The Association of Magazine Media

More from BoSacks on Retail Marketplace 2013

Industry watchdog and pundit Bob Sacks shares Part 2 of his thoughts (read Part 1 here)on MPA and PBAA's Retail Marketplace 2013 conference, which took place June 10-12 in Philadelphia.  Highlights from the event are available here.

 

BoSacks Speaks Out: The Real Meat and Meaning of the PBAA-MPA Conference (Part 2)

Last week I discussed the opening session of the PBAA -MPA meeting in Philadelphia. My reactions were mostly confined to the uber-presidents of the publishers' panel and I dropped some hints last week of what I will talk about today. The rest of this dialog will be about my reaction to the state of the union of the magazine retail channel as expressed in two days of listening and observing. I will start off saying it was very well run by the PBAA-MPA staffs and that there was a refreshing and honest sobriety to all the workshops.

One of the most insightful meetings of the whole event, if you paid very close attention to the details of what was being said, was the first workshop called POS in a Changing Newsstand Environment.  It was smoothly moderated by my friend Gil Brechtel of MagNet and hosted several publishers and distributors. Here in this meeting was where the rubber actually hit the road, or in publishing parlance, where some of the great "disconnect" of cooperation in the industry was actually discussed. Conde Nast's Bob Sauerberg hinted at this implication and implored for mutual cooperation on the first day of the show. 

For those who don't follow this side of the business in any great detail, there is some discord in the process of magazine distribution and sales that sure could use some examination for a speedier turn-around to success. On top of that there are also acronyms galore of sales techniques that must be understood, such as SBT (Scan Based Trading) and POS (Point of Sale) for you to really understand the issues at hand. (No pun intended, but still enjoyed.)

Describing these as briefly as possible is not easy, but I will try, because it is that important to us as an industry.  SBT is a process where retailers hold items for sale, such as magazines, until the items are finally sold and scanned at the retail counter.   POS captures much more detailed information and is a more expensive variation of SBT.

In theory, but only in theory, everyone gains huge benefits with a full system, detailed analysis of all sales. The central problem with SBT, as I understand it, is finding a way to equitably share the costs among all the many players in the process. You would think this would be easy, as it would be to everyone's benefit, but you would be very wrong to think so.  Sitting in the audience, my reaction was, that it seems that everybody else wants the other guy to pay the lion's share of SBT and/or POS development costs. 

This moderate discord of the magazine distribution system begins with the two middlemen who conduct our business.  They are the wholesalers and the national distributors. I've been told that part of the problem is that the wholesalers in developing arrangements with retailers have expended large sums of capital to develop and implement the process of SBT. And from where I sit it seems that the national distributors don't/didn't want to deal with it because they feel that they were left out of the negotiation process and that their part of the SBT financials weight in favor to the retailer. I could go on and on but all you need to know is that everyone involved in any business rightly works for a profit and that includes you and me. So the whole thing reasonably boils down to who should pay for what in the distribution process? And included in the mystery formula of our mutual success is when should the damn payments be made? The when "effect" is also part of another, yet to be satisfactorily resolved problem of up front payments and the longer than usual on-sale dates for SIPs and Bookazeens.

POS, which is a variation of SBT, is a system of not only tracking the sales and the inventory, but establishing a system of accumulated payments upon the sale of the magazines. Again in theory POS allows greater detail in the retail process taking magazines out of a store where they are not selling and putting them in a store where they are.  To the best of my knowledge, and I don't claim to be an expert in this, issue-by-issue reporting using SBT for magazines isn't currently available, because they don't use unique enough codes to identify each issue sold and where it was actually sold.

Again, I could go on, but at the end of the day I believe that it all boils down to who is willing to pay for the needed services rendered and what level of those services are really needed for everyone's mutual success. 

With that as my foundation for understanding the dynamics of the retail side of our business here are some key points of the PBAA-MPA conference:

The Future of the Retail Landscape

How are traditional supermarkets performing as we emerge from the "great recession?"

Meredith Adler of Barclays Capital said that the supermarkets of today are mostly still in a decline in sales because of price increases in many retail products that happened during the bad economy, although she said, it does seem that some of retail losses have started to stabilize. She pointed out that the sale of impulse products (magazines) seems limited mainly to stores in more affluent areas.

