Newspaper home delivery in Australia is an addiction newspaper publishers cannot shake. They appear prepared to give away anything to get a customer on board. Then, once a customer has fallen off at the end of an offer, they go back with the same heavily discounted offer to win them back. With deals of 50% and more off cover price it is no wonder the home delivery deals are popular.
The problem is that small business newsagents are funding a disproportionate part of the subscription deals. Following my post a couple of weeks ago about newsagent concerns about the Home Delivery of the West Australian, I received several emails from newsagents in South Australia documenting the falling return achieved from home delivery of the Adelaide Advertiser.
Some Advertiser home delivery deals result in South Australian newsagents receiving 11 cents for the delivery. Out of this they have to fund delivery drivers, plastic wrap and other business overheads such as fuel, management time and collection expenses.
Years ago, the same newsagents would have received 25 cents plus a delivery fee of around 7 cents a day – 32 cents in total.
It is only since deregulation of the newspaper distribution arrangements, as instigated by the current Federal Government, that News Ltd has driven newsagent newspaper home delivery revenue down by, as the South Australian example shows, up to 65.6%. Newsagents cannot afford this. While News Ltd has been cutting newsagent revenue, wages, fuel and overheads paid by newsagents have risen.
Below is a table prepared by a newsagent showing the annual cost to South Australian newsagents of the News Ltd cuts in home delivery revenue. If the data feeding into this table is accurate, South Australian newsagents are $500,000 down annually. This is off the bottom line. Some have suggested to me that this analysis is conservative and that the numbers are worse.
What is happening in the newspaper home delivery space and to newsagents in particular demands a Government inquiry. In 2004 I called for a Productivity Commission inquiry to follow up the impact of deregulation on the newsagency channel. This latest data out of South Australia and the evidence that newsagents are 65.6% worse off today than prior to the Government driven changes suggests an inquiry is warranted.
While some will say that the reduction in revenue is a result of competition I would observe that there is no competition for home delivery of newspapers. I’d also note that while News Ltd has been charging less and less for home delivery of newspapers, advertising rates charged by News Ltd have increased annually. News Ltd is covered – newsagents, who have no control over their revenue are not.
Small business newsagents have been disempowered by government deregulation and one has to ask whether that is good competition policy at work.
Mark,
I don’t understand what deregualtion has to do with the amount of commission the Advertiser pays newsagents for subacriptions. What’s the link?
Ted, In a legal sense nothing. However, if you track back on the deals and the newsagent financial support of these deals – everything. It empowered publishers. Mark
Perhaps the time has come for the Newsagents to impose a fee of their own. We analyse the model propose the fee to the publishers and push it out country wide. Only in this way can we recoup our expenses and yet make it transparent for the customer. I know the fees are different from state to state but if we make the effort now for a national model then future CPI changes will be easier.
Sorry Mark…I must be thick as I still don’t get it. How did deregulation empower the publishers to be able to reduce commissions to the newsagents on subscriptions? Haven’t publishers always been able to set commissions?
Ted,
Legally it did not give them anything they did not have previously. However, it terms of confidence, it boosted them and, at the same time, weakened newsagents. research into the revenue per paper delivered by newsagents over the last 30 years will, I think, support what I am saying.
mark