The Twin Elephants on the Foredeck (Part 1)

The new ABC reports are out for the first half of 2010 and we’re deluged with stories that try to put a thoughtful, pensive and sober face on all of the numbers.

What do they mean? What do they mean for the new print vs. digital paradigm? Where is this all going? At what point do we say to that cute little paper and ink baby, “You know, we’re tossing you out with the bathwater. Deal with it.”

You can’t argue with the numbers:

Total paid circulation is down 2.27% as compared to the first six months of 2009. No one would call 2009 a banner year for any business.

Total single copy sales were down 5.63%. Keep in mind that in the first half of 2009 Anderson News shut their doors, Source Interlink ran into a wall, and News Group and to a lesser extant, Source and Hudson News were scrambling to pick up the pieces left behind from Anco’s tantrum.

On the subscription side, sales were down 1.96%

Can we read the message in the bottle?

paidContent.org reported on the results this way: “ABC Fas-Fax: Consumer Mag Circ Sill Falling, Just Not As Badly.” That’s not exactly what I call a hearty endorsement of your industry.

So what’s up? How can you follow up a real stinker of a year with another rotten egg? In an interview with Media Life Magazine, consultant John Hanrahan  points out some things that everyone should already  be aware of: the poor economy, changes in buying habits, and the availability of free information on the web.

Writing in Audience Development, former Ziff Davis Circulation Director Baird Davis somberly advised  publishers who have copies on the mainline that they should find “more distribution alternatives because major wholesalers are more likely to be focused on their hit driven checkout titles.”

Yet check out title sales are down and some of the “hit” driven celebrity check out titles such as “Oprah” and “Every Day with Rachel Ray” are down.

So, um, those 9,000 copies per issue that I sell at a major national discount chain are going to be replaced, um, where exactly?

Where do we go from here?

Several things first of all.  I don’t think the shift to “digital” is what’s hurting the sales of print magazines at the newsstand. Yet.

Firstly, ABC audits a few hundred titles. We have as many as 5000 titles on the newsstand.

I’d also point out that 75% of my clients (most of whom are not ABC audited) experienced single copy sales increases in the first half of 2010. This doesn’t mean that I’m denying what’s happening in the world I work in, I just look at it from a very different angle.

And from my angle, I want to start the conversation by talking about the twin elephants in the room that no one wants to talk about: We do a lousy job of merchandising and marketing our magazines for sale at the newsstand.

On the marketing side of the aisle we have to face the fact that we produce millions of copies of our products for sale. That costs money. We invest hundreds of millions of dollars in packing and shipping our products all over North America and world,. We pay our merchandising companies even more money to place them on expensive displays that we often pay hundreds of thousands of dollars for to get the premium placement on those displays.

And then we hope and pray that someone will walk by and be willing to pay full price for our magazines because this is an “impulse” business.

We hem and haw when our retail trading partners ask us to join in something as simple as a coupon campaign.

Do you recall the last time you heard a radio ad encouraging you to buy a magazine? How about TV? Or let’s go all 21st century and think an internet ad? An E-blast? Something on Facebook? Twitter? Do some of our magazine marketing gurus even know about foursquare?

We rarely use social media to create campaigns to get people into stores to buy our magazines. That’s behavior we need to stop now.

Let’s take a look at the merchandising elephant. We abused our retail trading partners in the ‘80’s and ‘90’s to a point where they finally destroyed what was a pretty decent way to move product to market. Don’t knock local knowledge.

We now have about 90% of US distribution in the hands of three major companies. That’s not a bad thing. I don’t want to go back to the “good old days.” These partners we now have work hard and do the best they can. And they are good people to work with who want to do the right thing. But we can’t expect companies that are sprawled out throughout the country, working hundreds of miles from their central warehouses, handling thousands of products to get it all right. We can’t expect their stretched to the limit staff to really know and understand the products that they are handling when our own staffs are stretched to the limit.

We should face the fact that we took a combative and suspicious industry where the four links in the distribution chain often work at cross purposes and made it even more combative and suspicious.

