The Newsstand Needs a Business Model That Welcomes Innovation

A small publisher called me a few weeks ago because he wanted his magazine to be distributed across the country. His editorial focus has an appeal that would attract buyers; the sample copies he sent me indicated that the package had potential for sale and could sell anywhere in North America and possibly the international market. I ran a number of projections including changing paper to reduce weight and production costs, used various sales models with and without promotions and sadly, I had to write to the publisher and say, “while I firmly believe your magazine has potential for sale, under the current single copy model, your magazine will not break even on the newsstand.” I pointed out that he would need an advertising base to cover the potential loss of revenue from single copy, which may take months after a launch to build. As a firm believer in the power of single copy sales, that was one of the most difficult notes that I have ever written. We’ve heard it many times in the past few years: the single copy business has changed, the dynamics are different, the business is in a downward spin that has not happened before. But that’s not so. Replacing “Tired” Titles With New Titles In the 1940s and 1950s detective magazines filled the newsstands and there were buyers. True Detective, Real Detective, Dime Detective, Super Detective, Mammoth Detective were a few of the many crime magazines that readers purchased regularly. Western magazines and celebrity magazines were also on the top ten best sellers … Photoplay, Motion Picture, Screen Stars and Screen Guide brought the excitement and glamour of Hollywood into homes across the United States. Many of these pulp titles existed solely on newsstand sales. Advertising was limited or non-existent. For timely news and lifestyle, Time, Newsweek, Look, Life and The Saturday Evening Post were found in most households, and these had a strong advertising base that supported and built large organizations like Hearst Publishing, Time Publishing, and Curtis Publishing. In the 1950s television was a major factor that changed the newsstand model. While it was not harbinger of death predicted for motion pictures, it quickly replaced radio dramas and magazines. Most TV programming built on the success of the top selling magazine genres … western and detective TV shows like Perry Mason, Wagon Train, and The Twilight Zone quickly replaced newsstand favorites, but innovative publishers found new avenues to build and expand their business. The baby boomers born in the late 1940s and 50s found magazines tailored to their interests. For teen girls, there were titles like Ingenue, Seventeen, and Teen Screen. Teenaged boys did not have as large a selection, but Boy’s Life, Boy’s World, Westerns, and the rebirth of comics with new characters from DC and the newly launched Marvel brand filled hours of down time for these kids. And in the 1970s, we saw how People and US Weekly knocked Photoplay off the newsstand with more timely coverage of the stars of TV, screen and music. Now we see how many of the current line of celebrity titles are facing difficulties on the newsstand. Overexposure at retail and the immediate gratification of web coverage is pushing weekly celebrity/entertainment titles to the wayside. And there are not as many new magazine titles or categories being introduced as before. Where Have the Innovative Titles Gone? Why then are we not seeing a new generation of titles from innovators and enthusiasts? In my opinion, there are three reasons: 1. Where are the leaders with “Ink in their veins?” Up until the 1980 and 90s when consolidation became the new way of building a business, most magazine companies were managed and run by people that lived and breathed the business. “They have ink running in their veins” was a common expression I frequently heard. They had their fingers on the pulse of what was taking place in the country. Adrian Lopez was one of these publishers. Martin Goodman passed his knowledge of finding trends and developing successful newsstand titles to his son Chip Goodman. Myron Fass built a line of newsstand hits and was eventually succeeded by his young protégé, Stanley Harris. Whether the title they launched covered 45 handguns, men’s adventure or women’s lifestyle, they knew their targeted audience, released a title, and then killed it when they saw interest was waning … BUT they replaced it with another new and innovative release. When consolidation of publishing companies took place in the 1980s, these independent publishers were replaced by new corporations and CPAs and MBAs focusing on EBITDA, market growth, statistical analysis ,and head count. Magazines that had been unique became clones of themselves as titles and companies were bought and sold for “synergy”. Editorial staffs were combined, as the larger magazine companies grew, editorial became “plain vanilla” and the newsstand began to look the same. 2. Wholesaler consolidation impacted new product development. It first occurred in the 1990s when a corporate wholesaler with interests in food, laundry, and other non-magazine products (no longer in the magazine business), struck a deal with a major retailer to be the sole supplier for their chain (a chain which had operations in in Iowa, Texas, California, Kansas, District of Columbia, Oregon, Maryland, Colorado, and Utah to name a few). Servicing stores in so many markets, so far apart was expensive. This wholesaler closed, the business was assumed by another wholesaler who realized that traditional discounts were not viable for multi-state operations and long-distance truck delivery. Also with the consolidation of wholesalers and title mix, the personalization of local market knowledge was lost. For example, if you were in Portland, Oregon, you were serviced by the wholesaler in Washington state or Modesto, California, both very different then the Portland market. Soon, mainlines and checkouts looked the same in store after store across the country (with a few pockets earmarked as “regional interest”) and many customers lost their favorite reading materials. The alternative were the chain bookstores, who in the 1990s, did not have the full selection the remaining chains now carry. Small local wholesalers closed their doors, and field representatives for national distributors and publishers no longer had access to the skinny on where their audience lived and shopped. 3. Discounts, though a very sensitive subject, is another reason we lack innovation. Even when magazines cost 0.25, the share of profits was distributed among the four entities in single copy sales: the national distributor, the wholesaler, the retailer, and the publisher. When Retail Display Allowance (RDA) was introduced in the 1950s, it was to supplement the retailer discount in exchange for improved retail display. It later became part of the overall discount, reducing the net profit to the publisher. Because retailers were serviced locally, there were no transportation fees. Gas and diesel fuel was cheap, and, for example, magazines were not delivered from Virginia to Hartford, CT to service an airport, which would increase fuel and labor charges. Prior to consolidation, most wholesalers were owned by families in the business since Mo Annenberg created the I.D. wholesaler system in the 1930s, or they were owned by former managers of publishing companies. As the expenses associated with consolidation grew, the eyes of the wholesaler community were focused on the publisher. In some cases, publishers were able to drive massive revenue on the newsstand. For example, a president of a major national distributor at an Atlantic Coast Independent Distributor’s Association (ADIDA) meeting in 1990, pointed to a cross promotion between a Hearst women’s title and a beauty line, which generated over $2 million in advertising for one issue. The new breed of wholesaler did not understand the economics of magazine publishing, and did not realize that the independent publisher does not have the same deep pockets as the major publishing companies like Hearst. They felt that every publisher had the potential to buy a Rolls Royce, when in reality, many were driving Chevrolets. Today in 2017, the discounts associated with selling a copy on the newsstand for smaller publishers has increased by approximately 40% over the expenses in 1990. Potential Solutions Personally, I’ve seen growth with the titles I work with, I’ve also seen some publishers go without personal cash flow to build the distribution of their title. Not everyone can or will do this. The future, as I’ve written before, is to expand the selection of titles for consumers at the point of sale, to build on topical interests and local demographics. If the cost to enter the retail market is too expensive, there will not be any new product. Wholesalers must realize that the bank accounts of the majority of new publishers is not as deep as the large corporate groups who are building digital delivery and reducing their print footprint. Yet, there are still publishers that have ink in their veins. The time is now to create a viable plan to provide new publishers the ability to enter the retail marketplace, so they can then absorb the higher costs of doing business. The time to work with and communicate with the wholesale community to develop a viable plan is now.

Magazines

The Newsstand Needs a Business Model That Welcomes Innovation

John Morthanos

About

Subscriptions

Events

Publications

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!

John Morthanos