Pass-Through RDA: A Wave of the Future?

What a revived interest in Retail Display Allowance might mean for the industry.

By Linda Ruth
Sunday, April 1, 2012

Only a few weeks ago, a publisher friend of mine speculated that one of the changes we might see, industry-wide, consequent to the purchase of the Comag Marketing Group by the Pattison Group, is pass-through RDA. Now we hear that Condé Nast and Hearst, the former co-owners of Comag, have asked wholesalers and retailers to work with them on pass-through RDA, which began in April.

What Does This Mean for the Rest of Us?

RDA is Retail Display Allowance, and everyone loves to hate it. The red tape that goes with administering the program ends up costing so much over the 10 percent allowance that, for years, channel members have questioned its post-sale administration. Why not just pass it through?

Historically, there are several reasons for the way RDA is handled. When it was first implemented way back before practically any of us were in this business, it wasn’t a universal incentive. It was meant to be a special allowance from publisher to retailer, granted in return for full-cover display. Over time, the full-cover display aspect of the agreement got lost in the shuffle, but for many years RDA was not universally claimed. Publishers would often only grant it to their more important chains and deny it to independents or small chains.

The rise of RDA consultants, who worked for the retailers, and the appearance of independent coops for the purpose of collecting RDA created a new norm: 100 percent RDA collected. This opened the door to the possibility of pass-through RDA with no loss in discount to the publisher, who was already paying in full.

A couple of things still stood in the way. First, RDA was one way of collecting sales information by wholesaler—something that couldn’t, at that time, be done on a national level. The sales information wasn’t always wholly accurate or reliable, but hey, it was better than nothing, and publishers were reluctant to let that go.

Publishers also feared that, once the RDA was built into the discount, it would lead to another round of discount or incentive demands. When comic book publishers, for example, increased the discount to the wholesaler agencies with the understanding that 10 percent was to be passed through to the retailers, somehow that extra 10 percent got stuck at the wholesaler level. In case you wonder why comic books work on a bigger discount system than other periodicals (if you ever did wonder), this is one of the reasons (and there are others, of course).

All that happened many years ago. More recently, some retailers have mandated an up-front RDA payment, but the administration of it is far from simple. Rather than allowing that RDA to flow through from the discount and be applied as copies are sold, it is estimated up front based on previous quarters’ sales and adjusted afterward, based on actual sales. In case you have ever wondered why your RDA payments appeared to be applied to more than 100 percent of your sold copies, this is one of the reasons.

Our business is so different today than it was when RDA was created and the way it is administered developed. We have only a few wholesalers left; those wholesalers manage their discounts to retailers in ways that really don’t include publishers in the way they once did. We have, through MagNet, a way of determining national sales by chain more effectively than tracking RDA claims offered.

With so much changing, it does appear to be time for RDA to change as well. Perhaps in the field of RDA, Condé Nast and Hearst will show the way for the rest of us.

Linda Ruth is Principal of Publisher Single Copy Sales Services. Her book of case studies, “How to Market Your Magazine on the Newsstand,” is available at BookDojo.com and at Amazon.