Rethinking Newsstand Sales: Magazines, Money and Mobile Blinders

David Carey, president of Hearst Magazines, believes that people crave "spontaneous combustion" from their media purchases. "We live in this on-demand world," Carey elaborates. "There's nothing more satisfying than going to the newsstand, [browsing] by a subject area that you're passionate about, and you literally own it right then. You take it home, and you get to devour it." Newsstand sales exceed $3 billion, and magazines are sold at more than 100,000 retail spaces across North America. Single-copy magazine sales are critical to the industry's future prognosis. The newsstand, in its many retail manifestations, often provides insight into trends in magazine sales and how to best target magazine readers. The picture, however, is often bleak. John Harrington is a partner in Harrington Associates, publisher of The New Single Copy newsletter and the annual Magazine Retail Sales Experience. "Newsstand, single copy, retail magazines - whatever you choose to call it - is sick," Harrington affirms. "Sales are down more than 40% in five years, and the decline is continuing. Retail dollar sales . . . are below what they were in 1993. Beyond that, the wholesale level is financially distressed, and then some." Joe Berger of Joseph Berger Associates, a circulation marketing and consulting firm in Chicago, agrees with Harrington: "The present status of single copy sales in the U.S. is, at best, tenuous." Much analysis about the declining vital stats of newsstand sales has revealed numerous contributing factors, and left publishers pondering if the trends are irreversible. Everyone from CEOs to copy editors can cite causes for the newsstand's declining health, but few offer viable remedies. Yet a close look at some of the crucial issues related to newsstand sales points the way to a brighter outlook. Disparity in DistributionLuke Magerko is a 20-year publishing industry veteran who spent a number of years at Meredith Corporation and with wholesaler Independent Direct Distributors before his venture into the publishing arm. Most recently, he founded The Market Analytics Project, which compiles and interprets actionable data analytics for publishers, vendors and retailers. The contemporary newsstand climate is "bleak," according to Magerko. "Retailers are reducing in-store magazine space due to rapid sales declines. Wholesalers continue to add small fees and adjust terms and conditions in the hope they can generate incremental revenues at publisher expense. Lastly, newsstand departments, national distributors, and consultants avoid industry challenges by blaming outside forces such as the debilitating 2008 recession and the Internet," he confides. "Sales have never recovered from the Great Recession," according to Harrington. "But the biggest killer today is digital - not just the Internet or tablets, but the breadth of social media, the names of which I can't even keep up with. Answers? I could become a rich man if I knew that, but how about finding new ways and places to display magazines? And I don't mean putting cooking magazines in the produce section. I mean getting them where people are willing to spend money, like when they enter the store. By the time they get to the checkout, they've already spent their impulse money. I know it's not that simple, but not much has changed with [magazine] merchandising and marketing for maybe 30 years." Merchandising and marketing in a new way could potentially have a big impact, but the industry must begin by controlling its own narrative, according to Joe Berger: "The first thing is perception and marginalization. The perception issue is that we are going away; we're dinosaurs, and we have horrible press. We also seem to be our own worst enemy, because in the name of transparency we now trumpet our sales results on a quarterly basis, so news writers - who don't really understand the business - can write articles about the 'Continued Problems of the Newsstand: What Should Be Done!' "The second issue seems to be simple economics," Berger adds. "Each link in the distribution chain has a different measure for success. A publisher may break even at 35 percent, but a wholesaler may be deep in the hole at a 35-percent sell-through. The solution for the wholesaler is to try and sell more efficiently and revise the distribution to a lower, more efficient draw. That can even work on a national basis. But I have seen that strategy succeed, and I have seen it fail. Often we just see a lower draw and the same or even lower sell-through, even if the entire distribution is worked." Luke Magerko also notes that wholesalers face disparity challenges in the way they manage their magazine sales. "Wholesalers currently work under two separate business models," Magerko explains. "According to the Point of Sale [POS] Panel at PBAA, 55 percent of magazines sales are recorded using retail POS data. Wholesalers pay national distributors, and by extension publishers, using the traditional debit/credit method (Draw - Return = Sale). This is inefficient, and wholesalers are financially damaged by this model." And Magerko concurs newsstand marketing needs an overhaul. "Checkout space is not being utilized to its fullest potential, and I believe there are specific titles, categories and formats not being represented. There needs to be a new mix at the checkout," he explains. Publishers need to manage their own expectations, he adds. "Publishers should evaluate every part of their newsstand supply chain using profitability, not sales, as the basis for their decisions." Mining for Better DataGil Brechtel is President and CEO of MagNet, which provides critical sales and marketing information to the publishing industry. As the man with his forefinger on the pulse of the industry's newsstands, Brechtel offers particular insight and hope. "Bookazine sales have increased during the last five years when the industry sales were suffering," he notes, "and that's certainly a positive. I think it says that consumers are prepared to spend money on good quality publications, even though they may be at a $10 cover price. I think it also says that the consumer is smart enough to realize, why buy a magazine at full price on the newsstand, when they can get it through subscription at a reduced price?" Brechtel notes that because bookazines aren't offered through subscription, consumers are accustomed to paying full