This is not exactly what I would call a recipe for success.

More on this later this week.

It’s Snark Week! And the Titanic, I mean Barnes and Noble is sinking!

Businesses change, evolve, expand and contract all the time. When I was a high school student, I recall reading the Lawrence Sanders novel, The First Deadly Sin. Written in the early 1970’s, the novel was a study in the sexy, deadly, incredibly expansive and creative times that the 1970’s really were.  As a teenager, I couldn’t get enough of the weird characters: how straight-laced the protagonist Detective Francis X. Delaney seemed in comparison to the urbane, cool, detached  and decadent Daniel Blank.

Ten years later as a traveling professional, I rarely left home without at least one paperback in my briefcase  and I came across the book in a bargain bin. Leaving aside all of the unusually deranged sex and murders, the part that stuck with me then and today was the fact that the murderer, Daniel Blank, worked in the circulation department of a major New York publisher. And Daniel Blank was the one who updated the department from a floor full of secretaries and typewriters, to a room full of computers. As Blank maneuvered his mentor into early retirement, he get’s confronted and called a “cold bastard”, or something like that.

Check out the book http://www.powells.com/biblio/1-9780425104279-7 and you’ll see what I mean. (Editor’s note: I haven’t read it in awhile so I may have some details wrong).

The single copy sales industry is a long way down the road from the easy breezy times of the early 1990’s when almost anyone could launch a 100,000 copy print order onto the mainline and hope to get some traction. Since rapid consolidation in 1995, the Uni-Mag implosion of 1998, and last year’s Anderson News extinction level event, the circulation road has washed out, signage is missing, you’ll want to engage that four wheel drive, and you have to wonder if your fancy GPS is taking a few too many Darvocets because you’re pretty sure this isn’t the way you remember.

B. Dalton Booksellers evolved into Barnes and Noble. B. Dalton is long gone. Those fine Waldenbooks folks from Connecticut have been missing for many years and Borders Group, their new owners, are onto, well, who remembers? Some new incarnation with some new management group and who knows what will happen next.

The news this week was that Barnes and Noble has put itself up for sale.

What I find remarkable in all of this coverage is how much everyone immediately takes the conventional wisdom route. Take this article from WBIR: http://www.wbir.com/news/national/story.aspx?storyid=129750&catid=16

“Older Americans” are the only people in bookstores? Seriously? That’s news reporting? Hmmm. How do I explain then that some of the titles I work with that are aimed at the younger crowd have increasing sales in 2010? Maybe they’re young people who think old?

I love the snark attack in this blog posting from “24/7 Wall Street”: http://247wallst.com/2010/08/03/barnes-noble-the-titanic-goes-on-sale/

Yeah, I’m a sucker for a good Titanic comparison and illustration.

Will the last bricks and mortar bookstore please turn off the light? Thank you.

You can just feel the sarcasm and contempt dripping off of the writer and puddling in your shoes. The author has completely dismissed the publishing industry, told everyone to pack it up, turn over your keys, and quietly head out to the door. Nothing to save here. Digital is greener.

Really dude? Is that how it is? Are we already generating all of our power with windmills and solar panels? Are all of those cool, fast processing chips getting baked by the Keebler Elves in the few trees that weren’t pulped into books? Are those powerful long lived batteries created like so many Tootsie Rolls?

And you’ll find variations on the theme all over the place:

http://www.huffingtonpost.com/2010/08/03/barnes-noble-may-put-itse_n_669541.html

http://online.barrons.com/article/SB50001424052970204593404575407480864349678.html?mod=googlenews_barrons

http://www.latimes.com/business/la-fi-barnes-noble-20100805,0,890979.story

It’s interesting to note that just a few short weeks ago, B&N and their e-book store was riding high in the conventional wisdom. The Nook was yet another “Kindle Killer”. They were selling the Nook everywhere. It was awesome, people!  Really! It was going to save the company! They were going to save publishing! The B&N strategy to bring people into the store with their Nooks and to then buy stuff in B&N stores because of their Nooks was genius.

