There is a crisis gripping News Limited on the future of newspaper home delivery in Australia. My understanding is that there is disagreement between circulation executives in some News Limited state offices and their bosses at Holt Street in Sydney on the future model of newspaper home delivery and whether newsagents are part of the model.
The crisis in had its genesis in 2009 when somewhere between 100 and 300 newsagents handed their newspaper home delivery businesses back to News, claiming that they were not financially viable.
The company responded by saying that it would undertake a major review of newspaper home delivery. At around the same time they implemented what was called the migration project in South Australia whereby they took control of newspaper account payments by home delivery customers, even those directly won by newsagents. This cut customer traffic to some newsagencies as accounts could be paid through News rather than the shop. News also took delivery of newspapers to key hotels and some hospitals away from newsagents, they pushed their newspapers into alternative retail outlets such as coffee shops, did deals where newspapers were included in fast food meal deals and began a campaign of engaging with advertisers resulting in massive numbers of newspapers being given away at sporting venues, fitness centres and cinemas.
In short, News Limited responded to newsagents quitting newspaper home delivery by doing everything except working with newsagents on an alternative model. News executives will say that I am wrong and that they did engage with newsagents on an alternative model. I know what they did and would not call it engaging with newsagents. It was as if the company had a plan and they needed to ‘engage’ so they could tick a box and say they had engaged if asked.
My understanding is that today there are several News Limited executives in some parts of Australia in strong disagreement with the direction being taken by the company out of Holt Street Sydney. Some of those executives remain silent for fear of their jobs.
Whereas for decades News Limited left its state based newspaper silos (Herald & Weekly Times, Advertiser Newspapers, Queensland Newspapers etc) to control the management of newspaper home delivery, now all decisions around newspaper home delivery come out of Holt Street. The decisions are delivered by the state silos but they are decisions out of Sydney.
Some in News want home delivery management to revert to the states where managing relationships was easier and, usually, more successful for the newsagent, News an the customer. Others in News want the company to break free from newsagents and move to a fresh model. My understanding is that News has financial models of an alternative indicating that it is not financially viable, that they could not engage contractors prepared to deliver newspapers by early morning for a few cents remuneration each.
Just over two years ago News Limited told newsagents that they were undertaking a review of newspaper home delivery and that newsagents should expect changes. News executives told newsagents that they had three options: do nothing, consolidate or specialise. Newsagents were told that to do nothing was not an option.
Last week, News limited told newsagents that they were going to do nothing. I am told that this has shocked some in News Limited state offices.
One school of though is that the plan the company had is not financially viable and now they need to find a way to appease newsagents without letting newsagents increase the fee for delivering newspapers to rise to anything close to what would be necessary for it to cover newsagent costs.
This is the crisis in the company. One group wants to deal with newsagents equitably and continue the newsagent managed home delivery model. Others want to cut newsagents loose and strike contracts outside of the traditional newsagency model. I’m told that the dollars don’t support the latter.
News Limited controls the key levers which determine how much a newsagent delivering newspapers makes – they set the gross margin from the delivered product, the delivery fee charges, what can and can;t be delivered with the newspaper, the frequency of payment and how the newspaper is to be packaged for delivery.
By any measure, many newsagents are the working poor, often making just a few dollars an hour for work which often starts at three or four in the morning and runs through until six at night – following a model created and controlled by News Limited. While News is not responsible for this complete picture, it has been a key player for decades and in that time has resisted many moves for fair and equitable remuneration for newsagents.
News Limited should engage in a mutually respectful business discussion with newsagents on the future of newspapers and newspaper home delivery. This should be a serious discussion pursuing a mutually beneficial outcome. News executives need to trust newsagents when they say that they will not lose customers if the fee for the home delivery of a newspaper increases. Newspaper readers are prepared to pay closer to the real cost of the service. Addressing this price anomaly will create a mechanism through which the medium term future of newspaper home delivery by newsagents can be assured.
Newsagents with a newspaper home delivery component to their business need to engage on this issue. They need to sort out what they want and go for it. Doing nothing is not an option.
For background reading, check out:
- News Ltd newspaper home delivery fee increase is socially irresponsible.
- News Limited cost cutting leaks.