cover price for them. He also notes the impact of celebrity-style publications slipping in popularity. "Celebrity categories represent 25 percent of the business," Brechtel asserts, "and when those sales are down 12-13 percent a year; alone, they represent a two- to three-percent decline on the overall business. And I don't see the celebrity titles turning around anytime soon, mainly because of social media and the Internet, and the fact that the fans of the celebrities appearing on the cover already know the information way before the consumer can read it in People magazine." "Good, quality publications are selling, but at the same time the overall business is tough on the people involved, mainly the wholesalers and the publishers who are looking at and focusing their attention on digital and social media and not on the newsstand," Brechtel adds, "which means we're not seeing as many good, quality launches as we would hope, that would sustain the business long-term." There's also a big question of mobile blinders - the phenomenon by which consumers are involved with their mobile devices while standing in retail lines. This is time that used to be spent perusing magazine covers. "We need to think about two things: One, those celebrity titles for the most part are weeklies, so they're turning 52 times a year, and therefore generating revenues on every issue," he explains. "But I think we do need to look at the checkout titles and determine their true profitability for the retailers, and perhaps we should be rotating some of these high-cover-priced specials through pockets up at the checkouts, so that they're more visible to the consumer." Brechtel strongly believes the industry should work together more collaboratively - publishers, distributors, wholesalers, retailers - to glean new ways to drive sales, and not solely focus on cost reduction. Newsstand & Subscription: A Healthy CodependencyDespite its diminishing appearance, the newsstand still represents a vital revenue vein for the publishing organization. "Newsstand remains a key factor in the launch of a new magazine," according to Harrington. "It is also a valuable source of new subscriptions, and it is still profitable in itself." Joe Berger agrees that the newsstand can prove to be the perfect platform for new title launches. "The newsstand is still quite important," he cautions. "As long as we have bricks-and-mortar retail, a newsstand is a good measure of how well your audience - presuming you have placement in the right locations - will respond to what you've published. Is there a link between single copy and subscriptions? Sadly, in our market, the link is that single copy is a loss leader and a marketing ploy for selling subscriptions. If there was more equity in pricing, we may see stronger newsstand sales. However, that genie has been out of the bottle for years." "Newsstand provides a great opportunity to understand customers better," Magerko suggests. "My research indicates that newsstand is actually a leading indicator for each publishing department. Newsstand results can predict renewal rates for consumer marketing groups, provide feedback to editors because the main message is located on the magazine cover and consumers make a choice based on those messages. And lastly, through advanced text analytics and marketing analytics, a consumer marketing group should use cover results to determine the most effective message for direct mail." Steve Lacy, CEO, Meredith Corporation, is of the "all-platforms, all the time" school of thought. "I see an amazing opportunity to support the consumer - especially the Gen Y consumer that is very, very engaged," Lacy confides. "As a cook, as a gardener, as a home enthusiast, she wants the print product for relaxation when she finally gets the kids in bed. She wants the digital property for taking action, and she wants the mobile property when she's engaged at retail and ready to make a buy." The Good News"Look, publishing is being challenged from a thousand directions," Harrington affirms. "The primary response has been to expand into digital, but there needs to be a major effort to help newsstand. The wholesale level does not work under the current financial structure. It needs to be restructured before it collapses, and publishers have an even larger void to wallow around in." "Publishers need to reestablish their role in the supply chain and within their own newsstand departments," suggests Luke Magerko. "The publisher is the second most important player in the supply chain behind the retailer. However, they have ceded their authority almost completely to members of the supply chain." But publishers must remain diligent about the quality of the product they're increasingly worried about disseminating. Bob Sauerberg, president, Condé Nast, believes his company's primary role today is in building brands. "Our strategy is to build brands, and our brands start with our magazines," he expounds. "Print has never been more vital. The consumers tell us every day through all of our business channels, from subscriptions to retail, that they want print. They love it, and they are actually willing to pay more for it, which is an important part of our strategy in the long term." As CEO of Active Interest Media, Skip Zimbalist also remains bullish on print. "I'm very optimistic, and we see our audience in print as stable. We don't see our audience as going down. . . . When television came in, people said it was the death of radio; well, radio is still here and doing very well, thank you. And I think print magazines are going to be here 20 years from now and doing very well, as well." MPA's president and CEO Mary Berner has faith in the future of magazines - whether they're distributed in print or electronically, as part of a subscription, or by way of a supermarket check-out line. "I think we have key assets that are important in this wildly-competitive market," she reminds industry colleagues. "And we've got brand relationships. People go and seek out the magazine brand," Berner continues. "They go and look for Vogue or Cosmopolitan on every platform. So, that relationship with the consumer, I think, in this kind of digital explosion, is what's going to be the most important." PE

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Rethinking Newsstand Sales: Magazines, Money and Mobile Blinders

Samir Husni

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Samir Husni