A blog on issues affecting Australia's newsagents, media and small business generally. More ...

magazines

The stress of being audited by Ovato

Has your newsagency ever been audited by Ovato? If it has, you may recall a period of stress as you dealt with their information requests while feeling like you have done something wrong, feeling criminal.

The thing is, Ovato controls what newsagents are sent. They receive sales data daily. They receive returns data weekly.

If there is an issue, they would see it in the data.

Scanned based trading, newsagents paying for what they sell, would fix any data issue. Establishing scanned based trading with approved ‘locked’ software packages could provide a time saver for all involved in the compliance side of magazine sales in newsagencies.

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magazine distribution

Are Media to acquire Ovato magazine distribution business

Announced this morning:

Sale of Retail Distribution (Australia and New Zealand) to Are Media Limited 

Ovato and Ovato New Zealand Limited have entered into a binding sale agreement to sell the entire issued share capital of each of Ovato Retail Distribution Pty Ltd and Ovato Retail Distribution NZ Limited (together, “Retail Distribution (Australia and New Zealand)”) to Are Media Limited (“Are Media”) (the “Transaction”). 

The consideration for the Transaction comprises a headline purchase price of A$15 million in cash and the acceptance of a negative working capital position of approximately A$27 million. 

Are Media is a 16.4% shareholder of Ovato and is accordingly a substantial holder in Ovato for the purposes of ASX Listing Rule 10.1. Therefore, shareholder approval will be sought for the Transaction to comply with ASX listing rule requirements. Ovato intends to dispatch a notice of meeting in relation to the Transaction mid-June 2021, with the meeting to be held mid-July 2021. 

The major shareholder of Ovato, the Hannan family, who collectively hold 43.4% in Ovato, has indicated its support for the Transaction and intends to vote any shares it holds in favour of the Transaction at the proposed shareholder meeting. 

Ovato has engaged an independent expert, Lonergan Edwards & Associates, to determine whether the Transaction is fair and reasonable to Ovato shareholders who are not associated with Are Media. 

Subject to the satisfaction or waiver (as applicable) of the conditions to the Transaction (which include customary regulatory approvals), it is currently expected that the Transaction will complete by the end of July 2021. 

Put option to sell Marketing Services (Australia) to Ballygriffin Holdings Pty Limited 

Ballygriffin Holdings Pty Limited (“Ballygriffin”), an entity owned by the Hannan family, and Ovato have entered into a binding put option deed under which Ovato could require Ballygriffin to acquire the entire issued share capital of Ovato Creative Services Pty Ltd, Ovato Technology Pty Ltd, Ovato Communications Pty Ltd and Ovato Creative Services Clayton Pty Ltd (together, “Marketing Services (Australia)”) for A$9 million. 

Ovato Limited – ABN 39 050 148 644 

Shareholder approval will also be sought for this transaction to comply with ASX Listing Rule requirements. 

Ovato has engaged an independent expert, Lonergan Edwards & Associates, to determine whether the entering into the put option deed is fair and reasonable to Ovato shareholders who are not associated with Ballygriffin. 

It is expected that the timing of the shareholder meeting will be similar to the Transaction referred to above. 

Change of CEO & Managing Director 

Kevin Slaven has advised the Ovato Board that he will not be seeking an extension to his current contract which expires on 17 September 2021. It has been agreed with Kevin that he will step down as CEO & Managing Director and remain in the business until the end of June to assist with the business sales and to ensure an appropriate handover. 

James Hannan, currently Chief Operating Officer with over 18 years’ experience in print operations and senior executive responsibilities since 2014, has been appointed as the new CEO & Managing Director effective immediately. James, whilst responsible for the Group’s operations, also played a pivotal role in the successful negotiations with all stakeholders through the recent recapitalisation and restructure of the business and is spearheading the non-core assets divestment program. James will be very ably supported by existing members of the leadership team. The key terms of James’s employment contract are disclosed below. 

Michael Hannan, Chairman, says “The challenges of the industry over the last decade were further exacerbated by COVID-19. In response, the business will bring its focus back on print, the core of its operations. It will allow focus to be placed on a strong, viable and profitable printing business in Australia and the ability to invest in new technologies to support print. The sale of the Retail Distribution and Marketing Services businesses will greatly assist in providing Ovato with cash reserves for ongoing transformation and will be the catalyst for a significant flattening of the corporate costs starting from the top with immediate savings being realised by not replacing any departing member of the leadership team.” 

