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Distribution 2020: The ACT 7 Experience Brings Getting Your Magazine In The Hands Of Its Readers Front & Center…Linda Ruth Reporting…

May 7, 2017

Right to left, Sebastian Raatz, Executive VP, Bauer Publishing, USA, Jay Annis, VP/Business Manager, Hello & Hola! Media Inc.; Steve Crowe, VP/Consumer Marketing, Meredith;William Michalopoulos, VP/Retail Sales & Marketing, PubWorX; Curtis Packer, Director of Promotions, OTG; and Samir Husni.

At the first full day of Dr. Samir Husni’s ACT 7 Experience at the University of Mississippi, many of the challenges facing magazine publishers were outlined. “But we are not in the problem business,” Husni told the audience. “We’re in the solution business.

“The problem is not the ink on paper,” he continued. “The problem is what are we putting on the ink on paper. If we are still doing things the way we were pre-digital, we have a problem.”

With this in mind, he assembled and moderated a team of experts on the last day of the ACT 7 Experience (April 27, 2017) to address these problems: Jay Annis, VP/Business Manager, Hello & Hola! Media Inc.; Steve Crowe, VP/Consumer Marketing, Meredith;William Michalopoulos, VP/Retail Sales & Marketing, PubWorX; Curtis Packer, Director of Promotions, OTG; Sebastian Raatz, Executive VP, Bauer Publishing, USA. What follows is an important excerpt from that discussion panel:

Husni: Popular wisdom has it that it doesn’t make sense to launch a magazine anymore, the problems are rife. Does it still make sense, for example, to use direct mail?

Crowe: At Meredith, direct mail still makes sense for us. For The Magnolia Journal, direct mail response was through the roof. Meredith has existing channels, and Magnolia was able to bring a channel of its own. From day one, response was amazing. It helps to start with a well-known brand, and a channel.

Michalopoulos: To say print is dead is ridiculous. Hearst is launching Air BNB, a digital property that wants a print presence.

Raatz: I cringe to hear that “print is not dead.” It brings to mind the Saturn ad saying that the brand is going away. The push back makes it sound as if print’s continuing existence is debatable. It isn’t. Coming up with great magazine ideas is not any harder than it used to be. Magazines that fail, fail faster, leaving less damage in their wake. Magazines with great content and curation will still succeed. But the dialog about failure makes it that much harder to get into launch mode.

Husni: How easy is it to launch a magazine?

Annis: Go back to 2008 and look at the decline since then. It isn’t all that different from what happened to other merchandise categories in the same stores. The difference is that the retailers are reading about it, from us. The coverage makes them believe it is digital, as opposed to the recession, that has brought down print. So they are cutting back on display, on space, and that is contributing to the problem. When we launched Hola, we had a limited distribution, we targeted the Spanish-speaking market. We used our money to target display in that market. Four issues in, with a limited distribution, we’re selling 20-25,000 copies. And we found a few distributors who only target that market, and they make up a third of their sales. Looking at their formula will be part of the solution going into the future.

Husni: From a retailer point of view, how is distribution changing?

Packer: OTG is an airport retailer, and in airports the majority of sales are still magazines. We use technology to support magazine sales. You can order them right off our app, and one of our crew members will bring it right to your table. We want to expand that out to subscriptions, for example. We bring magazines out of stores and we put them in the food halls. You can buy magazines while you wait for your food. In our busiest airport, Newark, 25% of the magazine sales come from the OTG Quick-Serve restaurants.

Husni: What is the difference between a successful direct mail campaign and junk mail?

Crowe: Editors want beautiful packages. We do a lot of testing. We use premiums and get it to the customer first. It’s a transactional piece.

Husni: Have you seen a change in the response rate since the dawn of the digital age?

Crowe: They’ve held for some time.

Husni: How are you using digital to enhance direct mail?

Crowe: We promote special offers if you go online. Some groups are responsive, some less so, but we want people to start transacting with us online.

Michalopoulos: On the newsstand side, we push out regional emails about events where publications are being sold. Targets through email lists the promotion of a particular issue in a particular area.

Annis: We have over a quarter million followers on Facebook since August. Traditionally, Facebook followers want everything for free, but we’re going to be testing direct mail packages online. We can deliver our message to the customers’ phones while they wait at checkout; we can message them a special offer when they pass the magazine section. Or, here’s an idea: use drones to drop packages on every household! (Laughter)

Husni: We’ve been speaking about “audience first.” How are you using the audience data that is available?

