Hedge Funds Buys Newsstand Giant

Chatham apparently controls American
Media, publisher of the National Enquirer

Yesterday's announcement from the owner of the country's largest magazine wholesaler seems to have flown beneath the radar, but it could have major implications for the U.S. magazine industry. 

That's why we're publishing the news release word for word, which rarely happens at Dead Tree Edition.

We'll leave the analysis for others, except for a bit of background information:

• The News Group (TNG) is the wholesaler for the vast majority of magazine copies sold at retail in the U.S.
• Note that JPG will retain the part of TNG that merchandises magazines. (Wholesalers, rather than the stores themselves, are usually responsible for replacing old issues with new issues and deciding how they will be displayed.) That makes sense because JPG's massive distribution business delivers a variety of other products to grocery stores and other retailers. 
• Comag, which started as a Hearst-Conde Nast co-venture, is one of the nation's largest national wholesalers of magazines. National wholesalers represent publishers in dealings with wholesalers and retailers, managing copy placement, billing, collections, and other services.
• Chatham's other media investments have included American Media Inc (AMI) and the McClatchy chain of newspapers. Two Chatham executives serve on the four-member board of AMI, the privately held publisher of National Enquirer and other magazines that has been in hot water lately regarding alleged payments to silence women who had affairs with Donald Trump.

Jim Pattison Group Agrees to Sell U.S. Magazine Distribution Related Assets to American News Company, LLC

VANCOUVER, British Columbia, Nov. 29, 2018 /PRNewswire/ -- The Jim Pattison Group (JPG) today announced that it has reached an agreement to sell its United States magazine distribution business (TNG), including their interest in The News Group LP, to American News Company, LLC (ANC). The sale is expected to close by December 31, 2018 at which time executive management, and the approximately 1,500 employees of the acquired businesses, will transition to ANC and continue to oversee the day-to-day operations.

"This transaction allows the publishing community to have a more significant voice in the continued development of its supply chain and efforts to secure more efficient and thereby profitable newsstand results," said JPG President Glen Clark. "The stakeholders most impacted by this business, now have an extraordinary opportunity to be directly involved in a critical aspect of their business and will be well positioned to ensure its consistency, efficiency and sustainability."

The agreement to sell JPG's U.S. magazine business includes its distribution centers, depots, vehicles, systems, retailer contracts, publisher contracts, management personnel and related employees. Additionally, ANC will also acquire JPG's ownership stake and all related assets of Retail Support Services (RSS), Magazine Information Network (MagNet), Comag Marketing Group (CMG) and Genera Solutions. ANC will enter into a long-term merchandising services agreement with TNG Merchandising (which is not part of the acquisition and remains owned by JPG) to ensure that magazines continue to be properly merchandised at retail. TNG Canada's operations (wholesale and RS2 Canada) are also excluded from this transaction and will continue to be owned by JPG and run in the ordinary course.

"We are confident that aligning a leading U.S. magazine wholesaler with our valued newsstand partners will have a significant and positive impact on all our stakeholders," said TNG President David Parry. "Our commitment to the channel, and growth of all involved, will be underscored as we continue to work closely with our vital retail customers, suppliers and employees to ensure a low cost, efficient and long-term sustainable business. TNG will be laser-focused on ensuring a seamless transition for all channel participants."

American News Company, LLC, is a Chatham Asset Management (Chatham) portfolio company. Chatham is a $4 billion hedge fund and a longtime supporter of the media industry.

About JPG Headquartered in Vancouver, BC, Canada, The Jim Pattison Group (JPG) is a diversified group of operating businesses primarily in the United States and Canada that enjoy strong and positive market reputations, with most occupying leadership status within their respective industries. JPG's operating divisions span the automotive, advertising, media, agricultural equipment, food and beverage, entertainment, exporting, financial, real estate and periodical distribution industries. JPG has grown to be Canada's 2nd largest privately held company with over $10.1B in annual sales and more than 45,000 employees world-wide. For more information please visit www.jimpattison.com.

About American News Company, LLC American News Company, LLC (ANC) will, upon closing the announced acquisition, be a leading magazine wholesaler in the United States for publishers and retailers. ANC, through its subsidiary Comag Marketing Group LLC, will be a leading provider of national distribution services, including billing and collection and sales and marketing services, for publishers. MagNet and Retail Support Services, both subsidiaries of ANC, will offer licensing of magazine sales information and retail display services, respectively, to publishers and retailers.

