I’ve been involved in a research project into the cash-flow impact of magazines on Australian newsagencies for the last few months and have just completed a paper on the subject. While I’m not ready to share the full results here I’ll share this from the final paper:
The bottom 50 titles, as measured by cash-flow (taking into account cost of goods, credits for returns, income from sales, cost of real-estate and cost of labour) accounted for between 18% and 20% of all negative cash flow in the magazine department. Put another way, eliminating the bottom 50 titles in the research project would cut negative cash-flow by between 18% and 20%.
Given that an average newsagency has 1,000 titles, we are talking about 5% of titles costing between 18% and 20% of the loss made from magazines.
Imagine the value to the business of cutting the cash loss and using the reclaimed space to better promote the more successful titles.
Given the way newsagencies are valued, a cash-flow savings of $4,000 conservatively equates to a $12,000 increase in the sale price sought for a newsagency. This means that eliminating the bottom 50 titles is worth, in terms of the sale price of a newsagency, between $12,000 and $60,000.
These numbers are an indictment against the magazine supply model and the companies in control of that supply model. Newsagents cannot sustain such losses from a small number of titles.
I have now run two briefing sessions for newsagents where I take them through the data from the magazine cash-flow study. It’s a sobering event. The key will be how magazine distributors and publishers react – especially the small publishers responsible for the titlee causing most of the cash-flow problems.