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News Ltd cuts small business newsagent income by 40%

alphamag.jpgAfter playing a key role in making Alpha Australia’s largest selling men’s monthly magazine, newsagents have been ‘rewarded’ by News Ltd. News has cut newsagent margin by 40%, cut revenue by direct (non newsagent) supply to Woolworths, Coles/Bi-Lo, Franklins, Big W, 7-Eleven and Coles Express, seized control of newsagent home delivery customers and shifted distribution to NDD.

Newsagents earned 50% margin from the sale of Alpha.  This was in return for prime space allocation – next to newspapers.  It is this prime space commitment from newsagents which got Alpha to the circulation it has today.

For the last three and a half years, newsagents have been told to only sell Alpha with a News Limited newspaper. In the early days some News representatives were quite threatening to newsagents about this. That strategy is out the window with these latest changes. I am curious as to what this makes of News demanding that newsagents sell it with a newspaper.

Curiously, the announcement from News implies that the changes with Alpha will benefit newsagents.  There is absolutely no benefit in these changes for newsagents.  It is offensive for News Ltd to suggest otherwise.

Newsagents are white-hot with anger toward News Ltd about this move with Alpha. They feel “conned”, “ripped off”, “cheated”, “abused”. This is the issue of the moment among newsagents.

News makes a big deal in its announcement that the commission through NDD is 5% more than is usual for magazines through NDD. While that may be the case, it is less than newsagents have historically made from Alpha.  Indeed, newsagent margin has been cut by News by 40%.

You’d expect us to be used to this abuse – building a product and having what we have built taken away by a supplier.    For all of our complaints, however, we do not fight back.  We feel helpless.

Publishers will do what they think is right for their businesses.  Newsagents need to start to do the same.

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  1. Vaughan

    This was sent to news magazines today. It is not acceptable any longer that we are continued to be treated second rate by publishers and distributors.

    Rob Pegley
    Group Publisher
    Specialist Titles
    News Magazines

    Dear Rob;

    I write to you in reference to a letter I and many other Newsagents across the country received today regarding the change in distribution for Alpha Magazine and also the significant change in the remuneration package associated with this.

    In your letter you have correctly highlighted the success of Alpha Magazine since 2005; of which I would like to add that it was clearly as a result of the allocation of prime retail space, merchandising skills and shear drive by the newsagency channel that gave this title its success.

    You also mention that there have been significant changes at News Magazines and at Alpha, which are expected to benefit newsagents. Can you please advise what changes, and more specifically, what benefits newsagents will receive as a result of these changes. What formulae / forecasts are you basing your comments on?

    Immediately, I cannot see how you can state that newsagents are to benefit when clearly the remuneration package has significantly decreased with the change to NDD.

    You also mention that the business decision will improve levels of supply, returns, management and centralise business processes. You also expect NDD’s significant knowledge to increase sales of Alpha Magazine. If this is the case, why have you allowed the commission structure to be reduced significantly?

    You are not rewarding Newsagents for their past efforts by doing this; you are slapping every single one of them in the face. I am sure I do not need to remind you without the newsagency channel your title would not be the success it is.

    On top of the massive reduction in the commission structure, you have allowed NDD to ship directly into Coles / Bi-Lo, Woolworths, Franklins, Big W, 7 Eleven and Coles Express. At a time when you should be supporting the channel that has given your magazine its success; why have you allowed the further erosion in the remuneration to newsagents?

    Based on the commercial arrangement that you have made with NDD, I cannot support this initiative at either of my 2 stores. Can you immediately advise NDD to discontinue this product with newsXpress Seymour and newsXpress Beechworth?

    Whilst I am appreciative of the higher commission that newsagents received since the launch of Alpha Magazine in 2005; publishers and distributors need to understand that they cannot continue to erode the net revenue of small businesses based on commercial decisions newsagents have no control over.

    I look forward to your reply

    Yours Sincerely

    Vaughan Lawrence
    Managing Director
    newsXpress Seymour
    Phone:(03) 5792 1129
    Fax: (03) 5792 4124
    http://www.newsxpress.com.au
    email: seymour@newsxpress.com.au

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  2. John

    Spot on Mark
    Alpha will also remain a full copy return, which was OK under News Ltd as its trucks picked up the returns with unsold newspapers but under NDD distribution we will now be paying for the cost of returning unsold copies!

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  3. Jim

    Once again, News Ltd have shown their disdain for the newsagency industry with their typically arrogant approach to Alpha.
    It is interesting that they have chosen to distribute Alpha through NDD – if ever there was a bunch of bottom-feeders in the magazine industry, NDD is it and to use them for the distribution of what is a reasonably successful publication puts it under a heavy load.

    Like a lot of the crap titles NDD supply, Alpha is now destined for a 100% early return as far this little black duck is concerned.

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  4. Derek

    I cannot add any more than what has been well said.

    In one word – Disgusting.

    I will no longer be stocking Alpha.

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  5. Michael

    Derek, I suppose at least we have that choice now that it’s with NDD.

    Getting credits for returns was always a problem for us. NDD would now solve that problem for us.

