Postal Debate: Time Inc. vs. The NationMagazines on opposite sides of the shape-based postal rate structure.
BY Jill Ambroz http://www.foliomag.com/2008/postal-point-counterpoint-time-inc-vs-nation
FOLIO: asked two magazine executives-each with vastly different publishing backgrounds-about the impact of last July's shape-based postal rate structure. While mega magazine publisher Time Inc. was perhaps the foremost proponent of the new structure, it could be argued that The Nation was among those hit the hardest, having to absorb a half-million dollar increase in postage costs. The political weekly, with a circulation of 181,070, had to turn to subscriber donations to stay afloat.

So, ten months into the new rate structure, here's a look at their different approaches and different experiences.
FOLIO:: Do you feel the new shape-based postal rate structure implemented last July is a better system than previous rate structures?
Jim O'Brien, director of distribution and postal affairs, Time Inc.: The new rate structure is definitely a step in the right direction. When the rates begin to match the costs, mailers will work toward the lowest-cost method of preparing their mail, which is why you're seeing new growth in co-mailing and co-palletization right now. The new rates aren't perfect, but they're necessary if we want to keep Periodicals Class rate increases at or below CPI.

Teresa Stack, president, The Nation: I think it is a bad system. Instead of the preference that periodicals were entitled to since the founding of the postal service, the new rate plan imposes the most burdensome requirements for magazine retailers. What these new rates do is favor the large volume magazines (that by definition can better fill containers and perform other worksharing) and shift the costs onto the small magazines, including those that specialize in political content.

Our rates went up between 18 to 20 percent; some other small political magazines saw even larger increases, while the average rate increase was around 12 percent.

FOLIO:: Are the new periodical rates fair to everyone, small publishers and larger publishers?
O'Brien: If you surveyed the industry today, you would probably find that many small mailers think that the rates are unfair because they incurred higher increases than large mailers, and large mailers think that the rates are unfair because they pass through only 40 percent of the bundle and container costs and therefore perpetuate the cross-subsidy to small mailers. Our industry needs to get to the point where the rates reflect the costs and mailers pay for the resources that they consume within the Postal Service.

Stack: Clearly they are not. The largest publishers spent a lot of money lobbying for this new rate structure because it benefits their interests, unfortunately at the expense of small magazines. And while they can correctly argue that the new rates more accurately reflect costs to the postal system of individual titles, we have to remember that the entire class of periodicals has been subsidized for hundreds of years, with the goal of supporting a thriving multitude of opinions and content.

FOLIO:: What would you change in the postal structure?
O'Brien: I would like to see each rate element cover the Postal Service's cost to process and deliver that product and make a contribution to the overhead of the Postal Service. In other words, each mailer should pay for what they use. Last year, Periodicals mail covered only 83 percent of its postal costs. We need to get to 100 percent cost coverage or we may be at risk of an exigent increase.

Stack: In order for small magazines to survive, they cannot be subject to the radical restructuring imposed by the new rates. If we believe in our postal system, we may have to carve out different treatment for small titles in order to preserve the health of the class.

FOLIO:: The first quarter saw a significant decline in both First Class and Standard Mail, which pay for most fixed costs. If this trend continues, what will the repercussions be for the USPS and potentially, for publishers?

O'Brien: If Periodicals Class mail does not make progress toward 100 percent cost coverage then the Postal Service will file for an exigent rate increase to bring us to 100 percent. The average Periodicals contribution to institutional costs last year was negative 5¢ per piece. A 5¢ increase would be devastating for both large and small publishers, which is why Time Inc is pushing for mailers to change their behavior and prepare mail more efficiently.

As far as the Postal Service is concerned, volume losses put additional pressure on their cost reduction efforts. Postal Service management has done an excellent job of removing costs from the system but at some point they will hit the wall on cost reductions. When that happens, if volume does not rise, the USPS will be faced with either an exigent rate increase above the CPI cap or a bail-out from Congress.

Stack: Two things could happen: prices could go up even more (and if the large magazines have their way, those increases will be much higher for small magazines than for large ones). And then volume will go down. At that point, the USPS could be in real trouble. It may then take a congressional subsidy to preserve the universal service that our leaders believed was essential to our form of self government.

