Shootout at the Newsstand

Several people have asked for my take on the current turmoil in newsstand distribution. OK, here is Dead Tree Edition's exclusive analysis: The U.S. newsstand distribution system is a mess. (Please see the Feb. 19 update to this article.)

Trade publications have been writing about problems with newsstand distribution in the U.S. since Ben Franklin was a teenager, and just today Audience Development posted an interesting piece called "A Printer's View of the Newsstand Chaos". I won't rehash what's already been published, but here are a few tidbits that might provide some perspective:

• The crash in the market for recycled paper has helped precipitate the crisis. A year ago, a pound of unsold magazines was worth more than 6 cents in the recycled-paper market; today, it would be less than 2 cents, according to Pulp & Paper Week. That represents millions of dollars in lost revenue for the big wholesalers like Source Interlink.

• One of the best (and most entertaining) ways to keep up with the Source Interlink vs. Time/Curtis battle is on Yahoo!’s Source Interlink message board . It has all kinds of nasty comments and juicy rumors, some of which have turned out to be true. With a click or two, you can even track Source’s stock price, which bounced up to a whopping 10.5 cents per share today, and see that its current liabilities exceed its current assets. (Not a good sign.)

• Because of a temporary restraining order obtained by Source Interlink, newsstand distribution in much of the country is at a standstill until a court hearing on Monday (Feb. 23). Some magazines, especially weeklies, have been shredded without ever being sent to market, and some monthly magazines are likely to go on sale late.

• Something that hasn’t been explained well in the trade press is the role of the wholesalers and national distributors. The wholesalers don’t just deliver publications to stores, they provide all the merchandising – removing old copies, putting new copies on display, counting and accounting for returns, etc. They collect money from the retailers and pay it to the national distributors like Curtis, which in turn pay their publisher clients. Two of the four big national distributors, Time Distribution and CoMag, are owned by magazine publishers.

• And something that hasn’t been mentioned in the trade press is who owes what to whom. When some wholesalers got into trouble a few years ago (before the waste paper market bailed them out?), there was talk that some were behind in their payments to the national distributors; at least one sizable wholesaler went bankrupt. It’s not clear this time around what the accounts payable/receivable situation is.