Below is a table showing the cash-flow impact of Cosmos on newsagencies over the four months following its launch last year. Cosmos was launched with a fanfare and newsagents embraced the product with strong displays and promotions.
The negative cash-flow from Cosmos is not unique to the title as more than 60% of titles carried by newsagents are cash flow negative. The performance of Cosmos, however, illustrates the high cash cost to newsagents of launching a title like this.
Sales are over the counter sales; Expenses are supply invoice value; Operational expenses are the cost of real-estate, labour and credits received for returned product; Net the net cash-flow for the month.
There is a case to be made to Luna Media, publishers of Cosmos, that they ought to have delayed billing or compensated newsagents in some other way for their investment in the launch of the Cosmos brand.
In my research into the cash-flow implications of magazines on Australian newsagencies, I have uncovered the high cost of new titles, especially new titles in weak categories. Cosmos has come to my attention in the data I have seen for the six case study newsagencies. The experience of these six stores with Cosmos is reflective of the cash-flow impact of many other new titles.
It will take newsagents more than a year before they are cash-flow positive with Cosmos. For this time they are investors in the launch of the new title without any benefit from the longer term success.
While newsagents appreciate new titles and especially a title of the calibre of Cosmos, the impact on their business is significant. If they had exclusivity in return for the effort or were somehow stakeholders in the broader success of a new title then their commitment to building a new title would make more economic sense.
Newsagents are a cost-effective way of getting a new masthead seen. That most new titles are accompanied with a strong subscription push demonstrates a lack of respect for the investment made by newsagents in launching new titles. It would be valuable to know the subscription numbers achieved by Cosmos. It is fair to record that without newsagents and their advertising of the Cosmos brand, the cost of acquiring subscriptions would likely be uneconomical for the publisher.
With the significant number of title launches in 2005 and those projected for 2006, one can soon see the funding difficulties newsagents face with new titles.
Cosmos was challenged from the outset because of its subject matter. The Science and Environment category is in decline in retail. Newsagent sales data confirms this. I don’t have online data but suspect that it’s healthier than retail. Those interested in the category are Net savvy. This is why I am somewhat suspicious of the newsagent launch for a title (brand) which is better suited to online life.
What these figures do not take into account are the additional expenses incurred in supporting Cosmos during its launch: real-estate and labour for feature display space, second location real-estate in store (as some newsagents did for the first few months), poster space and time spent reading and considering material provided in support of the new title.
Behind the data in the table above is 135 pages of data from each of the six case study newsagencies for all titles. Every number has been triple checked in the most comprehensive study into magazine related cash-flow ever in Australia.