Rupert Murdoch, Chief Executive of News Corp., speaking at the annual meeting of the American Society of Newspaper Editors, urged newspaper editors to embrace the Internet.

“The trends are against us. Unless we awaken to these changes which are quite different than those five or six years ago, we will, as an industry, be relegated to the status of also-rans.” Rupert Murdoch.

Murdoch cited this report from the respected Carnegie foundation which we discussed in a blog entry on April 4.

Newspapers across the globe are reporting the stirring of News Corp. with most taking the Associated Press feed as this report in the LA Times shows.

The core of the News Corp. strategy must be the elimination of barriers between their business and consumers, the elimination (or dramatic reorganisation) of the supply chain, the growth of the online model while protecting revenues as much as possible from physical product as much as possible.

Newsagents need to read the Carnegie report and plan for the future just as News Corp. is doing today.

While we focus here in the impact of changes on the distribution of news and information in print media, it’s valuable to check in with the impact of technology on radio. This article from newcitychicago.com is an excellent discussion on the impact on radio and unemotionally outlines potential ramifications for commercial radio as we know it. The parallels for newsagents are clear.

Why would you advertise a job in a newspaper? Online you can publish immediately and now with aggregators like indeed.com you’re getting seen way beyond the posted website.

Take a look at indeed.com and see how easily and quickly it aggregates data from over 500 job sites.

Job advertisements have been a key part of the rivers of gold classifieds of newspapers. No longer.

It was disappointing to see Today Tonight on the 7 TV network last night rip into newsagents among others on retail markups. This story on their website says:

Newsagents
Newspapers are marked up 25 per cent, stationary up to 100 per cent, cigarettes up 25 per cent and confectionary as much as 50 per cent.

Newspapers are marked up 33% by the publishers. Our on sale price is dictated by our suppliers. Every retailer charges this cover price. In fact, most of what newsagents sell is at prices set or recommended by suppliers. Stationery is the biggest category where we set our own markup. Here the range is from 5% through to 120% with the industry average 60%.

There is no shame in markups. Shame on Today Tonight for inferring there ought to be. The markup (gross profit) pays rent (around 12% of retail), wages (around 10% of retail), theft (around 3% of retail) and overheads (around 6% of retail).

A journalist doing their job would have reported that many items sold in newsagencies are done so with prices set by suppliers and that in many cases prices have not changed in years.

I sell the Herald Sun newspaper today for $1.00. I sold it 5 years ago for $1.00. In the 5 years my rent has increased 4% each year – I am paying $1,000 a week more rent now than 5 years ago – wages have increased by 35%, insurance by 30% and so on. A good journalist would have investigated the situation and not just accepted what the Australian Consumers Association fed them.

Newsagents do not have any form of government protection like chemists. We do not have a monopoly. Indeed the last six years have seen our core products of newspapers and magazines pushed to all manner of outlets with the result of less traffic in our shops. Such is the impact of competition.

Our 4,600 independently owned small businesses provide worthwhile local business employment for many, we’re a beacon in the local community, assisting in many ways.

This Today Tonight story is really part of the push by Woolworths to get pharmacies in their supermarkets.

Podcasting is technology which takes audio and sets it free for the world on the Net. It’s revolutionising radio as this quote from Paul Montoya, CEO and a 31 year veteran of the broadcast industry stated,

I was there when FM radio came into its own and saw the impact on AM radio. I have also seen the impact satellite radio has had on FM radio. I can now see the incredible possibilities that Podcasting can have globally on the way people listen to content. Now they can listen to programs they want to listen to, when they want to listen to it.

Read more of the story here. Connections to newsagents and independent retailers? None. Except that Podcasting will morph across into publishing and that’s where the impact may be felt. The BBC is embracing this technology having now undertaken their second podcast.

What we knew as radio last year has changed significantly already this year.

The folks at Google are not resting on their laurels for traffic. Google Ride Finder is a taxi locator now in Beta in 10 U.S. cities. The site plots locations real time.

