Pandemic Publishing Roundtable: Jerry Lynch of MBR (Magazines & Books at Retail)

“We have opportunities available to no-one else” Article by Linda Ruth

Editor’s Note: The “Pandemic Publishing Roundtable” started a few weeks after the closing of most Barnes & Noble stores instigated a smattering of new articles proclaiming the end of that storied chain and the end of magazines at retail. While it is true that prior to the pandemic the future of single copy sales of magazines was at best a tenuous proposition, it’s death didn’t seem likely to happen any time soon. So once again, I was aggravated with the conventional wisdom of those who write about magazines.

I reached out to my colleague, Linda Ruth and together we came up with the idea of starting a weekly roundtable discussion with other members of the publishing community. We could talk about almost anything. We could invite other publishers, distributors, consultants to come and talk with us.

As we were all isolated from our places of work, the meetings became a great help this year in maintaining a feeling of connectedness to something, anything.

The article below, is the write up my colleague, Linda Ruth wrote and has also been posted in the BoSacks newsletter, and on his website. Joe Berger December 21, 2020

Winding up 2020, and our year of, our group—Joe Berger, Samir Husni, Bo Sacks, Sherin Pierce, Gemma Peckham, and me—hosted Jerry Lynch, President of MBR (Magazines and Books at Retail) to talk about what we’ve come through, and what lies ahead. Jerry Lynch talked about his faith in our industry, the unique opportunities available to us through ecommerce—and a big announcement he is almost ready to make.

Joe: We’ve spent the year reacting to the challenges that COVID threw at us; it seems, in general, we do a lot of reacting. Is there a chance for us to not be such a reactive industry?

Jerry: The challenge is going to be figuring out where retail, as a result of dealing with Covid is going to go, where it will end up, and when.  Contrary to what you’d expect, we don’t fully know what’s going on. Consumer habits have changed, and some of those changes are going to stick, but perhaps not all of them. Some of the things that businesses put in place as the result of the pandemic might have to be unwound as consumers start to change again. And additional opportunities will arise.

Meanwhile, we’ve had some positive changes; mass market and grocery are the classes of trade that have done best for us.

Bo: People have to eat. Of all the necessary resources available to the public, grocery is paramount. We have to eat 3 times a day.

Sherin: The club stores, Sam’s and BJs have done well too, although Costco has stopped carrying magazines. Why is that? 

Jerry: Costco has a unique way of judging performance. Magazines don’t fit nicely into their way of operating, and the resulting metrics don’t allow our performance, in my opinion, to be judged properly.  The timing of their decision—we had hoped the removal of magazines was temporary–did bump up against COVID, as well. We have some ground to regain there. Some retailers removed checkout entirely, seeing it as a distraction at the front end when they needed to move customers through for safety reasons.

We’ve seen some good consumer feedback around the category, and that’s giving us an entry point back in. 

Bo: People trust magazines more than any other medium. 

Joe: What is the role MBR has in presenting magazines at retail? 

Jerry: We see our role as overarching. Our involvement would be along the lines of providing good research, helping craft the story. COVID set us back. 

Sherin: If a retailer walks away from magazines, as, for example, Home Depot did, do you strategize with wholesalers how to get them back on distribution?  

Jerry: We do try to come up with a concerted effort, but remember that it’s driven by retailers in terms of who they want to talk to. That’s primarily the wholesalers and larger publishers. Our role would be to help coordinate, to make sure we’re delivering the same key messages having to do with the benefit of the entire magazine category in the store. 

Sherin: The Old Farmer’s Almanac had a direct relationship with Home Depot before anyone else, then the wholesalers got involved and turned it into a category issue. When, after years, the whole chain was lost it was a big hit.

Jerry:  Many times a decision about the category comes from higher up,  executives other than the buyer of magazines.  Those decision-makers may not have enough information or the correct information which doesn’t allow for a good understanding of the category. Where we can We work with the merchant to ensure they have the right information to take to upper management to help make our case.