Raatz: Bauer has always launched magazines, less on data and more on an understanding of our consumer, based on anecdotal evidence—deriving from our conversation with our existing audience members. Front-end magazines are impulse purchases. If you overlay smartphone adoption rates with checkout sales, as the one grew the other declined. This didn’t affect mainline sales, but the market for smartphones is pretty saturated right now. Presumably the checkout decline will level off.

Husni: Who is to blame for that decline?

Michalopoulos: Merchandising is a huge problem. When you go into a store, you encounter out of stocks, empty wire, old issues on sale—and, at the publisher level, still a lack of information. The rubber meets the road at the store level, at the merchandising level. And it’s a big, big problem. We’re seeing less of a drop off in airports and bookstores because they are doing a better job merchandising. We’ve heard that people are making more frequent, smaller trips to the stores, fill-in trips—so we need to change up the mix at the front end so it turns more frequently, so the more frequent shopper is offered new products. There needs to be a way to address that mix.

Packer: I am passionate about magazines, so I don’t accept less than 100% compliance. I don’t think industry members are doing a great job of sending the message of why magazines are great. Publishers are concerned about putting out a product, but often have nothing to do with the content or the cover. It’s got to be all about the customer, not about the publisher. What does the customer want?

Annis: We deliver the magazine to the wholesaler, the wholesaler to the retailer, the merchandiser comes in and puts it up. We spend millions of hours, millions of dollars, creating content and getting it out, and leaving it in the hands of a high-turnover merchandiser to put the magazine out in the correct way into the pockets we’ve bought. It isn’t happening. The secondary distributors have a different, maybe a better model—all of their drivers also do the merchandising, and they are on commission, so they take an interest in how things are put out, how the rack is dressed. This could be part of the solution. People who have skin in the game will do a better job.

Husni: Why do we hear nothing but doom and gloom from our own people?

Crowe: The publishers are so removed, so much of the whole process is outsourced.

Annis: We need to get back out in front of retailers. If we took 1% of our sales, we would have $3 million for an advertising campaign to the retailers, to convince them to treat magazines differently. Our business is not down the way you think. Look at the retailers that have kept the space, they have done much better.

Husni: We see Hearst and Conde Nast teaming up—tell us about that.

Michalopoulos: They have combined both staffs of consumer marketing, production, fulfillment, allowing us to handle outside clients. We’ve acquired ProCirc. We’re looking to see if there are opportunities with retailers. Consumer Reports is partnering with Good Housekeeping to sample a wider audience. PubWorks can create these opportunities.

Packer: Publishers need to understand the changing nature of the business. I will not take a magazine under $4 anymore—it just isn’t worth it, it takes up too much space. I sell a ton of Monocle, of Harvard Business Review. It’s time for publishers to start recognizing the premium value of what they offer people, as opposed to treating magazines as a throwaway product created for the advertising. Terminals will become a larger and larger part of the business, because traffic in airports is continuing to grow. And magazines are still the biggest part of the retail revenue in airports.

Crowe: Meredith is 90% subscriptions, so newsstand is relatively inconsequential. The volume is not what we’re worried about, we want to drive efficiencies. We do have our line of SIPS which do more on newsstands.

Husni: Time Inc. puts out 150 so-called “book-a-zines” a year now. Many other publishers are doing them as well. Do you think that is impacting the sale of the regular magazines on the newsstand?

Raatz: It’s certainly affecting units. Is it affecting dollars? At those cover prices, probably not.

Crowe: If they take one of our book-a-zines instead of a cheaper, rate-base title—so be it. It’s still a win.

Husni: Do we need rate base, or is that an antiquated business model?

Crowe: For now my boss is telling me to make the rate base. Our goals are to make profit and to make rate base.

BoSacks (from audience): I’d like to offer a billion dollar idea: how about 100% sell through, no returns?

Annis: We ship Hola Espana Weekly to certain markets, and have two wholesalers with very high discounts, no returns. It hasn’t been sustainable for them.The solution might be a hybrid: we’ll send 100 copies, you have to pay for at least 65 of them.

Raatz: Sell through is a huge issue. We have trained consumers to buy magazines based on abundant display. European shoppers, by comparison, know there is just one big beautiful section in a store with magazines, as opposed to, for example, 24 pockets at checkout. The average sell through in the U.S. is about the same as the average return rate in Europe.

Husni: Can you do this in the U.S.?

Raatz: I don’t think it’s a distribution question, I think it’s a consumer expectation question. In Costco, there is one deep pocket and efficiencies are higher. But do we tell Wal-Mart to take away all of its pockets at checkout and put them in one place in the store?

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