SOURCE The Jim Pattison Group
Related Links http://www.jimpattison.com

Related Dead Tree Edition articles:

• Wait! Don't Kill That Magazine: 4 Ways To Rescue A Struggling Publication 
• Books: Amazon's Big Mac 
• A Funny Thing Happened on the Way to the Magazine Shelf . . . 

Wait! Don't Kill That Magazine: 4 Ways To Rescue A Struggling Publication

As if plummeting ad revenue and rising paper prices weren’t bad enough, now the threat of skyrocketing postal rates has successful publishers like ESPN and Meredith talking about shutting down magazines.

But euthanizing money-losing titles isn’t always the best answer.

Just because your accounting system says the magazine is unprofitable doesn’t mean you’ll be better off ceasing publication. (I explain that more in a new article for  Publishing Executive, "Is It Time to Put Your Magazine Out of Its Misery?".)

A better option may be radical surgery – dramatically scaling back your magazine’s footprint to make it more sustainable for the long haul. Here are four examples:

Reduce Frequency
Turning two 80-page issues into one 160-page double issue can cut your production and distribution costs by one-third. For example, well over half the postage for most titles is related to the number of copies mailed, not the weight of those copies.

You can’t get that kind of savings from the usual, less radical tweaks. And, unlike trimming page counts or shifting to cheaper paper, doubling up actually yields a better product.

A double issue doesn’t have to be double-sized. Typical practice is to increase the page count by about 50% -- enough to give the readers noticeably more than they would get in a normal issue.

Reducing frequency enables you to continue publishing the issues that attract the most advertising while euthanizing the dogs of summer – those issues with poor ad sales.

A bonus: Double issues really do count as two issues. A recent promotion for TV Guide Magazine offered a special deal for a “1 year (52 weeks)” subscription, with fine print stating “will be delivered in the form of 26 double issues”.

Pare Your Subscription List
Letting people subscribe for less than the cost of printing and mailing their copies might have made sense when ad dollars were rolling in. But with that subsidy gone, sustainable publishing now means getting readers to pick up more of the tab.

Consumer magazines typically have a wide array of subscription price points – from airline-rewards miles to long-time customers who pay list price. (Are we the only industry that charges our best customers the highest prices?)

You can save money by eliminating negative-remit subscriptions and unprofitable promotions. Replace them with free copies distributed to such “public places” as hair salons, hotel lobbies, and doctors’ waiting rooms. Choose locations likely to be of interest to your advertisers or to have prospective subscribers. (Money-saving hint: Select regions in which your postage is most efficient.)

You can generate even larger savings if you’re willing to let your circulation shrink. That frees you, for example, to drop those 50-cents-per-copy subscription promotions, as well as subscription sources with poor renewal rates. And to stop offering renewals that don’t at least cover the cost of printing and mailing.

Factor in the impact on ad revenue; fewer subscribers means lower rates per page. But circulation reductions aren’t as big a deal as they used to be with advertisers, who now look to print media for highly engaged audiences, not masses of eyeballs.

Take a critical look at newsstand 
Magazine retailers and wholesalers focus on maximizing sales, not publishers’ profits. That means distributing lots of copies that don’t sell, which is OK for the channel partners but not so great for publishers that bear the printing and paper costs.

You’d think wholesalers would stop distributing your title to convenience stores that sell only 10% of the copies, but it never seems to work that way. Be willing to ban your magazine from retail chains with the worst sales.

Look especially at whether in-store promotions are paying off. And don't buy what you can't monitor: Non-compliance has become epidemic. (Hint: If you have copies in airport stores, there’s a good chance you're losing money on them because of "pay to play" promotional fees.)

Get more love for your digital edition 
Rising paper and postal prices don’t, of course, affect the costs of digital editions. Unfortunately, people haven’t exactly been beating down the doors to read our e-magazines.

But what if we gave them more reasons to take a look, whether via price discounts or bonus content? If you sell bookazines, give all of your subscribers access to a free digital edition. Or create a digital compilation of your best stories from the past year or on a specific topic.

Leveraging our digital editions more in promotions, such as providing free access to an issue, can gradually increase the share of digital-only subscribers. And it’s an inexpensive way of getting the email addresses of prospective subscribers.

The goal is not to get rid of print altogether but rather to replace our least profitable print copies with digital distribution.