Bo: My experience in our industry says there is great need for improvement, training and experience. How savvy are the buyers?

Jerry: Mixed. Book chains, terminal operators, for example, are great; in other classes of trade where publications used to have a dedicated buyer the category may now be one of many that the buyer/merchant has responsibility for or be treated as an add-on. It’s difficult to gain the expertise when the time isn’t there

Joe: and it can change in the same chain from one buyer to the next.

Sherin: Having those relationships was easier when you could go and see the buyer. They used to be happy to talk to you. Once the wholesalers took over the relationships, more of the communication went through them; the buyers have been harder to talk to. Our wholesalers need to stand up for the category and educate the retailer why magazines are important; it’s not just feeding your stomach, you need to feed your head.

Jerry: Other factors come into play as well: the decrease in sales volume, the pressures of consolidation at retail. Full service by wholesalers is seen as a real plus for retailers. That has been around for many years and recently SBT was an added big benefit for many. However, that has also allowed some retailers to be less vested/engaged in the category We need to build a love/passion for the category that gets us over those humps.  That passion is built from the product itself, the actual content of a magazine.

Bo: The magazine business is in the communication business and as an industry, we’re horrible at communicating our own presence.

Jerry: Yes, we talk about our problems all day, yet we do less well talking about our successes. We have to talk to our retailers, with good data, in a retailer-friendly format, saying what magazines mean to our mutual customer. If we treated retailers the way we do advertisers we might get somewhere.

Samir: The impulse buy, going to the store to browse magazines, has dropped off with the worsening of placement and display of magazines. When I go into a store, I might find one lane open, ten lanes self-checkout. I tell them, if I wanted to do it myself I’d stay at home and order from Amazon.

Jerry: Labor at the front end is the largest expense line by far.

Last week’s roundtable included (clockwise from L-R): Bo Sacks, Joe Berger, Jerry Lynch, Samir Husni, Linda Ruth, Sherin Pierce.

Joe: One of the opportunities we’ve been talking about is ecommerce.

Jerry: The MBR has been working with a small group of members to get ecommerce off the ground for publishers. It’s way more complex than you’d think. It’s becoming a critical item for most retailers, but there is a direct relationship between the retailer’s ecommerce sophistication and where magazines fall as a priority. As they get better at ecommerce, their interest in our category grows, so we can gauge where to put our resources based on how far along the road the retailers have traveled. Different retailers also handle ecommerce differently: in some cases, they have an ecommerce division that we need to approach; in other cases, the buyer is our link to the ecommerce people; it’s different from chain to chain.

Bo: Over the next few years we’ll continue to commodify ecommerce, making it simpler and smoother. At the end of the day, we’ll solve it, it will get more easy than it is today.

Samir: The increase of ecommerce even from Hearst, Meredith, and others, selling their own subscriptions, is up 40% YOY. How closely are you working with ANC?

Jerry: The wholesalers will be key in this. We need to work with them to ensure that, if a store offers say, 100 magazines via their online portal, every one of those 100 magazines are available in the store for pickup. You can turn items on and off at a store level. But—going back to SBT—without tracking inventory by the store the retailer won’t know how many copies they have.

Joe: Except we do through O/R. And we have more than enough inventory.

Jerry: But in an SBT environment, that O/R information often isn’t transmitted to the retailer. Long term, especially as we expand the selection, we need to solve this, because we don’t want to get sideways in operation and disappoint a customer. That will hurt us with the consumer and the retailer.

Joe: There is one additional customer to keep in mind that we don’t want to disappoint, and that’s the publisher. Too many of them are turning away from this business now.

Sherin: To that point, there are some forward-looking buyers. Harris Teeter, for example, is testing the OFA on its e-commerce site.

Joe: I keep coming back to the question of why wholesalers are not working with publishers to get a site up inclusive of all magazines in that warehouse. We have a few indy retailers that have it, but if I were a magazine wholesaler today I would use my warehouse as a source of eCommerce, and I’d set up affiliate relations as well.

