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Linda Ruth

TNG’s New Distribution Fees: A Game-Changer or the Same Old Game?

Linda Ruth Audience Development - 11/26/2013-15:31 PM

 

Over the past week I have spoken about little else than the new fees coming in from TNG, formerly The News Group, the largest wholesaler group in North America and responsible for over half of the continent’s magazine newsstand distribution. The fees, imposed unilaterally and to be implemented right away, range from two cents a copy to eight cents a copy, with 131 publications exempt. 

TNG is imposing these fees in a move that is eerily reminiscent of the fee-for-distribution that Anderson News Company attempted to impose in 2009. The fee imposed then was opposed by publishers and resulted in ANCO going out of business. There are differences now. And whatever the outcome is, it will be very different from that of the ANCO affair.

Which is good, as no one wants another wholesaler group to go out of business. No partner in the newsstand distribution supply chain could afford that today. As an industry, we need to try to create a situation where every member of the distribution channel is healthy and profitable.

But the situation troubles me, a lot, and for many reasons. Some aspects of this TNG mandate are game changers. Some are not. But the businesses most vulnerable to the consequences of these changes are the independent publishers.

I have heard—and probably so have you—comments made by some that this industry will become stronger, healthier, and more profitable by the removal of the “clutter” of the little guys from the newsstand. The irony is that the growth and stabilization of revenues in our business over the last two decades or so has come from the rise of special interest publications. Haven’t these guys been paying attention?

I am troubled by the ironies. And I am troubled by the game-changing aspects of this, and by the aspects that are not game-changing at all.

I am troubled that the extra fees are not being negotiated—they are being applied. That’s a game-changer. Now, is there a possibility that a publisher could talk to TNG to discuss other ways of skinning this particular cat? There might be. But to do so each publisher needs to take his or her own initiative to bring a plan to TNG. The initial wave of correspondence doesn’t include an invitation to show up at TNG to discuss. But I would encourage you to do so.

The fee is expected to be updated every six months. That means that publishers cannot know what they should expect to pay for distribution of their newsstand copies throughout the coming year. They will be charged at the will of TNG. Budgeting for revenues for a year will not be possible. Planning for what might come down the pike is impossible. That’s a game-changer.

The formulas used for imposing the fees are not to be shared with the publishers that they affect. Consequently, publishers have no say in how these fees are imposed, no way of improving their financial picture in the agencies. That’s a game-changer. 

Experience tells us that once those fees are imposed, we cannot expect them to be rolled back. Wholesalers are not known to reverse fees, once imposed. This is not just me grousing about life. This is an explicit policy on the part of the wholesaler community. That would be the same old game.

However, I have been told on excellent authority that this game is changing as well, and not for the worse. The six-month re-evaluation is formula-based. If a publisher’s standing changes for the worse, per the formula, the fee gets higher. If it changes for the better, the fee gets lower. So that’s another game-changer.

Of course, once the fees are imposed, they will obviously not be restricted to TNG. They will spread to other wholesalers, of which there are mostly only two. That is the same game.

I’ve heard from some industry sources that these changes are expected to succeed because the business models of publishers don’t rely on newsstand as a source. Publishers, I am told, discount subscriptions dramatically, so they don’t need the circ cash. They make their money from advertising, so they can afford to pay higher circ fees. But the publishers for whom these outdated business models still hold true are in many cases the ones exempted from the TNG fee. Many of the publishers taking the brunt of these changes depend on each revenue-generating channel to be profitable in its own right. Creating assumptions based on business models of the very publishers that aren’t hit by the consequences? That’s both an irony, and the same old game.

Where we are now is not any one company’s fault, but the fact remains: There are deep paradoxes involved in the concurrent consolidation of the distribution channel and the fragmentation of publishing and its consumption. I take the wholesalers at their word that they can’t afford to stay in business under the current model. And we ignore this reality at our peril. With a 10 percent loss year over year on a fixed-cost business, the agencies need to find a way to bring their business models into alignment with today’s newsstand realities. The costs of maintaining their truck fleets are huge; the costs of maintaining their merchandising teams are huge. Revenues are slipping. And we as publishers need for them to stay in business.