Referring to the change of CEO, Michael Hannan says “The Board recognizes the role that Kevin has played in a very difficult period for the company since being asked to take the reins unexpectedly in late 2017. He has addressed the challenges completing a very complex merger of two of Australia’s largest print businesses; IPMG with PMP, followed by a significant operational and corporate restructure to right size the business required by market conditions and the COVID-19 impacts. 

The Board wishes to thank Kevin for his guidance and leadership through this difficult period, and for his loyalty and dedication to the company. We wish Kevin well in his future endeavours.” 

This announcement was authorised for release by the Board of Directors of Ovato. 

I predicted this when Are Media first acquired a stake in Ovato. To me, it made a logical next, step move.

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magazine distribution

Magazines moved to the back of Coles

A popular and successful Coles supermarket in Melbourne has moved magazines and cards to the back of the shop. Whereas previously they were at the entrance to a busy aisle, near the entrance to the self checkout area, they are now located at the quieter end of an aisle.

I am not sure if the moves reflects a store specific decision of a Coles supermarket fleet decision. It will be interesting to see. This Coles also has no representation of magazines at any checkout lane.

Where newsagents place magazines is an on-going discussion within our channel. Flat and falling sales, low cover prices and a meagre margin mean we have to take other steps to try and reach a form of viability.

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magazines

Magazine sales decline 9.5% in Q1 2021 compared to 2019

I am close to completing the January – March 2021 versus 2019 newsagency sales benchmark study and am surprised by the extent of decline for magazines.

Magazine unit sales are down, on average, 9.5%. The surprise that only 2 of the 150+ businesses that submitted data reported an increase in magazine sales. What highlights that for me is that 78% of the respondent businesses reported an increase in overall revenue. This is the surprise – the extent of business revenue growth in businesses reporting significant decline in magazine sales.

The trajectory for magazines pre Covid continues.

Note: I am comparing 2021 with 2019 as 2020 for many businesses was an aberration because of lockdown and our channel being open while plenty of competitors were closed.

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magazines

The throw rug sale that’s worth 60 magazine sales in the newsagency

The story of the sale of this woollen throw is one magazine publishers could benefit reading as it speaks to the common margin opportunity for gift and homewares items that so many of us are selling in our businesses now. It also speaks to stock turn and the broader business narrative opportunity for us … as opposed to the challenged narrative for print magazines.

We received the throw rug in-store Tuesday afternoon. We sold it Thursday lunch time. The price was $180.00 with a cost price of $90.00. The $90 in gross profit translates to what we would make from 60 magazines based on overage cover price.

Selling items of this value and more is easy from the high street newsagency. The key is to buy well. For the rug, the keys were product quality, colour and the cold weather in Melbourne.

The throw rug was space efficient. It didn’t have any time-consuming data management requirements. We chose it. It expanded the reach of the business. These are all factors that don’t play when it comes to magazines.

I could just as easily write about a lamp shade, an ottoman, a work of art or a beautiful hand made vase. Many newsagents are diversifying into mid to higher price point items and having success with quite short stock-turn cycles. With GP sitting at 50% and more and with many of these items helping to attract new shoppers, it’s natural we compare their performance to newspapers, imagines and other legacy agency lines.

I mention magazines in this post as our channel continues to be a vital channel for magazine publishers. However, as more newsagents do well from a more diverse and GP valuable mix of products, the more we will look across at magazines and wonder.

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magazines

What Ovato could learn from greeting card companies

For many years I have urged management at Ovato, formerly Gordon and Gotch, to provide newsagents with the ability to control their own magazine supply. My argument was that giving newsagents control over range of titles and quantities received would see newsagents stock and sell more magazines.

The historic master / servant relationship with newsagents got in the way.

The leadership of Ovato did not like the idea and did not deliver this. They have maintained a system through which it is difficult for newsagents to manage their magazine title range and the quantity of inventory received. And, despite having access to accurate sales data, this appears to play only a moderate role in supply decisions within Ovato.

