Look Beneath the Covers; Magazines' Distribution Model Is Broken, Too

(MoneyWatch)  The big, depressing news in the magazine industry today is that, according to the Audit Bureau of Circulations, newsstand sales are down 11 percent. But there's another story that most media have completely overlooked: that the supply chain which gets those magazines on newsstands is itself broken, with one major distributor, Anderson News, suspending operations last Saturday.

Anderson's suspension of operations stems from a decision by it, and the other major distributor, Source Interlink (which is also a publisher of enthusiast magazines), to leverage a fee of 7 cents per copy to distribute magazines to retailers. According to Mediaweek, leveraging such a fee would cost the already-hobbled magazine industry another $150 million. Even as the distributors said they needed to charge the additional fee to stay in business, some major publishers, including Time Inc. balked. In fact, Source Interlink has now backed off the idea of charging the additional fee. The stalemate means that many major retailers -- including this little store called Wal-Mart -- aren't getting major magazines, like People. Together, Anderson and Source Interlink make up approximately 50 percent of the magazine distribution business.

At this writing, it's unclear who will blink first, but what's truly alarming about this, from the standpoint of the magazine industry, is that, in the near-term, several major publishers have decided that distributing their magazines as far and wide as they are accustomed to isn't worth an extra 7 cents per issue. As Mediaweek reminds us, one of the big issues that may get caught in the crossfire is Sports Illustrated's annual swimsuit issue, which goes on magazine racks today. Publishers maintain that the drop-off in newsstand sales will be small, and that they will be able to get magazines to the shelf via other distributors, but when newsstand sales have already dropped by double-digits, it's certainly not a position they want to be in.

On a separate note, that also speaks to the crisis in the magazine industry, Ad Age reports that Hachette Filipacchi Media U.S. has decided to drop its membership in the Magazine Publishers Association, the leading industry trade group, citing the high cost. There's lot of news in the magazine industry these days, seemingly none of it good.