Other Dead Tree Edition articles about magazine publishing include: 

• A Magazine Resurgence? The Numbers Say No

• This Magazine Subscription Has No Co-Pay

• Which of These Headlines Is Defamatory?

 

A Funny Thing Happened on the Way to the Magazine Shelf . . .

The Source Interlink shutdown left many
magazine racks empty in the summer of 2014.

The U.S. publishing industry has a strange habit of referring to retail magazine sales as "newsstand," when actual newsstands account for maybe 1% of copies sold.

It often seems that "newsstrand" would be a more accurate name, because so many copies end up getting stranded rather than being placed where consumers can buy them.

The bankruptcy of Source Interlink two years ago left millions of copies stranded in distribution centers and printing plants, while many retailers' magazine shelves sat empty.

But newsstranding occurs in other ways, such as when publishers pay to have copies placed in highly visible racks, only to have the retailer remove the racks or simply fail to implement the promotion. Or when copies are allotted to stores that then downsize or remove their magazine sections.

And some magazines get newsstranded "just because." Whether you call it the newsstand system, the grocery/discount-store/bookstore system, or the newsstrand system, the way magazines get distributed for retail sale is maddeningly inefficient.


This is the tenth installment in our 31-part Publishing Word of the Day series, which includes such sniglets as denialsizing and listicklers.

You Won't Believe What This Fortune Teller Predicts for Publishing in 2015!

 Smart phones, not-so-smart publishers, and hot new trends: 24 crazy predictions for the new year

Media consultant

When glancing at my article in the current issue of Publishing Executive, I had a revelation: Now that one of the publishing industry's leading magazines had called on me for predictions, I’ve graduated from blogger to media pundit.

And then my heart sank as I realized I had violated a cardinal rule of the International Order of Pompous Media Pundits: In its six-plus years of existence, Dead Tree Edition had never published a year-end list of predictions for the coming year.

With 2015 already under way and prognostication being new to me, I scraped up 50 bucks – Dead Tree Edition’s entire annual research budget – and headed over to Madame Marie, a local fortune teller and door-to-door magazine saleswoman.

Here are her 24 startling (mostly) predictions about magazines, the three Ps (postal, paper, and printing), social media, and publishing in general for 2015. If some turn out to be true, you can be sure I’ll be writing “told ya so” pieces in the next 12 months. And you can blame the wrong ones on Madame Marie:

1) Postal rates will not decrease, even though the exigent surcharge is set to expire this summer. Not sure if that will be from a court order or Congressional action. When I asked Madame Marie to explain, she responded, “What, you think I have crystal ball or something? All I know is, don’t ever bet on government getting rid of a temporary tax or fee.”

2) More web sites will jump into the printed magazine business. But they will not be welcomed into the fraternity of consumer-magazine publishers because they won’t have bloated ratebases or sell annula subscriptions for $5.

A postal bankruptcy would be, like, a bummer, man.

3) Three-dimensional printing will grow almost as fast as the buzz about it. By June, ad agencies will start demanding makegoods if their clients’ magazine ads aren't printed in 3D.

4) USPS will announce a new strategic plan called Seven Six Three – delivering Amazon packages seven days a week, other parcels Monday through Saturday, and everything else three days a week.

5) If you think native advertising is bad, wait until you see foreign-born advertising.

6) Mark Zuckerberg’s new book club will spread like wildfire, until people start seeing spammy “sponsored” posts and photos of distant acquaintances’ new puppies in their books.

7) Despite a decent economy, the market for huge yachts will plummet as billionaires join in the new craze for tasteful displays of wealth – buying a daily newspaper. When I asked Madame Marie whether the newspapers would still struggle, she said, “If you have to ask how much money they will lose, you can’t afford to buy a newspaper.”

8) Congressional Republicans will try to push the U.S. Postal Service into bankruptcy to break the postal unions – until voters realize a USPS bankruptcy would turn Forever Stamps into Never Stamps.

BoSacks flyin' high: Our consultant's
source of inspiration and insight

9) Congress’ next attempt at postal reform will be putting USPS up for sale. FedEx and UPS will quickly say, “No thanks.” However, the idea of buying out the middleman will intrigue Amazon, until it runs the numbers and realizes that, with proper accounting for pensions and retiree benefits, the Postal Service would be profitable. And you know how Amazon hates profits. To console himself, Jeff Bezos will buy another newspaper.

10) Amazon will go back to working on delivery drones.