Jerry: ecommerce provides a huge opportunity to link the two sides of publishing back together. Everyone in publishing, from all aspects of publishing, from circulation, from advertising, is looking at it. And the opportunities are enormous. Take one example: suppose people could buy a subscription for Prevention on the retailer eCommerce site, and next time they were in the store they could pick up that copy or have it added to their click and collect the order. That’s convenient. That opportunity doesn’t exist anywhere else. It only exists at retail. 

Or, another example, imagine the possibilities of an eCommerce generated shopping list leading the consumer to the  Food and Wine magazine next to the in-store wine display. Again, that’s an opportunity that exists nowhere else.

Sherin: Our industry has not kept up with our customers, what they want and need. Some of our customers are now buying from Amazon, or from specialty chains because newsstand hasn’t been able to provide the support to keep up with the demand.

Jerry: E-commerce has not been a high priority for retailers. But that is changing and has changed. Now it is.

Sherin: Walmart carries every one of our publications through our trade distributor because they got tired of waiting for the newsstand.

Joe: We as a group know many publishers who want seats at this table. They want to participate and help and make this happen. So how to do this?

Jerry: I expect to be able to make an announcement soon, of a step we have taken in the direction of making this happen. Let’s get together in six weeks and talk about it then.

Pandemic Publishing Roundtable: Jim Bilton, Media Futures and The Wessenden Briefing

By, Linda Ruth

On Wednesday, almost a full year after the onset of our pandemic, nine months from the first Pandemic Roundtable, hosted by Joe Berger and attended by Bo Sacks, Samir Husni, Sherin Pierce, Gemma Peckham, and me, we met again to review the state of our industry. Our special guest was Jim Bilton, the publisher of the annual mediafutures market analysis and the wessendenbriefing, the 7x newsletter covering print and digital trends and analysis.

While the scope of his business is international, we were particularly interested in hearing about trends in the UK, where his business is based, and how they relate to trends in the US and the rest of the world. Our conversation took us to the continuing strength of print, the re-dedication to print on the part of key retailers, and the excitement that our audience still finds in the world of print.

Jim: I was interested in reading in a past Roundtable about the direction Barnes and Noble is taking. That is such a huge part of your market; we have nothing like that in the UK. WH Smith was formerly number one in the UK, but they expanded into travel, which seemed a good move at the time, that has backfired; now magazines aren’t their main thing, stationery is. Tesco, a supermarket chain, leapfrogged over WH Smith.  Barnes and Noble is interesting because of its connection, through James Daunt, to Waterstones. But the size of the store format couldn’t work in the UK, where the rents are so high; we don’t have the big out of town malls to the same extent as in the USA. The interesting aspect, to me, is what Krifka said about focusing back on bricks and mortar, on print, and moving away from a strong digital focus.


Jim Bilton of Media Futures

Joe: We’re interested in getting your perspective on the effects of the pandemic on UK publishing, and where you expect it to take us from here.

Jim: During lockdown magazines did worse than newspapers. Sales dropped by 30% YoY, although they came back, and overall are now down about 17%. The travel sector fared much worse, of course, going into virtual hibernation initially and are still now about 80% down.  Here many UK publishers overreacted and slashed draws more than they needed to. Supermarkets held up; and independents have a bigger share than ever before. And there’s a background issue about the health of print—in terms of physical health; copies have been taken out of waiting rooms and shops because of health concerns and people have been made to feel uncomfortable about browsing at the magazine racks. This obviously hits impulse sales and discovery at retail.


Samir
: In the US, we’ve seen a big increase in people of color on magazines; are you seeing the same trend in the UK, and is it helping or hurting sales?

Jim: Yes, we are seeing the same trend, but the impact on sales is difficult to size given everything else going on in the marketplace. One launch I can point to is Cocoa Girl magazine, celebrating Black girls. We’re generally seeing lots of small launches, specialty launches, and a bit of a trend from digital to print.