Once in the cab, according to this story from the San Francisco Chronicle SFgate site, the passenger can access all manner of news and information using a touch screen.

It’s traffic generators like these which separates online plays like Google from the more traditional news and information sources – and that’s crucial as they are masters at leveraging that traffic for incremental sales.

The connection to newsagents? Less relevance for what we sell and a lesson in customer traffic generation and retention.

It’s astounding how much Australia Post is able to stay under the radar on matters of customer service. While Telstra gets beaten up with regularity over service for rural Australia, Australia Post continues to let consumers across the country down.

If this were Telstra the press and some more noisy Senators would be beating the drum calling for better service. Hey, folks, there’s a story here!

I don’t mind since I own a newsagency which competes with a Government owned post office (directly opposite) for stationery, greeting card, Western Union, phone recharge and bill payment products and services. But I still wonder how Australia Post gets away with it while Telstra does not. Of course, they do it by promoting their business around their delivery service – which is excellent – but it is in their retail sector where they are savage against family run businesses. They use the rivers of customers generated by their monopoly mail services and get them to buy products which would have otherwise supported the small business economy.

I guess the Federal Government needs the profits from the sale of a pack of paperclips more than I and other newsagents like me need it.

The retail arm of Australia Post is out to harm small businesses like mine and make mediocre service the standard. Australians should reject that! We deserve better.

The government should get out of retailing and leave that to small business owned who know a thing or two about customer service.

There is no doubt that newsagents face serious challenges. They are a key part of the news, information, advertising and gambling supply chains. In each of these marketplaces, online plays are shortening or eliminating the supply chain. While it will be some time before we feel the full impact of the changes, suppliers in the meantime are chasing incremental sales wherever they can and this means hurting the small business people who gave them life in the first place – newsagents.

Suppliers are taking products traditionally associated with newsagencies and putting them everywhere – dramatically diluting the value of the newsagent shingle.

Many newsagencies are starving because they are not sent enough magazines to satisfy consumer demand. This will reduce consumer traffic and potentially cause their businesses to die. Week after week we sell out of TOP 10 magazines barely 50% into their shelf life. That’s bad for business.

Many newsagencies are drowning because the lesser successful magazine titles are supplied in such abundance that more than 50% of what is sent is returned to be pulped. Newsagents cannot control what they are sent yet they have to pay for this stock and then claim back a credit which they get sometime long since the money left their account.

This small business retail channel is in trouble.

Is anyone listening?

Australia’s 4,600 retail and distribution newsagents need to create a business model which links them directly with consumers in the news and information area. As middlemen in the supply chain today we run the risk of being discarded when our economic relevance drops below a point of viability. Publishers have always ‘owned’ the relationship with their readers.

Newsagents can establish a direct consumer relationship by embracing blogging and citizen journalism technology and becoming a bricks and mortar conduit for local (community) news. While operating online, the resultant stories could be ‘published’ in short form and provided to the local community free from retail newsagencies.

This would underscore the role of newsagencies as local gathering places which makes sense since they are locally owned businesses employing local people and service the local community.

Further to my April 4 post about Bluffton Today, there are two other new and similar citizen journalism sites worth looking at.

YourHub.com is a Rocky Mountain News venture where anyone is invited to share stories/photos and opinions, add events, sell something. It is about to launch and is planned for 37 neighborhoods in the Denver area.

Blount County Voice is a community site in Maryville, Tennessee.

These sites and the others like them demonstrate a movement toward the local and acknowledge the place of the reader in creating content. While in its infancy and yet to evolve into what accountants might consider an economically sustainable model, consumer and participant interest suggests that they are heading in the right direction.

Local newspapers face the more immediate risk from the citizen journalism movement. Rich in advertising, these papers are lucky to carry one or two genuinely local stories. Consumers creating content will provide more interesting and more immediate local content and see more local papers thrown in the bin.