But from the supplier side, publishers also need to stay in business as costs keep rising and revenues keep slipping. I’ve done the math. Many of the publishers affected are already getting the thinnest slice of remit for the newsstand sales of their products.

From the point of view of the wholesaler, the game is not changing as much as it needs to. The fees levied are not enough to create the profit. They are not enough to fix a system that no longer works. They are seen as a bridge. Something to keep the distribution channel alive while the game is truly, finally changed.

So here we stand, yet again, on the brink of big sweeping changes, on the brink of a whole new way of doing business, and we still don’t know what it’s going to look like. But for today the changes are going to be about who can afford to stay in the game, who is going to leave, what counts as a “little” publisher and what the medium-sized publishers who don’t make the top 131 are going to do.

Some are going to go with TNG’s plan. Some will talk about alternative plans, ones that meet the goals of the suppliers as well as their distribution partners, ones that keep the balls in play for at least a while longer. And some are already speaking to book distributors, direct distributors, and retailers directly. Companies are going to disappear from the system as we know it. Most—but not all—will be publishers.

One thing that will not change is that publishers will continue to produce quality content that people want to read. And they will continue to find a way to get it into their audiences’ hands.

The details of how that will happen are under advisement.

 

 

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Linda Ruth

TNG to Take Over Mercury’s Texas Distribution

Linda Ruth Sales and Marketing - 10/03/2013-15:07 PM

 

I’ve been updating readers of this blog about the Mercury News situation.

If you have newsstand distribution, what’s happening with Mercury News has been affecting you whether you have kept track of the details or not. Mercury has been on shaky financial footing for some time, and there has been a lot of speculation as to who will pick up the distribution.

It isn’t an inconsequential question. Mercury’s footprint was big. Back in May, I reported that Cowley (a TNG marketing partner) had negotiated to buy out Mercury’s distribution in Oklahoma, Arkansas, Tennessee and northwest Mississippi. At the time it was believed that Mercury would keep its Texas accounts and focus on them.

Today we are told that TNG (formerly The News Group) has entered into an agreement to assume responsibility for servicing Mercury’s retail accounts in Texas and the southern Arkansas markets, effective October 2013.

Mercury’s final distribution is to be October 3. After that, all remaining product will be received into the TNG system. For now, and until the transition is complete, there will be no change in the title mix or allotment levels.

We’ll be hearing more as things develop, but for now it’s a relief that we can look to some stabilization of a volatile situation.

See Also: Waiting to See How the Mercury News Situation Shakes Out

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Linda Ruth

REMAG Pilot Program to Launch in December

Linda Ruth Audience Development - 08/09/2012-13:41 PM

 

REMAG’s sprawling and multi-faceted kiosk program would not be easy to announce in two to three words on a newsstand magazine cover. In fact, it would be hard to explain in 25 words or less. It’s new, fresh, innovative and, from a blogger’s point of view, a little complicated. But the program is, in fact, all about the newsstand sales of magazines, so it deserves our attention and comprehension.

REMAG’s Blake Patterson called me to give me an update on the program. Since I blogged about this last year, REMAG has added a step. The program works like this:

1) Remag sets up a magazine recycling kiosk in participating retail stores.
2) A store customer brings a magazine back to the kiosk for recycling.
3) When the magazine is entered into the kiosk a screen comes up listing some local charities and schools from which to choose.
4) After the charity is chosen a coupon screen comes up. The customer may select four coupons from the categories of choice.
5) The coupons are printed from the kiosk with the code for the donation embedded in the coupon.
6) After each coupon is redeemed, a nickel goes to the charity that the customer has chosen.

Since a customer can redeem up to four coupons per magazine recycled, that means that a potential donation of 20 cents will go to charity for each recycled copy. That charitable donation is currently paid directly by REMAG, who believes in this model enough to subsidize it.

When I first blogged about REMAG’s idea, the response from my readers was enthusiastic. They called it a fantastic idea, bringing sustainability into the realm of print publishing, not only by recycling the product but by incentivizing the further sale of magazines.

