Social media feeds of Australians are being flooded with more subscription offers than I have ever seen from overseas publications like Wired, The Economist, The New Yorker and others. The deals for digital as well as home delivered subscriptions are sure to attract sign-ups. They are at prices retailers have no hope of matching.
I am grateful to James Manning of Mediaweek for the interview published earlier this week. It was terrific to catch up and talk about the magazine category in our businesses:
Retailer’s message to Bauer: ‘Australians still love magazines’
“Australians love magazines and they want Australian stories represented on their pages.” That is the message from Melbourne newsagent Mark Fletcher when Mediaweek asked him about the sector in Australia. And after Bauer Media closed its New Zealand operation, which Fletcher said stunned not only him, but people he knew in Bauer Media Australia, we asked about Bauer’s future in Australia.
“I don’t think that Bauer is looking to exit Australia, but I say that without any special knowledge.”
If anybody has a good understanding of magazine economics in Australia it should be Fletcher. He publishes a daily newsagency blog, owns three retail newsagencies (two in shopping centres, one on the high street), owns newsXpress, a franchised group with 225 stores, in addition to operating Tower Systems which supplies POS software to 1,700 newsagencies. “I have fingers in a few pies!” Fletcher estimates there are roughly 3,000 retail newsagents in Australia.
Magazines remain important for newsagencies, but not as much as they once were. “Magazine sales have been declining over the longer term,” said Fletcher. “They remain an important part of the business, but newsagents now have other traffic drivers in businesses now.”
When asked if keeping people at home in lockdown may be fast tracking where the sector was heading, Fletcher replied: “Within newsagency channels, a lot of the discussion has been about decisions like some publishers pulling back were possibly on the radar. The coronavirus situation is bringing those things forward. We are seeing similar things in newspapers with regional and suburban titles impacted.
“When advertising revenue dries up the directors [of publishers] have to make a decision at what point do they declare the business non-viable. Any assessment of the current situation indicates we are probably in for 6-12 months of significant economic pain. Are publishers prepared to wait that period of time to see if there is something on the other side?
“My take is that the Bauer family are very pragmatic which is why you haven’t seen the Pacific Magazines transaction completed at this stage.”
Fletcher said he wouldn’t be surprised to see Bauer eventually make moves about rationalising its range in Australia.
Newsagents have been disappointed in the past with the way some publishers engaged with the distribution channel.
“Early on Bauer was engaged and active with newsagents. That faded, but now we are in a situation where they are engaging much better with newsagents in the past 12 months.”
Fletcher thinks newsagents have been doing better with magazine titles in the past 12 months because petrol and convenience stores aren’t as strong as they once were. “We remain a destination for many people because of the depth of range we still have. A typical newsagent still might have 700-800 different titles. A shopper looking for diversity is catered for. At present crossword titles, craft and scrapbooking are all doing really well and growing. Your average newsagent is looking at magazine sales being up probably 10 or 11 per cent year-on-year. That has remained the case for much April and May – if our stores remain open.”
One challenge for the industry could be distribution. Ovato, the business formerly known as PMP and its distribution arm Gordon and Gotch, is facing big challenges with shares trading under two cents as it grapples with reduced printing demand which is its main business.
Fletcher wondered if it is an area that News Corp might move into. “They have the infrastructure to get product out there. Could that be an option for them? The Ovato situation is a hot topic for newsagents because at different points in the cycle Ovato owes newsagents money for returned product.”
Fletcher speculated if there was a withdrawal of the major distributor it could take weeks for a replacement to be ready. “Would that be something to push some magazines over the edge? Some newsagents have also said they would not open their doors if that happened because some rely so much on magazine revenue.”
Overall regional and rural newsagents are in good shape, said Fletcher. So good that he doesn’t expect many will meet the criteria of seeing revenue drop 30% or more to qualify for Job Keeper program.
“High street metro newsagencies aren’t doing too badly either. However it is in shopping centres where things are different. We are seeing declines of 60-80% year-on-year. One of the fallouts will probably be less newsagencies in shopping centres.”