11) Wal-Mart will announce the development of anti-drone missiles that can be mounted on store rooftops.

12) A major publisher will redesign its web site, then realize the snazzy new look and upgraded user experience can’t be seen on smartphones, which represent 80% of the site’s visitors.

13) “Big data” will be so hot that tech companies will try to differentiate themselves with new projects involving “Really Big Data,” “Huge Data,” and “Massive Data.”

A source of insomnia -- and much cursing

14) Tablets will be linked to insomnia. We’re not talking about the recent study proving that using e-readers before bedtime disrupts people’s circadian rhythms and makes it hard to fall asleep. (That’s so 2014!) We’re talking about MediaVest, the ad agency that is refusing to pay for the portion of a magazine’s circulation distributed via tablet editions. As Madame Marie put it, while meditating on a 1978 copy of High Times with the BoSacks centerfold, “Magazine advertising executives will stay up all night wondering whether to grow a pair and tell MediaVest it needs a rectal-cranial extraction.”

15) With tight supply, rising prices (for now), and strong dollar, the U.S. will be the market of choice for manufacturers of coated paper around the world. Because of low energy costs and the recent shuttering of inefficient mills, North American producers will be able and willing to protect market share by cutting prices.

16) As usual, “that damned newsstand” will be a frequent utterance of magazine publishers. But in 2015 the phrase will refer to the long-neglected Apple Newsstand for marketing iPad editions of magazines. The regular newsstand system – the one that sells printed magazines – will actually register gains in 2015 after years of declining sales.

Google What?

17) The content-marketing bubble will burst when non-publishing companies realize how few people are viewing their content and that it's not generating actual sales. Some will find it more efficient to use -- perish the thought -- paid advertising.

18) Trying to ride the next big wave, a former content-marketing/social-media/SEO consultant will publish a book called How Publishers Can Profit From Chris Christie-sized Data.

19) Web advertisers will have a radical idea: Only pay for ad impressions that are seen by actual human beings.

20) Google will pull the plug on Google Plus. No one will notice the difference.

The next big thing in social media

21) The big news in social media will be a simple new app that lets people share their pain and disappointment by sending out messages saying, simply, “Oy!”

22) Magazine publishers will pour lots of resources into cool new ancillary enterprises that they will brag about at industry conferences. A few of these ventures will actually turn a profit.

23) Some magazine ads will still include QR codes. And consumers still won’t bother scanning them.

24) “Oh, one last thing,” added Madame Marie, still clutching her sacred copy of High Times. ‘Linkbait’ headlines designed to exploit people’s curiosity will take over the Internet. Even your blog will join the trend.” She’s already been proven right on that one.

Bare Shelves in the Magazine Aisle

There's nothing "OK!" about these magazine racks.

Here’s how a store’s checkout racks and magazine aisle look after going weeks without delivery of magazines.

Magazines strike out at checkout.

While most grocery and book stores this week were sporting July issues, this CVS store on the East Coast was stuck with May and June copies of monthlies and and a few early-May issues of weekly magazines. Thank God for bookazines, which stay on sale at least a couple of months, or else the entire magazine section would have looked even more barren.

CVS had the misfortune (or poor judgment) less than a year ago to go all in on magazine distribution with Source Interlink, which collapsed last month and Monday went Chapter 22 (its second trip through Chapter 11 bankruptcy reorganization).

Bookazines fill the void.

Any solution for Source-tied retailers like CVS will inevitably involve the country’s largest wholesaler, TNG. But it will take weeks for TNG to bulk up its distribution network to handle the majority of Source’s former customers.

Complicating the move is that TNG is demanding that publishers sign off on new terms, which include new fees and a transition to “pay on scan.” Source and TNG both apparently ran into trouble by grabbing market share with agreements to pay retailers based on the number of copies rung up at cash registers, not the number that were distributed but never returned.

Empty slots and out-of-date issues

Without reciprocal agreements from publishers, the two big wholesalers have been squeezed by the “shrink” – copies that are stolen, lost, or damaged. TNG now seems to have the power to impose pay-on-scan for publishers, including compensation to publishers for estimated shrink.

Meanwhile, the magazine racks at many stores, especially in former Source strongholds in the Midwest, are being depleted. Will they remain empty until the industry is ready to deliver its product once again, or will impatient retailers just turn the space over to other products that are probably less profitable but also more reliable?

