Sunday, August 19, 2007

Understanding the Crazy Magazine Newsstand Sales Market

Understanding the Crazy Magazine Newsstand Sales Market
By Baird Davis

Rumors were circulating last week that the newsstand sales of People magazine would be down over 5 percent. This sent pangs of anxiety through the fragile magazine industry. Had the big newsstand sales slide begun? Sure enough People's sales revenue was down 6.1 percent. But this time the sales of the industry bellwether didn't reflect industry sales as a whole.

Based on initial ABC and BPA supplied data, it's estimated (subject to revision when final audit bureau data is provided later this month) that the unit sales of audited publications were up .1 percent to nearly 456 million and revenue rose .8 percent to about $1.56 billion. This was tepid performance, but far from Armageddon.

In spite of People's sales dip, celebrity fascination continues to drive the newsstand market. The celebrity category that People spawned over 30 years ago continues to expand. Yes, the sales revenue of People (-6.1 percent), Us (-3.4 percent) and Star (-3.5 percent) were down. But the sales of the other celebrity titles-In Touch (+14.6 percent), Life & Style (+9.4 percent) and the British bred upstart Ok! weekly-lifted the sales in the six title celebrity category-unit sales rose 8.3 percent and revenue was up 7.5 percent.

The two audited tabloid publications (National Enquire, Globe) that round out the celebrity genre, exhibited slower sales-down 1.2 percent in revenue. However, the aggregate revenue of these eight publications rose 5.9 percent and accounted for nearly $507 million in sales-almost 33 percent of the total for all audited publications sold at the newsstand.

Britney, Brad, Angelina and their ilk continue to dominate the unruly newsstand market. Their success leaves little room for other titles to flourish. Exclusive of the eight titles devoted to celebrity coverage, the sales of the others (over 500 titles) experienced a slight unit sales decline of 2.8 percent and a revenue fall of 1 percent. This performance is similar to what has transpired in recent years-celebrity titles rising and the rest of the market in decline.

What's Causing This Erratic Market Behavior?

The newsstand market has been described as being as dysfunctional as the Simpson family. Some say it's headed for a sub-prime-like meltdown. That might be going too far, but clearly it's only a market that Tony Soprano's psychiatrist can love. Perhaps it can only be described in abstract terms. Below, in a typically obtuse newsstand manner, are the answers to 10 questions that may help describe the reasons for the market's strange behavior.

1. Largest Selling Digest Sized Publication?

No it's not Reader's Digest. It's now Prevention, the venerable Rodale publication whose sales were up 32 percent in this period.

2. Can We Find Redemption with Rachael and Paula?

Rachael Ray and Paula Deen bucked the celebrity trend (or you might say they're now celebrities themselves) by launching their titles in the hotly competitive checkout arena. The sales success of their publications speaks to the inherent resiliency of the newsstand market.

3. The Highest Priced Audited Title?

Hint-it's not a Bauer publication. It's Harvard Business Review. At $16.95, it's priced significantly higher than any other audited consumer title. Its sales revenue ($2.9 million) exceeded all monthly frequency business publications in this period.

4. Is Diesel Fuel Good for the Industry?

Forget about ethanol. Wholesalers and their delivery trucks live on diesel fuel. Enthusiast Media's new publication, Diesel Power, made its debut this period selling 88,000 per issue. It produced more revenue, other than market leader Truckin', than any specialty auto publication.

5. Is There Room in the Market for a Swedish Contingency?

Bonnier, a Swedish media giant, surprised all with their purchase of many of Time, Inc.'s specialty titles. This puts them squarely on the U.S. newsstand map. They now publish 24 audited titles and rank 17th in newsstand revenue among all publishing companies, with nearly $13 million in sales revenue in the first half of 2007.

6. Are the British in Partial Retreat?

Emap closed the door on FHM, a publication that not so long ago sold more than 400,000 copies per issue. Flex Dennis, no shrinking violet, is about to complete a sale for his laddie laden publications to a Kent Brownridge led group of investors. Still, the British remain a presence on our shores with the Northern & Shell's Ok! weekly and, of course, the fabulously successful British hybrid, The Economist.

7. The Most Profitable Publication Sold at Barnes & Noble?

Hint-it's not People or any other celebrity title. It's not Time or Newsweek either. It's the aforementioned Economist. They have used the power of a comfortable reading environment to their advantage to lift their sales revenue to record levels. In this period their sales rose to $9.5 million, up 39 percent, a level that surely has Time and Newsweek attention.

8. Publishing Company with Highest Newsstand Revenue?

If you guessed Time, Inc. ($218 million in this period) you are right, but not by much. Its newsstand revenue declined 10 percent, largely because of its sale of specialty titles to Bonnier. At the other end of the spectrum, Bauer's sales continued to grow-up 6.6 percent to $215 million. Bauer is now within very close shouting range of Time, Inc.'s newsstand sales lead. If recent history is a guide, they might pass them by the end of the year. How about some applause for Germany efficiency!

9. Can Cover Price be Reduced and Revenue Increase?

There's an industry rule of thumb that reducing cover price is analogous to closing the barn door after the horse has departed. But there are always rule exceptions. In this case it's Seventeen. When Hearst purchased this title several years ago, they reduced the cover price to $2.99. Since then this title has begun to recapture its newsstand glory. In this period its sales revenue was up 8.2 percent. Once again they are the teen category newsstand sales leader.

10. Which Company Has Greater Newsstand Revenue-Conde Nast or Wenner?

Conde may have 23 audited newsstand sold publications in their stable and Wenner only three, but Wenner's sales revenue (over $97 million) was slightly greater than Conde's in this period. The difference? Wenner has a successful celebrity weekly, Conde doesn't.

What do digest format, cover pricing, foreign influence, exciting new publications, bookstores and weekly publications tell us about the market?

They tell us that the market is internationally diverse, it's weekly driven, it allows for various cover pricing options, it embraces new product and bookstores (and by inference other specialty retailers), provides strong venues for publications with more limited audience appeal.

The newsstand market is amazing in its resiliency and as a barometer for evaluating product appeal. But the market has fallen far short of its sales potential. The age old conflicts of interest that dominate retailer, wholesaler, national distributor and publisher relationships have thwarted sales. These conflicts of interest must be resolved if the newsstand market is to reach its full potential. Why not start the resolution process right now?

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