And then the Kindle 3 was announced.

The real crux of the B&N story seems to me to have a lot more to do with proxy fights, the interest of Ron Burkle in acquiring the company, or more power over it’s future, and the struggle of the founders to hang onto something they hold dear. The fact that it is happening in the middle of a technological and possibly cultural shift in the public’s reading habits only makes it that much more interesting.

If dancing on the grave (or at least where you and some other predict the grave will be dug) and spewing snark all over the publishing industry makes you happy, well, have at it. If you’re a reporter and you’re too lazy to actually go beyond the conventional wisdom, well: Thank you for proving my point that news reporting in this country is in more trouble than the publishing industry.

Keep in mind. When you buy a digital book, you’re giving money to Amazon and you’re saving a few bucks, unless you rarely bought hard back books in the first place. Or maybe the money goes to Apple. Or someone else. And maybe Random House or Simon and Schuster get no cut, or a little cut. And maybe that’s cool for you because you hate those guys.

All digital books mean, in the end, is that the money gets divided differently. You pay less. And that can be a good thing. Unless you forgot to back up your Kindle and it crashes. But wait! There is the cloud. And it’s powered by pretty purple unicorns! But your device crashed and wifi is out so…

Bosacks Speaks Out: My Response

Bob Sacks, the founder of the consulting company, Precision Media Group is a veteran of the publishing world and considered by many in our industry a passionate proponent of the digital age. He also edits and distributes the Bosacks.com e-newsletter. In many ways, he truly is a visionary because he started this newsletter back in 1993. This is one email that many people in the publishing industry make their must and first read of the day.

Thursday morning, Bob pulled out one of his “Bosacks Speaks Out” pieces from eight years ago that was entitled, “A Candid Look at the last Remaining Mountain of Publishing Inefficiency”.

His point: Just because the newsstand distribution industry works, doesn’t mean it’s not broken. It doesn’t mean that it couldn’t work better. According to Bob, this is true eight years later.

For the record, I’m not going to argue with that. He has a point. The newsstand distribution industry has problems. If another wheel comes off the buggy, we’re in deep trouble. Or we could become a tricycle.

I have to ask. Do we really need to whip that tired buggy whip analogy?

Gee, Thanks Captain Obvious!

I mean that with my tongue firmly planted in my cheek.

I’ve just been meaning to say it out loud to some of the people who write about our industry. It doesn’t help to point out to us what we already know. Without explanation and exposition, it doesn’t help outsiders either.

Bob has some experience in our end of the business. So have many others who have written about the single copy sales industry.  And pointing out that we have problems, inefficiencies, issues, impending doom, isn’t helpful unless you have something else to offer.

I live in the newsstand world. I’m trending towards living in both the newsstand and digital world. You ignore where your money comes from at your own peril.

So telling me that we have issues, that we’re inefficient and pointing out our impending doom is about as helpful as reminding Captain Smith that there were icebergs in the vicinity.

How Much is Enough?

You tell me!

You ask if we need to take 21 days to ship and do the accounting for a monthly magazine. Well, what’s your alternative? Do you have some cost estimates for that? Because I’ve looked and unless the name on the check that came in last month was Uncle Moneybags, I haven’t seen a really cost effective solution that all publishers can afford. Key word: “All”. But I’m open to a suggestion. Even one I’ve already considered.

Twenty one days can work because stuff happens on the way to the warehouse. Like national wholesalers going out of business. Like copies getting mis-shipped and needing to be reshipped. Like copies getting lost in a warehouse. And it gives the “bankers” in the business, the national distributors an opportunity to make sure the product was delivered. And often it doesn’t take twenty one days.

Dirty laundry ahead: Sometimes an on-sale date is just a suggestion. Like a stop sign.

You ask if we should have to wait months for sell through results.

Well, no. We don’t. And in many cases, we don’t. For some of my titles, I can get three or four POS streams of data. From that I can come up with a pretty decent idea of how that title may sell. But it’s not always 100% accurate. That’s why it’s called an estimate.

Do you have a solution?

