I’m told that Fairfax representatives at the annual newsagent conference last week made it very clear that they want newsagents to restructure their businesses. Restructuring in this context means newsagents selling their home delivery and distribution businesses to others. The benefits for newspaper publishers are fewer accounts, fewer delivery points and specialised newspaper distribution businesses. In the current situation a newsagency is part retail, part home delivery and part distribution. Some at the conference have told me that Fairfax even said additional commission could be on the table for achieving restructuring.
My understanding is that News Ltd is supportive of such a restructuring but is publicly less demanding on newsagents than Fairfax.
The publishers must be getting frustrated since they have been pursuing restructuring for several years. Newsagents have been slow to get to the table.
I am in favour of restructuring, freeing retail specialists to focus on retail and distribution specialists to focus on distribution. Newsagents need to move on this or risk the publishers taking control.
The challenge with restructuring newsagent businesses is how the exit from one side of the business is managed. Newsagents have, for the most part, paid premium goodwill – anything from 3 to 5 times net earnings where ‘net earnings’ is a figure including net profit plus owner wages and a bunch of ad backs. In some restructuring scenarios I have seen play out recently the seller has no choice but to take a hit on their investment.
The Federal Government, ACCC, newspaper publishers and newsagent associations – all parties to the 1999 deregulation of newspaper distribution – could/should have foreseen the restructuring and resulting financial hit of today. If newsagents were farmers or miners the government would have put a compensation package in place to ease the burden of change. Because newsagents are not farmers or miners their families will take the hit.
It is not too late for the Federal Government or the ACCC to revisit their role in the hardship being felt by small business newsagents today. Nor is it too late for Fairfax or News Ltd to reconsider how they might assist those under pressure to restructure their businesses.