Are newsagents about to lose more magazine business?

Newsagents deliver newspapers and magazines to many other retail outlets. These outlets have long been called sub-agents. For a 50% share of gross profit newsagents deliver the stock, carry the account and refill stock as needed. It has been an important part of the newsagent business model and a low cost way of getting magazines into more outlets. In 2004 ACP delivered a blow to newsagents by going direct to many national brand petrol and convenience outlets. Much was made at the time of the fact that their main magazine publishing rival, Pacific, was not going direct.

I’ve been told by several people now (a newsagent and two people on the petrol side) that Pacific is a week away from going direct. If true, this will be a bigger blow to newsagents than the ACP move in that newsagents have drawn considerable strength from Pacific and their support for many years. The emotional impact will be considerable.

I don’t begrudge the ACP decision in 2004, nor the Pacific decision (if my sources prove to be correct). Their masters, Coles, Woolworths and national petrol chains are powerful and demanding. They want full commission on the sale of a magazine and if you are told that your national weekly title will be off the shelf in a matter of days unless you agree to a direct account then you’d make the decision. Coles and Woolworths are large, fat and hungry and they don’t care how many independent small businesses they push to extinction in their pusuit of a higher share price.

ACP copped a huge bagging from newsagents and some commentators for their move in 2004. It will be interesting to see the reaction of newsagents over the next few days to Pacific. To their credit, ACP delayed the financial impact for six months and put a compensation package on the table to mitigate the impact of the change. Pacific will need to at least be as generous as ACP.

Newsagencies in Australia were created by publishers in the 1880s. Our businesses are complex and finely balanced. The chipping away which has occurred, especially since the Howard Government driven deregulation in 1999, has harmed the model and made business challenging. The biggest challenge is that newsagents are disadvantaged by magazine supply arrangements which hark back to pre-deregulation. The problem is with the titles newsagent competitors refuse to carry – titles outside the top 100 sellers. An average newsagency has 1,000 titles – 65% of which are cash-flow negative. A smarter move by all involved in the 1999 deregulation would have been to negotiate new magazine supply arrangements.

If Pacific does go direct to major petrol and convenience outlets, magazine distributors must address the issue of supply arrangements for titles outside the top 100. Newsagents cannot sustain the continued challenge to their business model and sustain inequitable supply arrangements for unprofitable titles.

Some reading this will say boo hoo to newsagents. If you’re one of them. pick a newsagent, any newsagent and take the time to find out about their business. Look through their financial data. Then decide if you would invest your own money in the channel?

Newsagencies are unique and socially important businesses. They provide a personal community connection which only chemists come close to. To lose them would play into the hands of Coles and Woolworths and one day, down the track, you would realise what has been lost.