- Proof of a sick newspaper home delivery model in Australia.
- At 920g is the Sunday Telegraph unsafe to deliver?
- Newspaper contracts causing distress.
I am in Sydney today meeting with newsagents on other matters. I am sure this issue will be raised. I understand the anger and frustration of newsagents. The only way to address this is through a unified and committed approach.
If people have factored in delivery goodwill as part of the overall value of their business then they are in for a shock once they either try to sell or get a valuation. Just before we quit deliveries we got an evaluation on the business for a before and after comparison and we were told that because we did not “own” the area as we once did then we could only claim the current revenue from deliveries as part of the goodwill, so once we took out costs etc the goodwill component of the business hardly changed but compared to the valuation we had when it was thought newsagents “owned” territories and delivery customers it was a massive drop. Our bank also would not include delivery runs as an asset or part of the business loan as they stated we could not guarantee we would not lose them in future or be able to sell them so they are not an asset.
Just food for thought guys, get your retail arm in shape as going forward the delivery side has a short use by date.
Will we see a unified approach? The associations seem powerless in this area, with past proposals regected by NewsLtd, as seen by the last disgraceful 1 cent-a-day delivery fee increase.
If we wait for someone else to organise action, we will be here for the next 10 years.Like other issues in this industry, it seems we can only rely on ourselves.
I will act by giving up my run, which is breaking even financially at best.
As far back as 2008 (when we were looking for finance to buy this business), territories were worth nothing to them.
Once we did buy in, it became very clear very soon that a territory (albeit very small), was worth nothing to us, either.
I do wonder whether a whole redefinition of ‘newsagency’ is due. I think, personally, that that term is redundant, and has been for some time.
Given News’ approaches to new customer bases over the last few years, I suspect they also think so – at least in terms of distribution models, retail and delivery.
Steven, The associations have been pushing hard on this issue for two years. The challenge is on the other side of the table.
As a customer who has two papers home delivered six days a week, I know that I would be willing to pay significantly more for the service than I currently am. While ever my husband prefers to read the paper in print form rather than online, the convenience of only having to walk a few steps out on to the front lawn to collect the newspapers is something we value highly. The alternative would be: getting dressed, getting the car out and driving 2.5km each way to buy the newspapers. We know we wouldn’t do that. We consider ourselves very fortunate to have the option of having home delivery and of having extremely reliable and accurate service from our local newsagency.
News Limited appear to be struggling with the fact that their product is becoming less & less important for a Newsagent.
Dynamic Newsagents who embrace the changing trends & products lines in retail will soon realise that dealing with the hassle of daily delivery is not worth it. The imminent increase in commission for NSW Lotteries Agents will further highlight the inequities & futility in selling a Daiy Telegraph for $1.
We dropped our run some years ago now, it was a huge run but in all attempts to run the numbers we could not justify the expense vs the return. News Ltd tried two other delivery agents and both failed, they now do it themselves. We focus on retail and if newspapers ceased to exist tomorrow we could continue without pause. News Ltd will reap what it sows.
News Ltd are becoming a basket case. Our agency is a costal town off 2800 people. In holidays it increases to approx 14,000 so imagine trying to increase and decrease paper quantities, their supposed historical data they use does not work so now i get on line change the quanties then have to ring our rep to inform her that i have changed quantities otherwise they over supply. Now we have the delivery issue, it is a joke we are underpaid for the service we provide and the various associations we are members of are toothless tigers. So over the next month i am running a survey with my customers and News subs about home delivery and how it will impact them if i decide to give it away. Some i know will complain to News Ltd which is what we need to happen so News realise they are not only going to loose the support of the Newsagents but also their subscribers.
my delivery fee is more than what is set down by news ltd. Why not?, its my business, i own it. Not enought to cover true costs, but more than they would let me have if i followed their rates. Will they bail me out if i cant pay the bills, i think not
Ditto rick, but my fee covers costs plus a profit. I am very lucky to have customers like Megan, there are hundreds of them out there who can’t understand why their newsagent is NOT ALLOWED to make a living.
Have never used News Ltd or Fairfax delivery fee schedules from the day we bought the business. As Rick says, it’s our business & we make the rules. News Ltd are about to learn some lessons the hard way.