You ask, “Do we need to throw away 70% of what we print?”

Uh, no. And we pretty much work on that all the time.

Do you have a solution?

Garbage, Dead Editorial and the 25% Story

I won’t dispute Bob’s point that we toss away a billion dollars in print that never gets purchased. I won’t dispute Bob’s implied point that what gets shredded becomes old and dated editorial.  I’ll add that magazine wholesalers are spending money and effort and staff on shredding machines and balers to destroy what is unsold. However, sometimes they do make money on that.

No, this may not be all that sustainable. Although it does work and it may work into the foreseeable future.

Bob asks why “this last remaining mountain of inefficiency (is) allowed to stand so tall and unassailable? Why have we demanded the utmost efficiencies everywhere in our industry but here? Why?”

Have you read our press lately? Tall? Unassailable?

In Bob’s argument, which is from 2003, he mentions a friend who works for a magazine publisher and says  that so long as the advertising is there, he can live and make money off of a 25% sell through on the newsstand. Bob points out that these types of publishers often live off the advances of their national distributors.

Key word here: 2003. I  doubt that that is true in 2010. I also seriously doubt that his example was all that true for more than a small handful of publishers on the newsstand in 2003.

In fact, he acknowledges that it is only for the brave of heart and he doesn’t recommend it himself. So why bring it up? As an example, it’s a non-starter.

With regards to Bob’s take on how other sides of the publishing business are held to tight standards  – yet we get away with it in the single copy side: I would invite him to sit in on meetings and conference calls with most publishers who are deep in the single copy sales business. We discuss efficiency regularly. We talk about how to improve it. We make plans and execute them. Other departments are held to standards and so is what is left of the single copy sales departments in the magazine business. In case you weren’t aware, there have been a lot of layoffs in our side of the business too.

Um, Captain Smith? Sir? There’s icebergs in the water.

“The Distribution of Printed Magazines Needs to Be Very Quick, Reliable and Extremely Cost Effective.”

Yup. And we get there how?

See, this is what kills me about these articles. Great fired up rhetoric. The problem is succinctly discussed, dissected. Appropriate amounts of righteous indignation is poured out for all to experience the catharsis.

And….teeny, tiny little solutions to the big bad problem.

No disrespect. But come on, give me something to work with here.

Here are a few solutions that I’ve heard discussed, with some of the attending problems:

1) Go to non-returnable on all magazines: Then, theoretically, we have sold everything. But ask yourself. Did Macy’s really sell all of those dresses? Did Safeway really sell all of those “Vine Ripened Tomatoes”? Did Wal-Mart really sell all of that charcoal?

Believe me, many discuss this alternative and the perils of making it work would take up several articles. The real question is: Who goes first?

2) Get the industry talking together and find a solution: To what? Discounts? Brokerages? Marketing? Sell through efficiencies?

There are conventions and at most of them there are seminars where we discuss “best practices.” They’re pretty helpful and informative. You can usually find some literature in a brochure that points out that if the industry were to try and speak with one voice, it would be called “collusion”.  And that would be bad. In fact, I believe a former wholesaler is currently in court suing some of our national distributors and wholesalers over that word right now.

3) De-link the industry? Perhaps we’re too complex because there are so many facets to distribution.  Publishers, National Distributors, National Wholesalers, Regional Wholesalers, Specialty Wholesalers, Retailers.

Oh, and Readers.

Do you want to cut one of those lines of distribution and merge a few? Would that be more efficient? There’s a lot of ways that could be done. But do you honestly see any of these corporations or their leaders voluntarily locking up the offices and walking away?

I’d like to point out that since the initial crisis of wholesaler consolidation in 1995 and Bob’s 2003 rant, costs to be on the newsstand have steadily risen. Titles have left the newsstand. Publishers have cut  back their distribution, fired their newsstand directors and marketers, re-negotiated their contracts with their national distributors, paid out more discount to their retailers and wholesalers, and tried to keep their titles visible.

4) Work harder to be more efficient! Gosh darn it!

Sometimes it is what it is.

