PMP, the parent company of magazine distributor Gordon & Gotch, issued a profit downgrade on Thursday. The margin in the printing and distribution business is slim even in good times so the tough last quarter of 2011 has taken its toll.
The challenge for newsagents is that the Gotch part of PMP makes most of its money handling magazines – what they supply to us and what we return. yes, as I understand it there are often fees for product going out and coming in.
Gotch is currently in a purple patch when it comes to distribution. Oversupply is up and customer service is down. If they cut costs in the Gotch operation I’d expect both to get worse and newsagent support to decline further. This will ultimately affect the publishers Gotch can attract to their stable.
As someone in a magazine distribution business and familiar with their financial model commented to me recently – who’d be a magazine distributor?
Mark
While I understand your concerns about what the impact of PMP’s profit warning will be on the corrupted distribution system – lets call a spade a spade when companies are manipulating a system for for their own ends the system isn’t broken it’s corrupted – there is some good news in the fact that with the loss of the printing contracts for Pacific Magazines ( Seven Media Group purchased Pacific Magazines from PMP in 2001 with PMP retaining printing and distribution for 10 years) Seven Media now has a lot more leverage over PMP and as the distribution problems affect both publishers and retailers a bit of pressure from the top down may be a lot more effective than pressure from the bottom up. Then again I might just be dreaming
just means more oversupply to make up for the loss profit elsewhere. prepare for a deluge…….
One thing I’d suggest as a regular reader of this blog is the Gordon & Gotch and PMP businesses are poorly managed; hence the over supply and general all round incompetence over issues like returns.
As we’re seeing in other industries, while capital was cheap and markets were rising it was easy for substandard management to appear competent.
Now the tides have turned, we’re seeing which management teams are less than well endowed in the talent department.
It’s going to be interesting to see what companies fail as the post GFC, credit constrained business world evolves.
The thing is Paul that oversupply serves the requirements of their business.
Every step of the way there is a clip, or fee, they make. Inefficiency is their friend.
One publisher told me the other day that G&G were a week late in sending back unsold stock and this resulted in another week of warehousing fees – for their own inefficiency.
All that noted, I agree – the ever tightening of credit availability will force businesses to be good businesses by being accountable.