Bo: Last time I was in the UK most publications had cover mounts(Polybagged magazines with attached products of one sort or anohter) ; is that still a trend?

Jim: Yes, though not quite as much as before. There’s a big sustainability issue, and issues having to do with returns. Publishers are learning to move premiums closer to content, so they relate more directly to the content of the magazine. The same has been true of events—although of course that’s less of an issue now. But we haven’t realized how exciting our world is to our readers. Everyone’s got a wine club; but audiences want the unique content a publisher has to offer. Another trend we’re seeing is publishers varying cover price depending on content and pagination.

Sherin: Varying price issue to issue is something you really couldn’t do here.

Sherin Piece, Publisher Old Farmer’s Almanac

Jim: Yes, retail hates it, it causes problems.

Joe: Have your retailers adopted Scan Based Trading?

Jim: We’re getting it in progressively through the back door—WHS and Sainsbury have a soft version, supermarkets are getting ready for it, although each has a slightly different version. The pandemic has had the effect of creating more demand for it from retailers, who are asking for it to mitigate the demands made on their in-store personnel.  

There has always been resistance from publishers, who demanded much lower shrink levels before it would be considered. Yet the industry, led by Future Publishing, has decided to take the lead – they see it as inevitable and choose to manage it up front, to take the initiative rather than being forced to do it. Now other publishers are coming along. Wholesalers say this will be margin neutral—that retailers will concede margin but make cost-saving gains. In the US the situation got out of control, everything went the wrong way all at once. By contrast, in the UK the negotiations are tough, if the retailer wants SBT they have to give something.

Joe: In the US some publishers have seen an uptick in subscriptions with the pandemic. Have you seen that in the UK?

Jim: Subs are booming—mostly print subs. With publishers worried about their future at retail, many made the mistake of going crazy with front end acquisition. Now Hearst UK, for example, has been firming up sub prices. They, like lots of publishers, were doing short-term low-margin offers to build their files. They were overwhelmed by the response and are trying to back off on that. There were a lot of people in the funnel already, and all the cut-priced subs have done has been to shovel them in more quickly, and less profitably.

Joe: What percentage would you say subscriptions have increased?

Jim: Acquisition activity increased massively, but much of this was based on short-term, big-discount offers, which are now converting at quite low rates. When all this churn is taken into account, my sense is that total subs file sizes will end up being flat year-on-year in 2020. But that’s a big improvement on the 8% year-on-year drop seen in 2019.

Bo: What trends are you seeing digitally?

Jim: Financial people like digital editions; readers don’t so much. Newspapers are going into a digital black hole in terms of revenues apart from a handful of high profile brands like the New York Times or the UK Times and Telegraph. But what digital means to magazine publishers is very different from what it means to newspapers. Magazine publishers are still wedded to the issue rather than website accessed article level streams, which is the core of the newspaper digital offer.

Samir: It requires constant upkeep to maintain a digital file, a digital list. Publishers constantly collect and re-collect names, contact information. Has anyone found a way of making money?

Joe: For example, one of my publishers had 20,000 subscribers spread across the platforms; without constant upkeep, attrition can be rapid, and they’re down to a fraction of that now.

Sherin: Our only monthly publications, the OFA Extra, is digital. We send them a notice when an issue drops, and only revisit them for renewal annually. We keep it as simple as possible. People start with so many barriers, but you have to simplify that.

Gemma: We make our digital version free to print subscribers.

Gemma Peckham, Editor Rova Magazine & Oh, Reader Magazine

Jim: That’s why most legacy publishers are holding on to print. Hearst Premium—making best out a bad situation—has lower frequency, higher pagination, and a higher cover price at its core. Digital is still a thin medium that consumers aren’t prepared to pay a full amount for. To make this difficult field profitable, we might look to e-commerce. How high can print cover prices go?

Bo: Much higher than you might think.

Gemma: Magazines are still really underpriced.

