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The Saga of the American Newsstand: Newsstand Innovation Vs. Other Innovation in Media. The Man Who Wants to Save the Newsstand. Part Three of the Mr. Magazine™ Interview with Luke Magerko

August 19, 2013

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A fair question: Are the innovations in the single copy sales of American magazines keeping up with the pace of the innovations in the electronic field? A fair answer, from a man who wants to save the newsstands, Luke Magerko, is a resounding NO. So, in this third part of my interviews with Luke about the newsstands I decided to look at a growing industry on the periphery of publishing. Working with Luke, we assembled a simple timeline of major innovations in personal digital assistants (remember those?) since 2000, focusing on the Blackberry, the smartphone, iPad and touch screen devices. These devices dominate our world and have legitimately decimated some and impacted other magazine categories, if not all magazine categories. (See the list at the end of this blog entry).


SO MY FIRST QUESTION TO LUKE WAS, WHY START WITH THE YEAR 2000?

In October 2000, Cathie Black, the former Hearst Magazines President, was quoted at the AMC Conference by the New Single Copy. She said: “[the industry must] make sure we really understand scan-based trading (“SBT”) before we implement it, and make sure that the system accepts new products.” The publishing industry has been stuck in this same operational morass for more than 4,500 days. The leaders of this industry should be embarrassed that this is still an issue.

WHY ARE YOU COMPARING PRINT TO ELECTRONICS?
I want publishers to focus on the concept of competition. For example, the Blackberry was an unrivaled success, and then competitors duplicated and enhanced similar products for customer satisfaction. Apple’s iPod and iPhone were unrivaled before Google Android and Samsung became power players. In this competitive set, each company tries to grow their business by outperforming each other.

WHAT ARE YOU ADDRESSING TODAY?
Publishers should ask its newsstand leadership, its wholesalers, and its consultants how they have tried to outperform each other at retail in the past two decades. Publishers are not going to like the answers they receive because they will hear a series of industry platitudes and excuses.

In the 1990s, publishers were told sales declines were caused by the expansion of gum, candy, salty snacks, and soda coolers at checkouts. The industry response was to defend checkout space by raising cover prices and paying more for checkout space in the form of higher placement fees. The result: even more sales erosion.

The 2000s brought us 9/11 in the first half of the decade and a recession in the second. The publisher response again was to pay higher fees to maintain the ever-shrinking checkout space. But two important events conspired against raising prices to offset these fees. It is impossible to raise prices in a severe recession. Also, because publishers initially embraced free internet content, it is equally difficult to raise cover prices; therefore the industry is in more peril today than ever before.

THIS IS NOT REALLY A FAIR COMPARISON – ELECTRONICS BECAME UBIQUITOUS AND PRINT, IN SOME PEOPLE’S MIND, IS DYING!
I can point out a print industry that is doing anything but dying: Diamond Comic Distributors is the sole distributor of comics to comic shops in the United States and Canada. I was privileged to work with them from 2011 – 2013, and they taught me a great deal about the publisher/distributor/retailer relationship. The symbiotic relationship reinvigorated the comic book industry after the 2008 recession, the same time magazine sales continued to decline.

Below, is a chart of comic retail sales by month dating back to 1999. I want to thank The Comic Chronicles for their work reporting data to the comic industry. This, and many more reports, are found at their website http://www.comicchron.com.

Top-Selling Comic Books and Trade Paperbacks Ordered by Comics Shops in North America (in $)
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The chart makes three points. 1) While there was a small decline after 9/11, sales resumed their normal pace quickly thereafter. 2) Comic sales were hurt as badly as magazines from mid-2009 through mid–2011. 3) Look at the sharp increase in DC Comics sales (red) in late 2011, and the Marvel Comics sales spike (yellow) in 2012. I highlighted the growth in with green circles.

WHY DID DC SALES SPIKE?

In August, 2011, DC Comics launched the New 52, a brilliantly-conceived editorial change described by one industry leader as “the biggest development for DC Comics since 1985 and…may, in fact, be the company’s biggest development ever.” (http://screenrant.com/dc-universe-reboot-justice-league-film-benm-117890/)

DC Comics Senior Vice President of Sales Bob Wayne described the change:
“[T]he new #1s will introduce readers to a more modern, diverse DC Universe, with some character variations in appearance, origin and age. All stories will be grounded in each character’s legend – but will relate to real world situations, interactions, tragedy and triumph.” (http://screenrant.com/dc-universe-reboot-justice-league-film-benm-117890/)

ONE EDITORIAL CHANGE CAUSED SUCH A BIG SPIKE?

Partially. The second largest comic publisher developed a revolutionary new concept and, working hand-in-hand with Diamond Comic Distributors, successfully rolled out the biggest thing in comics flawlessly. I was working on other projects for Diamond, but I witnessed remarkable competency from both companies.

WHAT HAPPENED WITH MARVEL IN LATE 2012?

Marvel NOW! was a relaunch of the Marvel comic line. Marvel editor-in-chief Axel Alonso differentiated Marvel NOW! from DC Comics’ in an interview with Entertainment Weekly. “This ain’t a reboot. It’s a new beginning…every week you can go into a comic book store and find a few new jumping-on points for the Marvel Universe, a place you’re going to like visiting. Or revisiting.” (http://popwatch.ew.com/2012/07/03/marvel-now-jean-grey-exclusive/).

HOW DO YOU RELATE THIS TO MAGAZINES?

First, let me pose a question to you: can you think of the last major change in the magazine business where a publisher worked closely with its national distributor, its consultant and its wholesaler to make a positive difference in existing titles? You will be hard pressed to come up with one.

Second, and I will elaborate on this in upcoming sessions: the current level of distrust and animosity between supply chain “partners” guarantees that nothing like the Diamond/DC and Marvel success will ever happen unless major changes come to pass.

ARE MAGAZINE PUBLISHERS OUT OF IDEAS?

No. Think of your roundtable meeting with the CEOs at PBAA. The major publisher CEOs have great ideas and want to implement them. Smaller publishers are coming out with new products all the time and are looking to expand distribution and have ideas of their own.

SO WHERE IS THE EPICENTER OF THE PROBLEM?

Publishers are, without question, the second-most important player in the magazine supply chain behind the retailer. Due to a series of unwise business decisions, publishers ceded their authority to consultants, national distributors, wholesalers and a myriad of other middlemen. Each one of these middlemen have different agendas, so any major change is blocked, delayed or just killed in the gauntlet set up by these entities.

For the next few weeks, I will focus on publisher challenges and opportunities. This week, I ask publishers to consider the following: most publishers (knowingly or unknowingly) employ most or all of the following agents:
• Wholesalers
• RDA Consultants
• National Distributors
• Publisher Consultants
• IPDA
• MAGNET
I ask publishers to please answer the following questions for each entity:
1.) Which of these groups are part of my supply chain?

2.) What purpose does each entity serve?

3.) How much do we pay each group?

4.) What is the publisher’s profitability after paying for three, four, five, six or seven agents?

5.) Have there been times publisher proposed a marketing plan but was prevented by any of the entities other than the retailer?

6.) Was the negative response plausible to the publisher?

7.) Does my publisher consultant and national distributor prioritize my business, and are they working in a way that makes me most profitable?

This is just the beginning, Luke Magerko has still plenty to say in this continuing, yet very important saga of the American Newsstands… Stay Tuned.

The Ever Changing Electronic and Digital Market

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