Time to Make the Case for Magazines and Books

Time to Make the Case for Magazines and Books
By John Harrington
http://www.nscopy.com/

At The Retail Conference, which wrapped up two weeks ago, several of the presentations focused on information that demonstrated the unique values that magazines and books bring to the retail environment. Additionally, another argued that these findings need to be consolidated into an aggressive and coordinated retail marketing approach that will benefit the entire category, and all of the members of the magazine distribution channel. Frankly, such a concept was employed, successfully and cooperatively, nearly two decades ago (see page 2). And for the last 10 years or so, it has been talked about constantly. Now, as the first decade of the 21st century is drawing to a close, and competitive product lines are clearly aiming at publications' space in large chain stores, and the tensions in the channel are reaching a crisis point, all members of the business should be doing whatever they can to see that publishers, national distributors, and wholesalers begin speaking loudly and with "one voice" to retailers.

Some of the good news from The Retail Conference about magazines began with Wendy Liebman's "How America Shops." A few points:

Women who buy magazines are cautious, take charge shoppers, but magazine buyers are also less price sensitive, enjoy browsing more, and are willing to pay to get in and out quickly.

Women who buy magazines shop in more retail channels than those who do not, by 12.5 to 8.6 in a three month period.

Magazines are #1 on the list as an affordable, under $10, treat for women; and,
Magazines are the #1 checkout favorite for women.

In "Improving Store Performance in the Grocery Channel," Tom Griffith of Willard Bishop Consulting, noted that while the so-called "Center Store," essentially general merchandise, is under siege, magazines and books are the most profitable products there. Among the numbers:

Within general merchandise, magazines generate 6.4% of sales, but 16.3% of profits.
Books and news represent 2.6% of sales, but 7.2% of profits.

Magazines profit-per-item sold of $0.58 is higher, by considerable margins, than snacks, gum, candy, and carbonated beverages.

These findings and more were a key part of a third presentation, "A Case for Magazines at Retail: One Voice." Three national distributor executives - Jay Felts, Comag Marketing Group; Drew Wintemberg, Time/Warner Retail Sales and Marketing; and Jay Wysong, Distribution Services, Inc. - laid out the beginnings of a plan to build a true "industry" presentation. The work is being done by a committee of the International Periodical Distributors Association (IPDA). No timetable was announced, but the message was that it has a high priority.

The History: Late in the 1980's, initially under the auspices of the Magazine Publishers of America (MPA), research about magazine and book supermarket profitability was begun, using the direct product profit (DPP) measurement. A major consulting firm substantiated that magazines were the most profitable general merchandise item, and that books were among the leaders as well. The wholesalers' trade organization of that time, the Council for Periodical Distributors Associations (CPDA) soon joined the project. The program's budget, in 1988, was nearly $1 million. Additional hundreds of thousands were budgeted over the next few years to bring the findings to top executives at the largest supermarket chains. Publishers, national distributors, wholesalers, association executives, and the consultant were part of those presentations. Beyond those joint sales calls, DPP materials, monographs and video tapes, developed by MPA and CPDA, were key parts of retailer visits by individual publishers, national distributors, and wholesalers.

The DPP program of the late 1980's and early 1990's was very successful, as supermarket publications' footage increased by double-digit percentages. As a follow-up, MPA and CPDA engaged the consulting firm to study DPP figures for discount stores. The resulting study was presented to a then-emerging discounter located in a remote town in Arkansas named Wal-Mart, which was only beginning to display magazines in its growing chain.

Remember as well, in those years, magazines were strictly a 20%-off cover price item, with display allowances bringing their gross margins up to around 27%. Today, and for the last decade, as a result of increased channel competitiveness, gross margins are estimated, modestly, to be over 30%.

The key to the success of the DPP marketing program of 20 years ago was its cooperative nature. For a new program to succeed, it will also have to be inclusive, and it will have to take place as soon as possible

At the Newsstand: Cloudy Sales Results and Growing Tensions

At the Newsstand: Cloudy Sales Results and Growing Tensions
By Baird Davis
Circulation Management Magazine
http://www.circman.com/viewmedia.asp?prmMID=3875
Newsstand sales performance of audited publications in the second half of last year appears to be reasonably good in spite of a few extenuating reporting contingencies. Unit sales of 477 million were only down .7 percent and revenue rose to nearly $1.7 billion, a lift of 4 percent.