As to reasons why the hunger for magazines has declined, there are several, said Fletcher. “As soon a publishers started putting their top performing titles in supermarkets at checkouts it cut down the browsing of magazine aisles. Browsing was key to people picking up multiple titles. The impulse purchase of magazines is really important.
“The long tail that newsagents provide – a broad range of titles in smaller numbers – is really valuable to our channel. The speciality customer is glued to the business and returns regularly to find their niche titles.”
Mumbrella reports…
Pacific Magazines is taking Bauer Media to court over the $40m acquisition of its business which was given the green light last month.
The takeover was scheduled to be completed on Thursday, with Seven West Media’s magazine arm now seeking support from the courts to ensure the deal goes ahead.
…
In an update to the Australian Securities Exchange (ASX) today, Seven advised it has received an email from Bauer’s solicitors saying: “Bauer is aware of its obligations under the Sale of Business Agreement and, as you
know, has been actively engaged since October 2019 in preparing for completion”.
This is a serious question: Is magazine distributor Ovato hitting small business newsagents with an unexpected cost as a result of an impact on its operations due to COOVID-19?
Many newsagents have reported an unexpectedly high magazine charge. For some, the charge is higher than their cashflow supports, they will be unable to pay the bill.
So, I dug deeper. I have found examples of Ovato increasing supply of titles beyond what is reasonable over the last two months, even longer this year. In one instance, for Reader’s Digest, based on a 25% return rate, Ovato increased supply 37.5%. Then, another 10% and a month later another 16.5%. There is no justification whatsoever in the sales data from the store for any increase.
It’s not just Reader’s Digest. There are other titles too.
Ovato has, as I understand it, a requirement in some magazine publisher contracts that they distribute all of what they receive. If my understanding is right and this clause has not been set aside in the current situation, the closure of most transit location retailers will have increased the volume of inventory that Ovato must place elsewhere, thereby increasing the cashflow obligation on newsagents.
Ovato management need to explain how they are dealing with the shutdown of around 25% of their usual mix of retail outlets. They need to ensure that their allocation systems do not unreasonably increasing supply to newsagents. The evidence suggests otherwise though. If this has been the case, they need to fix it right away. If I am wrong, they need to explain why supply increases where the return rate is 25% or more.
I really thought we were behind the problems of serious magazine oversupply. Research over the last week indicates otherwise. I’d be glad to be proven wrong.
If you are a magazine publisher, look at your contract with Ovato, see whether you require them to distribute everything. If it does, propose that this requirement is set aside for the next six months.
Given the data flow from newsagents, there is no need for oversupply. Indeed, any oversupply ought be considered neglect, a cash grab,. And given the parlous state of Ovato, that is the last thing newsagents need to be exposed to right now.
Here is how we are responding to oversupply to my own newsagencies: we have reverted to weekly tight culls of magazine supply, cutting back to what we know we will sell plus a small buffer to allow of the current unique situation where some magazine categories are in growth.
The oversupply has caused us to invest more time on magazine supply and to be ruthless to protect our business.
NZ Herald reports that Bauer has closed its NZ magazine business permanently.
New Zealand’s biggest newstand magazines have been folded, as Bauer Media NZ abruptly closes its doors permanently as a result of the Covid 19 crisis.
The New Zealand wing of the German-owned company publishes a range of New Zealand magazines including Woman’s Day, New Zealand Woman’s Weekly, The Australian Women’s Weekly, the Listener, North & South, Next, Metro, Kia Ora, Home NZ and Your Home & Garden.
The closure brings to an end many decades of publishing in New Zealand, with around 300 staff out of jobs.
A staffer spoken to by the Herald said they were “devastated” and “didn’t see it coming”.
This move is a shock.
This story The Australian just now:
Printer Ovato cuts pay by 40pc, seeks bank aid
Australia’s largest printing company, Ovato, is seeking help from its banks amid the coronavirus crisis and will slash pay by 40 per cent for most of its staff, including all executives and board members.
Ovato, previously known as PMP Group, said ANZ and Assetsecure have agreed to waive the testing of financial covenant ratios.
