What Went Wrong with Newsstand Sales in 2008

Unit sales and revenue decline, but don’t lay all the blame on the economy.

By Baird Davis
Tuesday, March 31, 2009

[Click here and here to view accompanying charts.]

Things went disastrously awry at the newsstand in the second half of 2008 (remember this all transpired prior to Anderson News’ ill-fated initiatives, which didn’t disrupt sales until the first quarter of 2009). Unit sales of audited publications declined to about 405 million, an unprecedented drop of 15.1 percent and revenue fell to just under $1.6 billion, off 6.5 percent, the steepest decline in many decades. The sales slide began in the first half of last year and accelerated like a souped-up Maserati in the second half. For the year, unit sales declined a record 10.1 percent and revenue was down 2.1 percent.

What Went Wrong?

There is no doubt that the sagging economy has had a severe dampening effect on newsstand sales. But it’s too simplistic to declare that all the sales difficulties can be laid solely on the doorstep of a weak economy. There are other factors that have contributed to the record sales decline. For one, there were steep price increases—up 10.2 percent in the second half of last year to an average $3.88—that surely impeded sales. Plus there are other contributing factors. In this article we’ll explore all of these things in more detail.

We’ll start by comparing the sales performance differences of checkout and mainline titles. We’ll look at the sales of the top 10 newsstand sales companies to determine if there are any variances that may provide insight into the industry’s sales slump. Finally we’ll compare the sales performance of the top ten newsstand sales publications of 2000 with the top 10 in 2008, which will offer further clarification of some of the causes for the sales difficulties.

Checkout Sales Decline Sharply

On the newsstand, mainline sales are almost an afterthought. Macho, male-oriented magazines don’t really move the sales needle, but titles oriented toward women do. The newsstand, especially at checkout, is far from being gender neutral—approximately 70 percent of the newsstand purchases of audited publications are made by women.

What we’ve learned in the last year is that formerly shopaholic women are pulling in their purchasing horns. The sales of checkout titles in the second half of last year fell 17.8 percent, which far exceeds the average annual unit sales decline over the last decade of about 3 percent. The average price of checkout publications increased a staggering 11.4 percent. But even the massive price increases were not enough to prevent a revenue fall of 8.4 percent—the largest decline in many decades. The decline in checkout sales was broad based—few titles were spared the butcher’s knife. Of the 69 checkout publications tracked in this study, only 7 reported higher unit sales in the period. On the other side of the sales equation many of the declines were precipitous—19 titles (see accompanying chart) experienced unit sales falls greater than 20 percent.

At the very center of the blistering newsstand tsunami are the six celebrity titles, which accounted for 40 percent of checkout unit sales in the last half of 2008. What we have here is a tale of the omnipotent king and the five subordinate princes. Among the princes, Bauer’s two celebrity titles (In Touch and Life & Style) exhibited the most obstreperous behavior. In the fall of 2007, Bauer increased the price of those two publications by 50 percent—from $1.99 to $2.99. Sales of these two publications fell sharply in the first half of 2008 and the slide intensified in the second half of the year—unit sales down 34 percent and revenue off 14 percent. The sales fall-off of these two titles appears to have reordered the product purchasing patterns within the celebrity category. Plus, it’s within reason to think they could have had an adverse affect on the sales of all publications sold at checkout. The unit sales of the other three princes—US, Star and OK!—were down 23.6, 16.7, and 20.8 percent respectively. But the king (People) survived the onslaught in an even more dominate position, its unit sales down only .8 percent and revenue up 5.7 percent. People’s strong performance contrasts with the average 27 percent unit sales decline of the other five celebrity titles. It now seems very apparent that the In Touch and Life & Style mega-price increases not only helped to reconfigure the sales patterns in the celebrity category, but they might have exacerbated the downturn effect of a weak economy for the entire checkout sector.

Mainline Sales: Down Modestly

The sales story wasn’t all peaches and cream on the mainline either. But compared to the checkout, the sales at the mainline were a relative success. Unit sales in the second half of 2008 were down 5.6 percent and revenue was off 2.3 percent. This isn’t exactly superb performance, but it wasn’t appreciably different than it was for the last three years.

Why the sales performance disparity between mainline and checkout titles? One reason is that the mainline price increases were gentler—up 3.9 percent compared to 11.4 percent for checkout titles. But, perhaps more importantly, mainline titles represent less of a discretionary purchase than publications sold at checkout and a greater proportion of its sales are accounted for outside the channels of trade (supermarkets, mass merchandisers, drugstores) where checkout sales predominate.

These checkout and mainline sales differences would seem to indicate that the bleak economy has affected the various channels of trade differently.

Sales of the Leading Publishing Companies: All Down

The top 10 publishing companies accounted for 80 percent of the newsstand sales of all audited publications in the second half of last year. But being big did not offer much protection against the ravages of the industry’s steep downturn. The unit sales of the top 10 companies fell 17 percent and their revenue was down 8.1 percent
Every one of the top ten companies experienced a unit sales decline and only two (Time Inc. and Rodale) squeezed out modest revenue increases. On the minus side, six of these companies had unit sales declines of more than 20 percent—Bauer, Hearst, Wenner, Source Interlink Media, Meredith and Northern & Shell. It was a very harsh six-month period for America’s magazine publishing giants.