Related articles:

• A Glimmer of Hope Amidst the Newsstand’s Gloom 
• Publishers Hope Threesome Will Perk Up Newsstand Sales 
• Shootout at the Newsstand

Publishers Hope Threesome Will Perk Up Newsstand Sales

Here’s proof that tough times make for strange bedfellows: Three major magazine publishers are teaming up to peddle newsstand copies of their top fashion magazines.

The unprecedented promotion for Conde Nast’s Vogue, Time Inc.’s InStyle, and Hearst’s Elle will appear this autumn in Target stores during fall fashion season, the publishers revealed at last week’s Retail Marketplace 2014 conference. “The offer: Buy any two of the fashion titles and get a $5 Target gift card as you check out,” according to a write-up from the event.

Along with in-store displays, the promotion will be boosted by 50 fashion bloggers, said Will Michalopoulos, Hearst’s senior director, retail sales.

“This is an example of competing titles coming together to drive sales for some of their biggest brands, and to drive traffic for a retailer,” he said. News of such innovations was welcomed by beleaguered newsstand executives, who are still reeling from the collapse of the country’s second-largest wholesaler, Source Interlink, not to mention continuing declines in newsstand sales.

A Meredith 2-for-1 promotion

Hearst and Meredith are among the publishers who have polybagged pairs of related titles to offer two-for-the-price-of-one deals at retail.

“In almost every case, these have gained incremental distribution, and in one case, we calculate that this program will double the overall retail business in one of the chains in which it’s been introduced," Michalopoulos said.

With publishers talking more than ever about cooperating to bolster retail sales, the three-way Vogue-InStyle-Elle tie-up is a logical next step. There was also talk of other joint ventures at the conference, such as creating an industry-wide mobile app to promote sales of magazines.

“Our competition is not other magazines; it’s all of the things that readers are doing when they’re not looking at magazines,” preached Joe Ripp, Time Inc.’s chairman and CEO.

“There’s no going back, so we’ve got to work together to survive in this brave new world,” agreed British media consultant Jim Bilton.

While the magazine industry’s newsstand leaders were having their Kumbaya moment at the conference, the nation’s largest magazine wholesaler sent them a message demanding that they sign a legal agreement if they wanted to continue selling magazines in Walmart and many other stores. The document, which spells out the terms under which TNG will take over most of the magazine distribution that Source Interlink left hanging, is highlighted by a convoluted 191-word Lawyerspeak sentence covering indemnification.

“I still can’t make heads or tails of that sentence,” commented one magazine executive, “but I think it means that if Source ever sues TNG or anyone who works there, I have to give up my first-born child.”

Related articles:

• A Glimmer of Growth Amidst the Newsstand's Gloom  
• A Renaissance for Print, Or Is Flat Just the New "Up"?
• Shootout at the Newsstand

A Glimmer of Growth Amidst the Newsstand's Gloom

Despite continuing declines in North American newsstand sales the past few years, one category has experienced steady, impressive growth: bookazines.

Unit sales of the special issues in the U.S. and Canada grew at nearly an 11% annual rate from 2008 to 2012, with annual revenue up 80%, according to data presented recently by MagNet, an industry consortium.

During the same period, total unit sales of magazines decreased about 10% annually. The trend of rising bookazine sales and decreasing overall sales is continuing this year.

"If print is dead and newsstand is dead, why is it that consumers will plunk down and make an impulsive purchase to spend 10 or 12 bucks to buy a high-quality publication at the newsstand?"asked Gil Brechtel, MagNet's president, at the Magazine Innovation Center's recent Act 4 Experience conference. (Brechtel's presentation begins at about the 30-minute mark of this video.)

Bookazines, also known as book-a-zines, mooks, SIPs, one-shots, or special issues, are non-subscription publications sold via the newsstand system. They are usually published by subscription magazines, but some are published under such non-magazine brands as Philadelphia Cream Cheese, USA Today, and the American Bible Society. Brechtel's definition of "book-a-zine" includes only titles having a cover price of at least $9.99, which is probably the vast majority of special issues.

"During 2012 there were 900 bookazines released," Brechtel said. "Some did very well. Some didn't do so well." They generated $352 million in retail sales, a 20% increase over 2011. Typical subject matter included tributes to dead celebrities, in-depth looks at a single topic, and recipe books -- lots of recipe books. The top seller was a National Geographic title that brought in almost $3 million.