But things are not exactly as they appear. There were several conditions that clouded the process of interpreting newsstand sales performance in the last half of 2007. First, industry sales were inflated by an "extra" 1.8 percent by a timing situation that made it possible for weekly publications to report 27 issues for the audit period instead of the previous year's 26 issues. Plus, Meredith reportedly boosted its numbers by counting sales sold at deeply discounted prices at Dollar Tree stores. This inflated industry sales another .8 percent. These factors have partially compromised the viability of year-over-year sales comparisons. If these factors were excluded from the sales calculations the industry's unit sales would have been down 3.2 percent and revenue up 1.9 percent-still a fairly good period, but not nearly as good as it first appears.

Celebrity Titles Still Set the Industry Sales Agenda

Once again, the celebrity category kicked butt. The aggregate sales of the six celebrity titles (People, Us Weekly, Star, In Touch, Life & Style, OK!) grew in the second half of 2007. Unit sales were only up .8 percent, but revenue rose $49 million, up 11.4 percent. The average cover price for the group increased from $2.86 to $3.16. However, it should be noted that the sales of these publications (all weekly frequency) were helped by an anomaly in the audit bureau reporting period that allowed an additional issue to be reported for the period. This, in turn, skewed the year- over-year comparison, giving it the false appearance of lifting their unit and revenue 3.8 percent. But even without the frequency factor, the revenue increase would still have been nearly 8 percent.

Sales of the two audited tabloid publications (National Enquirer and Globe), which in essence are also celebrity titles, continued to fall in the face of the strong sales performance of their regular sized competitors. Their unit sales were down a combined 10.6 percent, but their revenue, helped by aggressive price increases, only fell 1.7 percent. The combined sales revenue of the celebrity and tabloid titles totaled nearly $570 million, up over 9 percent. Like it or not, these eight publications continue to set the magazine newsstand agenda, accounting for one-third (34 percent) of the industry's revenue for audited publications.

In the past, the sales success of the celebrity titles precluded strong sales performance from many of the other checkout publications. But in this reporting period, the sales performance of the non-celebrity checkout sold titles (nearly all women-oriented) was generally good. There were a meaningful number of titles with revenue increases of 10 percent or more. This group included Rolling Stone (23.3 percent), Sports Illustrated (20.5 percent), Self (18.0 percent) Redbook (17.8 percent), Everyday with Rachael Ray (17.0 percent), First (16.6 percent), Prevention (14.6 percent), Soap Opera ABC (12.1 percent) and O, the Oprah Magazine (10.0 percent). However, there were some major checkout title sales casualties-Good Housekeeping (-20.7 percent), Marie Claire (-14.3 percent), Glamour (-13.2 percent), Soap Opera Weekly (-13.1 percent), Vanity Fair (-12.8 percent), Woman's Day (-11.0 percent) and Allure (-10.6 percent). But the winners exceeded the losers and revenue for the non-celebrity checkout publications rose a healthy 5.4 percent.

Largest Cover Price Increases in Three Years Confined to Weekly Publications

The average cover price of audited publications sold in the second half of last year increased 4.8 percent-from $3.36 to $3.52. This is the largest percentage price increase in recent years. It represents a major change from the last three years, during which average price remained flat.

The price increases, however, were not broad based. They were primarily confined to weekly frequency publications. Fourteen of the top 17 selling weekly publications increased cover price in the last year. The combined effect of the price increases on weekly publications produced an aggregate average increase of 10.0 percent for this group. The average price increase for all other publications was a miniscule .5 percent.

Most of the weekly publication price increases were not, in the traditional sense, market driven. Publishers of low priced (less than $2.99) weeklies were influenced, to a large extent, in their price increase decisions by wholesalers who "persuaded" them that pricing below $2.99 was not financially healthy for the industry. Even though some publishers of weekly titles have been inching up their cover prices in the last few years, it was Bauer's decision to increase cover prices approximately 35 percent in the fourth quarter of 2007 for all their audited publications, including their three major weeklies (Woman's World, In Touch, Life & Style), that has had the most dramatic industry pricing impact.

It's too early to definitively determine the effect of the price increases for weekly publications. But the initial results appear to show that it's not necessary to employ super-low pricing to maintain volume sales. The apparent success of raising the low prices for weeklies, however, does not necessarily translate to elastic pricing for other publications. The market pricing elasticity restraints that have slowed subscription pricing are likely to remain in play at the newsstand for most other publications.

