In Queensland alone, more than 50 newsagents have abandoned their distribution runs and in some parts of Brisbane people can no longer get a newspaper delivered to their homes.The sustainability of newspaper distribution is one of the core issues we need to deal with and will be at the heart of the broader review of the overall system.
No-one can guarantee the future of any business, and it would be misleading if we were to attempt to do so. We don’t yet know what changes will be needed as a result of our review of the system.
The way consumers access and consume media is rapidly changing, along with shopping habits. These changing consumer demands are forcing us to review the way we conduct our entire business from how news is produced, the design and content of our newspapers to where and how readers access them.
We are also aware that while some newsagents continue to be successful, in too many parts of Australia, the current system of newspaper distribution is inefficient and not working as well as it should for newsagents, publishers or consumers. It’s getting more difficult for us to get our papers delivered to our readers.
The 2010 Agreements mark the first stage of a full review … to address the challenges facing the newspaper industry.
Our review will look at what’s necessary for the long-term sustainability of newspaper distribution. Working together may give us the best outcome but, regardless of the review’s outcome, we all need to accept change and adapt.
These quotes are selected from material sent with the newspaper distribution and retail contracts received by more than 2,000 newsagents from News Limited around two weeks ago.
Newsagents have another four weeks in which to make a decision as to whether to accept the new contracts.
I have read contracts sent to newsagents in various states. I have talked with many newsagents about the contracts. I have also been fortunate enough to have a discussion with senior management at News about the contracts.
I am not sure what I would do if I received one of these contracts. Having sold my distribution business three years ago and converted my shop to a sub agent relationship for newspapers, I do not have a direct contractual relationship with News Limited.
While the contracts have come as a shock to many newsagents, they should not be a shock to newsagent leadership or longer term newsagents. From the release of the current contracts ten years ago, newsagents were on notice that new contracts would come. We have also been on notice for years that the newspaper distribution model is under scrutiny. There have been countless studies, reviews, workshops and discussions – all driven by publishers, none, to my knowledge, driven by newsagent representatives.. The change, flagged in these new contracts, is that News has committed to making a decision within two years and that the signs in the contract paperwork are not encouraging.
New newsagents, those who entered the channel in the last three years, are disadvantaged by the new contracts. They have paid a multiple of net earnings which will take longer than the two years to recover. They bought into what was probably pitched as a stable, protected even, business. Now, they find that they have a business with two years, maybe longer, but only two years in which to bank.
The new contracts mean that goodwill paid for a newsagency will fall – probably immediately if a purchaser undertakes thorough due diligence.
Any newsagent with bank funding also faces an impact. Once the banks assess the contracts their lending terms and ratios for newsagents are bound to change since the existing sort of open ended contract provided the banks with a measure of security against which they would lend. I’d expect to see the debt to equity ratio to be reduced and loans for newsagencies harder to achieve.
When the contracts first hit, my initial hope was that no newsagent would sign them and that this act would bring News to the negotiating table. The reality is that News is not ready to negotiate a longer than two year contract because they don’t know what the newspaper distribution model looks like for them in two years. Some newsagents are saying that News knows and that they don’t have the guts to move against newsagents right now. Only time will tell if they are right. I suspect that News, corporately, does not know what the model will be – hence the two year period and the clarity in the contract documentation about what they will do over the next two years to assess the best model for their business.
I applaud News for putting in writing that in too many parts of Australia, the current system of newspaper distribution is inefficient and not working as well as it should for newsagents, publishers or consumers.
The problems for newsagents with the current newspaper distribution model are:
- Newsagents cannot set the price for their services. Newspaper home delivery is a premium service. My sense is that consumers understand this and would be prepared to pay appropriately. Newspaper publishers, not just News Limited, have refused to give newsagents permission to charge a fee which is more closely aligned with the costs of providing the service.
- Newsagents cannot control margin on the products they deliver.
- Newspaper cover prices have not kept up with the CPI.
- Newsagents are, in some states, forced to share in the financial cost of deep discounting.
- OH&S issues with newspaper size sometimes and the number of papers to be delivered by a driver to break even.
As I have written here and elsewhere over the last five years, newsagents ought to lobby government for an independent review of the distribution of newspapers and magazines. This was deregulated by the Howard Government in 1999 and it would be appropriate for a review of this policy to be undertaken – the ten year anniversary would be a good opportunity. Such a review ought to look at the costs of each step and what the impact has been over the years on each step. Only an independent study will provide evidence necessary for a balanced discussion on the future of newspaper distribution.
The real issue is what the future of newspapers looks like. Know that and you will have the start of a plan for distribution newsagents.
I doubt that anyone, consumers, economists, share analysis, newspaper publishers or newsagents expects newspaper distribution to grow considerably. We are at best in a flat market and at worst in a declining market. The consideration of the future of newspaper distribution needs to be considered in the context of a pragmatic assessment of the medium and the environmental and economic costs associated with it.
The two years offered by News is two years. This is why, after much thought, I would probably sign the contract, get my two years and work hard to reengineer the business to considerably reduce reliance on newspaper related revenue in the two years. Now is not the time to try and negotiate considerably different terms. That time was in 1999 when the ANF leadership negotiating on behalf of all newsagents, failed them.
The way I see it, the two years gives me something and to many newsagents this will be better than nothing. Although, I acknowledge, that for some newsagents nothing is better than a negative something.
Yes, these are complex issues. My opinion is merely that. I don’t know if I am right. Newsagents will not know if they are right. For many, this will be a tough four weeks navigating to a resolution.
Like many newsagents I am sure we received Up in the Blockhole, a book by ‘Warwick Todd’. Our margin is 30% – considerably below what it should be for a book. It is also outside the range of book titles we usually carry – if only we were given the opportunity to say now. The publishers of this book are abusing newsagents by accessing our channel. They think they are doing a good thing giving us 30% instead of the usually 25% for magazines. No! This is a book. If we are to carry it we should be supplied on the basis of a good book margin.