"Why are people buying $10 bookazines full of information they can get free on the web?" he asked. "A lot of these are coffeetable books."

The formula for bookazine success, according to Brechtel, is strong brands, high-quality cover and paper stock, and appealing content. Bookazines have the advantage of avoiding a major cause of declining retail sales -- low-ball subscription offers.

"Publishers are trying to chase ratebase so much they're basically giving magazines for free or for a very low price," Brechtel said. "If you buy Cosmopolitan 12 issues for $5 a year why in heck would you spend $3.95 for one issue?"

Bookazines accounted for more than 10% of total newsstand sales last year, and that share seems to be growing rapidly. At a couple of stores I visited recently, it was hard to find actual weekly or monthly magazines amidst all the special issues.

At Target recently: An issue of TIME surrounded by bookazines.

One advantage of the special issues is that they don't go "stale" quickly and can remain on sale for up to three months, versus a month or less for regular issues.

But that's not relevant to all locations: As some stores shrink the amount of space for magazines (though it's the most profitable category for supermarkets), there's increased pressure to turn inventory over quickly, even for successful, high-priced titles.

Related articles:

• Invasion of the Bookazines, Featuring the Return of the Living Dead 
• Mooks and Canucks: The Bookazine Invasion Crosses the Border
• Rupert, Weiner and Cardboard Animals: 5 Who Should Be Ahead of Me on RISI’s Top 50 Power List
• 8 Questions About Newsweek's Future

Seven Lessons for Publishers from the Boston Bomber Cover Controversy

As part of our mission to provide helpful advice to the magazine industry, Dead Tree Edition offers seven ways Rolling Stone could have avoided the recent Boston Bomber cover controversy:

• Remember your history: You can’t spend decades gracing your cover with the likes of pedophile rock stars, drug-addled actors, and Charles Manson – and then expect us to be happy when you desecrate that hallowed space with a criminal.

• Emphatic language: Some thought Rolling Stone was depicting Jahar Tsarnaev as a hero. Merely calling him a “monster” wasn’t enough; the cover should have had big red letters saying “This is a really bad man.” Besides, because Monster is a popular web site, perhaps some confused people thought Rolling Stone was endorsing him as a resource for job searches.

• Learn to use Photoshop: People complained that the photo of Tsarnaev looks like Jim Morrison or a young Bob Dylan. Outrageous! Every good American knows that terrorists wear turbans, have badly styled facial hair, and are obviously from somewhere else. They’re not supposed to look like a Sad-Eyed Laddie of the Suburbs. Couldn’t Rolling Stone have had the decency to edit the photo so that Tsarnaev didn’t look so much like one of us?

• Give him the Juice: Don’t forget the infamous TIME magazine trick of darkening O.J. Simpson in hopes of making him look more sinister.

• Know your sales channels. Among the first retailers to jump on the boycott bandwagon were major drugstore chains. They’re used to seeing Rolling Stone covers featuring their most profitable type of client – abusers of prescription medicines. You can’t expect them to stomach a cover model whose demons are apparently all non-pharmaceutical.

• Know your sales channels’ customers: Noting that The New York Times had previously used the same image on its front page, without controversy, Matt Taibbi of Rolling Stone summed up the controversy as “it's OK for the Times [to use the photo], not OK for Rolling Stone, because many people out there understandably do not know that Rolling Stone is also a hard-news publication.” No, it’s OK for the Times because its magazine is not on display in supermarkets and drugstores. People in such venues don’t want to be reminded of bad things in the real world. They want to see fluffy stuff about movie stars and royal babies that get their minds off their hemorrhoids, cold sores, oxycontin addiction, or whatever it was from the real world that brought them to the store in the first place.

• Ban my magazine, please: Getting banned from some stores will get you more publicity than money can buy, boost your web traffic and digital subscriptions, and turn your issue into a collector’s item.

Invitation to Extinction? Newsstand Professionals in an Up-roar

Those of us on the print side of the publishing industry tend to get a bit touchy about comparisons to dinosaurs, which usually come amidst discussions of e-this, digital that, and print-is-dead pronouncements.

Especially touchy are the people responsible for “newsstand” marketing, who are perhaps the most endangered species in the Printosaurus genus.

Ad pages and print subscriptions have stabilized, but newsstand sales keep declining at an annual rate of about 10%. (“Newsstand” is a misnomer because most retail sales of magazine occur at supermarkets and bookstores, with a tiny percentage at actual newsstands. And none occur online.)