Deeply Discounted Sales

While the industry appears to be moving away from super-low pricing practices some publishers experimented by selling their titles at Dollar Tree stores, where the publications are presumably sold at a dollar or less. The largest proponent of this practice in the second half of last year was Meredith. The sales of their five leading newsstand titles-Better Homes & Gardens, Fitness, Ladies Home Journal, Family Circle and More reported a combined sales revenue increase of $9 million, nearly 29 percent. It's now estimated that all, or nearly all, of the sales increases for these titles can be attributed to Dollar Tree. However, Meredith, to their credit, has announced that they have discontinued sales of their products at Dollar Tree. Many industry observers believe that it was important for Meredith to rescind their Dollar Tree agreements. There's a sense that it will help preserve the industry's long record for selling publications at full (or nearly full) cover price. There is also a belief that maintaining full cover price integrity helps to demonstrate product vitality and "wantedness" for the newsstand source of circulation, which is very important to advertising buyers.

Checkout and Mainline Sales Heading in Different Directions

The unit sales of checkout titles grew .9 percent and revenue increased 7.2 percent. In contrast, mainline unit sales declined 6.1 percent and revenue fell 2.4 percent. These divergent trends began taking shape in 2004, when the sales of celebrity titles began their growth spurt and the sales of "laddie" titles started to abate. In the intervening three-year period, checkout unit sales have increased about 1 percent and revenue 2 percent per annum. Mainline unit and revenue sales, on the other hand, for the same period have annually fallen 5 percent and 3 percent respectively. The spread between checkout and mainline sales is expanding. This trend probably indicates that a greater proportion of industry sales are being made in the mass merchandiser, supermarket and drugstore channels of trade, where checkout sales predominate. If this trend continues, it doesn't bode well for mainline publications.

Newly Audited Publications

A total of 27 titles with newsstand sales were added to the auditing ranks in the last year. The performance of four of those titles stand out-People Stylewatch and All You (Time, Inc.), Quick & Simple (Hearst) and Taste of Home (Reader's Digest). Together these publications accounted for over $30 million in revenue in the second half of 2007.

People Stylewatch is probably the most noteworthy. It reported average sales of 549,000 per issue. This is the best performance achieved at launch by a monthly title since the debut of O, The Oprah Magazine in 2000. A Taste of Home, although newly audited, is not a recently launched publication, having previously been published by Rieman. It has a massive paid subscription base of nearly 3 million, but it still reported newsstand sales of 162,000 per issue. The other two-All You and Quick & Simple-although newly audited have been sold at the newsstand for two years or more. They both carry cover prices below $2 and are frequently referred to as "Bauer Beaters". Although they posted relatively strong sales, their market position could be compromised in the future if the industry continues to shift away from super low cover pricing practices.

Sales of the Top 10 Companies at Newsstand Time, Inc. and Bauer

Time, Inc. continues as the newsstand revenue leader with sales of $258 million. But Bauer is closing the revenue gap.

Sales revenue grew to nearly $235 million, up 11 percent in the last half of 2007. Bauer's sales were helped by large cover price increases in the fourth quarter of 2007. Their sales in this reporting period, however, only reflect the effect of price increases on several issues. In the first half of 2008, the full effect of Bauer's aggressive price increase strategy (average 35 percent) will be revealed. If the Bauer titles don't suffer significant unit sales fall-off as a result of their price increases it's entirely possible their newsstand sales revenue will exceed Time, Inc.'s in 2008.

American Media, Hearst, Wenner, Condé Nast, Meredith and Hachette

American Media's sales slipped, hurt by the continuing sales slide of their two tabloid publications, but their sales still leave them in third place among all publishing companies. Wenner's revenue, on the other hand, grew a robust 14 percent, helped by the sales growth of Us and Rolling Stone. Hearst's sales revenue was up nearly 8 percent, but if the sales of their newly audited title, Quick & Simple, is excluded the revenue of their previously audited titles was flat. Their performance, however, was better than Condé Nast and Hachette whose sales revenue slid five and six percent respectively. Meredith's revenue was up 18 percent, but as previously discussed, their sales lift was almost solely a result of Dollar Tree sales.

Enthusiasts Media

Enthusiasts Media's newsstand performance is important because their sales, more than any other company, are a proxy for special interest publications. They publish 47 audited publications and all, except two soap opera titles, are male-oriented special interest publications sold on the mainline. In the aggregate, their sales revenue declined about six percent. But if the sales of their two soap opera titles are excluded, the revenue of their 45 special interest titles were down less than 1 percent, good performance in a down market for special interest titles.