SEE ALSO: Can Magazine Recycling Boost Retail Sales?

I liked the idea because we badly needed then, as we do now, something new in our world, something positive and forward-looking. The REMAG model seemed promising. It still looks promising, combining, as it does, magazine sales, sustainability and charitable donations—or, as Patterson puts it, three great stories to tell.

“We’ve always spoken about a magazine purchase as a value proposition extending beyond the purchase itself,” said Patterson. “This adds massive value to the transaction, value that a customer can discover directly, by walking over to the kiosk and finding the coupons and charitable donations available.”

Given how ambitious the program is, it’s no surprise that it has taken a full year to launch the pilot.  But launched it finally will be, in eight News-Group-serviced Save Mart/Lucky stores starting in December. There will be two kiosks per location, one per entrance. And the EPA itself has reached out to REMAG to start a program in Puerto Rico, where landfill space is running out. As a result, REMAG is setting up a pilot in three Super Max locations in Puerto Rico starting in February 2013.

What REMAG is looking for from the publishing community now, as they were a year ago, is visibility, participation, and support.  How can we as an industry build magazine sales through this? How much can we boost newsstand sales from the entire category by, for example, having a generic coupon for all magazines? Or for all the magazines published by a single multi-title publisher? And a final great question: What more can the rest of us do to help?

SEE ALSO: Magazine Publishers Family Literacy Project 

 

 

 

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Linda Ruth

Newsstand Innovations: How Partworks Work

Linda Ruth - 01/26/2012-16:21 PM

Every now and then, when our own newsstand landscape begins to look too homogenous and our cover formulas too tired we look overseas to shake us up a little.

Or a lot—the polybag premium craze that swept our consumer publications a decade or two ago (but who’s counting) was sparked by one UK company.

Polybag premiums to some degree have, after many years, run their course here in the U.S., but any publisher with a serious commitment to a UK distribution is aware that it is still the vernacular on the English newsstand.

Partworks are a UK newsstand innovation that take the practice of polybagging premiums to a new level. They offer expensive, high-quality premiums on every product and, as the name indicates, each premium is a part of a much greater whole.

At a meeting not too long ago Ian Bridgman of Comag UK walked me through the history of partworks, produced mostly by a handful of multi-title international publishers.

Here’s how they work: Each issue of a newsstand release will contain one part of a model or a collection. To get the complete collection, or every part needed to complete the model, it is necessary to purchase every issue. Ian tells me that many give a gift away each week, some to build large scale models which, when finished, are very impressive. A James Bond Austin Martin made of proper metal that takes four years of collecting to finish. A human skeleton (at £5.99 per week) that takes two to three years to collect and build, piece by piece.

What an investment these partworks are for their collectors! By project’s end they might have spent £600 to £1,000 pounds collecting the pieces.

And what a variety of topics to choose from! A collection of insects, or action figures, or precious rocks. A Victorian doll’s house, a Hello Kitty party, an entire season of CSI on DVD. Product tie-ins galore—Dr. Who, DC Comics, Star Wars.

The partworks series is usually launched after the first of each year, supported by TV advertising, and with a temptingly discounted price for the first issue or issues.

As you might expect, the sales drop off considerably after the first few issues. And here in the U.S., where distribution is so much broader and efficiencies commensurately lower, returns would certainly be a problem. In the UK they manage the return issue by collecting the unsolds and shipping them overseas in staggered launches. France and Italy have proven to be markets for the unsolds, as has, to some degree, Canada.

Could it work here? It’s hard to see how it could work on the newsstand—our high rate of unsolds, the necessity for a large investment in copies to cover a broad geographical area, the difficulty of processing quirky premiums in the wholesale agencies, and the difficulty of getting full-copy returns (undamaged) all combine to make it an unlikely revenue source for U.S. publishers.

But as a direct sale from the publisher? Why not?

Linda Ruth is Principal of Publisher Single Copy Sales Services. Her book of case studies, "How to Market Your Magazine on the Newsstand," is available at BookDojo.com and at Amazon.