I can point to any number of cases where I have “scientifically” cut my draws and managed the allotments. The end result: stable or sometimes increased unit sales and sell through efficiencies.

But I’ve also “scientifically” cut my draws and managed my allotments: And lost unit sales and wound up with the exact same sell through as before.

Sometimes it is what it is.

So, Bob, my long winded conclusion, is this: You’re a little more on the outside of this thing than I or any of my colleagues are. Therefore, you can speak a little more publicly and creatively about some of our solutions. That would be good because the leaders of our industry are up there on the bridge and you have more access to it than many of us deckhands.

Maybe they will listen to you.

The Single Copy Mystique – A Warranty, but No Guarantee

A good friend of mine, a former publishing executive and semi retired magazine consultant frequently says to me that “ Single copy sales is a very simple, practical, complicated, business.”

That’s not as off putting as it sounds. The end goal of the single copy chain of distribution is simple: If your magazine is readily available on the newsstand, and a reader is of the mind to look for a magazine, you have a chance to make a sale.

Of course, the magazine rack could have a case of strawberries in front of it.

This could be a "Buy 1 Package of Strawberries, Get Cooking Light at 50% Off", but I don't think so.

Or, there could be numerous dump displays in front of it.

Now that's a Tri-Fecta of dump displays.

Or, some genius may have decided to eliminate flats (large display “flats” at the bottom of the rack) and replace them with pockets that are only three inches deep

Twofer
This is a Two Fer: The flat is gone and a dump is in front of the rack.

Or, your art director may have decided to put an inscrutable cover on the magazine that baffled your readers.

Or, your transportation company may misdirect your shipment to Warehouse 13 http://bit.ly/dh1oVG.

Or a key wholesaler could shut down right at the time so many publishers need a solid first quarter in a new year http://bit.ly/Vu3uT.

Or, one of your key magazine wholesalers may have submitted a print order for 35% of your national US print run, then decided that they were kidding and only distribute 70% of that 35% of your print order.

Am I making a case to put myself out of business or what?

As my semi retired friend (who spends some of his online time taunting the imperturbable BoSacks.com) says: “Single copy sales is a very simple, practical, complicated, business.”

Not as catchy as “If you build it, they will come.” But true. If there’s a market for your magazine, and the delivery, distribution or display don’t get screwed up, people will buy it.

The question is, how many will buy? And will that cover the bills?

Like all people who live and die by the sale, I prospect for new business during the year and at least once or twice, I have a conversation with a publisher that goes something like this:

Publisher: “ If I hire you, my newsstand sales will go up, right?”

Me: “That’s certainly the goal, but I can’t guarantee that they will.”

Publisher: “Well all I really want you to do is pay for yourself. You’ll do that, won’t you?”

Me: “My goal is to increase your sales, increase your efficiency, and help you make more money, That will more than pay for myself, but I can’t guarantee that.”

Publisher: “Well why not?  I don’t get this stuff. My sub gal doesn’t want to be involved. I need a guarantee!”

Me: “ The only way I would even try to guarantee this for you would be if you gave me complete control over your editorial, your ad-edit ratio, your cover art, if you hired me sales representatives to call on all of the major distributors and retailers, and if you hired me about 15,000 merchandisers to direct traffic in key stores to your magazine’s spot on the rack. Will you do that?”

Publisher: “That’s going to cost a ton of money.”

So you can see why a lot of publishers are taking a hard look at digital marketing and digital editions.

I could turn this post into a rant about how businesses are now looking for the sure thing and aren’t willing to invest and develop their products so they can have a “brand” to sell.

But it seems to me that we’ve done a really fine job of taking something simple and making it difficult. There’s a mystique around newsstand sales that doesn’t need to be there.

For the record, that rant I have with the publisher only takes place in my head during long bike rides. If I’m on the phone with the publisher, I wear a hole in the carpet pacing and trying to explain what reasonable expectations are.  If we’re face to face, I put on my calm, nice guy face and do the same. Sometimes I make the sale, sometimes I am shown to the door.

There are no guarantees.

But there are affidavits of returns.