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  6. David

    It wont be sold in my shop either. Due to the fact that I am one of the circa 600 agents nationwide that NDD have decided it is now not economically viable to supply,(no, Im not located in the middle of nowhere, I am 2km from the CBD and get bucketloads of stock from the other 2 distributors on Mon,Wed and Fri,as well as,in the past NDD.) Just my demographics dont support the titles that they handle. I wont even receive the title and as a consequence naturally wont be able to supply in turn to my subagents.
    I am actually quite surprised to have read no comment on this NDD decision anywhere, maybe all those affected are happy about it?

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  7. steve

    No shelf space , no sale and early retun..no real loss to me, but a compounded loss to News…time to teach some lessons to those that abuse us.

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  8. Keith

    Good posts everyone. Alpha will be removed from my shop.

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  9. ANDY

    What happens with alpha subscriptions? will thgey be sent by post or will they expect me to deliver?
    no more deliveries here!

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  10. Derek

    Michael- I totally agree with your comments, My sales of Alpha although small in the bigger picture of Major Newsagencies were good, I have only 2 left from this months supply which started last week, I received 14 I think.

    NDD has solved that problem because I cannot afford to be a member due to being sucked dry of cash from my business due to their inadequate supply distribution model and its inability to control its systems.

    I cannot believe David’s comment that NDD have culled 600 account holders, I am sure it has got something to do with NDD’s crap allocation system rather than demographics.

    I am sure the other 2 distributors may pick up some of NDD’s better titles once the publishes realise their mags are not getting to 600 former account holders.

    I am sure that was a prime reason that Lovatts Magazines moved from them, that is only an assumption.

    I was asked to become a sub agent when I closed my account. I have not become a sub agent and although I want to keep a Dozen or so of NDD Mags I am still hesitant to become a subby.

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  11. Vaughan

    Andy, subscription copies will be delivered by Australia Post.

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  12. Mark

    Outside of News Ltd’s cutting of margin and stealing Alpha home delivery business from newsagents is their cynical attempt to hide the decision by announcing it late Friday. I bet they hoped it would get lost over the weekend.

    The associations were told an hour or so before newsagents. There was no negotiation. Just a declaration from News.

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  13. Y&G

    What a relief. Being one of those 600, NDD aren’t welcome here any more, so we don’t have to cop it.
    We found that Alpha had its loyal followers, but certainly not enough to make any difference to our income! What we didn’t know, though, was that we had to sell it in conjunction with a Mail, until recently, reading a POS. LOL

    Now, if we can just get NDD to respond and advise re discrepancies on their ‘shop closure’ supplementary return form, so we can send them off proper… Not once have we had one that’s been correct, so this last hurrah is no surprise, either.

    Not to mention a response to our reply to IPMG re our kiss-off anyway. We’re looking forward to adding more novelty and gifty items to our range, once NDD’s stuff is finally out of here.
    Poor form, the norm.

    David, I hijacked the March sales thread, advising of our ‘release’ from NDD. Only because I don’t know how to start a new thread in this format, or even if we’re authorised to do so..

    And as I said to IPMG, it’s good riddance to NDD; and to Alpha!

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  14. BRUNEMIESTER

    GOOD TO SEE EVERYONE STICKING TOGETHER ,ALPHA MAGAZINE WILL NOT BE LEAVING THE STOREROOM ONCE IT IS DELIVERED ,HOW LONG BEFORE THEY REALISE THEY HAVE SCREWED US FOR THE LAST TIME…IF WE ALL STICK TOGETHER …..NOT TO LONG

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  15. Nicole White

    Good bye Alpha – and now newsagents have to be mindful of how they will flick us regarding the home delivery territory as soon as they have an alternative.

    Alpha has just died from my shop!

    I dont have a NDD contract (my choice) either!

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  16. GAYE ENGLISH

    we will no longer be stocking ALPHA. I am sick and tired of being pushed around by NEWS. We need to stand up to them and this is away we can. Lets shaft ALPHA in response to their decision. Can you imagine the oversupply from NDD?

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  17. Y&G

    Yes, and I can also imagine their rejection of any application to cease delivery of it!

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  18. Manni

    News Ltd made me a sub- after I declined to deliver 12 copies of their papers and Fairfax quickly joined in (only delivering 6 of theirs) APN kept me as a full Agent.
    The proposal I made to News Ltd was a Win-Win for both parties as I would of embarked in selling 100 plus newspapers on Market days and they declined on that.
    They are small minded people sitting in their ivory towers

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  19. Y&G

    That would be fine with me, however I doubt the bigger agents in our area would want to sub to yet another agency. That would cut into their margins, which kind of suck anyway, given the handling and work involved in managing subbies. It would also mean that our subbie will have to also be included in whoever takes us on’s books, cutting margins further again.

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  20. Manni

    Y&G
    You would be surprised at how some newsagents think as a newsagent about 15km from me took it on very quickly when News Ltd approached them to do the deliveries-Good luck to those newsagents that think there is money in deliveries and also being told what to do by the Publishers. It is important that like-minded newsagents get together so that we can take a stance and air our views like we’re doing in this blog
    Good on you all for your comments!

