Publishers Clearing House
|Headquarters||Port Washington, New York, United States|
|Key people||Robin B. Smith (chairman)
Andrew Goldberg (president and CEO)
|Revenue||$705 million according to Crain's (2011)
$750 million according to Publishers Clearing House (2012)
Publishers Clearing House (PCH) is a direct marketing company that sells merchandise and magazine subscriptions and operates prize-based game, search, and lottery websites. Its products are promoted through sweepstakes and prize promotions. The company is known for the Prize Patrol, which surprises sweepstakes winners at their home in a televised event.
Publishers Clearing House was founded in 1953 by Harold Mertz to replace door-to-door, single-magazine subscription sales with a single vendor offering multiple subscriptions by mail. It introduced its sweepstakes in 1967. In the early 1990s, the company became the subject of concerns and legal actions regarding whether consumers were misled about their odds of winning the sweepstakes and whether purchases increased their chances. By 2010, the company had reached settlements with all 50 states.
Publishers Clearing House was founded in 1953 in Port Washington, NY by Harold Mertz, a former manager of a door-to-door sales team for magazine subscriptions. The company started in Mertz's basement with help from his wife LuEsther and daughter Joyce. Its first mailings were of 10,000 envelopes from Mertz's home in Long Island, NY and offered 20 magazine subscriptions. 100 orders were received. Within a few years the company moved out of Mertz's basement into an office building and started hiring staff. When Publishers Clearing House moved its headquarters in 1969, its prior location was donated to the city and renamed the Harold E. Mertz community center. The company grew to $50 million in revenue by 1981 and $100 million by 1988.
In 1967 Publishers Clearing House started its first sweepstakes as a way to increase subscription sales, based on the sweepstakes held by Reader's Digest. The first prizes ranged from 25 cents to $10 and entrants had a 1 in 10 chance of winning. After the sweepstakes increased response rates to mailings, larger prizes were offered of $5,000 and eventually $250,000. It began advertising the sweepstakes on TV in 1974. Publishers Clearing House was the only major multi-magazine subscription business until 1977. Former client Time Inc. and several other publishers formed American Family Publishers to compete with Publishers Clearing House after the company turned down repeated requests by Time for a larger share of sales revenue from magazine subscriptions.
American Family Publishers and Publishers Clearing House competed for exclusive rights to magazines and for the better promotion and prize ideas. When American Family Publishers increased their jackpot to $1 million, then to $10 million in 1985, Publishers Clearing House raised its prizes to match. $7 million in prizes were distributed by 1979, $40 million by 1991 and $137 million by 2000. In 1988, two members of its advertising team, Dave Sayer and Todd Sloane, started the tradition of the Prize Patrol, a publicized event where winners are surprised with a check at their home. The idea was inspired by the 1950s television series "The Millionaire."
In 1992, thousands of discarded sweepstakes entries from contestants that did not buy magazine subscriptions were found in the trash by city employees, reinforcing beliefs that the company was favoring those that made purchases in selecting a sweepstakes winner. Publishers Clearing House said this was done by a disgruntled employee at their mail processing vendor. A class action lawsuit resulted from the incident, which they settled by giving discarded entrants a second chance to win.
Publishers Clearing House sent mailings telling recipients they were all "finalists" and American Family Publishers did the same. Some mailings said the recipient was a prize-winner in large letters, then featured a smaller disclaimer "if you return your entrance form and it displays the winning number." This led to a series of legal troubles for both companies due to concerns that the mailings misled consumers about their odds of winning and implied that magazine purchases increased their chances.
Bad publicity, state lotteries, legalized gambling and an improved economy resulted in less interest in sweepstakes. Industry sources estimated Publishers Clearing House's response rates decreased 7-12 percent and its sales volume by 22 to 30 percent. In 2000, Publishers Clearing House laid off a quarter of its 800-person work force. Publishers Clearing House reached settlements with all fifty states and agreed to work with a "compliance counsel."
Publishers Clearing House began selling merchandise in 1985 with two products. When a Hershey's Chocolate Cookbook, followed by a diet cookbook that sold more than other products, the company began expanding into jewelry, media, collectibles, household products and others. The company also shifted its focus online. It began selling magazine subscriptions and merchandise on PCH.com in 1996. In 2006, it acquired Blingo Inc., an ad-supported search engine that was later re-branded as PCH Search and Win. Publishers Clearing House ran contests on Twitter, Facebook and Myspace. iPhone apps for slot games and trivia were developed. The company created online play-and-win sites like PCHGames.com and PCHQuiz4Cash, with air-hockey and video poker games.
In December 2010, Publishers Clearing House acquired Funtank and its online gaming site Candystand.com. In 2011, Publishers Clearing House promoted a "$5,000 every week for life" sweepstakes in TV ads and the front page of AOL.com. The following year the company acquired a mobile marketing company, Liquid Wireless. The company utilized, then stopped then started again utilizing coregistration (through other websites) to expand its customer base.
In 2008 a PCH spokesperson said the digital properties were intended to attract younger consumers. By 2013, the internet had become PCH's primary channel of interaction with consumers. The New York Times described the digital transition as "part of an overall effort to collect information on Web users, show them advertisements and use the registration information for PCH’s mailing lists."
Publishers Clearing House is a direct-marketing company that sells merchandise, magazine subscriptions and operates several prize-based websites. While best known for the sweepstakes and Prize Patrol it uses to promote its magazine subscriptions, the majority of the company's revenue now comes from merchandise. The company has been selling books, media, jewelry and other consumer items since the 1980s. Publishers Clearing house operates eight websites, including PCH Search and Win, PCH Lotto, PCH Games, PCH Save and Win, and Candystand.