Time Inc._ Although its unit sales declined slightly it was one of the few companies to show a revenue sales increase—unit sales were down two percent and revenue up two percent. Its sales were led by the continuing strong performance of People, whose revenue rose 5.7 percent. It was also helped by good sales from Time and In Style. However, the performance was disheartening from Sports Illustrated, Southern Living, Cooking Light, Sunset and Money—all of which had unit sales declines greater than 10 percent. Overall sales results were mixed, but still considerably above the industry norm.

Bauer_ Its unit sales fell 22.9 percent and revenue declined 7.9 percent. Bauer’s sales suffered from the hefty price increases they initiated across its entire line of nine audited titles in the fall of 2007. The effect was especially acute on their aforementioned celebrity titles—In Touch and Life & Style. Its sales difficulties were less acute, but still significant, for its two women’s service titles (Woman’s World and First), its two soap opera titles and two of its three teen publications, all of which suffered double-digit unit sales declines. Bauer appears to be a victim of raising prices (some of them by huge percentages) at exactly the wrong time.

American Media_ Its newsstand sales continued to sag—unit sales down 14 percent and revenue off 7 percent. Its two tabloid publications (National Enquirer and Globe) continued a decade’s long sales slide and Star’s unit sales fell nearly 17 percent. These three weekly publications represent the core problem for American Media. Its tabloids are fighting a losing battle of sales attrition and Star is deeply mired in fourth place in the celebrity category melee.

Hearst_ Its sales were very disappointing—excluding data from Quick & Simple, a title that was published in the second half of 2007 and closed last year, Hearst’s unit sales were off 11 percent and revenue down 10 percent. Cosmopolitan’s sales were bruised, but not seriously wounded—unit sales and revenue off 6 percent. However, four of their publications experienced unit and revenue declines of more than 20 percent. None was more significant than the unexpected sales descent of O, the Oprah Magazine, whose sales fell 25 percent. Its other big sales decliners in the women’s field were Cosmo Girl, Country Living and Redbook whose sales were down 24, 23 and 33 percent respectively. There were few newsstand bright spots for Hearst titles in the second half of last year.

Wenner_ Sales at Wenner were down substantially—unit sales fell 22 percent and revenue was off nearly 17 percent. At Wenner, newsstand sales rise and fall on the broad back of US Weekly, whose unit sales tumbled nearly 24 percent, adversely affected by a price increase and the growing sales volatility in the celebrity category. US maintained its number 2 rank in revenue among all publications, but it lost valuable market share to People, the market leader.

Conde Nast_ Their unit sales fell 10 percent and revenue was off 9 percent. However, they had several sales highlights in an otherwise dreary period. Vanity Fair, Vogue, New Yorker and Details all showed modest sales growth. But, nearly all of their other 19 newsstand titles reported sales declines in the period. Of greatest concern to Conde Nast must have been Glamour’s 18 percent sales decline. Glamour was once a top 10 newsstand title, but it has been steadily losing sales for the last decade and its newsstand sales rank has fallen to number 16. Conde Nast no longer has a publication ranked in the top 15 in newsstand sales.

Source Interlink Media_ Their newsstand sales have continued to decline at an alarming rate. The unit sales of its two soap opera titles, which account for 48 percent of their newsstand unit sales, fell nearly 19 percent in the second half of last year. The sales of their other 40 audited newsstand publications (all niche special interest titles) were equally disappointing—unit sales down 26 percent and revenue off 21 percent. Source Interlink Media has been aggressively lifting cover prices for the last five or six years. In a market that is increasingly price sensitive, it’s a strategy that appears to be backfiring.

Meredith_ In the last half of 2008 their unit sales were down nearly 22 percent and revenue fell about 20 percent. Part of the reason for the steep decline can be attributed to Meredith’s decision to discontinue selling some of their titles (at heavily discounted prices) at Dollar Tree. The results of this decision are very apparent in the sales declines reported by BH&G, Fitness and Ladies Home Journal—whose unit sales declined 39, 45 and 40 percent respectively. It should also be noted that the newsstand sales of BH&G and Ladies Home Journal were enhanced in the second half of last year by employing “combination” sales (as reported on their ABC statements). Both titles reported 12,000 per issue “combination” newsstand sales for the period, helping boost the total newsstand sales of these titles by about 5 percent. Among their 16 titles that reported newsstand sales, only two (smaller newsstand titles—Parents and Siempre Mujer) showed improved sales for the period. Meredith’s mostly mature titles are having a difficult time finding sales traction in a newsstand environment that increasingly favors weekly frequency titles and publications that appeal to a younger audience.