Magazine publishers should be frustrated buy this and here’s why …

For decades, newsagents could not easily choose the greeting cards they stock. The card companies had an antiquated and opaque process, that newsagents, for the most part, were happy to go along with.

Over the last two years, several major card companies have provided newsagents with complete control over ordering, including the ability to replace one design with another.

Looking at comprehensive pocket level before and after sales data, I am confident in saying that providing newsagents control over what card designs they stock is a key factor in above average growth in card sales. I am talking here about 20% and more year on year card revenue growth – even with the Covid period sliced out of the data.

The data study I have undertaken included businesses that did not change card suppliers – those that controlled what they stock grew revenue several times more than those that did not.

The message for magazine publishers is simple – if you want to grow magazine sales in the newsagency channel, give newsagents full control over what they stock. In my opinion, the failure of Ovato to enable this has held back magazine sales opportunities.

Are magazine publishers frustrated? probably not since they do not actively engage with newsagents. It’s one-way and sales of their titles suffer as a result.

Thankfully, some card companies have realised the commercial value to them from giving retail newsagents more control over what they stock. Kudos to them.

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magazine distribution

Are Media CEO leaving

Brendan Hill, CEO of Are Media is leaving the company. This, from Mumbrella:

Jane Huxley replaces Brendon Hill as Are Media CEO April 22, 2021 2:03
by ZANDA WILSON
Are Media has announced the departure of CEO Brendon Hill, with former Spotify, Pandora, Microsoft and Fairfax executive Jane Huxley appointed to the role.

Huxley will start on 26 April, with Hill revealing the change follows extensive recent discussions about the company’s future strategy with the board.

Hill said: “The board and I have been discussing the future strategy for the business and the opportunity to accelerate the growth in digital.

“Following the integration of Pacific and the development of a new strategic plan for the combined Are Media group, this is the right time for me to step aside and make way for a leader experienced in digital transformation.”

Huxley was most recently Spotify’s regional managing director, covering Europe, the Middle East and Africa. She also spent time with Microsoft and Fairfax, and was the founding managing director for Pandora in Australia and New Zealand.

Are Media chairman, Clark Perkins, thanked Hill for his time with the company. “Brendon has done an excellent job at Are Media, especially the integration of the Pacific Magazines business, managing the business through COVID 19, and in crafting a new strategy for 2021.

“The business is very profitable and is delivering excellent results, and we are in a strong position to perform even better over the coming years.

Perkins added: “The board of Are Media is eager to sustain the excellent combined publishing platform that has been established under Brendon’s leadership and to accelerate the growth of the digital business.

“The key pillars of the business in women’s entertainment and lifestyle, food, homes, motor and industry all have significant opportunities to grow and develop both their traditional media and digital audience reach. We are delighted to have attracted a leader of Jane’s calibre to lead the business.”

Hill has served as Are Media CEO since 1 June, 2019 (then Bauer Media), when he took over from Paul Dykzeul.

Dykzeul spent two years in the role, which was previously held by Nick Chan for a period of just over 12 months.

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magazines

Kudos AFL record

The AFL record is the one magazine that consistently pitches newsagents on social media posts as a retailer where you can purchase the title. Every issue.

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magazines

UK supermarket moves on plastic toys bagged with kids magazines

The Waitrose supermarket group in the UK is removing kids magazines that come with small plastic toys following a campaign by a 10 year old.

The story is getting good coverage in the UK, leading me to wonder if it will gain traction here. This, from Country Living:

Waitrose bans magazines with plastic toys, thanks to 10-year-old girl
The “pointless plastic” has finally been called out

BY LISA WALDEN
MAR 23, 2021

Waitrose will no longer sell children’s magazines containing disposable plastic toys, after a 10-year-old girl from Gwynedd launched her own campaign to persuade publishers to ban them.

Over the next eight weeks, the British supermarket will begin removing magazines containing toys from its shelves, explaining that they are “pointless plastic” with a short lifespan. The ban will only remove those containing small plastic toys, but will not include educational or reusable craft items, such as colouring pens and pencils.