The company also sells magazine subscriptions at a discount and advertises subscriptions along with its sweepstakes. It's estimated that companies like Publishers Clearing House keep 75-90 percent of the fees from the original subscription, while publishers use the increased distribution to improve circulation numbers and revenue from renewals. Publishers Clearing House popularized the idea of using sweepstakes to sell magazine subscriptions in the direct-marketing market and became known by detractors as a producer of junk-mail for advertising through mass-mailings. Documents filed with the New York State Department in 1993 said that year the company mailed 220 million envelopes. Frequent buyers can receive 30-40 mailings a year.
The New York attorney's office initiated an investigation into potentially deceptive advertising practices in 1993 in response to consumer complaints. The suit was joined by 14 US states. In 1994, Publishers Clearing House denied wrongdoing, but agreed to pay a settlement of $490,000 and to change their practices. Under the agreement, Publishers Clearing House would define terms like "finalist" and reveal the chances of winning. In 1997, a contestant of competitor American Family Publishers flew to Tampa, Florida thinking he had won, though he didn't actually. The resulting publicity caused more lawsuits for both companies. Publishers Clearing House reached a $30 million national settlement in 1999, and participated in Senate hearings that led to the passing of the Deceptive Mail Prevention and Enforcement Act. At the hearings, Publishers Clearing House claimed most customers knew their chances of winning were small and knew that purchases did not increase their chances. They said only five percent of customers were spending more than $300.
Settlements with 49 States
In 2000, another $18 million settlement was reached with 24 states, after the company sent mass mailings that said "You are a winner!" and used mock personalized checks. According to The San Francisco Chronicle, "State officials said 5,000 consumers in California paid more than $2,500 a year purchasing magazines under the false belief they were increasing their odds. Publishers Clearing House agreed to make it more clear that purchases don't increase a participant's chances of winning. It also agreed to avoid similar mailings in the future, to add a "sweepstakes fact box" with information about the chances of winning and communicate other disclaimers.
State attorneys spoke out against the national settlement and additional lawsuits were filed by individual states. Another $34 million settlement was reached in 2001 in a lawsuit involving 25 states. As part of the settlement, Publishers Clearing House was required to add disclaimers to their mailings saying that the recipient has not won and that purchasing merchandise won't increase their chances. The company said it would avoid terms like "Guaranteed Winner," but was allowed to continue using language like "you could be a winner." Publishers Clearing House apologized in the settlement for its deceptive sweepstakes promotions and said it would contact customers who had spent more than $1,000 on merchandise the prior year.
In 2007, Publishers Clearing House reached an agreement with the Iowa Attorney General to pay a $2,500 penalty each time it mails to someone who has been removed from its mailing list and to contact customers over 65 that are spending more than $500 a quarter.
More Recent Settlements
In 2010 Publishers Clearing House paid $3.5 million to the Attorneys General of 32 states and the District of Columbia to settle possible contempt charges that it had violated the terms of the 2001 agreement. The company denied wrongdoing, but to ensure that the language in its marketing would be clearly understood, agreed to work with both an ombudsperson and a compliance counsel who would review its mailings quarterly. The company also agreed to stop tactics that implied the recipient was close to winning, such as sending mail from a "Board of Judges" or saying the recipient had a "key code" for the winning entry.
Although Publishers Clearing House advertises its sweepstakes along with magazine subscriptions, no purchase is necessary to enter or win. In 1995, Publishers Clearing House began the tradition of announcing winners of its $10 million prize just after the Super Bowl. As of 2012, $225 million in prizes have been distributed. Some of its larger prizes are for $5,000 a week for life, or $10 million. Prizes can also range from $1 Amazon gift cards to $2,500, $1 million or $3 million.
Sweepstakes scammers often pose as being from Publishers Clearing House and say that a cash payment is needed before they can deliver a prize. According to Chris Irving from Publishers Clearing House "If you are contacted by anyone claiming to represent Publishers Clearing House and they request payment of any amount to collect a prize, do not send any money... You have not heard from the real Publishers Clearing House."
Odds of winning
The odds of winning a Publishers Clearing House sweepstakes vary depending on the number of entries and what prize or sweepstakes is involved. According to the official rules, the estimated odds of winning the $1 million a year forever are one in 1.3 billion. In 2011, the odds of the big prize were one in 1.75 billion. The odds of winning the $10 million prize were one in 505 million in 2008 and one in 1.5 billion in 1995. Smaller prizes have better odds that may vary from one in 223 to one in 80,000, depending on the prize.
The Prize Patrol surprises sweepstakes winners at their homes, work or other locations with cash prizes and captures the event on video. Since their introduction in 1989, these reality TV-style videos of prize-winners surprised at their doorstep with checks for $1,000 to $10 million have been used in widely broadcast television commercials, and, more recently, in the company's online acquisition efforts, websites and social media communications. In 2013, a $5 million television campaign modified the traditional prize patrol commercial by digitally altering video from classic sitcoms like The Brady Bunch and Gilligan's Island to show the prize patrol visiting characters in the show.
The Prize Patrol has made in-person appearances or delivered prizes on TV shows like The Oprah Winfrey Show and The Price is Right. Their surprise winning moments have been spoofed by Jay Leno, Conan O'Brien and the cast of Saturday Night Live, woven into the plots of movies such as Let's Go to Prison, The Sentinel and Knight and Day and the subject of cartoons.
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