Northern & Shell

The biggest surprise among the top ten newsstand sales companies was Northern & Shell, publisher of OK! Weekly. They raised the cover price of OK! from $1.99 to $2.99, yet unit sales rose 11 percent and revenue grew 70 percent to over $44 million. Their sales increase moved them ahead of Hachette on the newsstand sales leader board. After a rocky start OK!, with its British heritage, is demonstrating that it may have real staying power in America.


Shattering Any Illusion of Market Stability

For the last few years, wholesalers, in the absence of industry leadership from publishers and national distributors, have been more assertive in their actions and in voicing their industry concerns. In doing so they are sending shivers through the newsstand industry.

Wholesalers continue to ratchet up the intensity of their rhetoric. They have threatened to hold back payments to national distributors and tried, unilaterally, to raise publisher's discount rates. However, it should also be noted that their actions, some made in desperation, have produced some very constructive results. They have reduced the number of titles handled and significantly restricted distribution allotments. These actions have helped improve the industry's sales efficiency level from 36.2 percent to 39.6 percent (as reported in The New Single Copy). This has apparently been accomplished without any significant reduction in industry sales. The financial implications of improving efficiency by 3.4 percentage points is to annually save more than 100 million copies from being printed and distributed-a truly staggering number. Still it's the stridency in which wholesaler objections are being put forth that is causing legitimate concern across the entire newsstand supply chain.

It's been more than a decade since retailer initiatives irrevocably changed channel operations. During the ensuing period the surviving wholesalers have found efficient ways to accommodate many of the operational and financial mandates imposed by retailers. But most wholesalers have now exhausted their cost saving opportunities. Further exacerbating the situation has been the recent rapid expansion of scan-based trading (SBT) as a newsstand trading option. This has placed an additional financial burden on wholesalers.

It's now evident that wholesalers have been pushed to the financial brink. Financially wounded wholesalers are severely endangering the well-being of the entire newsstand supply chain.

On Eve of Retail Conference, PBAA Survey Details Publisher Concerns

On Eve of Retail Conference, PBAA Survey Details Publisher Concerns
By John Harrington
The New Single Copy
http://www.nscopy.com/

The 2008 Retail Conference, with the theme, "Unleashing the Power of Print," will begin next Sunday, March 30, in Tampa, Florida. The conference is co-sponsored by the Magazine Publishers of America (MPA) and the International Periodical Distributors Association (IPDA). According to the results of survey by another publishing related trade group, the Periodical & Book Association of America (PBAA), the conference will take place in an atmosphere of uncertainty and concern; at least among the 38% of PBAA's members who participated in the survey, which was conducted in January and February.

The following findings of the PBAA report were excerpted from the association's publicity release of March 18:
"68% of publishers decreased or kept their draws flat in 2007 (in line with wholesaler initiatives).
"More than half of the publishers had decreased or flat sales.
"69% raised their cover prices (32% by a $1.00 or more). Publishers seem to be trying to make up revenue by cover price increases, since sales are flat or down.
"86% expect flat or declining sales in 2008. Note: Publishers are unhappy in general with wholesaler attitudes; copies have been taken out of the systems, efficiency is up, but publisher cost savings (of not printing the wasted copies) are eclipsed by rising paper, printing, binding, and distribution costs . . .
"Publishers are seeing continued resistance by wholesalers in general to the concept of 'returning copies to the system' by re-investing or 'trading up' copies to new outlets . . .
"75% of publishers saw no benefit in their participation in wholesaler incentives.
"65% of publishers perceive the national distributors are trying to 'fight the fight' but are not effective at this time . . .

"Wholesalers are perceived primarily as magazine distributors, not as sales partners (and need to be more aware of this widespread perception), leading to increasing publisher efforts to find additional sales channels."

Confirmation of Increased Tensions: Although the PBAA survey results are strongly attitudinal, and probably not a statistically valid representation of the entire business, they do confirm the increased levels of tension that are clearly present today in the magazine distribution channel. Although sales have improved, albeit only by minuscule levels, in each of the last four years; and efficiencies are up by six percent during that period, the levels of distrust between wholesalers and publishers and their national distributors is at a very dangerous level. More than a decade of financial distress at the wholesale level has driven the surviving companies to institute, particularly in the last few years, policies aimed at reducing costs. Although most wholesalers say they are also engaged in aggressive marketing, suppliers generally feel the policies emphasize cost savings at the expense of expanding sales. At the same time, the already mentioned fragile economic condition of wholesalers has driven some of them to demand higher margins and/or challenge national distributor payment terms. The tensions arising from these types of confrontations have led many in the business to consider the possibility of one or perhaps more major wholesalers leaving the business entirely. For any publisher or national distributor, the challenge of suddenly having to deal with the loss of 15% to 20% or more of its retail distribution is more than a daunting task. That scenario has always been a remote contingency, but only in the last six to nine months, has it matured into an imminent possibility.

