Is A Transformation Coming, Or Is Our Bow Underwater?

Those of us who worked on the front lines of newsstand distribution in the mid 1990’s made a few assumptions when rapid consolidation hit the business. One was that the ID wholesalers who remained in the business were there because they were tough, hard working and had more options than the colleagues who sold out. That’s still a decent estimation of their capabilities.

But we also thought that category of small wholesaler would rebound because we saw some small newspaper operators and adult bookstore suppliers jump into the mainstream newsstand business. The Detroit metro area, for example, saw four such wholesalers enter the market. Almost twenty years later, two remain. 

The other presumption some of us made was that both the large wholesalers (i.e.: Source, News Group, Hudson, etc.) and some new actors would make inroads into the “non-traditional” marketplace. This would be a good, but not large space for magazines.

That happened. Source Interlinks’ Retail Vision division has an extensive list of retail clients as does News Groups’ Select Media and Hudson News’ Hudson Direct. HDA in St. Louis jumped into the arena and serviced Michael’s Arts and Crafts and other stores. Ingram Periodicals has a good foothold in categories such as outdoor sports stores and art supplies.

For a long time, however, profits in newsstand distribution have been elusive.

Late last week, we heard news that international supplier PMG, a company that mostly exited US wholesale distribution market in the mid ’90’s consolidation was shuttering its overseas and Caribbean operations. Last month we received the shocking (to us veterans) news that Gopher News of Minneapolis, MN was closing its doors immediately and that Benjamin News was closing all of its Canadian operations this coming April.

Early this week, it was announced that specialty distributor HDA was shutting down.

Does anyone out there really think wholesalers can make a profit in this market?

In 2013 we lost two small wholesalers: Erie, PA and Pembroke, NH. The list of ID wholesalers continues to shrink so clearly our presumption about this being a growth category was very wrong.

To make a comparison relevant to this blogs title: Last year we sprang a leak.

This year, what do you think? Is the bow is down in the water about 15 degrees?

It’s been clear for a long time that the wholesale community is operating under some pretty miserable conditions. A colleague called last week and started to rant.  I had to interrupt and ask: At this point, who cares? Do we really need to argue twenty years later if this is a business problem of their own choosing? It really wasn’t and it really doesn’t matter anymore.

It’s also clear that our major national publishers will not or can not operate in any sort of concert to promote the sale of single copies at the newsstand. A few years ago, we saw the “Power of Print” video and a few of them will occasionally promote on social media or with a limited advertisement for a single title. But that’s the best they can do.

The national distributors are not only trying to stay relevant, they’re also still fighting a rather expensive lawsuit that dates back to the Anderson News debacle of 2009. Apparently the Anderson company maintains that the national distributors and their competitor wholesalers and some publishers met face to face to plan their demise and they’re willing to spend their remaining fortune to prove this.

My point: The ND’s are a little busy right now and can’t be expected to lead the promotion of the category.

Every link in this distribution chain has a different way of scoring their success and clearly what we are doing is not working if our goal is to sell more, not less. Publishers are reinventing themselves, national distributors have their attention focused elsewhere. Wholesalers are too financially stressed. Their innovations at the moment are focused on reducing expenses, innovating in the warehouse and out in the field. Let’s not forget, they deliver and merchandise the magazines on the rack. They don’t create the product they sell.

Retailers supply space and customers. We know magazines are profitable for them but it’s a very small piece of what they carry. Even national bookstore chains don’t (for whatever reason) advertise magazines much to their customers. While we may not have lost much space yet despite our lost unit sales, my guess is that the promotional dollars publishers now spend to prop up their unit sales goals are keeping the space available to us.

We do know that retailers frequently ask publishers to step up and participate in coupon promotions or ask publishers to come to them with “Out of The Box” ideas. My guess is that the response rate is less than enthusiastic. Most of what I have seen is either too complicated, too outside most small publishers niche, or too expensive for all but the most deeply pocketed publishers. The timing often has nothing to do with the publishers’ editorial calendar.