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Linda Ruth

A Sad Goodbye to Borders

Linda Ruth Consumer - 07/28/2011-10:44 AM

The Borders bankruptcy has been a long time coming. It was well over a year ago when a Borders executive walked away from a conversation in which I asked, in a less-than-diplomatic way, about the long-term chances of the chain. So we’ve had plenty of time to go through the stages of grief, and also to modify our budgets and business plans, and to think about where we would sell our copies when the giant was gone.

All the preparation hasn’t made it easy. For many of my publisher clients Borders was the second biggest source of distribution and sales for their publications: a sturdy prop in a difficult time. Along with Barnes and Noble it represented a remaining place where a special interest publication could find a home and an audience, and where the cost of returns wouldn’t cripple the possibility of some positive revenue flow.

In fact, Borders’ demise is a surprise to no one—not even to my daughter’s college-age boyfriend who said he knew, when he heard (years ago) that someone from the chain had dismissed the e-reader as inconsequential, that this company wouldn’t last. “To deny new technology because it threatens your profits never works,” he said. “The new technology always wins. Always.”
Well said, Ben, and oh, so true. But from a magazine point of view I would never dismiss the chain as lacking in vision. I remember years ago when Borders was on the cutting edge of the magazine superstore concept. Waldenbooks, once a huge powerhouse of magazine distribution, was starting to wither away in its shopping mall locations, and little upstart Borders was becoming the robust hope of magazine publishers. When Walden was moved from Stamford, Connecticut to take its place under the wing of BGI in Ann Arbor it almost seemed like a case of the tail wagging the dog; but Borders grew and thrived and sheltered magazine publishers from the dwindling sales from Waldenbooks.

As we struggled for incremental magazine space in supermarkets and drugstores there was relief to be had in the miles of mainline in the Borders chain. I remember magazine buyer Bill Jourdan looking for independent comics and “’zines” to add to the magazine racks—who would even accept those products in those days? He wanted a true mix with lots of choice for his customers; he wanted to carry everything. More recently Carla Bayha met with publishers to customize “out of the box” promotions programs that would play to the strengths of their magazine line.

Consumer magazine publishers have gotten very used to the changes brought about by bankruptcies over the past couple of decades. The first ones I remember happened back in the 1980s when a big national distributor and a smaller direct distributor went out of business.

Ironically, the direct distributor had built its business around Waldenbooks, and the removal of that pin was what sent it under. Then Unimag, ANCO, and countless more of the little guys…

But, unlike WB Yeats after the 1916 Irish uprising, I’m not going to “murmur name upon name” of the fallen heroes of newsstand distribution. Now we have a new storm to buffet our tiny boats and one less safe haven to sail into. We’ve been through many bankruptcies, yes, and more might be pending. As a business we’ve learned not to let collections get too far out; we’ve learned how to regroup and re-strategize and re-forecast and respond. We’ll move forward; we’re moving forward now. And as we do, we take a moment to say goodbye to a once great chain.

Linda Ruth is Principal of Publisher Single Copy Sales Services. Her book of case studies, "How to Market Your Magazine on the Newsstand," is available at BookDojo.com and at Amazon.

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Linda Ruth

MagNet’s Cover Analyzer Gives an Early Peek at Newsstand Trends

Linda Ruth Audience Development - 09/09/2010-09:34 AM

It’s the riches of our digital life that are being offered up to us, this time through the MagNet data system.

Of course, most of us are getting great feedback from our readers from our online cover surveys. In some cases the readers help sway a decision: the close-up or the distance shot for the cover image? The quirky human interest article or the solid investigative piece as the lead? The starburst or the banner?

It’s a wonderful world of reader participation and interactivity. But no doubt about it, the best way to assess the impact of a cover is still through its newsstand sales.

And the best time to assess that impact is, of course, as soon as possible. Things change fast in this business, and an early warning is a good thing. That’s why I was so pleased when Gil Brechtel asked me if I wanted to take a look at MagNet’s Cover Analyzer and its companion POS flow and comment on what I see. We’re all pretty familiar with MagNet’s data stream—it’s allowed us, in recent years, to see exactly how many copies we sell in every single retail outlet, with data that is updated daily in the Web portal. That’s information that hadn’t been readily available on a national basis for many years, to the frustration of publishers everywhere. The Cover Analyzer and POS piece allow us to see how well a cover does its job—to excite interest, and sales, for the publication.