With Australia’s 4,600 retail and distribution newsagents reliant on newspaper and magazine sales for more than 50% of customer visits each day, we need to urgently find a way to meaningfully participate in citizen journalism. Publishers embracing the model will do so outside our bricks and mortar channel. Our response has be between us and consumers.

ICANN, the not for profit peak internet management body yesterday at a meeting in California approved the creation of .jobs and .travel sponsored top level domain names as this item reports.

The .jobs decision reduces the supply chain between job advertiser and job seekers. Aggregators such as SEEK now face their own challenges. In recent years it has been SEEK and others challenging newspapers.

This ICANN decision is further proof that the supply chain is shrinking in many sectors and bricks and mortar and older technology aggregators need to adapt to maintain relevance.

It will be interesting to see the impact of this decision on the forthcoming SEEK float.

This article from Wired News announces that several newspapers are about to offer news reading software which will make news from their sites and others more accessible. The same software is also expected to enable consumers to search classified advertisements.

This move further challenges the relevance of traditional channels through which newspapers distribute their products.

The good news is that publishers and software developers are teaming up to deliver timely articles of your choosing to your virtual doorstep — and you don’t even have to tip the delivery boy.

And so opens this article from Wired News posted two days ago.

Newsreaders pull headlines from a variety of bloggers and news sources and allow consumers to create their own ‘paper’. Newsreaders are available without cost and they access websites such as BBC, CNN, News Limited and ESPN which provide content without cost. Once you select an article of interest you are taken to the site for the story.

Newsreader software is available for hand held devices making up to date news accessible on the road.

The road between story conception and the consumer is changing.

We have seen the changes in news and information distribution for some time and set in place a plan a year ago to grow the business and brand. Our goal has been double digit growth in the magazine and newspaper categories and to leverage that traffic into other areas as we expand our range.

The strategy is working. Magazine sales are up year on year by 30% and newspaper sales are up 12%. In the Women’s Weeklies segment of magazines our sales are up 50% year on year. We’re seeing positive impact elsewhere in the business.

While not addressing the longer term issues, our strategies are building consumer loyalty. Holding their hand we’ll lead them through our evolution.

Australian newsagencies are bricks and mortar aggregators. Consumers visiting a newsagency have access to between 1,500 and 2,000 magazine titles and between 20 and 50 newspapers in English and an array of foreign languages.

Historically we have been a one stop shop for news and information. The perfect model for the day – a model which has resulted in significantly better than average per capita consumption of news and information product. The model was created by the publishers and until 1999 protected by government.

The model in its present form is out of date.

Now that we have been cut loose we’re facing tougher competition. Those who created and fostered the development of the newsagent channel are busy placing their product in other channels where they feel consumers are more likel to make an impulse purchase. This is happening at the same time as new online models are emerging to challenge print.

Newsagencies are typical middle-men in the supply chain and are the most at risk of not adapting to change. Many are too busy in their businesses to consider the strategic issues.

Given the involvement of the Australian Government in, first protecting the newsagent channel decades ago and, now, cutting them loose, it would be appropriate for them to provide assistance so that the 50,000+ employees in newsagencies and the mum and dad investors who own the businesses have a future.

Content is king. Long live content. Consumers and content providers are the new best friends and finding ways to each other which eliminate many traditional businesses. In fact, they are racing toward each other faster than we can measure. Whole channels are at risk in the music, video and news/information distribution and retail categories.

Eliminating bricks and mortar channels replaces our out of date product search, service and payment mechanisms with a model which today’s 18-34 year old consumers want.

While my last posting here talked about a way newsagents could participate, it’s stop gap because of the desire for content to be as close as possible to the consumer where and when the consumer wants. In such a world newsagencies, CD stores, video libraries and the like are of little relevance.

Newsagents can be relevenant in the future if they start changing today.

