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The Newsstand Is Nearing Endangered Species Status

One-third of revenue has been lost since 2007.

Baird Davis By Baird Davis
02/22/2012 -03:00 PM

The newsstand sales slide continues to gain pace. The decline is of serious concern—it now far exceeds general economic parameters. As a result, this persistence and severity are beginning to have some unanticipated and adverse consequences. In this piece we’ll explore those consequences and offer thoughts on how they might be neutralized.

It’s estimated, based on preliminary ABC and BPA data, that unit sales of audited publications fell 11.9 percent and revenue dropped 11.8 percent in the second half of last year. Since 2007 (the last “good” year), the newsstand industry has lost a third of its revenue and 40 percent of its unit sales.

The effects of this steep decline are being felt across the whole spectrum of the newsstand channel. Every major channel participant is hunkering down—new title launches of audited publications have nearly dried up; publishers have reduced their newsstand promotional spending; national distributors have trimmed staffs and services; wholesalers, in an attempt to meet lower revenue realities, have reduced services; meanwhile retailers are growing increasingly weary of the entire magazine situation.

Future Sales Prospects—Not So Rosy

Assuming a continuation of this sales trend, the long-range implications for the industry are decidedly not rosy. If, for example, industry sales declined at a 10 percent annual rate over the next three years, as they have for the preceding three years, unit sales and revenue would fall another 27 percent. You don’t have to be an expert to understand that an industry in 2015 generating 57 percent less revenue than it had in 2007 will be substantially weakened.

Viral Newsstand Conditions

Second half sales graphically reveal some of the aberrations resulting from over three years of falling sales. The decline has affected nearly every magazine category, some more than others, and its definitely diminishing hope of recovery. Newsstand market conditions have gone viral and, in a real sense, the decline is now feeding on itself. Several examples illustrate this phenomenon:

Celebrity and Tabloid Titles:
This category of eight titles (People, US, In Touch, Star, Life & Style, OK!, National Enquirer, Globe) accounted for 38 percent of units sold and 37 percent of the revenue of audited publications in the second half of last year. They represent 8 of the top 10 leading newsstand revenue generating publications. They “drive” the newsstand industry as only weekly frequency publications can. In effect, these titles replaced, starting in the 1990’s, the incomparable TV Guide as the industry’s bellwether. To understand the newsstand industry is to understand the outsized effect these titles have on the performance of the entire channel. In the second half of last year their combined unit sales were down 12 percent.

As disappointing as this is, things could potentially get worse for this category in the future. The celebrity category, given current conditions, will probably have difficulty economically supporting eight titles. It’s a distinct possibility that one or two of the "lesser" titles in the category could be discontinued. If that were to happen, it’s highly unlikely the “lost” sales of the discontinued publications could be absorbed by the remaining titles in the category. An even less likely prospect for filling the void would be the launch of a new publication with the mass appeal to sell 300,000 to 400,000 weekly copies. Sales of celebrity titles have reached the saturation point. The industry’s bellwether category is in jeopardy and there’s no apparent relief in sight.

Soap Opera Titles:
This once robust category is on the verge of being extinct, comparable to the demise of computer magazines in the early 2000’s. Bauer recently removed their two soap titles, Soaps In-depth ABC, Soaps In-depth CBS, from being audited. Sales of the other two audited soap titles, managed by American Media, Inc., Soap Opera Digest and Soap Opera Weekly, were down 17 percent in the second half.

The TV networks have closed four soap shows in the last several years. I believe only three or four remain on network TV. Ten years ago the five soap titles (at the time) were a newsstand factor representing nearly five percent of the industry’s sales revenue of audited publications. Their rapid demise is making a serious contribution to the industry’s sales decline.

Teen Category:
Seventeen (down 6 percent) is doing relatively well, but the four other audited teen titles (J-14, M, Twist, Teen Vogue) are suffering a serious sales drought—sales off about 20 percent in the second half of last year and down nearly 40 percent since 2007. Although it’s not a large sales category, accounting for less that one percent of unit sales, their lack of sales presence is having an effect on industry performance. Reduced sales are probably an accurate indicator of the rising difficulty publishers are having in reaching young people (both female and male) on the newsstand.

Impact of TV Exposure: In the second half we witnessed the incredible power of TV to influence the newsstand sales of certain titles. On the negative side is the precipitous decline of two major newsstand titles—O, the Oprah Magazine sales (off 32 percent), previously the second highest selling monthly publication, and Martha Stewart Living (off 17 percent). Their steep sales declines can be directly attributed to less TV exposure for their famous namesakes.

Two titles have recently benefited from TV support, although not nearly enough to offset the Oprah and Martha losses—Food Network (up 16 percent) and Hearst's new HGTV publication. Publications that owe at least some of their popularity to another medium, or to a specific personality, have always been especially vulnerable to changing media tastes. The fickle nature of this has never been more apparent than it is today.

Hearst/Conde Nast/Pattison to the Rescue?

Newsstand conditions are nearing, or may have reached, a critical juncture. The wicked combination of an economic slowdown, a wealth of new electronic media options, changing buyer patterns, an increasingly timid set of defensive minded newsstand channel participants, and now, a viral sales slide that’s feeding on itself are fueling a sales decline of epic proportions.

Given these circumstances it couldn’t have been too surprising that ubber publishers Hearst and Conde Nast recently exited the national distributor business by selling Comag, their jointly owned distributor company, to the Pattison Group. After more than 50 years of internecine wars a Hatfield (wholesaler) and a McCoy (national distributor) are now (more or less) partners. Circumstances certainly make for strange bedfellows. On the surface it’s kind of an odd marriage, but it might be the most encouraging newsstand development in many, many decades.

We don’t know, of course, that the Comag/Pattison deal will positively effect channel operations, but it certainly has interesting potential. What we do know, however, is that without comprehensive reform the newsstand industry simply can’t resolve the serious problems that plague it. This deal could be the long anticipated catalyst for reform. It’s already set an important precedent for bridging the differences that divide wholesalers and national distributors. But the industry is still a long way from meaningful reform. In order to eliminate duplication of effort, reduce expenses and level the playing field with retailers, it’s going to require an unprecedented level of cooperation between wholesalers, national distributors and their publishing partners.

At this juncture I believe the burden for reform lies primarily on the shoulders of the seven major newsstand publishing companies—Time Inc., Hearst, Conde Nast, Wenner, American Media, Bauer and Meredith – with perhaps an enhanced degree of responsibility on newsstand sales leader Time Inc.

It’s now a matter of putting differences aside and acting unselfishly to preserve a newsstand channel that has turned dangerously viral. Hearst, Conde Nast and Pattison started the ball rolling. Now, the fate of the fragile newsstand lies in the hands of what hopefully will be parties that are not solely interested in self-preservation, but rather are focused on the protection of the endangered newsstand channel. If not, there may no longer be an adequate channel for the retail sale of magazines.

Dear Publishers—let’s get it together and save an endangered species.

Baird Davis is a senior consultant with Circulation Specialists.

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