Bo: We have to continually make the transformation from a perceived commodity product to a necessary luxury product worth paying for.

Jim: In the UK, everybody is putting their prices up.

Linda: What do you see as the effect of Brexit on exports.

Jim: A lot of UK publishers are going digital-only for export sales rather than shipping print across borders. And anyway, our really big export markets are the USA and Australia, not so much Europe. The Brexit issue more has to do with cover mounts and where your paper comes from, where you’re printed, what borders are crossed on the way to creating the final finished product. For example, a garden title with cover-mounted seeds had problems getting across borders. And it varies from country to country. In France and Germany, the supply chain is tightly regulated. But as we go into Brexit, everyone has their Plan B and Plan C. 

In the UK, every link in the chain is under pressure. Publishers are feeding less product into the market. Retailers are cutting ranges and the space allocated to newspapers and magazines. Yet the recent focus has been more on wholesale. We only have two mainstream wholesalers now – Smiths and Menzies – with Smiths recovering from a disastrous diversification programme which caused them some serious financial issues. In response, some of the newspaper publishers had been looking at a newspaper-only distribution network – although this has gone quiet now. If we ever went down that route, then magazines would lose many of their current advantages – five- or six-day a week magazine deliveries, sales-based replenishment and national on-sale dates.

Samir: Vogue sold out its Harry Stiles issue in Barnes and Noble. They had to replenish.

Jim: Print still has immense power in the magazine business. Look at Amazon. Around their major markets, they offer print and digital, single copy and subscription. They understand that magazine consumers want print as well as digital. Print is still the “gold standard” and is still part of the “magazine experience”. At least for the foreseeable future. Yet there is no single, simple business model that works across every market. It’s all about understanding your own audience and delivering what they want. Not what you think they want.

A Fellow ‘Rep’ Chimes In…

A buddy and I were marveling at the changes here in the Chicago marketplace over the past year or two. Like me, my friend spent many years working in the Midwest and recalls calling on many of the former wholesalers discussed in a post last month.

The changes out here in the central Midwest are significant. Source and News Group had reached what felt like holding pattern in the last decade. The acquisition of all Kroger banners by News Group last year did not significantly impact this market. TheNews Group already serviced the Michigan, Cincinnati and Columbus banners. When Source took over CVS and Rite Aid Drugs last fall, that too was not a big change. These had been Source accounts since the fall of UniMag in the late 1990’s. The only big changes we had seen in metro Chicago was the transition of the airports and Meijer’s Discount to News Group. But in 2014, this is old news.

But now in the first and second quarter of this year we will really see the impact of the closing of the Dominick’s Supermarket chain on newsstand sales. The venerable Jewel/Osco supermarket chain has moved suppliers from the Source McCook, IL facility to the Jackson, MI News Group DC. In late Spring, the Roundy’s chain of supermarkets, which  includes the fast growing upscale upscale Mariano’s  stores in Chicago, will move to News Group service. The rest of the Roundy’s banners in Wisconsin and Minnesota also move to News Group.

Let’s be clear: No one can fault either of these wholesale distributors for trying to make a profit, expand their business horizons, or increase their market share by taking on national or regional chains. The issue, as some magazine publishers have expressed to me is that no matter how hard they work (and they do work hard), how hard they try (and they do try hard), there no longer appears to be any marginal benefit for a publisher when a retailer shifts from one wholesale supplier to another. In fact, the disruption to the distribution can significantly hurt sales.

With a promise to remain anonymous and only a little light editing, I wanted to share with you what my friend had to say. I could feel the frustration coming from the monitor in waves:

            “I have a client who has lost significant sales in CVS and Rite Aid out on the east coast due to the CVS and Rite Aid transitions. This benefited the publisher how? They get to explain this to their advertisers (especially the ones  based in Manhattan) how? Will TNG tie product in Central Michigan for delivery to the Chicago and Wisconsin market. I have a local publisher in Chicago. How does this improve things for them?