So it was a bit surprising when the main trade group promoting U.S. retail sales of magazines chose to illustrate an invitation to its annual dinner with a photo of several large, extinct reptiles. That’s hit a raw nerve for some folks in the newsstand field.

"Is that supposed to show the museum or the dinner's attendees?" one invitee to the IPDA dinner asked.

The depicted dinosaurs are part of a display at Drexel University’s Academy of Natural Sciences, where the event is being held. But some people in the business fear they will soon be the ones on exhibit in the Hall of Extinct Species.

Cheer up, folks. Scientists now tell us that not all dinosaurs went extinct. Some survived the great die-off and evolved into what we now call birds.

Survival is possible, but watch out for falling meteors.

Other Dead Tree Edition articles about newsstand sales include:

•  Invasion of the Bookazines, Featuring the Return of the Living Dead  
• Weeklies' Weakness Pushes Down 3rd Quarter Newsstand Sales  
• Trouble in Magazine Land: We're Running Out of Celebrities!

 

Weeklies' Weakness Pushes Down 3rd Quarter Newsstand Sales

Although the latest statistics on North American newsstand sales look gloomy overall, they also show significant growth for many magazines.

Third-quarter newsstand sales in the U.S. and Canada totaled 874.2 million, down nearly 8% from a year ago, according to MagNet.

“Newsweeklies and especially celebrity titles continue to lead the decline,” the industry consortium reported. But for non-weeklies, MagNet sees signs of “high newsstand consumer demand [for] quality publications that are not providing huge subscription discounts.”

Among major monthly titles experiencing healthy growth were National Geographic (23.8%), Shape (9.5%), and Consumer Reports (7.0%). (Is it just a coincidence that National Geographic and Consumer Reports have also invested heavily in their web sites? Maybe digital and print are not enemies after all.)

Sales for the Top 50 publications, which include most of the celebrity weeklies, were down 8.3%. But the next 50 actually increased their sales 7.4%. Nearly one-third of the Top 100 enjoyed increases, according to MagNet.

Another favorable trend: Less waste. Publishers responded to weakening newsstand sales by distributing 64 million fewer copies than they did a year ago, including a 15.7% reduction for weeklies. But because unit sales did not decline as much as the reduction in draw, the proportion of newsstand copies that were sold increased by nearly 2 percentage points for the weeklies and nearly 1 percentage point for the non-weeklies.

Related articles: 

• Trouble in Magazine Land: We're Running Out of Celebrities!  
• Print Is Dead? Not For This Growing Publication Niche  
• Invasion of the Bookazines, Featuring the Return of the Living Dead  
• 8 Questions About Newsweek's Future

Trouble in Magazine Land: We're Running Out of Celebrities!

An early peak at First Quarter newsstand numbers shows a slowing decline in U.S. magazine sales, but also an ominous portent.

Noting that retail sales of gossip-oriented titles are in the tank, industry consortium MagNet told its affiliates this week that, "One of the major hurdles affecting weekly celebrity publications is the ability to find new celebrities and subject matter that consumers are interested in discovering."

Brad & Angie don't cut it. Early sales data for editions of People and OK! featuring the couple's recent engagement, MagNet said, "indicate that both issues will produce sales results at least twenty percent less than previous issues' average sales," MagNet said.

That's a huge disappointment to many in the industry who were hoping for yet another boost from Brangelina. (For the record, we at Dead Tree Edition never considered the engagement big news: After having six children, the couple has obviously been engaged in something for quite a while.)

"Late in the fourth quarter of 2011, we started to see a slowing of the downward sales trend for magazines," MagNet reports. Led by non-weekly titles, the trend continued in the First Quarter of 2012. The overall decline in dollars from a year ago was an estimated 5.6%, versus the 10% year-over-year declines typical of 2011.

As we say in the magazine industry, "Slightly down is the new up."

One of the big successes was the April issue of National Geographic featuring the Titanic, which is on track to sell nearly 200,000 copies, more than 50% above the three previous issues. (Note: The cover story was about the real Titanic, the one that sank 100 years ago, not the Hollywood version, in which celebrities swim about in water frigid enough to cause immediate muscle spasms while spouting inanities like "Promise me you'll survive.")

If disasters, not celebrities, are now the key to retail success, will we be seeing a lot of cover stories about the U.S. Postal Service?