It is also working to secure “similar waivers and covenant relief from noteholders” of the $40m secured subordinated notes due in November 2022.
Chief executive Kevin Slaven said the company is working to ensure its expenses match its revenue during the economic uncertainty.
“While this uncertainty continues, Ovato remains confident in its ability to maintain our service standards with plants operating in all Australian states, albeit at reduced capacity,” Mr Slaven said in a statement released late on Tuesday night.
Chairman Michael Hannan said the group is facing the “unprecedented crisis with the most experienced management team in the industry”.
“We have acted early and are adapting to the daily changes. We have managed capacity by shutting down equipment at all sites, while retaining the flexibility required to ramp up or down quickly.
“I am proud to say that we have had good co-operation from our entire workforce, which will see an effective 40 per cent pay reduction for most of our staff, including all executives and board members,” Mr Hannan said.
Here is the ACCC press release:
Bauer Media’s proposed acquisition of Pacific Magazines not opposed
The ACCC will not oppose Bauer Media’s proposed acquisition of Pacific Magazines (ASX:SWM), after deciding the transaction was not likely to substantially lessen competition in relevant markets.
Bauer Media and Pacific Magazines overlap in the publication of print and digital magazines and in content published on digital platforms.
The ACCC carefully assessed the impact of the merger, given the close competition between the parties’ key print magazines, Bauer’s Woman’s Day and Take 5, and Pacific Magazines’ New Idea and That’s Life!.
“The significant declines in the circulation and revenue experienced by many magazines are sustained, substantial and likely to continue, resulting in less investment in content and fewer retail promotions,” ACCC Chair Rod Sims said.
“We note that some magazine titles have already closed, and others are likely to follow, regardless of this deal.”
“We also note that the content offered by the four key magazine titles, including celebrity news, ‘real life’ stories, puzzles, and food, health and lifestyle tips, is all available from other sources.”
“Ultimately, we determined that although there is a notable level of competition between the particular print titles, the transaction was not likely to substantially lessen competition because publishers in other media, particularly online publishers, will increasingly compete with Bauer,” Mr Sims said.
The ACCC found that while many of Bauer and Pacific Magazines’ customers value the tactile nature of physical magazines, they are often not regular buyers of the magazines. Further, increasingly others see online content as a ready alternative, and this should constrain Bauer’s ability to raise prices or reduce investment on content.
Further information is available at Bauer Media Pty Limited – Pacific Magazines Pty Ltd.
Background
The ACCC commenced a review of the proposed acquisition on 23 October 2019 and raised concerns about the acquisition in December.
Bauer Media and Pacific Magazines are publishers of magazines and digital content.
Bauer Media is part of the Bauer Media Group, which is based in Hamburg, Germany. Bauer Media group is a privately owned international media company publishing over 600 magazine titles globally.
Pacific Magazines is a wholly-owned subsidiary of ASX-listed Seven West Media Limited (SWM). SWM is a national media provider across television, magazine and newspaper publishing and online platforms.
ASX-listed Seven Group Holdings Limited (SGH) has a 41 per cent shareholding in SWM. SGH is an Australian diversified operating and investment group with businesses and investments across industrial services, oil and gas and media.
Bauer and Pacific Magazines overlap in the publication of titles in:
- the category referred to as “Women’s interest” in industry documents (Bauer with Woman’s Day, The Australian Women’s Weekly and It’s Your Day, and Pacific Magazines with New Idea and New Idea Royals); and
- the Real Life category (Bauer with Take 5 and Take 5 Monthly, and Pacific Magazines with That’s Life! And That’s Life! Monthly).
The parties also overlap across other categories of magazines including Home & Garden, Celebrity, Fashion & Lifestyle, Health & Fitness, Puzzles, Food and Parenting.
Release number:
47/20
This issue of Australian Geographic magazine is perfect for pitching at the counter. Shoppers will buy it for themselves and as a perfect gift for someone overseas. The koala is adorable, the image timely.
That’s my recommendation – place this issue of Australian Geographic at the counter, and see it sell.