We like a host of other newsagents had no other choice but to hand our runs back, we could sell it because unless we ripped the buyer off and fudged the figures no one would take on a loss making business, and we could not make a profit due to the publisher taking our customers away from us and not allowing us to increase fees.
This is going to be the problem moving forward, you won’t be able to sell the runs unless the buyer is ignorant of the way they are set up or the seller misleads them and we lose the goodwill portion after we paid for it in the first place when we bought in. we lost about $300,000 in goodwill on the new valuation.
Without opening a new debate the same can be said of lotteries now we only have a 5 yr renewal, and all these new players are getting agencies. These are the things that set us apart from a corner shop but not any more.
Sorry the first sentence should be we could not sell it
Congratulations Mark on getting this article in Crikey today.
For a company to devalue its own product like it has – given away free at local cinemas at midnight, free paper with this etc, it is reaping what is sows. Or as some will say “shat in its own nest”.
I think Nationwide have other large problems they must address alongside home deliveries. For a product to be valued at $1 in todays society also states to customers that they are buying trash. Free giveaways every other weekend makes the customers laugh that they are being bribed to buy the paper!
The Australian and SMH have both had price rises over the years and I have not lost one single customer from that increase.
I agree with Megan many customers state they are willing to pay an increase in price for an increase in quality journalism and delivery fee. Let Australia Post deliver it and see how much the customer will be charged!
Thanks Istvan. MediaWeek, a respected daily email and weekly magazine for media professionals picked it up this morning as well.
It is sad to see a great company ruining itself and hurting traditional partners in the process. Has anyone else noticed how the Herald Sun is not the same paper? When customers tell you they have stopped buying because it has become full of rubbish you know the paper is sick at all the management level. Delivery renewals after the Christmas break this year were only 60%. The HWT has forgotten its audience and abused its allies and that is a lethal formula
You can find the results of a meeting between News and the ANF here: http://vananews.com.au/
You have represented how I feel well Mark. Thanks for putting the work in. Reading the result of the meeting today at the van a link you provided I think we are being connect by News. Is it just me or does the statement about the meeting say nothing?
Having once before nearly handed back our newspaper deliveries (The News area manager was at least understanding and a little worried, Fairfax send their standard letter explaining that a continued retail arrangement couldnt be guaranteed) .. So I backed off and retained our deliveries. But I must admit I haven’t given serious considerations to increasing my fees. Those that have already increased their fees, what costing method did you use? I was thinking of working backwards from an acceptable profit margin. Mark…. are you aware of anybody undertaking a full costing exercise on their run? I would be interested in any assistance offered.
John Don’t forget you can only do this with your directs. All the subscription customers still only generate contract rates. You can’t get too fussed about the costing. Customers won’t pay for full cost recovery. Go into stealth mode. Put it up every month by a couple of cents. Over time you can end up with another 25-30 cents a day which helps, but doesn’t disturb anyone. (speaking from experience).
John, I did before selling my own delivery run around four years ago. With 350 customers in suburban Melbourne it was break even after allowing for the purchases customers made when paying their paper account.
I am certain others have. I know the VANA has some information on this – I am sure other associations would too.
Agree with ‘May First’. I charged 20c per paper, per day when I was delivering papers. If two Fairfax papers were delivered that was 40 cents.
I never asked for permission or told anyone in the channel, I just phased it in over 6 months. I lost one customer out of 400.
People, just start charging your customers what you think they will pay! Just as Megan said in Post 5. above, most customers are happy to pay a fair and reasonable amount for the convenience.
You have to remember 99.9% of customers aren’t aware of the contractual agreements you have with News Ltd and Fairfax. They are not aware of the prices you are supposed to charge.
Put your delivery fees up TODAY!
Read letter, from a Newsagents point of view it summarised Newsagents situation, in my view great.
Its up to News Ltd to prove that they want to engage, not engage in a drawn out process but to move quickly.
I am not waiting for News Ltd, I must look after my own business future as they have not given Newsagents a fair deal, Distribution & Retail.
We charge $2.00 a week. We crept the fee up gradually.
