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Distributor Balks at Wholesaler's Price Hike

Curtis breaks away from Anderson; Comag extends contract.



Bill Mickey By Bill Mickey
01/30/2009

All the variables in the recent newsstand supply chain fiasco are beginning to fall into place, but perhaps not as the wholesalers hoped.

National distributor Curtis Circulation said its publisher clients will not comply with the Anderson's 7-cent price increase. Comag, however, has extended its contracts with both Anderson and Source Interlink—without the price increase.

Major retailers, however, could end up deciding wholesalers' fate. Yet the retailers remain a wildcard. One source with direct knowledge of the situation said Friday that major retailers fully intend to stick with their current wholesaler configuration. "They don't like being dictated to," said the source. "This disruptive event certainly doesn't help our cause as a category."

Other industry observers also think it's the retailers that have the upper hand in the channel.

But for now, some tough decisions are being made. "At this point Anderson is no longer receiving Curtis product(s)," said Dennis Porti, Curtis' executive vice president. "And I wouldn't say that Curtis cut them off. Because of their unilateral mandate, they more or less cut themselves off. The publishers simply cannot afford that kind of money."

Curtis' decision could be a major setback for Anderson, which announced a 7 cents per copy distributed price increase on January 14.

Not Playing Ball

Reports this week said Time Inc. won't play ball either. Time Inc.'s decision—not to mention Curtis'—not only erases a major revenue source for the wholesaler, but also denies it a newsstand lynchpin: People. That fact alone could prove damaging to the wholesaler-retailer relationship.

To get a sense of Time Inc.'s leverage, a loose, back-of-the-envelope estimation of total sales for 20 of its newsstand titles is approximately $550,921,963, per first-half 2008 ABC statements. The wholesaler slice of that pie is estimated at 15 percent, or almost $83 million. Anderson and Source are said to have a combined 50 percent share of market.

As for Curtis, the distributor is the largest, in terms of billing, with a 40 percent share of market, according to John Harrington, publisher of the New Single Copy newsletter. According to his Web site, clients include Rodale, Forbes, AMI, Hachette, Johnson, Taunton, Newsweek, the Atlantic, the Economist and F+W.

How all of this will shake out next week remains to be seen. But at this point, publishers are not only taken aback by the unilateral price hikes—despite the significant financial pressure wholesalers themselves are under—say they simply are not in a position to pay, citing tight finances themselves. "All I can say is our company, just like most, can't afford the money that these wholesalers are asking for," said Will Michalopoulos, VP, retail sales and marketing for Hachette Filipacchi.

Bill Mickey By Bill Mickey
01/30/2009




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