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A Buying Co-Op for Smaller Publishers Gains Traction in Production Cost Area



By FOLIO: Staff
04/28/2006

Advertising cooperatives;in which magazines team up to blanket certain
areas by offering package deals to advertisers;abound in the magazine
industry but as costs continue to skyrocket, there are surprisingly few
co-ops that exist on the back-end to pool resources for buying products
and services such as paper. Publishers need to explore alternatives and
in the case of one of the industry's biggest expenses;paper;that could
include the creation of more buying co-ops, according to Paul Cumisky,
director of cooperative supply chain for Quebecor World.

The industry's one major buying co-op, the Integrated Media Consortium,
is seeing returns for members. Launched in February 2005 by publishing
veterans Bill Walker and Alan Douglas, the co-op was designed to give
small to mid-sized ($3 million to $200 million in annual revenue)
publishers the benefits of lower costs on printing, paper, shipping and
general office expenses by consolidating volume purchasing. Today the
co-op includes 12 members, the most recent being SpecComm
International, which joined in February.

The consortium features 17 different preferred partners (read: vendors)
and 15 different cost centers, covering everything from paper,
reprints, telemarketing services and Web services research. "We work
with best-in-class providers to deliver win-win propositions," says
Walker. "The cooperative is not going to be successful if we just beat
people up on price because our partners aren't going to make any money.
The only way for us to be successful is to bring them more business."
For larger or more technical matters;such as circulation and
manufacturing;the co-op has organized a series of committees. "We will
send out requests for information to the market leaders for paper or
circulation services, telemarketing services, and other supplier
products and services," says Walker.

Consolidating Needs With Others

The biggest costs; paper and manufacturing;are naturally getting the
most interest from members. Stamats Business Media is using the co-op
for telemarketing costs as well as fax and e-mail distribution, and is
close to signing up to get paper discounts for its seven different
publications, according to executive vice president and chief financial
officer Peter Stamats (who also serves as treasurer for the
consortium). "Being a smaller company, it gives us a chance to
consolidate our needs with others," he says. If Stamats gets the paper
contract signed, the subsequent savings will be in the neighborhood of
$75,000 per year.

Beyond the Dollars and Into Best Practices

For Rob Brai, director of manufacturing at Northstar Travel Media, the
co-op enables publishers and vendors to share ideas as well as pool
resources. "The cooperative can go beyond just savings," he says. "You
can share best practices. Saving money is a driving force but there are
other things a cooperative can bring."

Northstar has saved $50,000 on paper buying through the co-op. However,
some publishers have been slow to heed their example. "We and another
publisher in the co-op were the only ones buying our own paper," says
Brai. "Others were buying paper through their printers. We tried
to open people's eyes to the pros and cons of that and that would mean
taking on more responsibility. People were reluctant to do that. In my
experience, buying paper through the printer doesn't educate you."

Ultimately, the changing dynamics of the publication paper market may
act as a catalyst. Pricing will force publishers to re-evaluate their
purchasing process, says Brai.

"People are reluctant to change but at some point they may not have any
choice," he adds. "Capacity is being taken out of the marketplace and
mills will then have the leverage to raise prices. It's all going to
come to a head. It's been a slow progression but this will jumpstart
changes in buying paper."

By FOLIO: Staff
04/28/2006







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