Thursday, October 04, 2007

Major Consumer Magazines May Not Hit Wal-Mart Shelves

Major Consumer Magazines May Not Hit Wal-Mart Shelves (and other major retailers) Next Week
By Jeremy Greenfield

Earlier this week, Anderson News, the nation's largest wholesaler of magazines, recently announced to its customers (Time Warner, Comag, Curtis, and Kable, to name a few) that it was requesting a major change in the economics of distribution due to retailer implementation of SBT (scan-based trading--more below). Time Warner, et al, have threatened, in response, to stop shipment of its magazines to Anderson, which would keep Vogue, Time and others off of Wal-Mart and other retail shelves, starting this week. Anderson handles roughly 25% of all wholesale magazine distribution in the US.

Today, Time Warner came to an agreement with Anderson that would prevent the stoppage in magazine delivery until next week to give parties on both sides time to negotiate. Industry sources have also told minonline that Curtis Circulation Company, whose clients include Elle, Maxim, Forbes, and Newsweek, has settled with Anderson, and will continue its relationship uninterrupted with the wholesaler.

At the center of the conflict is a new technology called SBT that helps eliminate waste in the distribution business. Basically, instead of buying a stock of issues and then selling them to its customers, retailers will only buy each issue as they sell it to the customer. With the old system, magazines had to be sold back up the distribution chain if they went unsold at the rack. With SBT, this need not occur financially, making the process from printer to consumer a much less complicated one. Instead, as it stands today, magazines in stores are on Anderson's books, and listed as inventory. What the company wants is for those magazines to appear on the publishers' books, giving them both a higher stake in what happens at the newsstand, and more control as to how many copies are on newsstands. In addition, this required Anderson (and other wholesalers) to eat a one time loss of revenue from not being paid one month when the retailers switched to SBT. Anderson is trying both to change distribution chain relaionships, and recoup its money from that lost month.

"Anderson, along with a whole lot of other magazine wholesalers, felt they had an unusually high cost in switching over to SBT, and that they were bearing all the burden of it," says John Harrington, Editor of The New Single Copy, a newsletter about publishing and distribution. "What Anderson unilaterally proposed is that they were going to assess a share of it to the national distributors."

"All I'm saying is that I want them to carry the cost. I'm not trying to make any money out of this overall," says Charlie Anderson, CEO of the company.

Anderson cites the case of American Greetings, which just went to SBT for its greeting cards business, stating, "Do a supply chain management study. This is why American Greeting went to it. It simplifies the process. Magazine publishers are very similar." In Anderson's opinion, this is an issue for publishers to handle and not for wholesalers.

Harrington suspects that Anderson will reach an agreement with all of its suppliers before any magazines are kept from the rack, as both parties have a huge stake in making their relationship work. After all, Curtis has already reached an agreement.

While Anderson will not comment on the specifics of his relations with various distributors, including Curtis, he is confident that all will be resolved: "I think business will continue because I think we're making progress in negotiations."

We will keep you updated as reports come in.

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