Fulfillment Presidents Panel Discusses State of the Industry

FMA luncheon event highlights 'value partner' concept for providers.

By Bill Mickey
Wednesday, January 27, 2010

New York—At an FMA luncheon held at the Princeton Club in Manhattan, a 'presidents panel,' made up of leaders from five of the industry's fulfillment providers, provided some perspective on publisher fulfillment needs and where services are headed. Maintaining a transactional relationship to support legacy systems while moving toward one that enables publishers to make more money was a key focus of conversation.

Panelists [pictured below], which included ARGI CEO Ray Butkus, ESP VP Michael Jordan, CDS Gobal CEO Malcom Netburn, Strategic Fulfillment Group president Tony Pytlak, and Palm Coast Data EVP Mike Taschler, framed much of the talk in the context of "surviving" in today's media market. While the majority of panelists cited shrinking file sizes, one area of was up across the board—digital.

Nevertheless, CDS's Netburn described fulfillment services as "commoditized" and stressed the need to make sure "our industry survives—not thrives."

ARGI's Butkus continued in that vein, highlighting the trend most media companies faced in the last couple years, massive cost-cutting. "We're linked to a function that's perceived as a necessary evil. What you do with a necessary evil is you try to control costs. That's what we all here have faced."

Butkus added that while the core services fulfillment companies provide are on target, clients still see opportunity to try to negotiate lower pricing. "In more cases than not, the perception is that services are good, but there's an acknowledgement that fees are too much and have to be reduced. It's a fundamental flaw."

The discussion of pinched revenues continued as ESP's Jordan described a reluctant focus on collections and slow payments coming in from clients. "It frankly caught us by surprise," he said, adding that 24 client titles closed last year.

SFG's Pytlak added that pricing for traditional fulfillment services is one thing, but clients are simultaneously needing service upgrades to accommodate multi-platform brand expansions, which puts further pressure on already slim margins.

From there, the conversation quickly moved to how those brand extensions are impacting fulfillment. Netburn sees opportunity here to begin to transform the client/provider relationship. "We've got to deliver on what's going to drive value to [the publisher] in order for us to be successful. It's finally achieving what I've hoped to become and that's a value partner rather than a transactional relationship."

Moderator Joe Furgiuele, principal of consulting firm Furgiuele & Company, challenged the panelists to explain why they're not more like Amazon. That question was quickly dispatched by Butkus who explained that companies like Amazon had the benefit of starting with a greenfield and no legacy business. "If we were going to reinvent the business to be the value partner, we would not reinvent it the way it is," he said.

Yet Furgieuele pressed for more details on new services from the providers, noting that "I feel like it's been coming awfully slowly. We've been talking about this ad nauseum."

Butkus countered that the industry is dealing with trends that it's never had to deal with before, yet fulfillment providers must be in a position to help publishers make more money. "How do content developers want to make more money? We have to figure out how to facilitate that. That's very different than being 2 percent cheaper on a call. No one believes that you'll survive by selling more ads and increasing circulation, those days are gone."

Netburn then jolted the panel by saying that "the days of us owning the data are over," noting that, while certain customer information is "owned" by the publisher and fulfillment provider, there is much more data available that third parties are encroaching on—Amazon's lock on customer data was cited as one example, and Apple's presumed iTunes content model for its just announced iPad was another.