Skye, who has been encouraging the magazine industry to include eco-friendly alternatives, told the BBC: “I’m really pleased so many people have agreed with me and supported my petition – I want to thank everyone who has signed and shared my campaign to ban plastics from comics and magazines. Thank you to Waitrose for agreeing with us and no longer selling the unwanted plastic tat.”

Here is the Waitrose tweet about their decision.

Here are other news tweets about this story:

It will be interesting to see whether this campaign gains traction in Australia, whether supermarkets act and whether publishers respond and address the disposable small plastic toy issue.

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magazines

Are Media / Australian Geographic campaign preferences Woolworths over local small business newsagents

Are Media has launched a campaign that preferences Woolworths over newsagents. What is utterly stupid about this is that newsagents have access to a broad range of Australian geographic products that they could promote with this campaign to make it more successful and valuable than Woolworths is doing. B&T has an image of the in-store execution.

Yes, it’s a floor display unit setup by a visual merchandiser with little or no QWWoolworths engagement.

Had Are Media and National geographic done their research and partnered with newsagents, the display would have been better integrated with the business, better connected with those working in the business.

Yes, this is a stupid decision and those responsible should have been able to make a better decision, for all stakeholders involved. This quote from sally Eagle is particularly galling:

Sally Eagle, customer director at Are Media said: “As category leader, it is incumbent on us to support other magazine publishers and the entire magazine category, particularly Australian made magazines and of course the retailers which are so vital to our collective success in connecting our brands with audiences across the country. We’re delighted to be working with Australian Geographic and Woolworths on the first of planned partnerships with other publishers and retailers.”

Sally – you are not supporting the entire magazine category with this single retailer focussed promotion. No, you are seeking to attract magazine shoppers from newsagencies, the retailers with the best magazine range in the country, and land them in Woolworths, a retailer that cares little for the medium and probably only engages when you pay them in one way or another extra to do so.

With the awesome Australian Geographic products that we already stock and our deeper engagement with that brand, we are a natural fit for this promotion.

I’d love to know how the dollars flowed to make this a Woolworths promotion. Which businesses paid for what. For example, is Woolworths paid for the floorspace? Newsagents place displays like this for free? Are Woolworths staff trained? In my experience, not beyond the very basics? Does the campaign help grow the Australian geographic brand engagement? Unlikely with no branded allied product available in Woolworths – or if it is, it is not located with this floor unit.

Underlying this Woolworths, Are Media and Australian Geographic is a desire to attract magazine shoppers to Woolworths. Thanks for that to all involved.

Yes, this is frustrating. In real terms, newsagents make less out of magazines today than a few years ago. That a key supplier ignores them for good promotions, like this one, challenges one’s support for the category.

To the ex newsagents preparing to comment that nothing has changed: Yes, you are right, good for you. Some newsagents have responded by quitting the category. For others, the foot traffic and GP$ are too much to ignore.

To anyone at Are Media preparing to say newsagents are important, we respect the channel: Words are meaningless when not backed by action.

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Competition

Magazine oversupply continues

We usually sell 2 or 3 copies of Maxim magazine. The circulation experts at Ovato think we need 40 copies of the latest issue. What a waste.

The circulation experts at Ovato will have an explanation, a glitch, human error or some such thing. I’ve heard it before plenty of times.

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Magazine oversupply

Newsagents want change in magazine distribution arrangements

The survey I launched 24 hours ago seeking to understand the attitude of newsagents should magazine supply arrangements not change received over 150 responses:

What change do I want? It is simple, really. I want magazines supplied on terms at least equal to those of my main competitor, supermarkets.

  • I want to eliminate most of the arrival and return data work.
  • I want to pay only for what I sell.
  • I want electronic invoice access to be free.
  • I want reports of list or damaged supply to lodged electronically and always accepted.

The current model disadvantages newsagents. Unless there is change, yes, I am likely to reduce my commitment to magazines.

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magazines

Magazine survey for newsagents

It’s my view that unless there is significant change requirements on newsagents regarding magazines, newsagents are likely to reduce their interest in and support of the category.

With supermarkets benefiting from scanned based trading, saving hours on arrivals and returns per week per store, not having to cover the cost of shrinkage and not having to pay for the right to get access to electronic invoice data, newsagents are competitively disadvantaged.