Northern & Shell_ Until the second half of last year OK! Weekly (Northern & Shell’s only American title) had been rapidly progressing up the newsstand sales ladder. But in this period its sales hit the proverbial wall. The cover price was increased from $2.99 to $3.49 and the frequency reduced to 24 issues for the period. These changes helped decrease unit sales by 21 percent and revenue by a less severe 9 percent. OK! appears to have lost its sales momentum, an ominous sign for a publication in the precarious number 5 ranked position in the celebrity field.

Rodale_ It continues to demonstrate newsstand sales vitality. Its unit sales declined minimally (4.5 percent), but it was one of only a few companies to report a revenue gain (up 2.7 percent) in the period. Men’s Health and Women’s Health sustained their strong performance—revenue up 5 and 10 percent respectively. The only sales disappointment in this period was digest-sized Prevention, whose sales declined 14 percent.

The Changing Face of Top 10 Checkout Title Sales: 2000 Vs. 2008

Many titles are sold on the newsstand, but it’s the performance of ten publications, the top ten checkout titles, that define the market. Eight years ago the top 10 titles accounted for nearly half (46.8 percent) of the unit sales of all audited publications. In the second half of 2008 the top 10 titles still accounted for about half (46.3 percent) of unit sales for all audited publications.

The unit sales impact of the top ten titles has remained stable, yet the title makeup, frequency and cover pricing of these publications has dramatically changed. A comparison of top 10 titles from the second half of 2000 to the second half of 2008 (see attached chart) helps illuminate the effect of these changes. Several distinct developments should be noted:

1. Cover Prices Increased Dramatically
In 2000, eight of the top ten titles, were priced below $3. In 2008 only one title was priced below $2.99 (Woman’s World). The average price of the top ten titles increased from $2.02 to $3.38—a huge 67.3 percent surge. This compares to more modest price increase rates of 21.3 percent for other checkout publications and 20.4 percent for all the other audited titles during this period.

2. Publication Frequency Increases
In 2000, seven of the top ten titles were weekly and three were monthly frequency. Their average annual frequency was 41 issues. In 2008 only one monthly title (the mighty Cosmopolitan) remained in the top 10. During this eight-year period the average annual frequency of top 10 titles rose from 41.0 to 47.6 issues—a frequency increase of 16.1 percent.

3. Unit Sales of Top 10 Titles Decline in Equal Proportion to the Market
Between 2000 and 2008, unit sales of the top ten declined 28.9 percent, approximately the same rate of sales decline experienced by all other audited titles.

4. Revenue for Top 10 Titles Rises, All Others Decline
Unlike unit sales, the revenue of the top 10 and all other titles diverged in different directions. The revenue of the top ten rose 18.8, but the revenue of all other publications declined 12.4 percent.

Lessons Learned from Top 10 Title Sales Trends
There is much to be learned from the changes occurring among the top 10 newsstand titles.

Weeklies Are Preferred
At the checkout weekly frequency publications now dominate. Among other things the shift to weeklies has adverse processing and handling ramifications for wholesalers and retailers.

Higher Cover Prices Are the Norm
Although higher cover prices have undoubtedly precipitated the unit sales decline, they have become the new checkout sector norm.

Checkout Sector is Zero-Revenue Based
High cover prices have helped increase revenue for the top 10 publications. Conversely this has translated into lower revenue for all other titles in the checkout sector. This helps confirm the belief that the checkout sector (indeed, probably the entire newsstand market) is zero-revenue based (that is—individual title revenue can rise or fall, but the sector/market revenues will remain unchanged).

Higher Cover Prices Mean Fewer Multi-Title Purchases
Higher cover prices for the top 10 titles has meant less multiple title purchases. This has contributed to the unit sales decline.

Strong Titles Benefit from Higher Competitive Pricing
Strong titles (number one or number two in the category) will benefit from higher pricing by their competitors. People is a good example.

Monthlies Have Been Marginalized at Checkout
As the influence of weekly titles has grown, it has adversely affected the sales of monthly publications, especially the more mature women’s titles.

Publications with High Newsstand Circ Ratios Ascend
All the top 10 publications have newsstand-to-subscription circ ratios greater than 40 percent and high subscription pricing—this was not so eight years ago. It now appears as if there is no longer room at the upper echelons of the newsstand market for titles whose circ is top-heavy with deeply discounted subscriptions.

Wrapping Up
The magazine newsstand market, although battered by a brutal economic downturn, mirrors the faults, vulnerabilities and strengths of consumer magazines. It serves a diverse group of titles, but only a few leaders set the market sales parameters. It’s a mature (zero-revenue based) business with few prospects for growth. It’s not homogeneous, rather it’s a market that offers multiple channels of sale—each with their own unique characteristics. It’s a price sensitive market, but, perhaps, not as severely sensitive as subscription circulation. In a weak economy the adverse effect of cover price increases are exaggerated. It’s a constantly evolving marketplace. Witness how the changing mix of leading newsstand publications modifies the checkout sales paradigm. It exposes the vulnerability of large circulation monthly frequency checkout titles, publications with low newsstand sales ranks and titles that persist in sustaining bloated circ levels with marginal subscription circulation. The newsstand market is a mean, but often fair, mistress.