips while primarily focusing on offering mini-articles that took little time to read. The magazine was made colorful, featuring more advertisements and pictures, to attract young subscribers. According to some RD readers, all the new changes were making the magazine lose the distinct identity it had painstakingly created over many decades. According to them, in doing so, RD was becoming indistinguishable from the swarm of other publications (featuring Hollywood stars, new diet recipes for women), which offered nothing of enduring value to their readers. The quality of content had reportedly come down so much that it was instantly forgettable. Readers even criticized the increased number of advertisements. A former RD subscriber said, “Reading of current RD magazine may cause you to want to turn on your TV to view advertisements instead.” In spite of this, the company proceeded with another plan that attracted criticism from many quarters – this was the decision to acquire Reiman Publications LLC (Reiman) in January 2002. Reiman was engaged in publishing cooking, gardening, lifestyle and nostalgia books and magazines. Commenting on this, Ryder said, “It will help us distribute our products to new customers, through new marketing channels, while providing an alternate platform for new-product development. The acquisition also will advance our effort to further reduce our dependence on sweepstakes promotions.”

1. Critically evaluate the restructuring strategies put in place by RDA during the late-1990s to regain its lost profitability. Did RDA succeed in its attempts? Give reasons. 2. Discuss the future of Reader’s Digest in the light of dissatisfaction of its readers and the acquisition of Reiman Publications. What according to you should the company do to regain its profitability and subscriber base?