Other retailers won’t take this initiative.
The cover of the latest issue of The Australian Women’s Weekly made me nostalgic for the days of when a Diana on a cover would guarantee extra foot traffic and terrific sales. We have pitched this issue on social media and at the counter to leverage the nostalgia interest. Supermarkets and other non newsagency retailers will, of course, do nothing special to promote this issue.
The Australian today has the story from Leo Shanahan about Bauer Media asking the ACCC to approve the PacMags acquisition.
Bauer Media boss urges ACCC to permit merger with Pacific
Bauer Media’s Australian boss has pleaded with the ACCC to allow the takeover of Seven’s Pacific Magazines in the interest of the struggling industry, pointing to growing unregulated online competition backed by the findings of the watchdog’s own digital platforms inquiry.The call by Bauer ANZ chief executive Brendon Hill comes in a week that The Australian revealed the German-based media conglomerate lost a private equity suitor after Mercury Capital pulled out of a reported $150m offer to buy the Australian arm of Bauer Media. The buyout would have proceeded only had the Pacific deal gone ahead, but last year the competition watchdog released a discussionpaper outlining several possible barriers to the $40m merger, voicing concerns over possible price rises and declining quality of the titles.
Although the ACCC statement of issues recognised online competition as an issue, Mr Hill said he was dismayed the watchdog viewed competition between Woman’s Day, New Idea, That’s Life and Take 5 as “the market”, given it recently completed a landmark review into the effect of digital platforms of traditional media.
At an industry function last year, just after the proposed acquisition was announced, the CEO of Bauer announced to those attending that no magazine titles would be closed as a result of the acquisition.
I don’t see any public benefit in the ACCC blocking the proposed transaction.
From a newsagent perspective, magazines are not as critical to our future as they were, say, ten years ago and their relevance is fading. They continue toe as important but are no longer critical to the success of many in the channel. This is why I say, from a newsagent perspective, there is no reason to block the acquisition.
I think changes like single day delivery and greater focus on mass retailers like supermarkets (to the detriment of newsagents) will come regardless of the proposed acquisition. I say this considering that supermarkets pay for magazines they sell and not net sales based one sale or return. Newsagents would benefit from such an arrangement. Instead, we have to live with sale or return and ourselves carry the cost of shrinkage. This advantages supermarkets – hence my concerns about an even stronger relationship with them.
The latest Australian Geographic magazine is out and newsagents are being pitched as the go to retailers for the title on social media. Right now is a good time to leverage this coverage for our channel.
In store, this is a good title to pitch with greeting cards that feature animals as well as plush animals – to tell a more complete visual story. You don’t need much space to take this initiative.
The ACCC today has published Statement of Issues with the proposed Bauer take over of Pacific Magazines. The statement includes:
The ACCC’s preliminary view is that the proposed acquisition is likely to substantially lessen competition by reducing the number of major print magazine publishers in key magazine categories from two to one. The focus of the ACCC’s concerns is in relation to the loss of competition in the supply of content to readers/consumers between Woman’s Day (owned by Bauer) and New Idea(owned by Pacific Magazines) and the loss of competition between Take 5(owned by Bauer) and That’s Life! (owned by Pacific Magazines).
Bauer has released a statement:
ACCC HAS PRELIMINARY CONCERNS WITH BAUER MEDIA GROUP’S ACQUISITION OF MAGAZINE PORTFOLIO FROM SEVEN WEST MEDIA
Sydney, 19 December, 2019: Bauer Media Group is disappointed that the Australian Competition and Consumer Commission (ACCC) has today indicated that it has preliminary concerns with the proposed acquisition of Seven West Media’s Pacific Magazines portfolio.
Adrian Goss, Bauer Media General Counsel says: “In view of the ACCC’s own findings in its recent Digital Platforms Inquiry, we are surprised that it has not cleared the acquisition at this stage. While we are confident of receiving clearance in the New Year, the ongoing uncertainty is enormously challenging for Pacific Magazines’ staff and the business more generally. Bauer Media has always seen the acquisition as a positive step towards ensuring the sustainability of print magazine publishing in Australia.”
