New Business Model Needed for Magazine Newsstand Distribution
| Article Index |
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| New Business Model Needed for Magazine Newsstand Distribution |
| Value of Single Copy Sales |
| Alternative Solutions |
| Opportunity for a New Distribution Business Model |
| All Pages |
February was a bad month indeed for U.S. print publishers. Half the publications intended for sale at newsstands encountered delays, as publishers tried to choose alternative means of distribution in reaction to a 7¢ per copy fee imposed by Anderson News and Source Interlink, the nation’s leading magazine wholesalers. Lawsuits, accusations of collusion, and massive business disruption have followed. Digging a little deeper uncovers the screaming need for a new business model, possibly the first of many as this stagnating economy unplugs obsolete and dysfunctional distribution processes throughout the publishing supply chain.
Current News Capsulation
Magazine wholesalers providing single copy distribution services claim to be losing money or experiencing unacceptable erosion of margin as the result of not increasing their prices for years. Anderson News reported a $20 million loss on 2008 revenues of $760 million. Apparently rebuffed in their discussions with publisher clients about the need for cost driven price increases, the two leading vendors, who control half of the single copy sales network and provide these full services, levied a unilateral 7¢ per copy fee.
This fee was to be applied to the 2.184 billion annual copies distributed through full service wholesalers. This would result in an incremental expense to publishers of these General Interest titles of $153 million. While the sum total of all publication revenue streams – subscriptions, advertising, and newsstand sales – are $40 billion annually, this smaller figure would potentially eradicate significant publisher profits if other corrective measures were not taken to offset this expense hike.
When the large publishers refused to deliver their weekly single copy issues to these two largest and presumably exclusive magazine distributors and merchandisers, Anderson News was forced to shut their doors. Source Interlink successfully filed a court injunction against Time, Inc., other large publishers, and competitive distributors for trying to put Source out of business. Time settled with Source for a multi-year distribution agreement that does not include the 7¢ per copy fee. This clearly does not solve the diseconomies of this decades old unsustainable distribution model for single copy sales.