Retail Conference Topics:In this somber atmosphere, MPA and IPDA have announced the subjects of a series of panels and workshops for next week's conference. They include:

"Consumers, Retail, and the Environment." Chaired by John Griffin, National Geographic and chairman of MPA. Panelists: Michela O'Connor Abrams, Dwell; Steve French, The Natural Marketing Institute; David Refkin, Time Inc.; and Dave Sherman, Blu Skye Sustainability.

"Inside Insight: Through the Eyes of Former Retailers." Moderated by Richard Lawton, CMG. Panelists: Steve Burbridge, T/WR; Tim Humanik, CMG; and Jerry Lynch, IPDA.

"Puzzled, Perplexed & Pondering.. . . . Why Publishers do the Things They Do." Moderator: Rob Gursha, T/WR. Panelists: Linda Brennan, Business Week; Ken Godshall, Hearst Magazines; Terry Day, National Geographic; and Suzanne Roman, The Taunton Press.

"Future of Magazines at Retail." Moderated by Peter Kreisky, The Kreisky Media Consultancy. Panelists: Jaime Carey, Barnes & Noble; Glen Clark, The News Group; Rich Jacobsen, T/WR; and John Loughlin, Heart Magazines.
"A Case for Magazines at Retail." Panelists: Jay Felts, CMG: Drew Wintemberg, T/WR; and Jay Wysong, DSI.

Other speakers will include Matt Cooper, Portfolio Magazine; Cindi Leive, Glamour; Wendy Liebmann, WSL Strategic Retail; Tom Griffith, Willard Bishop Consulting; Anne Zafian, Simon & Schuster; John Santanella, Nickelodeon; and J. Walker Smith, Yankelovich Partners.

In Circulation: Timeliness, transparency help circ measurement keep pace with other media

In Circulation: Timeliness, transparency help circ measurement keep pace with other media
By Lauren Bell
Audit rules approved by the Audit Bureau of Circulations board last week seem to mark a trend in circulation measurement: faster, more precise reports that bring print audits closer to the sort of metrics used by other media. The ABC's new rules were intended to simplify current audit rules and make audit reports more useful to advertisers and publishers.

Key to this new push for usefulness was the change ABC made to its Rapid Report guidelines. Publishers using Rapid Report - an online tool for recording audience numbers issue-by-issue - are now being asked to post initial post-issue readership projections within three weeks of a weekly title's on-sale date. Monthly publishers should post within seven weeks.

"It's a much more on-demand world today," said Kammi Altig, manager of communications at ABC. "People in the Internet age do expect information more quickly, and it certainly makes the print industry more competitive and more comparable with other media industries."

By speeding up the process, ABC is making print audience reports more comparable to the more regularly-posted numbers provided by TV, Web sites and other media. Such information is expected to raise print's standing in a marketplace where ad buyers consider and compare multiple media platforms. It is important to note, however, that Rapid Report measures circulation, while other media measure audience - a difference that makes comparisons between the two an apples-to-oranges exercise.

Robin Steinberg, SVP, director, print investment and activation for MediaVest USA, added, "The simple answer is yes, it does make print more competitive, that's why we developed these reporting guidelines. As a medium we need more timely data and we need to understand the data earlier rather than later. It's really about transparency, and I think publishers will benefit by being more transparent on a timely basis."

A new MPA initiative unveiled by president/CEO Nina Link two weeks ago sought similar effects. MPA proposed new audience-based metrics that measure different audience demographics and engagement with ads.

"A key item was to become faster in our measurement and more comparable to the way other media are measured and more accountable," Link said.

A tangential, but no less important, effect of the MPA changes is that better consumer metrics may allow circ marketers to deploy more targeted campaigns. And with numbers coming in on a timelier basis, marketers will be better able to judge how audiences respond to a magazine on an issue-by-issue basis.

Like ABC, the Magazine Publisher's Association is making improved online survey techniques a major focus in its reworking of the audience reporting process.

