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Distribution newsagents given a delivery fee increase by News Corp.

Screen Shot 2015-02-26 at 9.31.04 pmNews Corp. has advised distribution newsagents in QLD of the results of its annual distribution fee review. While not probably as much as some were hoping for, any increase is better than nothing.

Some said that the structure of the fees is a problem, and that distribution newsagents are not keeping up.

In the announcement, News made a couple of other interesting comments on their plans:

News Corp Australia has implemented cover price increases on all of our mastheads in the last 12 months and we intend to continue this in the forthcoming year. This has, and will continue to add additional revenue to the home deliveries and retail side of newsagency businesses.

We will also be continuing our highly successful series of collectable promotions which have generated considerable circulation increases and incremental merchandise sales, along with incremental distribution revenue.

You can access the News Corp. announcement here.

FYI I’m not endorsing or promoting the review, only sharing the results.

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  1. James

    That’s not a review Mark, that’s one year of cpi after 2 years on no increase and nothing less than another complete slap down for the industry. In Victoria, VANA invested significant industry funds in consulting and compiling a comprehensive and considered submission. If Vics review is similar to this then that has been completely ignored…..again. This includes information on the cost of providing the service. And yet News Corp knowingly choose to pay less than cost. Time for the industry associations to get serious and stop taking this treatment lying down.

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  2. shauns

    Not even one cent , or am I not reading that properly . Get rid of your runs sell a few snicker bars and coke deals in the morning with a paper and sleep in .

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  3. Mark Fletcher

    James I expect the figures published to reflect those for other states.

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  4. Dean

    The VIC increase is similarly stingy. I thought there must be a typo when I first saw it.

    News Ltd says they are committed to the future of distribution. Their actions suggest otherwise. They know our income is going down, and our costs are going up, yet they give us a rise which will not even come close to meeting our employees’ annual pay rise over the last year let alone rent, electricity, etc.

    We have been buying up delivery rounds when they have become available, and there are a few available now. This review by News has in my opinion actually devalued rounds by 25-50%.

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  5. Mark Fletcher

    Dean I agree with your assessment re the impact on the value of distribution businesses.

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  6. Gary

    $4 increase for 1000 papers, what a joke.

    It’s actually a decrease when you consider the commission lost since the last 2 price rises. Shows how little News thinks about distribution.

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  7. Gary

    just saw bulk size for tomorrow’s Sun is 17, that’s close to 1kg per paper and surely unsafe to throw.

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  8. Mark Fletcher

    I think distribution newsagents ought to be able to set their own fees. The challenge with that is that someone could under cut them. It could be that the current ‘minimum wage’ fee is better than an open marketplace.

    Regardless, there is no upside for distribution. Newsagents who ask me what to do – I say sell, hand it back or close it down unless you are making good money. Tough as they are, they are your alternatives.

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  9. jenny

    Hardly an increase, didn’t we sign with publishers for 25% and 12.5% commissions when we joined this industry?

    Distribution agents could set their own fees and not be under cut as no one else can deliver in their territories.

    If agents charge what they want I am sure most customers would be happy to pay (most are shocked at the current rates) and if not they can pay the publisher direct for a subscription.

    I also think that publishers today probably wouldn’t care what is charged for delivery, considering how many newsagents have dropped their runs over the last few years, plus the belief that there is no long term future in print.

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  10. Dennis Robertson

    When it comes to the real deal of $ remuneration, all of us are just pawns of News Corp.

    They will only ever throw a few shekel’s in the dust, and generally will do what they want because they can. History proves it.

    State off-shoots of Industry bodies can force local News Corp crews to be more communicative and get some system and process changes through, (and that’s a good thing), but nothing will save the Newsagent from having to accept whatever cents News Corp decides to hand out.

    That’s the reality and apparent facts of the matter. Anything else is just simply ….. self-fulfilling noise on the part of Industry Bodies.

    I also do not believe that Small Business Commissioners in some states will do anything tangible to assist.

    At the end of the day if a Distribution Newsagent can cut out a reasonable level of business expenses each year, that’s what really matters and where the focus should be in my opinion. It’s very do-able to be able to follow the decline in circulation numbers down if one is big enough.

    I think News Corp hold that same view in that they understand the consequences of not being able to meet rising costs is that Distribution Newsagents should and must do their bit to cut costs. Nothing wrong with that in my eyes, but they should be very careful not to force a dropping of service levels by Distribution Newsagents who do not have the ability to review and cut expenses.