Bauer Media will continue to cooperate with the ACCC in addressing the matters raised in its statement of issues and expects the acquisition to be cleared in early 2020.
-ENDS-
While I agree it will lessen competition, so to would the closure of Pacific.
Magazine publishing has changed dramatically in recent years, with more changes coming. Blocking the takeover, if it did come to that, would serve little purpose in my view.
This one-shot, Inside The Crown, from Pacific Magazines under the Who banner is perfect for pitching on social media right now.
With season 3 of The Crown TV series out now on Netflix to critical acclaim and achieving extraordinary viewing engagement, this accompanying magazine should be selling well. That’s why I suggest pitching it on social media. It is the type of magazine product that could drive traffic.
I’d also suggest placement of the one-shot with newspapers as well as at the counter. It is a perfect title for impulse purchases.
Make the most of the opportunity. Even as a low-cost Christmas gift it works.
While I get the magazine margin remains offensively small, we have the stock so we might as well chase incremental business.
Isubscribe offers $5 for each magazine subscription referral that results a subscription. That is a nice reward.
Newsagents, on the other hand, are expected to offer use of their retail space and resources to promote subscriptions for no reward.
While it has always been thus, in this world of little or no increase in cover prices and newsagent earnings from magazines far less today than ten years ago, it is only natural we look at issues like this.
FYI, here are their current featured deals…
Newsagents are the only retailers being promoted in the ads currently running for the new ABC Cricket magazine. I heard the ad on radio on the weekend and we are the only retail channel pitched.
The ACCC has written to a number of interested parties seeking submissions by Friday this week on the proposed takeover of Pacific magazines by Bauer. The Merger Investigations office of the ACCC has published questions to be considered by consumers/readers, advertisers, content suppliers, newsagents and magazine distributors, printing services and others.
At the Bauer Media Connections conference on the Gold Coast yesterday I was interested to see data shared by Ovato about the reduction in magazine titles being circulated over the last 3 years. I appreciated seeing the drop broken down by local / UK / US.
While there have been some magazine launches over the 3 years, the reality is we have less titles in circulation today compared to 3 years ago. This is a good thing in my view.
Shopper interest in special interest and more m mainstream titles is easily satisfied by the reduced range on offer today. Indeed, we could see a cut of, say, 25% in some segments without a negative impact on sales.
What often happens in a business with more titles in the same segment is a more diverse mix of titles sold rather than a desired increase in total revenue for the segment. Competing titles can cannibalise each other. Retailers do not benefit from this.
So, I am pleased to see this data from Ovato showing a net reduction in the range of titles available.
This report, from Amanda Meade at Guardian Australia on the closure of Picture and People:
Softcore magazines the Picture and People to close amid sale ban and falling circulation
Exclusive: Hundreds of service stations recently banned the magazines from sale, saying they demeaned women and girls.
Australian men’s magazine the Picture and the 69 year-old People magazine will close at the end of the year, ending decades of printed weeklies featuring topless models and readers’ sex stories.
Publisher Bauer Media was forced to axe the magazines after retailers lined up to ban them from sale at service stations; and readership fell to 0.02% of the population over 14 for People magazine and 0.01% for The Picture. They are already banned from sale in supermarkets.
“Discussions to close the Picture and People magazines have been taking place, as the magazines have lost ranging [visibility], which has affected their commercial viability,” a spokeswoman for Bauer Media told Guardian Australia.
“As closures impact a number of people, including some staff and suppliers, they need to be well considered and timed appropriately.
“The magazines will be closing at the end of the year and we’re working closely with staff to find suitable redeployment.”
I expect minimal impact on the newsagency channel from the closure of these two titles.
The cover price for the UK Autosport magazine has been more than doubled for over the counter purchase in a move that appears designed to drive migration from print to online.
Magazine cover prices need to increase to reflect cost increases for retailers. Or, newsagents ought be paid a higher percentage of cover price.
The price increase for Autosport, however, is nuts.