Scan-Based Trading's Hold-Up

Scan-Based Trading's Hold-Up
Fully adopting SBT is a complicated, gut-wrenching situation.
By Baird Davis
Circulation Management Managzine

Fully adopting SBT is the most complicated, gut-wrenching situation ever faced by the magazine distribution industry.

One's perception of the value of scan-based-trading (SBT) for magazines varies widely depending on whether you are a retailer, wholesaler, national distributor or publisher. If you're a retailer, you love it, but the other channel participants are far less sanguine about it. But regardless of one's position, there is no mistaking SBT's inevitability or its critical place in determining how business will be conducted in the newsstand channel.

SBT has resided on the periphery of the newsstand industry for nearly a decade. It's been reviewed, tested, discussed and exhaustively analyzed by chain retailers, wholesalers and national distributors. But only in the last year has the process achieved sufficient scale to help demonstrate its inevitability as a trading option for magazines. Today, more than 25 percent of magazines distributed by wholesalers are done under SBT agreements. In the next few years, SBT is realistically expected to exponentially expand.

Conceptually, SBT will significantly reduce expense, improve efficiency, ease the return handling burden and generally help streamline an archaic system. It sounds like it's a pretty good thing, right? Well, not exactly.


What's Holding Back Full Adoption of SBT?

The central problem is finding a way for the newsstand channel partners to equitably share SBT's costs and benefits. This would seem to be a relatively easy task. (On the contrary, fully adopting SBT is the most complicated, gut-wrenching situation ever faced by the magazine distribution industry.)

To understand the severity of the SBT issues facing the industry, a little background information may be useful. The most important thing to know is that SBT is not currently an industry-wide initiative. It is being conducted between only retailers and wholesalers. National distributors and their publisher partners have chosen not to participate in the process. That, of course, raises the question: why haven't national distributors/publishers joined the SBT party?

The answer to that question lies deeply rooted in the history and culture of the newsstand business. The magazine distribution system, unlike most systems bringing product to sale at retailers, has two middlemen-wholesalers and national distributors. The relative complexity of the magazine product line (thousands of different products, return processing, etc) requires the services of both. But having two middlemen has greatly escalated the prospect for disagreements and conflicts of interest.

If truth be known, there has always been an uneasy truce between wholesalers and national distributors. Compounding the inherent difficulties of the wholesaler/national distributor relationship is the lack of unanimity of thought and action within either the wholesaler or national distributor communities. This has led to "intramural competition," which, from time to time, has been detrimental to the best interests of newsstand channel efficiency.

Business life in the newsstand channel has never been without tension or conflicts of interest. Now SBT has been tossed into that messy stew. SBT has heightened areas of contention among all four major channel participants. But it's the issues that divide wholesalers and national distributors that are the most critical. Wholesalers, largely out of competitive necessity, developed SBT agreements with retailers. But in doing so, they've taken on a huge financial burden.

National distributors have held back from participating mainly because they felt that the SBT financial terms are too heavily weighted in favor to the retailer; that the agreements did not meet minimum system and security guidelines (all the major national distributors have published papers outlining their SBT system requirements); and, in general, they felt that wholesalers entered into these agreements without proper due diligence. Wholesalers, for their part, believe national distributors (and by inference, publishers) have not been properly sensitive to the changing market conditions that have made adopting SBT a priority for retailers. Nor do they feel that national distributors have been empathetic to the SBT-related financial burden they have assumed.


The SBT Stalemate: A Lose-Lose Situation

The hope for industry-wide SBT program is now stuck in a stalemated situation. This poses a grave danger for the entire industry. SBT has, in effect, been endorsed by the mass merchandiser retail community and it's going to move forward with or without national distributor/publisher participation. But-and this is the critical consideration -it can never achieve its hoped-for efficiencies without national distributor participation.


The Importance of Breaking the Stalemate

Now let's be frank about SBT's benefits. Even a more equitable division of costs and benefits is still likely to heavily favor the retailer. The retailer derives immediate and substantial benefits from SBT. For wholesalers, national distributors and publishers, it's unlikely there will be any significant benefits in the short run. But it will undoubtedly provide significant long-term cost saving benefits that accrue from an improved and more efficient distribution channel.