    On the expansion front,
    News Corp are still looking to kill off smaller Metro Distribution Newsagents in my opinion. The really important thing moving forward is NOT to pay anything for takeovers. I think that’s the message that should be out there for all existing Distribution Newsagents who want to stay in the game. There has to be another way.

    All previous invested capital has been for the sole purpose of buying an income (albeit a diminishing one that faces rising costs). And that’s fine as long as there is acceptance you will not get that investment back at the end of the day in the form of a pot of gold.

    Hint: It’s not going to get better unless something can be done to arrest the falling HD numbers, because that’s where the income is.

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  11. John Fitzpatrick

    Hi All,
    Could Delivery Newsagents from all states (except SA), please share with me your new Delivery Fee Rates for News products?
    Thanks
    John

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  12. Dean

    Victoria:
    Total home delivery fee including fixed distribution fee + retail fee + home delivery fee (this is for Herald Sun) weekdays $0.5338, Saturday $0.7363, Sunday $0.8628, all inc gst.

    This is an increase of a little over $0.01 per day.

    With the $0.10 weekday price rise recently we also got $0.0125 per day price rise for any papers not sold through a subagent.

    With a increase of profit by about $0.02 per day per paper they have to be kidding themselves if this makes any difference to us.

    Our only option is to cut costs, which will have a negative impact on customer service levels, which News Ltd will NOT be happy about.

    If News Ltd want to avoid deteriorating customer service levels by distribution agents, then “show me the money”

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  13. Amanda

    Last week Australia Post announced it was moving the cost of postage to change with the times. Mail home delivery is costing Australia post hundreds of millions of dollars. Consumers have moved from physical to digital postage. Costs have increased, so the cost to the consumer has to increase. It all makes sense.

    The Australia post mail home delivery issues mirror the home deliver of newspapers.

    The FACT of the home delivery of newspapers is that it too as an industry loses millions of dollars. The difference? It is subsidised by husband and wife businesses. Some have lost their business or their homes. The rest are subsidising their runs through the retail side of their business. Others are not drawing a wage from the run.

    If a $1 delivery fee is ok for Australia Post, then why not for newspapers?

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  14. Mark Fletcher

    Yes, newsagents should set their own price for the service. The challenge, however, is the threat that publishers will go to tender.

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  15. ANDY

    Hi Mark
    why would it be a threat if it went to tender it should suit most don’t you think?

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  16. Mark Fletcher

    Andy I’ve been in meetings where publishers have said it as a threat as if they know they could get a quote to do it lower than the newsagent. I’m not saying it is actually a threat – just that it has been put in the past as a threat.

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  17. ANDY

    I would like to see that quote

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  18. Mark Fletcher

    I agree. The thing is, do distribution newsagents want a tender process? As I’ve noted before, there is no upside in distribution in my view. The only way to improve what you make is to cut costs but that often comes at a personal cost. Publishers will treat distribution newsagents poorly as long as distribution newsagents permit this behaviour.

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  19. jenny

    If publishers went to tender they’d stuff the whole system up using cheap non professional labour and would kill home delivery. (Just my opinion)
    Customers will not put up with bad service.

    It’s quite simple, if you make money and are happy doing distribution then continue while it works for you and run your business for yourself, not for anyone else.
    If not give your run back and make your life easier.

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  20. Dean

    If publishers went to tender, they would have to pay the new distributors substantially more than they currently pay newsagents. That is the only reason why they have not gone to tender because they know they are screwing us over. That is also one of reasons T2020 fell over, the quotes coming back would have resulted in News Ltd paying hundreds of millions of dollars more to newsagents nationwide

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  21. Dennis Robertson

    The wild card in a tender process are some of the newcomers from the sub-continent. Some, in this state, are happy to work as Sub-contractors to Distribution Newsagents for below employee rates. From general discussions with them, I doubt they would see a problem in a tender situation in under-cutting everyone else out of the game.

    Of course the intended and un-intended consequences for Publishers would be a degrading of service to levels that would effectively trash the industry and leave customers with a 3rd world service for probably at least 3 years. When the Publishers finally wake up to what’s happening and put belated plans in place for some accountability, it may well be too late and game over. So I agree with others who have voiced similar thoughts.

    Our friends from the Sub-continent are very, very astute at finding an industry and then moving in to displace existing people who maybe asleep at the wheel.

    It’s one of the reasons I’ve said before; that I believe it is incumbent upon Distribution Newsagents to look at reducing expenses so that figure can be added to the yearly remuneration that Publishers choose to pay.

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  22. Amanda

    With respect to your comments Dennis, the game is already over. On the East Coast of Australia home delivery runs are being handed back every week. That is reality. Yes there are some pockets where a distribution agent can still make money, but generally the agent does not draw a sufficient wage from the distribution.