You know who newsstand consolidation really benefited? Right from start of this big mess right up until the beginning of 2008? It’s got to be the accountants and the Wall Street guys. All of this must have made their books look better. Maybe it added some cash to their bottom line. SBT has to make the bottom line look real pretty too. The inventory gets stuck with the wholesaler.

So we “modernize” and “fix an ancient and creaky distribution system” (Remember those awful UniMag Power Points?) we’ve blown up something that worked kind of OK and replaced it with something that does not work all that well for any of the suppliers in the chain, the wholesalers and national distributors, or the producers – the publishers. But it has to have worked out OK for the retailers.

That buyer from Wal-Mart Canada who was in Harrington’s a few months ago that BoSacks blasted all over the place? She is right to want to see publishers step up. She is right to want to see publishers take some ownership for the newsstand and the sub offers and the high newsstand prices.

But I want to see these retailers take some ownership for the changes and challenges they put on us. I hear a lot of complaints but we didn’t make the system this way. They did. (Emphasis mine)”

It went on this vein for some more but you get the gist. And it’s an interesting point. In all the writing you see about the “broken” newsstand system, you see call out after call out after call out for the publishers, the national distributor, the wholesalers, someone, anyone, to do something. But this started with something the retailers wanted.

Personally, I wonder if the supply side of the distribution chain has the will or ability to “fix” what is broken. There are too many disparate needs and viewpoints. The true leaders of the industry, the larger publishers, are focusing their talents, money and attention elsewhere. The small and medium sized publishers don’t have the cash, the experience or the clout to make changes.

The real advances that we will see in marketing, display and call outs to readers to come into bricks and mortar stores to buy magazines will take place on an ad hoc, piece by piece basis. We’ve seen much of this in the past few years from advances in electronic covers to social media campaigns like the Miley Cyrus cover from last year. The question is: Will we reach a critical mass in time to save the system?

In light of all these things, I still find it endlessly fascinating that once again, in the dawn of what looks to be another down year, I am working with publishers who are willing to launch new product into this “ancient and creaky” system. Heck, beyond my personal experience in the launch venue, in the past two months, Mr. Magazine ™  has ID’d another 32 regular frequency launches and 103 specials. Does that mean the world is crazy? Or hopeful?

I’m always “cautiously hopeful.” After all, I’m on the Titanic. But I’m also on the foredeck. If you recall, it’s easier to get off the ship from here.

Further Evidence: “Why Esquire Magazine Gets It”

The February Brooklyn Decker issue of Esquire Magazine that hit the newsstands this past year was not the smashing success that many, myself included,  thought it would be.  Still  the publisher rightly deserved props and kudos for being brave enough to test interactive features on the iPhone, in Barnes and Noble, and for the “Find the Esquire logo” feature throughout several US cities. In fact, Esquire gets kudos (at least from me) for continually trying stretch the limits of what they can do with their print edition. Beyond that, I give them props for their digital edition on the iPad.

February's Cover Featured Brooklyn Decker in an interactive app for iPhones that was directed at their displays in Barnes and Noble.

This week, while searching the racks for my clients latest releases, Esquire’s “Big Black Book” special caught my eye.

The current issue on display.

‘Cause it’s a “man” thing, it can’t be a “little black book”. But judging by the size of the, ‘um, “package”, this $9.95 SIP (Special Interest Publication, in case you ever wondered what SIP stood for) is a brand extension that is definitely worth the price.

Behind the cover wrap of this edition...

While there’s really nothing all that new about what Esquire is doing, and their “Big Black Book” is five years old, what really captured my interest here was their continued commitment to the production quality of the magazine, the continued desire to experiment with interesting and different covers, and the simple fact that never, ever, do they do the same thing twice.

Esquire “gets” it. That’s why they are still around. That’s why they are successful.

How are you trying to get “it”?

And, did you go to Mr. Magazine’s ACT 2: Restart Your Engines conference this week?