So here we are. Maybe the bow is now down 20 degrees. Is that cracking noise the keel?

This week and well into next, for better or worse, we’re may see a lot of ink and bytes about single copy. MagNet has released their data. It’s not good. Pretty soon AdWeekAd AgeFolioAudience Development and everyone else could weigh in on the “Continuing Problems of The Newsstand”. Numerous opinionators, prognosticators and harumphers are going to give us their deep thoughts on “What Should be Done About Newsstand”* and “Why Aren’t the Major Publishers Listening to Me?!”**

Last November I offered five and a half steps to “fix” the newsstand. Here’s a few more thoughts:

6. Stop selling other sources of circulation at the expense of newsstand. If you offer a deal digitally or via subscription, offer “deals” for single copies. Go ahead and test it. Be a part of the solution.

7. There is no reason anymore to wait for someone else to “promote” the category. Small, large and medium-sized publishers can, on their own, promote single copy sales of their own titles to their own audiences via a host of social media. Learn it. Do it. Be a part of the solution.

8. If you are a publisher and you are not satisfied with the responses of your national distributor or wholesaler or retailer with regards to your display or sales, go and make some noise until you get your answer. You’re the one who invested in the product in the first place.

No one person, company or idea can save the newsstand. You have to wonder if this year, we will have a fundamental transformation in how we do business because it was forced on us.

The demise of this industry was not set in stone in 1995 or 1997 or 2009 or even with the unsettling events of this year. It doesn’t have to happen.

Of course, we could continue to drift, bow down 30 degrees. Then we may see this:

*: It’s usually some variation on ‘Let’s all work together to solve this! Oh, and stop wasting so many copies. It’s disgraceful.”

**: Most likely because they are very busy right now trying to stay in business, thank you.

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3 Replies to “Is A Transformation Coming, Or Is Our Bow Underwater?”

  1. Retailers are the customers of the wholesalers and in some cases the National Distributors, yet it is the Publisher who must deal directly with the retailers, and also pay them, some in advance, for the special displays to make their product more visible, or to gain authorizations, for their titles. Y wonder where the money is to fill the shelves for them. It’s the Publisher who provides the product(print and editorial), pays for shipment to their warehouses, and pays for the best displays (huge Promotional dollars) they can get, and NOT the wholesalers, and certainly NOT the ND’s. Yet the Publisher still gets asked why he doesn’t promote his product on the newsstands, and help support the distribution channel. ARE THEY KIDDING OR WHAT??? Publishers do not make actual dollars with newsstand sales. Never did, unless they sold way way above the industry average efficiency.
    Sure, it helps the rate base, but many an ad director has talked a Publisher down the drain by insisting their rate bases need be increased to a point where newsstand copies become way too inefficient leading to additional losses by finding promotional dollars to place these copies in more outlets to create further additional losses.

    1. You’re right that newsstand is often a losing proposition and that an enormous amount of financial pressure is now placed on that channel of circulation – by retailers, wholesalers and ND’s. Everything that you mention that the publishers do, is expensive and labor intensive. And in the background.

      However, with so many other options for readers now (Netflix, tablets, games, etc.), does it make sense to print a few hundred thousand of something and dump it out there and hope that someone will pass by the rack and find your title? That’s what I mean when I say that we need to promote the channel. Over the years, my attitude has shifted from hoping that the industry as a whole would try something, to suggesting to my clients that they do their own thing to promote their single copy sales. Why go through the expense of edit, print, production, distribution and often the purchase of premium spave, if you don’t try to let people know your product is available for sale?

  2. Well said Joe. it all makes sense. Just to bad that there is so little follow through. The very large pubs onlywant to promote there subs, not the newsstand copies. When i can subscribe to “Time” at the senior rate of 56 issues for $15, AND a clock radio, something is wrong with the economics of profitablity. Could add several other titles that are sending me deals through the mail.

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