Other articles about retail sales of magazines include:  

• Print Is Dead? Not For This Growing Publication Niche  
• Invasion of the Bookazines, Featuring the Return of the Living Dead 
• Stuck at the Borders: Magazine Publishers Have Failed to Explore the Amazon  
• Shootout at the Newsstand

Source Interlink Was Almost in the Drink

Before Time Inc. and Source Interlink kissed and made up today, their lawyers each made some interesting statements about the other company.

Source is behind in its payments to Time to the tune of about $120 million, Time's attorney said during a hearing last week. "We had a very real concern that we were never going to collect any meaningful portion of that amount of money," Rowan D. Wilson continued. The transcript is at http://amlawdaily.typepad.com/SourceTROtranscript.txt.

Source didn't deny that it was in financial trouble: "Your honor, our client, Source Interlink, is going under, and it is going under as we speak." Source attorney Marc E. Kasowitz said. "And the reason it is going under is that it is a magazine wholesaler and the defendants who have been supplying it with magazines -- People magazine, Time magazine, Sports Illustrated and the like -- for seven uninterrupted years have now abruptly cut it off from 80 percent of the supply of magazines that is the lifeblood of its business."

"As a result, Source's business is being destroyed," Kasowitz continued. "Its customers are leaving. Its employees are being raided by competitor wholesalers. Its bank credit is evaporating. Its vendors are threatening to demand cash in advance or cash on delivery. And if things continue the way they are going, Source will not be able to make its payroll this Friday. The result of that, your Honor, will be that the company will have no choice but to lay off thousands of employees."

The two companies announced today that they had settled Source's antitrust lawsuit against Time and its newsstand-distribution arm and that the two sides had "reached a multi-year agreement securing Source's access to Time Inc. magazine products." There was no mention of what happens to the money Source owed Time or of any settlement talks between Source and the other defendants, which include national distributors Curtis and Kable.

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.

What has changed?

What a week, not just in the political world but also in magazine land. With every day seeming to bring another announcement of layoffs at a magazine publisher, it’s easy to conclude that everything has changed. Nope. It looks to me as if we’re still doing the same stupid things.

I still see us putting out three newsstand copies for every one that’s sold. For weeklies, who pay extra to get allegedly quick on-sale, it’s more like four copies distributed per sale.

I still hear about plenty of magazines mailing their titles inefficiently. I still receive the same old lame direct-mail pieces asking me to subscribe to magazines that I’ve never seen. (Stupid question: Why would I subscribe to a magazine based only on marketing copy without knowing what’s in the actual magazine?)

And, other than a few exceptions, I see little evidence that publishers are considering their impact on global climate change despite growing concern among their readers and advertisers. After all, we did elect a President this week who has promised to focus on the issue.

Here’s my advice for magazine CEOs looking to cut waste in response to falling ad revenue:

• If you have mailings of between 10,000 and 800,000 magazines (or up to 1.2 million catalogs) that are not being co-mailed, find out why. In fact, if no one has mentioned to you the possibility of some form of co-mail for those titles in the past year, you probably need to fire someone. There are plenty of production and distribution managers on the job market now who understand how to minimize postal costs. Note that even Crain’s, which a couple of years ago presented testimony that weekly titles could not be co-mailed, is now co-binding some of its weeklies.
• Read your magazines’ direct-mail pieces. Betcha 2 to 1 they suck.
• Call your circulation director and newsstand distributor into your office, hold a gun to their heads, and tell them to stop wasting so many newsstand copies. “Reduce the draw, reduce the sale,” they will parrot back at you. Comag Marketing Group has proven that you can reduce draw with little impact on sales. After all, the goal should be to maximize profits, not sales.
• Get ready for more of your advertisers to ask uncomfortable questions about the carbon footprint of your products. On the print side, you can start with the big item – paper manufacturing – by asking your paper suppliers about the carbon footprint of their products and what they are doing to reduce it. On the electronic side, make your people and your vendors stop suggesting that Web ads and digital editions are necessarily “greener” than print.

Is this harsh advice a betrayal of my readers? No, you are likely to read this before the magazine CEOs, so take it as a warning. Get a ballpark estimate of what you could save with co-mail and put it in front of your CFO. If you don’t, a consultant will. Take a scalpel to your newsstand draw before the bean counters take an axe to it. And get ready for the growing movement among advertisers to track, and perhaps offset, the carbon footprint of their ads.