Intel Backs Bertelsmann (Sony) File-Sharing Venture
The world’s largest chipmaker, Intel, and German media conglomerate Bertelsmann plan to cooperate in developing technology for downloading and sharing films, music clips and games from the Internet.

This announcement from two giants in content and processor technology has gone largely unnoticed in Australia.

This is a convergence play of enormous proportions. It will bring bigger files to all manner of devices faster and in a higher quality form. It changes the playing field and could impact newsagents.

The impact for Australian newsagents is in this question – what happens when consumers can download the stories they’d read in Time or Womans Day or New Idea or Who onto their iPod for listening later or a portable video device for viewing later for just a few cents? What purpose magazines in that world? I appreciate it’s a way off but it’s something to consider.

Camera loving Dick Smith launched Australian Geographic magazine in 1985. After a struggling subscription launch, Australia’s 4,600 newsagents promoted the heck out of the product and grew over the counter sales considerably. Then, surfing the waves of success, Dick Smith and his crew turned their back on small business newsagents and jumped into bed with Australia Post.

“By the time we pulled out of the newsagents we had about 135,000 subscribers,”

“It’s a very expensive journal to produce and we tried to negotiate to get the copies sent back to us, but it didn’t work that way,” Whelan says. “At the time they were just simply cutting the masthead off for the credit and they’d pulp the rest”

Two quotes from Howard Whelan, Editor of Australian Geographic as reported on the Australia Post website talking about the history of their move from a retail distribution model to a mail only distribution model.

In the same article on the website Australia Post says: Australian Geographic was also troubled by the amount of magazines wasted in the newsagents’ system. While the journal achieved better than average sales figures, selling 70 to 80 per cent of copies sent to the newsagents, those copies not sold – which at times numbered as many as 30,000 – were pulped.

A 70% – 80% sell through rate is fantastic. Especially in that product category.

I do not believe the claim on full copy return. Full copy was available at the time this happened. I suspect that someone other than newsagents was being too greedy and priced full copy returns out of contention. So, the all green Dick Smith at the time decided it was better to save the 30,000 paper copies which would have been pulped and instead use 200,000 plastic bags every month to get the product to consumers. Paper or plastic Dick? I guess you chose plastic. And you chose big business over small business.

Here is the link to the article on the Australia Post website.

Australia Post holds Australian Geographic up as a successful subscription only story in their pitch to publishers. They kick newsagents for wastage and for not being prepared to negotiate on this matter and provide full copy returns. In a very clever spin they promote their service and educate people about what they consider to be flaws in our business model.

Folks, this is our own Federal Government doing this to us. Our Government is happy to sit by while their wholly owned corporation takes an unreasonable swipe at our independent small business channel.

All of this took place in the late 1980s. It is relevant today because Australia Post use this story today in their pitch for more subscription business.

Shame on Australia Post and shame on their owners, the Federal Government of Australia.

Thanks for your support of small business.

For the record I note that Dick Smith is no longer involved in the magazine.

This article on blogs and blogging from the Wharton School of the University of Pennsylvania is an exceptional introduction to the blogging phenomenon and the reach it is likely to have.

It is a must read for any involved in news and information publishing and distribution.

Dan Hunter Assistant Profession of Legal Studies explains that blogging is here to stay in this quote from the article: “This is not a fad,” says Hunter. “It’s the rise of amateur content, which is replacing the centralized, controlled content done by professionals.”

In Australia around 90% of newspapers are sold through newsagencies – a channel of 4,600 retail and distribution businesses established for this purpose. Almost all are privately and individually owned. The future of newsagencies as we know them is inextricably linked to the future of newspaper and magazine publishing and distribution – yet we are not part of the conversation about future models for mainstream media.

With the blogging phenomenon newsagents have an opportunity independently to claim territory in what is called the blogosphere. Newsagencies could create BLOG POSTS – an in store kiosk like PC where people can read or post – giving a bricks and mortar presence and therefore greater person in the street relevance for blogging. This fits with the movement citizen journalism where everyone is a journalist. There are several models emerging including this model from Bluffton South Carolina.

