By Marrecca Fiore
A new report from Harrington Associates of Norwalk, Connecticut, says the proliferation of the $1.99 consumer magazine is making it nearly impossible for the already cash-strapped wholesale industry to make a profit from the distribution of the discount titles.
The "Impact of Low Price Magazines," commissioned by Magazine Information Network, an organization comprised of some of the largest mass market magazine wholesalers, says that, under the current distribution formula, any magazine priced below $2.49 is not profitable for wholesalers to distribute.
The $1.99 magazine, made popular by Bauer Publishing’s Life & Style and In Touch, have experienced a surge in popularity over the past two years. In 2005, for example, the total unit sales for low price titles were 15 percent of all magazine retail sales. They were 19 percent of total sales in the first half of this year, according to the Harrington survey, which used information from Audit Bureau of Circulations and BPA Worldwide.
Harrington Associates partner John Harrington, publisher of The New Single Copy, said wholesalers may have to stop delivering discount publications all-together, if a solution is not found. "I think wholesalers are saying they’ve got to have some additional revenue from the publisher one way or another," Harrington said. "Because the revenues generated by the magazines don’t cover the cost of handling the product.
Harrington said the easiest solution would be for the $1.99 magazine publishers to pay the wholesaler an additional fee or offer them a deeper discount to deliver the product to retailers. "This is something they’ll definitely have to do, especially if the magazines continue to grow and be a bigger part of their mix," Harrington said. "It just exaggerates (the wholesalers) losses. They’re not profitable companies and haven’t been for some time."
More than likely, Harrington said, low-price magazines will not be raising their cover prices to cover the shortfall anytime soon. "People and Us Weekly have continued to grow their circulation even though they’ve raised their prices," he said. "But if you look at their covers, it’s hard to find the prices. With the low prices magazines, that’s the first thing you see is the $1.99 with a starburst on the cover. Going above the $2.00 ceiling would almost certainly produce negative results."