As Newsstand Atrophy Worsens Reform Remains Possible
Can the Newsstand Channel Survive?Publishers (and wholesalers) must now address the question they’ve been successfully avoiding for years: Can the newsstand channel survive a decade long revenue decline of this severity?The answer is a qualified yes.Most knowledgable observers believe that archaic newsstand channel practices have contributed to, if not exacerbated, the decline. This is undoubtedly true. But over the years, fixing the system has proved to be elusive — primarily because this seemingly simple business is actually, at its core, quite complex. It’s a business not like any other.The problem is not getting the products distributed and displayed, but rather accounting for all those damn returns. Return processing and accounting concerns have created a toxic lack of trust among channel participants. This lack of trust is the key factor in preventing the channel parties from working toward equitable reform.Major Publishers Hold the Key for SurvivalThe channel can only survive if the channel parties set aside their individual grievances and work in concert toward affecting channel reform. However, one of the channel groups has to step forward to assume reform leadership. In this case the responsibility realistically falls to publishers, the group that, arguably, has the most to lose if the channel fails.It’s vital to understand that only a small set of publishing companies will determine the fate of the newsstand. Until recently, eight publishing companies dominated the industry. However, recent events have eliminated Rodale and Wenner from the newsstand leadership ranks. The fate of the newsstand now largely rests with six publishing companies: American Media, Bauer, Time Inc., Hearst, Condé Nast, and Meredith. Among audited publications, these companies control nearly 90 percent of unit sales and over 84 percent of revenue. Changes at the Top of the Publisher Newsstand HierarchyTime Inc., the de facto newsstand leader for many years, now appears to be in a hasty retreat. Although the company is apparently no longer for sale, they are pursuing a vigorous cost-cutting strategy. This includes selling off a number of their less significant titles, reducing frequency on some of their weekly publications, and selling or outsourcing their massive fulfillment operation. It’s possible this could also signal their withdrawal as a national distributor.Time Inc. has a checkered history of newsstand leadership. To their credit they tried to introduce channel reform, but it wasn’t accepted by the industry. Over time, they have become better known for feathering their own nest, rather than forging needed channel reform. They’ve had their shot. Now they’ll have to make way for an unlikely set of new newsstand leaders: American Media and Bauer.American Media vaulted to the top of the audited publication newsstand revenue heap (see chart above) with their acquisitions of Us Weekly and Men’s Journal from Wenner Media. Bauer’s place at the top of the newsstand hierarchy is based on the sheer volume of their unit sales, which now represent a massive 32 percent of all audited publications units sold. Every third audited publication sold at the newsstand is a Bauer title.However, American Media and Bauer are untested industry leaders. In fact they have, for years, been the industry mavericks. But if necessity is the mother of invention, the industry may have inadvertently discovered the right set of leaders. More than any of the other major publishers, they are fully committed to the newsstand by virtue of their large portions of newsstand circ. If the newsstand grows more dysfunctional, and it’s heading in that direction, the other four major publishers — including Time Inc. — should be able to survive.But an increasingly dysfunctional newsstand channel could spell doom for American Media and Bauer. These two publishers have made a huge bet on the newsstand. If they’re smart, and we know they are, they will do what’s necessary for their self preservation – which means helping lead much needed newsstand reform efforts.Hope for a Positive Newsstand ElegyJ.D. Vance expressed hope that the “learned helplessness” of his people could be replaced by harnessing community power. When the newsstand elegy poem is written, it’s hoped that the two former industry mavericks will be saluted for helping the newsstand community get its groove back. For purposes of this analysis, this distinction makes a difference because of the record number of titles (35) that posted sales in the first half of 2016, but resigned during the year. Among the titles that resigned were: Maxim, Prevention, Self, and Vegetarian Times. If the sales data from these titles (representing unit sales of about 3 million in the previous period) had been excluded from the analysis, the unit sales decline would have been 2 points lower — or about 16.2 percent. Said another way, the unit sales decline of continuing publications in the first half of this year was about 16.2 percent.Any way you look at it, the sales decline of audited consumer magazines in the first half of this year was devastating. There were hardly any bright spots. Every multi-titled publisher, except National Geographic, took a serious sales licking.2017 Marks the End of a Decade of Newsstand FutilityThe weak first half sales marked a fitting close to a decade of chilling newsstand futility. In 2007 (10 years ago), the year before the economic crash of 2008, newsstand sales revenue of audited publications reached their peak (over $3.2 billion) and unit sales, although continuously declining since the 1980’s, stood at a robust 932 million.In 2007, life was pretty darn good at the newsstand. But the ensuing decade has brought nothing but grief and disappointment to the embattled newsstand channel. During this 10-year period, unit sales of audited titles have fallen on average 13 percent per year. For the decade, unit sales are down 77.1 percent and revenue is off 70.5 percent.Think about it this way: Unit sales and revenue of audited titles in 2017 are 4.3 and 3.5 times, respectively, less than they were 10 years ago. In effect, the newsstand channel is only a quarter of its 2007 self. J.D. Vance, in his compelling bestseller, “Hillbilly Elegy,” traces with sorrow the “learned helplessness” of hillbilly life. In this case, I thought his book and the use of the word elegy seemed appropriate for helping describe what has transpired at the newsstand in the last decade.First Half Sales Decline at Record RateThe newsstand sales of audited publications in the first half, as reported by the Alliance for Audited Media (AAM), revealed a record annual unit sales decline of 18.2 percent to 106.4 million and a revenue fall of 14.2 percent to $478.5 million.An 18.2 percent unit sales decline is, of course, gigantic — the largest ever experienced by audited consumer magazines. It does, however, require a note of explanation. The analysis in this piece is based on comparing current period sales with sales data from the year previous period. This differs from the AAM comparison, which compares data from the previous year period for only titles reporting in the current period, but not for publications that resigned from the audit bureau during the period.