    There are also some who are subsidised by the paper company to continue delivery.

    The major problem with the industry is that too many agents are willing to accept such crap conditions / commissions.

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  23. Dennis Robertson

    Amanda,

    The game is a long way from over. Scale makes the difference.

    As I said, up the page a bit, News Corp are still looking to kill off smaller Dist. Newsagents. From your comments, it’s clearly working on the East Coast.

    I don’t believe a rebellion or revolution by Distribution Newsagents is the right response to unhappiness with conditions/commissions.

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  24. Dean

    I think Amanda and Dennis are both correct, it just depends on the circumstances. If you are small, say 500 home deliveries and 5-15 subagents, then you should consider selling your run or handing it back in. You aren’t really making that much from it unless you are doing the work your self. Your income is dropping rapidly. If you are in the country it may make sense to keep your round as a service to customers, especially if there is another newsagency in town and they don’t have a delivery round.

    If you are larger like us, about 2,000 home deliveries and about 100 subagents then you are making good money. You still have to watch your costs though. Even at this scale your profit is going backwards, so you need to keep buying more territories as they become available. You need to pay no more than 3-12 months earnings for them, depending on the size.

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  25. Dennis Robertson

    Dean,

    In SA we are probably in the low-mid range size.

    We are about half your size in both HD and Subagents. Our best day is Sunday with ~1260 HD throws and 1800 into the Subagents that are open.

    With News Corp choosing to not do enough to cover rising costs/reduced HD income in this latest annual reveal, I believe it imperative to be fairly aggressive in actively reducing costs. I needed to do more than just watch costs.

    To this end, from mid January when it seemed more likely News Corp were going to be miserly in their treatment of Dist. Newsagents I put in place plans to achieve cost reductions of 21% – for the coming 12 months – to the biggest slice of the pie; Staff wages.

    We will achieve this result and it will be achieved with no reduction in service levels at all.

    The past month has seen us operating with only 2 staff instead of 3 on the weekends and on 4 days during the week. On Mondays there will still be 3 staff.

    Adding back those savings and combining it with the shekels from News Corp, makes me happy enough to continue for another year.

    The problem for me and I suspect News Corp as well will be in the ensuing years because it is not possible to continue with that level of savings without impacting upon service levels.

    Fortunately diversification is working for me, so I don’t feel the need to invest more capital in additional rounds. In any event, my own criteria for taking over other rounds is quite disciplined so it doesn’t seem likely. But one should never say never.

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  26. Chris

    These are trying times for Distribution Agents. Sub agent deliveries constitute a large part of any distribution business and yet over the past 12 months we have not received any increase despite the fact that during that time, The Herald Sun has gone up by around 15 per cent. Retailers have benefitted by retaining their 12.5 per cent of the new price, yet despite considerable cost increases, distributors return has remained stagnant. Frankly I can’t understand News Limited’s decision to refrain from giving distributors an increase and we have still to get a satisfactory explanation as to why. The Cynic in me makes me think that News values & needs the retail channel to promote their product, but considers distributors to be dispensable, as other options are available to them. The reality is this is probably true! News Limited’s treatment of Distribution Agents is abhorrent and totally ignorant of remuneration that is required to operate a professional distribution business. Agents are cutting corners to save costs and what News Ltd doesn’t understand is that this is to the detriment of their business. If only they were to “get it”, then they would realise the error of their ways and reward Distributors accordingly.

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  27. Mark Fletcher

    Chris, I think newspaper publishers and magazine distributors treat newsagents as they do because we let them. Take magazines, while we complain about them – oversupply and low margin – newsagents stick with the category because they have to for the base foot traffic. While some have reduced space allocation to make the category more efficient, the majority have not.

    If I was representing newsagents I’d invest in two things: business planning (from outside the channel) for a more commercial model for newsagents to be presented to publishers and other suppliers and, researching a possible legal challenge to the fee structure imposed by publishers. I see the fee structure as problematic in that there is no transparency as to how the fees are determined, no reflection on actual costs and no consideration of the benefit of the service.

    Distribution newsagents run a business for which they have no control over their fee structure and little control over customer acquisition. These are not businesses but rather contract employees – who are disrespected every day.

    The reality is we have what we have. As newspaper publishers have been know to say in the past – take it or leave it.

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  28. Dean

    Hi Dennis,

    I have a plan to reduce costs by $1,000 per week. So far I have cut out about $200. Like you the bulk of this will come from wages.

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