Tuesday, July 24, 2007

Wholesalers are not dying . . . they are committing suicide

Wholesalers are not dying . . . they are committing suicide
By Samir Husni

I just came back from my usual weekly magazine purchasing tour in Memphis, TN. I bought 105 magazines and spend over $500.00. The price of the magazines ranged from $1.59 to $19.95. Some were $1.99, some were $2.99 and some were $5.99. Different prices for different magazines. The average cover price for a new magazine last year was over $6.50.

Why the lengthy introduction? Very simple. The media lately has been filled with news that magazine wholesalers are pushing publishers of low priced magazines to cut draw and raise the price of their magazines. Some say that wholesalers cannot make any money on any magazine priced less than $2.50. In fact this week Mediaweek carried an article (read it here) by Lucia Moses titled "Wholesalers Pressure Magazine Publishers to Up Cover Prices, Cut Draw." John Harrington's The New Single Copy editor repeated the findings of a study sponsored by Magazine Information Network. The study "reported that it was not possible for wholesalers to earn a profit on publications, no matter what the sale or retail sell-through percentage, on publications with prices of $2.50 or under." The study drew a sharp response from Michael Duloc President and CEO of Kable Distribution Services, a national distribution company. His response to the MagNet study (and John Harrington), published in The New Single Copy this week states, "Relating to your (John's) recent comments on this subject, your viewpoint, in our estimation, continues to be very slanted. It would appear that the major wholesalers (or perhaps another weekly celebrity publisher) are contributing beyond normal subscription rates to keep the issue of lower cover price, yet highly efficient titles on the radar screen. The question is, where would wholesalers be without this additional $450 million in annual retail sales? From your writings, one would quickly assume better off. I'd like to see audited numbers, versus the fuzzy number which have been used to substantiate this claim."

It is amazing that the only publisher who revived single handedly the single copy sales, and I mean Bauer Publications, is now forced to kill what would have been their fourth weekly because of the "single copy market climate." In the good old days, and in most of the world, magazines that sell are rewarded with better placement and good publicity. The wholesalers in their recent attempt to force Bauer to increase the cover prices of their magazines, and those of the rest of the publishers of low cover priced magazines, is gasping for their last breath of air. Those low priced magazines are needed to bring the traffic to the newsstands and to maintain the unit sales of their "bread and butter." What type of logic is this that bites the hand that feeds you? It does not take a researcher or a Ph.D. (although I claim to be one and do have a Ph.D.) to see the flow in the wholesalers logic. They are digging their own grave and they are digging it deep. When you hear people say that the wholesalers are in trouble, check and see if the trouble is from their own making. Wholesalers are not dying in this country, they are committing suicide. They have buried their head so deep in the sand that they can't differentiate between friend and foe.

As a matter of fact, do you know that four of the top ten revenue-generating magazines on the newsstands are Bauer magazines and are all priced under $2.00. If they, as publishers, can survive and make money from this single-copy driven model of publishing (unlike many other advertising driven publishing models), I cannot see or understand how the wholesalers cannot make any money unless the price is over $2.50. Wholesalers deliver magazines as a whole (in boxes) and not by single units and titles, and the average cover price of all magazines distributed (old and new) is almost $4.95. The magazine distribution channel is indeed broken, but the low-priced magazines that they are selling are not the cause of the problem. In fact if wholesalers do not want to commit suicide they need to force other publishers to lower the single copy prices of other magazines to be equal or close to that of the subscription prices.

I cannot believe that they see fault with a magazine that sells at $1.99 and has almost a similar price for subscription, but they do not see fault with a magazine that sells for $5.95 on the newsstand but sells for less than 50 cents by subscription. It is a world gone mad. By the way, none of the covers shown above are from Bauer. I just wanted to show the proliferation of the low-priced magazines besides Bauer. They include respectively Meredith, HFM, Time Inc., Penny Press and Hearst. If those publishers did not see the wisdom of the low-priced single copy sales in reviving the single copy marketplace, a practice that Bauer has adopted since its inception as a company in this country in 1981, I do not know why they are doing it then! I am not going to second guess Bauer and their decision of not publishing Cocktail Weekly, but I am going to continue to give them credit for saving America's newsstands, and the wholesalers, from a sure death. They maybe the only company that can help bring the wholesalers from the brink of death. Time for the wholesalers to hit the brakes and rethink their collective stand against the low-priced magazines. Rethink now!

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