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  21. Warrick

    To most of you out there in Queensland that still deliver newspapers for NEWS LTD be very careful, you wont be delivering for to much longer, you may ask why, my suspicion is all your contracts are due on the same date and I think you will find most of you will end up as subbies after that date. I challenge all of you to ask your area news rep and the answer will be silence.
    There will be only a handful of newsagents keeping their delivery area’s because of the size and news cant afford to lose them.
    Back 3 years ago when we were negotiating with news about our delivery they said to me to put a proposal to them, well, if I had put a proposal on the table like some other newsagents who are in bed with them, they were able to cut their runs down from 2 hours to 10 minutes and news accepted this.( our paper round was 287km daily)
    Because I was one of the first in QLD to buck the system I was crucified.
    BEWARE: Newspapers will not be around shortly and then what are you going to do.
    Just looked up paper cuts and to this very minute in the USA there have been 7345 job loses this year so far with many more expected.
    Just recently 2 newspapers in the states with a total of 287 years of publications ceased, finished ,GONE.
    Australia generally follow trends and with the global downturn it will only get worse.
    Regards
    Warrick Hosking
    newsXpress gympie

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  22. andy

    how can we do this as a united front?
    i feel we need to send news a message that we will not do what they want and be sharfted again.how can we keep together without being bullied by news?
    cheers andy

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  23. Russell McDonnell

    I agree that we have been used & abused again by another ‘publisher’ but they have made a business decision that we have to live with. Treat Alpha magazine like any other magazine – measure how it sells in your newsagency and treat it accordingly. As a group how do we stop ‘abuse’ from publishers?

    Qld News Deliveries – Warren if we are worried what to do without newspapers then our business plans have been very poorly planned. We all have to do our ‘sums’ in regards to paper deliveries due to rising costs (fuel, late deliveries, maintenance, rent, wag etc) and Qld News are NOT going to increase any part of our contract for what we deserve. ALSO another factor that SHOULD be calculated into newspaper deliveries is LIFESTYLE – stress, personal health & family. There are plenty of newsagents that have ‘ditched’ their newspaper runs – after doing their sums – and have increased their turnover by being able to concentrate on retail without the worry of the paper run. When our contracts come up for renewal with Qld News have all facts & figures on hand and understand that WE can live without our paper runs – after having business plans in place and doing our ‘sums’ on our paper runs. As Qld Newspapers have always said to us ‘If you don’t do it couriers will take your place’ or maybe some other newsagent then GOOD LUCK because waiting around for a FAIR DEAL from Qld News will never happen. We all have a decision to make as individuals.

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  24. Y&G

    Hmmm Warrick, that might explain a couple of odd anecdotes re certain agents’ behaviour of late.
    It might also explain the silence from News about an urgent query of existing delivery customers’ deals.
    Interesting times are certainly ahead.

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  25. Mark

    Andy,

    Remove Alpha from your newspaper area. Tell merchandisers that they are to get your permission before putting anything up promoting Alpha.

    Write to your Alpha delivery customers and advise that News Ltd is taking your customers from you.

    Look at Alpha sales and assess cash-flow – if it is loss making, cut the title.

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  26. Chris

    To everyone,

    Alpha in our business will now be killed off.
    Our Associations need to make it very clear to News of their members disgust, at this decision.
    The disloyalty shown is UN-Australian, and we need to make a stance as an industry, through the right channels, to ensure the right people at the top get the message.
    On the issue of home delivery, I have blogged previously about the impact of declining Advertising in the printed industry. There is no future or a satisfactory return on Investment in Home delivery. The quicker newsagents grasp this the better off they will be.
    Newsagents need to ensure that their business model does not rely heavily on Home Delivery, as growth (of bottom line profit) in this sector is non existent.
    As you evolve yourself, and your bsuiness, into other areas of retail etc. you become a better business person with a model to sustain and grow your cashflow for a greater R.O.I.

    Chris
    Reservoir

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  27. Mark

    Chris,

    It’s like surfing. We either grab our board and ride the wave by being just ahead of it or we drift and look on as the wave chasres into the beach.

    Victims do the latter. Leaders do the former.

    mark

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  28. Y&G

    One thing has occurred to me in the wake of all this. We’re now pondering the point (or right) of continuing to call ourselves a newsagency, should we call the delivery breach bluff.
    Would signage and fittings be removed by the newspaper media outfits? Would we be able to retain one publisher once the other main one has had its backside slapped by our door on its way through it? If we were sub agents, would we be getting the same supplies as before? If Warrick is right, just who would we be subbing from??

    If Warrick is correct, would any of us be able to still be ‘newsagents’ at all, should News pull the plug.
    Pardon my ignorance here, being a newby and all, but it seems to me that if they went ahead with such a plan, they would (hopefully) have a fight on their hands, given the investments involved in being bona fide agents in the first place.

    Change? Bring it on. I just wonder exactly what will be involved at this stage, in terms of losses and the true value of our business, having just bought it – regardless of good or poor planning. Rather naively, I suppose we hadn’t anticipated such an interesting turn of events so soon.

    And thanks, all for the insights and perspectives here. All very helpful and encouraging.

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