SPY magazine subscribers with sensitive noses got some bad news and some good news with their October issue.

The bad news was that the magazine smelled like perfume. The good news came in a letter from publisher Thomas L. Phillips Jr. touting a "Historic Announcement": "A fragrance scent strip has never before been included in SPY. And a fragrance scent strip will never again be included in SPY. So, this is it. Your first and last chance to see and feel - and, of course, smell - a fragrance scent strip in the pages of SPY."Fragrance scent strips, if somehow you have avoided them, are those small glossy inserts, folded at the edge, that accompany perfume ads in glossy fashion magazines like Vogue, Elle and Cosmopolitan. When opened, they release thousand of micro-encapsulated scent molecules, carrying into the air (and your nose) enticing, enthralling, sexy (or to some, disgusting) aromas such as Poison, Obsession, or the less-suggestive Charlie or Benetton.

Scent strips have become the hottest marketing tool in the $4 billion a year fragrance industry. Before strips came on the scene, perfume manufacturers had to showcase a new scent with free atomizer squeezes at cosmetic counters or expensive introductory samples. Scent strips carry a sample whiff of the newest creations directly into the homes of the fashion-conscious, serving as an efficient - and inexpensive - door-to-door sales force.

Manufacturers' demand for scent strip advertising space is so great, according to Nancy LeWinter, advertising manager for Vogue, that the magazine could run as many as 10 in each issue. But wary of overdoing a good thing and overdosing even voguish noses, the magazine has an informal limit of three per issue.

In June a scent strip guerrilla war erupted when even unopened magazines containing ads for Calvin Klein's new perfume, Eternity, could be smelled across a room. The Eternity scent strip had been printed on porous, uncoated paper, and it leaked its scent copiously - a tactic that many in the magazine business suspected to be deliberate.

Anti-scent strip reaction was immediate. Vanity Fair, which usually receives only a few complaints, got 80 to 90 irate letters; other magazines that ran the ad got a similar response. Calvin Klein was told by some magazines to use coated paper in the future.

For SPY's Phillips, making fun of fragrance scent strips was a matter of creative damage control. The advertising staff had sold the scent strip ad before the magazine decided on a ban. Phillips first tried to back out of the deal, but the advertiser objected. A compromise of sorts was reached: The scent strip was carried in subscription issues only, along with the letter of apology from Phillips.