The Broken Newsstand
By Andy Jackson, executive director, April 08 2009
I recently heard from a student of mass communications studying the current newsstand situation. She asked a number of questions but essentially wanted to know why publishers, especially of smaller independent titles, don’t simply bypass the national distributors and sell directly to wholesalers. I’m not an expert but I offered her these thoughts:
There are a lot of moving parts in newsstand distribution. Some of these are:
1. Smaller magazines have very little leverage, even with regional wholesalers, compared to the big national multi-title publishers.
2. Most advertising-driven magazines are willing to lose some money on the newsstand to get the additional unit sales to show as advertising rate base. This is not so easy for magazines that are primarily circulation-driven.
3. National distributors provide (or did provide) some financial security to publishers through contractual obligations to pay publishers on an agreed-upon schedule, usually 90 days from on-sale. This is often not the case when publishers go directly to wholesalers.
4. Retailers want to simplify their magazine sourcing as much as possible, ideally relying on a single monthly invoice for all products and being relieved of any responsibility for servicing racks, claiming returns, etc.
5. Smaller publishers typically don’t have the resources to distribute their issues separately to multiple wholesalers and/or direct dealers, with all the complexities of billing, returns processing, collections, etc. that that would entail.
6. Multiply all these complexities over hundreds of titles of differing frequencies, on- and off-sale dates, prices, etc., thousands of retail outlets, trucking, billing, returns processing, etc., etc., and you begin to see why margins have been razor-thin or nonexistent for distributors in recent years.
7. Different markets seem to require different distribution models. For example chain and independent bookstores are serviced by specialty distributors like Ingram Periodicals while the broader supermarket/convenience/drug store market has different characteristics that the traditional wholesalers do best (but perhaps not well).
8. The current system is tremendously wasteful, with well over half of all newsstand magazines unsold and shredded. Publishers want to ensure that their titles will be available at every retail outlet throughout their on-sale period, but to allow for unpredictable spikes in sell-through, this requires that retailers almost always receive more copies than will sell.
9. Distribution of magazines to retailers is both capital and labor intensive, and however it’s done, it requires a lot of money and know-how.
So you’re right, the system is broken. I don’t claim to have the answer to this dilemma. Currently, leadership seems lacking both from the distribution or publishing communities. However, a couple of thoughts that have occurred to me are that maybe publishers could get together and take over some distribution as some form of co-op. It also seems that much more and smarter use of technology, starting with requiring all retail sales to be scanned, would introduce some efficiencies.
Comments:
Newsstand distribution in this country has indeed long been a tangled web of complexity, pulled this way and that by the competing interests of publishers, wholesalers, retailers and readers. Recent trends of higher energy prices, a bewildering number of magazines and lower magazine readership have brought it to the breaking point. What is needed is a much simplified, standardized, more efficient cooperative system including a process for balancing fairly the needs of publishers distributors and retailers.
Such a system may require some combination of higher newsstand prices, lower allotments (allowing for higher sell-throughs) and perhaps rules that exclude magazines altogether from markets in which they consistently sell poorly. Combined with scan-based automation, this might provide enough efficiency and profit to make newsstand distribution sustainable, but we publishers would likely have to be prepared to accept lower unit sales in return for less cost of shredded copies.
And yes, many publishers would love to get anywhere near a 50% sell-through. A lot of magazines have been hobbling along at closer to a terribly wasteful 20%. My feeling is that 45% should be a floor with 70% the goal for most magazines. The current system cannot be sustained.
By Andrew on May 05, 2009
Yes, the system is “broken,” but I’d go so far as to say that it’s always been this way. No matter who’s controlling the distribution and counting the returns, there will always be differing points of view. It’s an incredibly complex machine, which involves so much guessing and tweaking, who can really understand it?
We sell about 3,000 copies each issue, and we use a national distributor mainly to ensure that we receive payment for those copies.
We also use a newsstand consultant to keep a watch on what’s happening in the industry.
Overall, I’m surprised we sell as many copies as we do.
As to the waste, hasn’t the sell-throughs always been around 50 percent or lower?
By Matt Holliday, Pennsylvania Magazine, on May 05, 2009