I may have lost 2 customers in eight years over delivery fees. Our local paper prints 6 days a week and we only deliver FULL weeks, no picking out Wed & Sat for the Tv guide and the fat Saturday issue. A single Sunday paper is delivered for $2.00. Tough but we have to pay Sunday rates to the drivers, don’t we – and a minimum of three hours pay to boot.
Newsagents need to take control. Its 2012 you’re not agents anymore.
Can you please explain Publisher, what you mean by “It’s 2012, you’re not agents any more.”
h, our channel was created by publishers. This is why we were called agents – agents of their products. Today, we are not agents. Our future is up to us. Every decision we can make for ourselves. That’s how I see it at least.
Mark, publishers still treat us as agents
though, has no-one told them we are not thrir agents any more?
Mark
Have you seen the response to your piece yesterday by News in today’s Crikey?
“… there is not a crisis at News Limited …” “… we are doing the hard task of understanding the pros and cons of the current system and how best to improve it.”
h- It takes a while to build a bridge, some have started the foundations, hopefully more will be proactive to help construct it, I believe we must encourage Publishers to stop listening to distributors and start listening to Newsagents, its a win win.
I am looking forward to News Ltd damage control rebuttal.
As a newspaper reader who suffers from the appalling service I get now that my paper is delivered by some faceless white-van organisation instead of someone behind a local shopfront that I can go and talk to when things go wrong, I’d love there to be a better system in place.
Since my local newsagent closed down I have no idea who delivers my papers. When they don’t arrive (which is often) the only contact I have is with the Farfax and News Ltd call centres. When both papers don’t arrive I have to call both of them. The people working there can’t answer my queries or resolve my problems, all they can do is “give (me) a credit for today’s paper” and tell me to “call again tomorrow if there’s still a problem”. This can go on for days. When I go on holiday I cancel both papers which takes two phone calls but invariably one of them keeps on arriving.
It’s a dreadfully inefficient way to run a customer facing network and who can blame people for not buying newspapers if these are the hoops they need to jump through.
Gavin, sounds like a good argument in support of a well run local delivery Newsagent to me!! It’s just a shame that the major publishers don’t see it that way. They don’t care about customer service anymore – just reduced costs via “white van” delivery services!!
Gavin, publishers no longer see a print newspaper as part of a customer facing model.
I am frustrated that the associations put out the News line. They would be better off telling News to publish their own spin. This is what makes us not like the associations. I ditched my round others should too. Like make says – working poor.
Many things can be said about the plight News (I would also add Fairfax to the mix) in relation to Mark’s article.
The four main facts about why I see the industry; Newspaper Publisher and Newsagent in turmoil (I choose to omit the political scene )
The problem of the current home delivery model has never been defined. News in particular have asked many questions all with a specific aim. Because the problem has never been defined then the solutions News has developed will never work; financially and logistically
Bunker decision making has successfully failed in any sphere of business decisions just about anywhere; coalface input must be obtained and respected (after sifting out any emotional input). The current academic text book skills in vogue, for decision making, will never reflect the expectations of customers. How many customers have dumped their subscriptions and converted back to full paid home deliveries because of the newsagency efficiency; I have had quite a few.
The scenario of News to disrespect their own brand – Daily Telegraph – with no price increase since 2003 draws like a magnet to the comments that come across the counter. Without an increase to the Daily Telegraph and increase to all other expenses, since 2003, equates to a downturn of about 4,400 Daily Telegraphs per week in my business. It has been suggested there is a fear of a downward purchasing trend if an increase happens. Well guess what, the downward trend has occurred without the increase. Why? Customers suggest, and I have read the same comments on this site from other Newsagents, the content needs addressing. Also on this site is the suggestion of the free paper to Newsagents to sell at a set price with all income into the pockets of Newsagents. This would provide a cost reduction to News; No accounts, no returns collection/auditing both of which would have other cost reduction spin offs of significance. Other papers which have had price increases seem to have suffered no worse downturn that the Daily Telegraph; Mercury $1.20 no affect, Sydney Morning Herald $1.50 no effect; Saturday Morning Herald $2.50 slight effect and here’s the stupidity Australian $1.70 slight increase and Weekend Australian $2.70 slight increase to even. Go figure cause I can’t.
Customer expectations are being ignored.