In addition, wholesalers, national distributors and publishers must, to some extent, look beyond prospective cost savings and take the long view in considering SBT's merits. They have to carefully consider the importance of what SBT can do in simplifying, for retailers, the often-convoluted process of selling magazines. It is the single most vital action that the channel partners can take to cement relations with retailers and help insure the long-term viability of the mass merchandiser participation in the sale of magazines. SBT requires upfront sacrifice from wholesalers and national distributors, but in the long run, it's likely to be the best alternative for protecting the newsstand business.


Let's Get It Done

It's imperative that SBT become an industry-wide initiative. This means wholesalers and national distributors must settle their differences. I don't want to underestimate the difficulty of reaching agreement. The issues (shrink, inventory control, system security and transparency) dividing wholesalers and national distributors are unbelievably thorny.

But in a SBT study conducted by John Harrington and myself (copies of this report can be obtained by contacting John Harrington at jharrington@nscopy.com), it was revealed that there were no issues dividing the parties that were so intractable as to be considered as "deal breakers." What's required is for wholesalers and national distributors to immediately begin the process of negotiating, in good faith, a SBT accord. It's possible to do this. Stop wasting time -let's get it done. As the Harrington/Davis SBT report indicated, "no less than the future viability of the newsstand trade with mass merchandisers is at stake here."

After Newsstand Spike, Meredith Discontinues Dollar Store Distribution

After Newsstand Spike, Meredith Discontinues Dollar Store Distribution
Was licensing deal with Wal-Mart threatened?
By Dylan Stableford and Bill Mickey
http://www.foliomag.com/2008/after-newsstand-spike-meredith-discontinues-dollar-store-distribution

With newsstand sales still struggling to make any significant headway, Meredith, like most publishers, has been under pressure in recent years to find alternative sources for retail sales. And it appears one of those sources resulted in a spike in newsstand sales-and got them into trouble with Wal-Mart.

During the second half of 2007, Meredith's Better Homes and Gardens posted a 71.5 percent jump in single copy sales, according to ABC's FAS-FAX. That jump is thought to be largely attributed to selling issues at steep discounts at Dollar Tree stores, which attracted the ire of Wal-Mart and may have threatened a significant licensing deal Meredith recently struck with the big-box retailer.

While there's nothing inherently wrong with selling magazines through alternative and steeply discounted outlets such as the dollar stores, the strategy does have an impact on both the brand perception and the rest of the distribution chain. Indeed, Meredith has since discontinued its distribution into the dollar outlets when, according to sources, Wal-Mart threatened to turn the publisher's titles away from its newsstands.

"We had always planned to phase these programs out," a spokesperson for Meredith told FOLIO:. The spokesperson declined to comment on details of the specific distribution programs, such as the Dollar Tree Store, and the Wal-Mart deal, citing proprietary concerns.

Meredith's Better Homes and Gardens and Ladies Home Journal were both on the notorious Wal-Mart list of magazines scheduled to be cut from its stores. They have since been reinstated.

Other titles distributed into the dollar stores, according to sources, were Family Circle and Ladies Home Journal. All three titles are distributed by Time Warner Retail, which did not return phone calls for this story.

According to ABC's FAS-FAX report for second half 2007, single-copy sales rose 71.5 percent for BH&G, 12.7 percent for Family Circle, and 37.5 percent for Ladies Home Journal.

Controversial Circ Practice
"One, you're devaluing your product, and two, you're damaging your relationships with your major retail customers," says John Harrington, a noted industry consultant and publisher of the New Single Copy newsletter. "Plus, it could have damaged the branding agreement Meredith had [with Wal-Mart]. It's the newsstand version of verified."

The Wal-Mart branding deal, which included a range of home products based on the Better Homes & Gardens brand, was announced last October. The new line will be available this fall.

That licensing deal would look strange without the namesake magazine on the retailer's shelves.

According to a source familiar with the arrangement, the copies sold in the Dollar Tree stores were overrun copies still within their on-sale period. "I don't know if they were returnable or if it was a one-way sale, but they were probably one-way if they were only a dollar a copy," says the source.

Since the copies were still within their on-sale periods, the steep discount was a tough pill to swallow for other major retailers who sell the magazines at cover price.

Pulling the magazines from the dollar stores should, after all, not have a material impact on the publisher's overall newsstand strategy. They were sold for a dollar, after all. For Better Homes & Gardens, single-copy sales represented about 5 percent of total paid and verified circulation; for Family Circle, a more robust 23 percent; and Ladies Home Journal, about 10 percent.