My interpretation is that it is a mixed bag in supermarket land and many customers are still struggling, although the more affluent customers are not. Now combine fewer people shopping less often and include the "mobile blinder" syndrome of people who are shopping, but looking at their cell phones at check-out instead of our magazine racks, and you have a less than perfect sales situation for impulse magazine buys. 

How Editors Move the Needle at Retail

Moderator, Mike Duloc of Kable, asked his panel, "What types of in-store displays or placement tends to work for your specific magazines?"

With all that I wrote above about decreased check out sales, it was interesting to hear Clare McHugh of All You magazine say "Nothing beats the checkout."

It was also interesting to hear that Randall Lane of Forbes declare that Forbes has seen sales increases in the last three six-month periods, while at the same time increasing its cover price and reducing its overall retail draw. This is something I have been pushing for twenty years or more. Every alchemist in the distribution chain will tell you that we have to "flood" the market to sell magazines. To my limited understanding of retail, Forbes starts to prove that theory if not wrong, is at least worthy of very close review. 

Another interesting plea was from Food Network Magazine's Maile Carpenter, who said that she often requests that retailers, "Put us in the produce section."  I like this reinvention of the newsstand. Put the magazines, when possible, near their companion retail brothers and sisters. Food magazines with food, do it yourself mags with hardware, and perhaps certain woman's magazines in the cosmetics aisle. I'm sure that there are large retail logistics problems to the magazines-everywhere theory, but it might be worth experimenting with. Let's face it, as an industry with an average of print ten and sell three, some experimentation seems to be in order.

One of the last events was Samir Husni's passionate lecture on The Futility of Converting Print Brands to Digital-Only.  Samir's contention is that print titles going to the web is the publishing kiss of death. He said that he's been unable to find a single magazine brand that has succeeded or thrived by going digital-only.  Samir suggested, "When a print magazine is about to draw its last breath of ink, is digital really a life support for it, or just prolonging the inevitable...defining a vegetative state as new life?"

He answered his own question by saying, "A print magazine that can't make it in print is not going to make it in the digital sphere. The problem is not with the medium-the problem is with the magazine." He went on to explain, "If you fail to connect with your customers/readers time and time again, going to digital online heaven can't save you. Cut your losses, let your magazine die in peace and don't torture it anymore."

As most everyone in the industry knows, Samir and I have been debating the future of the reading business since 2005. We still continue this dialog every time we meet. It's fun for us and a delight to anyone astute enough to sit at the same table with us. So, I'll say this here for the enjoyment of the crowds, that Samir is right that most failing print magazines will not be likely to survive in a digital world. We all know that bad curation has nothing to do with a substrate. But that observation doesn't change anything about the financial trends of the reading industry. It isn't the death of old titles that has any relevance to us survivors, but rather where the future of the magazine business is going.

The scariest thing I heard at the very first workshop at the PBAA-MPA conference and which effected my perception for the rest of conference, was the statement from Ron Clark, President of Hudson News Distributors, who in the first panel said that "tell everyone, if something doesn't change we will be flat out closed". Meaning that if newsstand declines continue for another year as it has been declining, some distributors, perhaps even Hudson News will have to go out of business. I say this is scary because we have lost at least 40% of newsstand sales in the last five years and 11% was lost last year. Does anyone really think that the slide has finally skidded to a halt?

We still remain a very robust and profitable industry that is grappling with the new world order of changing information distribution dynamics.  In the near future, our predominant revenue stream will be digital.  Print won't die and printed newsstand magazines will be with us for many years to come.  But over the next few years, one of the main effects of the great publishing realignment that we are now going through, will be the deep-rooted change experienced by the magazine industry going from primarily a print-oriented business to one where digital products will represent the largest share of the periodical industry.  We reach more readers now than ever before in our history, but we will continue to reach them in ways that are different from the ways we have in the past, and now we do so easily and profitably on a global basis.  Hearst is getting $19.95 per digital subscription, and they have over a million digital subscribers and growing.

At the end of the day, it is how we all are going to sensibly handle this inevitable transformation that truly matters. I am more bullish about the publishing industry than ever before. It is lucrative, fun and exciting for us all to be involved in such a marvelous and ever-changing industry. As Conde Nast's, Bob Sauerberg suggested, now is the time for us find better ways to work together for the benefit of all. On top of Bob's remark, I ask this final question, if not now...when?


"Heard on the Web" Media Intelligence: 
Courtesy of  The Precision Media Group.   

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