How do you feel knowing that your biggest competitor in the magazine category has trading terms that are significantly better than yours? I know of some newsagents who have quit the category because of this.

So, I have a question for you. I’ll keep it general and start with what we have today. If nothing changes do you plan to keep your magazine commitment as is, increase or decrease?

Create your own user feedback survey

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magazines

Harvey Norman ad may impact TV Week sales

Given how magazines are displayed in plenty of retail situations with, often, the top third or less of a cover being on show, I wonder if the above the masthead placement of the ad for Harvey Norman on the latest TV Week may impact sales of this issue of the title. The ad revenue from Harvey Norman must be compelling to Are media for them to place that brand ahead of their own magazine title brand.

This is an odd move.

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magazines

Strong magazine numbers in some newsagencies in January

Check our this magazine sales data from a regional newsagency for January, reflecting excellent year on year growth in January 2021 over January 2020.

The numbers achieved by this business are typical for small town regional Australia. The growth is at the high end, reflecting an extraordinary result by the owners, who have tirelessly pursued new traffic opportunities to expand the relevance of their business.

Well done to them and to all newsagents who are achieving year on year growth numbers for magazines and their business overall.

There is plenty of good news in your channel.

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magazines

Australia Post not proceeding with magazine trial

ALNA has shared news today that Australia Post will not be proceeding with the trial of selling magazines in its outlets.

This is great news.

ALNA has lobbied hard on this issue as have plenty of us.

I’m not sure who made the call … Australia Post, Are Media. It’s a good decision for the Aussie newsagency channel and for the magazine category more broadly. It encourages newsagents to remain or become local magazine specialists without a worry that Australia Post wants to take the shine off that.

For reference, here’s my video from October 28, 2020 on the issue:

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magazines

Local business collaboration tip for newsagents

A fruit and veggie shop near where I live home delivers mystery boxes of fruit and veg for a fixed price. They also offer a magazine with each delivery. Here’s what it looks like.

This is an easy collaboration opportunity for a newsagent and a fruit and veg shop. Okay, you get one magazine sale, but, hey, that with a flyer inside could attract shoppers to your business. Also, if they deliver 50 of these mystery boxes, that’s a good number.

My point is, collaborations like this one are smart and local and local is key in 2021.

Also, it is this type of small step initiative that can help a local business. There is much foundational strength to gain from many small steps as opposed to one big step.

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magazines

Did Better Homes and Gardens even check newsagents for their where to buy back to School article?

Better Homes and Gardens has published a story on the beside all for back to school. Here is the part of the story that connects with our channel.

Stationery

Typo

Flatlay of stationery

The ‘Getting it Done’ stationery bundle

Typo

Save with back to school deals on stationery items at Typo. Buy 3 ‘Campus’ notebooks for $15, 3 pens for $5, and pencil cases starting from $9.99. ‘Getting it done’ stationery bundle, $55.

Available at: Typo

Kikki.K

Receive a free weekly planner (valued at $19.99) with every $50 purchase.

Available at: Kikki.K

Booktopia

Save up to 75% off book bargains.

Available at: Booktopia

Dymocks

Save on Dymocks’ range of notebooks, pencil cases, lunch boxes, educational games and flash cards.

Available at: Dymocks

Officeworks

Officeworks are running a back to school price beat guarantee. If you find another store offering a lower price on an identical stocked item, Officeworks will beat the price by 20%.*

Available at: Officeworks

*Terms and conditions apply.

I know of newsagents who beat these named suppliers.

I wonder how the journalist who wrote the article did their research? Did they focus on national businesses, advertisers … what? Newsagents should be listed if they have the best deals. Also, newsagents are more likely to support the local school and local community groups.

It’s frustrating that small businesses are left out this way.

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magazines

The latest Vogue US magazine popular in Australia

I’ve had 8 people ask about buying the latest edition of the US Vogue magazine, the issue featuring incoming Vice President Kamala Harris on the cover. A couple those inquiring made it clear they didn’t care about the price.

It’s in situations like that I’d love an online portal through we could demand order single issues with certainty, even with a firm sale requirement. I am sure we could grow magazine sales. It would be easy to setup and run.

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magazines
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