I see BLOG POSTS in newsagency stores as the beginning. They identify this old world bricks and mortar channel with the new movement. They provide a relevance for the 18-34 year olds who are shunning newspapers. They provide a starting point from which new traffic generators and business opportunities for newsagents can evolve.

Bricks and mortar businesses like newsagencies with rely on newspapers and magazines for more than 50% of their foot traffic can either look outside news and information for their future or embrace the opportunities of blogging and practically demonstrate their relevance in the emerging new world. Through BLOG POSTS in their shops newsagents would identify themselves as part of the future.

The big question is how newspaper publishers would react to this. A secondary question is how would those in the blogosphere react to such a relationship with a traditional media distribution channel.

Where will newspapers be in 5, 10 or 20 years time. The world is becoming more environmentally savy and more time savy. Everyday billions of newspapers are printed all over the world and i would say that most consumers would not be aware that any unsolds are returned to the publsher (this is the case in Aust, anyway). These returns come come at a huge cost in both transport and labour for both the retailer and the publisher. Imagine a world where only the number of newspapers that are actually purchased and paid for by the end consumer are printed. Will newsagents become mini print centres? With high speed colour printers/copiers readily available in most newsagents will this become a reality?
Imagine reading a newspaper printed on quality white paper in full colour with much better quality graphics. No more ugly newsprint, no more broadsheet and when your finished bring it back to your newsagent the next day, we will recycle it and give you a discount on the next days all because you recycled.
With copier technology available today we can fold, staple and hole punch your newspaper all for your reading pleasure.

And when you buy your newspaper we are not going to put it in a plastic bag for you to take home either.

More on this later

Ben Kay

Further to my earlier post here about Australia Post…

Foot traffic is crucial to every retail business. It’s a numbers game. The more people walking through your front doors the more likelihood that someone will find something they like and make a purchase. For many years Australia Post retail outlets existed to provide a retail face to postage products. In the 1980s they started to offer non postage product and this trend picked up apace in the 1990s to the situation we see today where, on average, more than 50% of a government owned Australia Post retail outlet is given over to non postage product of greeting cards, stationery, telephone hardware and in person bill payment services.

That Australia Post has exclusive representation of the retail of postage product through its outlets provides it with an unfair competitive advantage over the retail outlets selling the other products and services which Australia Post carries. Australia Post competitors do not have an equivalent government protected product offering to guarantee equivalent customer traffic.

The Western Union money transfer service offering is a good example of Australia Post benefiting from its government ownership. Newsagents introduced Western Union in 2000 and by January of 2004 year had achieved 800 independent small business owned outlets. During 2003 year Australia Post introduced Western Union.

Solely because of its foot traffic, Australia Post has been able to snare a majority portion of the Western Union business. Australia Post outlets do not provide signage or significant promotional displays whereas newsagents invest significantly in signage, literature and advertising.

A study of the Western Union example will prove the considerable commercial value of the Australia Post foot traffic and show the advantage Australia Post gains from having access to the exclusive foot traffic.

What is happening with Australia is privatisation by stealth. Our own government is beefing up the Australia Post retail network to the detriment of small businesses like newsagencies. What for? Dividende? A sell off?

Newsagents should revolt and demand an enquiry!

Welcome to blufftontoday.com. You are witnessing the launch of a new kind of newspaper.

And which those words the world was introduced Sunday night to a new newspaper model – an online newspaper with a free daily give away for the citizens of Bluffton South Carolina.

Blufftontoday is part online newspaper, part citizen journalism. There are professionally written pieces and blog entries. Professional photos and submitted photos. But all wrapped with an air of professionalism whcih makes it interesting.

We have to find a way for traditional news and information retailers (like newsagencies in Australia) to be part of the new media. Maybe reading stations in our shops? Maybe a promotion point for the such new local ventures. We must respond in some way otherwise our relvance will be challenged.