While there are regulatory processes to play out and finalisation is anticipated to be months away, the news yesterday that Bauer Media and Seven West Media had reached agreement for Bauer to acquire Pacific has captured the attention of plenty in our channel.
Bauer media and Pacific Magazines are the two largest magazine publishers in Australia.
The most common question in emails and calls that I received yesterday from newsagents was what does this mean for us?
I think asking this question now is late. I say this because rationalisation of print media businesses has been happening for some years and has been discussed widely here and elsewhere in our channel.
If you are asking today what it means, you are already behind. If this is you, I encourage you to invest time now to catch up.
If the Bauer / Pacific news has come at a shock and you are wondering about the impact, act now, make decisions that focus on propelling your business forward. No supplier will do this for you – putting your business first in every decision.
While I don’t know what a Bauer acquisition of Pacific will or could mean, we can reasonably speculate that there will be changes over time. It cannot 100% be business as usual.There will have to be changes given the challenges faced by some of the titles involved. One benefit of single ownership of an expanded stable of titles at Bauer would be co-ordinated management of all titles. This could mean less cannibalisation between competing titles through more thoughtful and complementary coverage.
Many of us in the newsagency channel have been actively working on chasing net new traffic for categories outside of legacy product categories for our channel for years. There have been hits and misses through. Such is the experience of chasing change.
There is no doubt we are in a period of extraordinary change in print media. Change is being driven by how news is delivered into our hands, how and when we engage with news and information, what constitutes news and entertainment, what people will and will not pay for, who is a publisher (all of us?) and how print mastheads and stories are packaged and priced.
The Australian market is small. I think that is a factor playing out here too. Print media products need critical mass. We miss that in some markets here.
Thinking about what could change as a result of the announced acquisition… It would not surprise me to see: the days of magazine delivery changed, maybe to one a week; the closure of some weekly titles; the launch of a new weekly title; changes in monthly titles; greater accessibility for over the counter purchase of titles.
What should matter most to newsagents today is focus of the business changing net new shopper traffic, broadening the shopper appeal through new products, driving overall business GP%, growing online sales so the business is less reliant on local shoppers and chasing opportunities through pursuing what we don’t know our businesses can achieve.
The Bauer / Pacific announcement is an encouragement for us to work on our businesses, to pursue change, to make our businesses more valuable in the future.
All of this, of course, means more focus away from the newsagency shingle.
Here is the announcement from Bauer in full:
MEDIA RELEASE
BAUER MEDIA GROUP TO ACQUIRE ICONIC AUSTRALIAN AND NEW ZEALAND MAGAZINE PORTFOLIO FROM SEVEN WEST MEDIA
Sydney and Hamburg, 21 October, 2019: The Boards of Bauer Media Group and Seven West Media are pleased to announce an agreement for Bauer Media to acquire Pacific Magazines, which publishes a leading portfolio of iconic Australian and New Zealand media brands – including Better Homes & Gardens, New Idea and Marie Claire.
Combining Pacific Magazines with Bauer Media Australia’s existing multi-platform publishing portfolio brings together over 50 highly complementary titles.
The enlarged business will boast deep expertise in the Women’s Entertainment & Lifestyle, Fashion, Beauty & Health, and Food & Homes categories, and be well placed to maximise reach and engagement with consumers while continuing to invest in new, must-have content.
Brendon Hill, Bauer Media Australia CEO, says: “We are delighted to be able to combine our talent and resources with one of our most admired and respected industry peers. More than ever, scale and superior content is emerging as the differentiator of success in publishing. This transaction will bring the Bauer and Pacific teams greater opportunities to innovate, create and collaborate – and continue to delight their audiences.”
Bauer Media Group is a global owner of assets ranging from radio, print and digital content to online comparison platforms and marketing services. This acquisition is in line with the Group’s strategy to capitalize on its leading position in publishing, investing in new launches, concepts and business models around its strong brands, whilst actively participating in the consolidation of the industry and pursuing opportunities in new areas.
The transaction is expected to close during either late 2019 or early 2020, subject to ACCC approval.
-ENDS-
Here is the Seven West announcement in full.
