What’s Troubling the Newsstand Industry … And How to Fix It
– Baird Davis
Make no mistake about this: the number one problem on the newsstand is the massive proliferation of publications. There are too many titles chasing too little display space. Don Logan, Vice Chairman of Time Warner, in response to a recent interview question by Advertising Age, reconfirmed this belief when he said, "There are too many magazines [on newsstands].
"Everybody needs to prune their portfolio a little bit," Logan continued. "Go out to the newsstand and there’s so many out there jammed in that it’s hard to find them. And most of the magazines are not very good."
Publishers (including Time Inc.) have attempted to address the newsstand channel difficulties in the past, often with elaborate, self-interest fueled studies. But these studies have generally avoided addressing title proliferation;the problem that has had the most significant effect on channel efficiency and profitability.
To help illustrate the magnitude of the situation, I’ve analyzed the 2005 sales performance of one wholesaler. I believe this data is generally representative of the magazine wholesaler industry. The critical findings of the study are these:
-Titles (Different Bipads) Distributed in 2005; 2,250 (only 450 are ABC/BPA audited publications)
-Wholesaler Profitability Contribution;Top 500 titles, 86 percent; top 1,000 titles, 96 percent; bottom 1,250 titles, 4 percent
-Wholesaler Efficiency (Sell Through Percentage);All titles, 30 percent; top 10 titles, 42 percent; top 500 titles, 32 percent; bottom 1,750 titles, 17 percent; all titles (less top 10), 25 percent
This data reveals several startling truths: first, wholesalers are basically operating at a 25 percent efficiency level (if the top ten titles are excluded), well below the often quoted industry figure of 35 percent. Secondly, the great majority of titles distributed by wholesalers do not carry their economic weight;in effect they receive a free financial ride from a small cadre of high performance titles. This analysis reveals that 78 percent of the titles had an abysmally-low combined 17 percent efficiency average and contributed only 4 percent to wholesaler profitability.
Retailers will simply not tolerate this kind of performance in the future. Wholesalers, who have been severely punished for their previous lack of title discipline, are being pushed to the financial breaking point. National Distributors, on the other hand, should also be a little uneasy with this performance, but are probably not overly concerned because their income is based on sales, not efficiency.
The newsstand channel, we’ve come to learn, is defined by the multiple misunderstandings and conflicting interests of its various participants. Ironically, it’s publishers that have the most to lose in the internecine battle of conflicting interests.
Despite the current difficulties, real opportunities exist for publishers. The most consequential are those associated with the benefits of creating less crowded newsstand racks. There have been a number of industry tests that have conclusively proven that better (more full face) display on racks populated with fewer titles will improve revenue, profitability and efficiency.
Less, however, means fewer titles distributed. This could be a tough pill for many publishers to swallow. But sacrifices for the greater good will be necessary if publishers are to preserve the overall viability of the retail magazine sales environment.
Recommendation Publishers can, and must, work closely with retailers and wholesalers, but they can’t dictate to them. However, they can control their own behavior and also significantly influence the actions of their national distributors. Therefore, I suggest that the publishing industry establish a full-time (paid) position called, for lack of a better name, Title Proliferation Prevention Czar.
The person in this position would be responsible for developing a program that defines distribution criteria guidelines for all publications going to chain stores. I believe, by the way, that this prospective program should be limited, with the exception of major bookstore chains, to retail chain store distribution. This means it would probably be confined to monitoring only wholesaler, not direct distributor, distributions.
The Czar’s completed distribution guideline document should be sent to all magazine publishers and national distributors, asking them to "voluntarily" adopt these new retail chain distribution standards. After initiating the program, the Czar would continue to monitor publisher, wholesaler and national distributor compliance. For practical (funding) purposes it might make sense for the Czar to work within the MPA framework, an organization with the infrastructure to properly support an initiative of this scale.
The magazine publishing industry must move beyond its self-destructive petty bickering and fear of governmental collusion roadblocks and adopt a program that reduces the display rack overcrowding conditions that are plaguing the newsstand market. Nothing less than the future of the newsstand channel is at stake. Publishers: get off your collective duffs and start doing something that might even make a cynical Don Logan take notice.
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