In keeping with the season, I thought I’d start with a look at the fall fashion publications. They always stir up some excitement at this time of year, and I’d heard that these all-important September issues showed increases in ad pages, per Min Boxscores (and Hallelujah for that): W up 31 percent, Vogue up 24 percent and InStyle up 16 percent.

InStyle’s September issue is 600 pages of fall fashion—a heady promise! And according to MagNet’s POS it has sold over 44,000 copies in the first two weeks on sale in the retailers tracked for reporting purposes. This is less than its 2009 anniversary issue, which sold 48,000 copies in those same retailers at that same point—but as we circulators know, that was long ago in a galaxy far, far away.

Vogue’s fall issue tops InStyle with over 700 pages of fall fashion. On the newsstand bipad alone, MagNet’s POS tracking shows Vogue selling 32,472 copies at in the first two weeks. Again, slightly disappointing when compared with 2009’s September issue, a “mere” 500 plus pages, which sold 34,132 copies in the same retailers in the same period of time. This is still promising, compared to the previous couple of issues, which tracked at about two thirds that level in those retailers at the same day of on-sale.

W follows a similar trend, up from the softer summer issues but down from the golden days of yesteryear, and I guess that’s the story of our lives right now. These fall fashion issues are benefiting from the ad page bonanza as well as the seasonal up-tick in their category, but any rally is welcomed.

And isn’t this Cover Analyzer a nifty tool for tracking the ups and downs of our industry, its categories, and its covers?

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Linda Ruth

More Newsstand Distribution Changes May Be Coming—From Wal-Mart?

Linda Ruth Audience Development - 06/24/2010-12:02 PM

The gang at Wal-Mart is always up to something, and the latest something appears to be a chain-wide initiative to move transportation services away from suppliers to their own trucks and warehouses.

Wal-Mart, of course, does have its own trucks, which they currently use to move product from distribution centers to stores. The initiative is meant to lower costs through direct supply across multiple categories. How that is likely to translate for magazines appears to be the elimination of the wholesaler suppliers with the difference in discount going directly to Wal-Mart.

But does Wal-Mart intend to make the same arrangement with magazine publishers? And how would that play out for magazines?

For some publishers, it’s back to the future with this. A multi-title publisher with a large annual publication did set up a direct relationship of this sort with Wal-Mart a couple of decades ago. It cost the publisher dearly.

“What we didn’t understand at the time, was that for any pennies you save moving to direct supply, it costs that much more across all the other channels,” the publisher recently explained to me. “The wholesalers lose the volume and the route density, and they have to spend more to get their product to every remaining retailer. And to stay in business themselves, they are going to have to get that difference from somewhere. There are only two places to spread that cost out: to the retailer and the publisher. It’s what happened with the bookstores back in the ‘80s, and to some degree, the entire system has been paying the price ever since.”

The price, in this case, is the further weakening of the already-fragile wholesaler supply system with the reduction of overall volume raising the prices everywhere else.

With so many suppliers on the magazine side, so many returns to manage and so much complexity in the system, this all might become a moot point. After all, the wholesaler system consolidated to its current state through trying to meet the needs of large national chains such as Wal-Mart. To undo those relationships again will give rise to many questions: will Wal-Mart set up its own returns processing center? What about in-store merchandising? Will the RDA be rolled into the discount? How will this affect payment; and how, in turn, will that change affect the survival of some of Wal-Mart’s smaller publisher suppliers? Or will Wal-Mart, having picked up its own trucking, want to pick up the trucking to other retailers as well? Will they essentially move in the direction of becoming a national wholesaler?

While some of these scenarios are more likely than others, certainly none are impossible. We’ve seen massive changes in our system before and there is no real reason to believe that we won’t continue to see change.

But as Wal-Mart begins to talk directly with publishers about direct supply, this might not be a change we want to embrace. There is every reason to anticipate that costs savings to the retailer will mean additional costs in the long run or the short run to the publisher.

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