In much the same way that the digital ad industry is dominated by the Facebook/Google duopoly, the newsstand distribution model is largely run by two major wholesalers who handle around 90% of retail magazine distribution. This untenable situation has one major publisher seeking alternatives.
“Bauer Media USA, publisher of newsstand and supermarket checkout mainstays Woman’s World and First for Women—the number-one and number-two best-selling magazines, respectively, at retail in the U.S.—has retained advisory firm FTI Consulting to lead a formal RFP process, soliciting bids from wholesalers who distribute other products, like consumer packaged goods, to supermarkets and retail outlets, but not periodicals,” writes Greg Dool in Folio:.
It’s not entirely unexpected. Magazine publishers basically told TNG to get lost last fall when the distributor asked publishers to pony up to fix things. There was much talk then of “alternative distribution systems” as publishers pushed back against an overly complicated and inefficient system. Bauer Media is also increasingly alarmed at the prospect of their reduced bargaining power and what it means to terms and pricing.
“The larger of the two wholesalers, with 70–75% of total market share, according to most estimates, The News Group first began charging publishers fees of up to 8 cents-per-copy distributed to retailers in 2014 (when it controlled around 50% of the market), echoing an earlier 2009 attempt by wholesaler Anderson News, which was rebuffed by publishers, effectively forcing Anderson out of business,” Dool writes. “The subsequent collapse of Source Interlink Distribution, in 2014, left TNG and Hudson as the only major wholesalers still serving a critical element of the supply chain.
“Emerging victorious from the ‘brutal wholesaling war of attrition,’ as newsstand expert Baird Davis described it, TNG upped its standard discount to as much as 60% off the cover price for new clients and again raised per-copy surcharges on some publishers, according to multiple industry sources, arguing that it required a cash infusion to remain viable amid plummeting newsstand sales and that publishers needed to reinvest in retail as a distribution channel,” Dool continues. “Those developments preceded TNG’s sale, last November, to American Media Inc. backer Chatham Asset Management, after which TNG was rebranded as the American News Company.”
This makes a whole lot of sense. It’s a new age of distribution, for everything from kayaks to cupcakes. Why should magazines be any different? The newsstand channel has been broken for years, and this continued consolidation does nothing to “fix” things in a truly positive way.
I’ll be watching this with interest to see where it goes. At the very least, Bauer Media has sent an unmistakable warning shot across the newsstand duopoly’s bow.