Australian Newsagency Blog

A blog on issues affecting Australia's newsagents, media and small business generally.

Newsagency business values could be hit as News Corp moves on newspaper home delivery

Mark Fletcher
August 2nd, 2019 · 10 Comments

Several newsagents contacted me about this News Corp. communication yesterday. Click here to see the letter.  Click here to see the FAQ.

This move by News Corp to take over newspaper home delivery from newsagents for what I am told is minimal compensation is along the lines of the company’s T2020 plan from 2013.

It appears that small business newsagents who paid goodwill for their distribution businesses have had, through this latest move, that goodwill  ripped from them by this large supplier.

Here is the letter, which has newsagents calculating losses in the thousands a week for some.

Dear Newsagent,

As you would be aware from our previous correspondence, News Corp Australia has undertaken a review of the distribution network in Metropolitan Sydney following a significant number of distribution newsagent territory handbacks.

An extensive consultation process was undertaken in early 2018, with over 150 respondents including industry bodies overwhelmingly supporting consolidation of distribution areas.

In September 2018 News Corp Australia issued a Request for Proposal (RFP) for the Supply of Distribution Services inviting all distribution agents and those with logistics experience to participate.

The RFP outlined proposed key changes to the way the distribution of newspapers in Sydney would be conducted:

  • Consolidation of the existing territories into larger zones
  • A commitment to reduce or remove the administrative or duplicated aspects traditionally undertaken by distribution newsagents
  • To create consistent home delivery product presentation by flat wrapping subscriber copies directly off the press at our printing facility at Chullora.

Following an extensive RFP and evaluation process News Corp Australia has selected National DistributionServices (NDS), a joint venture between two of the country’s largest distribution newsagents for eight (8) of the proposed nine (9) zones.

Due to its unique set of delivery requirements we are still reviewing the best options available for the servicing of the Sydney CBD.

Timing of Changes:

It is planned that the transition to the new distributor will be conducted over several months commencing later this year. We expect to be completed by July 2020. The process will start with the migration of customer billing.

Transitional Support:

  • Contract Fulfilment Payment. In order to encourage outgoing distribution newsagents to support and assist in the transition to the new model, News Corp Australia will provide a payment to distribution newsagents in return for them making certain commitments to us. Details are included in a pack that they will receive shortly via post.
  • Case Manager. For affected agents News Corp Australia has appointed a case manager as a main point of contact who will be in touch soon to further outline these changes and answer any questions they may have.
  • Driver Register. NDS will also establish an online portal for existing distributors, drivers and contractors to register their interest to be considered to provide services to NDS. News Corp Australia is not part of this process or portal.

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Further Information:

  • A pack will be mailed to you in the coming days outlining details of the changes including timing of the transition for you.
  • A full list of Frequently Asked Questions (FAQs) is attached.
  • Agents are also encouraged to attend Townhall meetings in the coming weeks where News Corp
  • Australia representatives will further outline these changes and address queries.
  • Any queries regarding the changes or how it impacts individual distributors or retailers should be directed to your dedicated case manager or contact details below:

Distributor enquiries:
Robert Rigby secondary_distribution@news.com.au

Regards

Michael Newell
Executive General Manager, Publishing Operations News Corp Australia

Media enquiries:
Liz Deegan corporateaffairs@news.com.au

This is extraordinary action by News Corp against small business newsagents.

If I was a distribution newsagent and had received this letter, I’d be contacting the ACCC to discuss the abuse of market power.  I’d also reach out to state based opportunities like the CTTT, VCAT and QCAT. I’d also be talking to my local politician as  this is a small business store with impact locally.

While News can argue that this has been their long foreshadowed plan, that does not make it fair.

Newspaper home delivery has been a local community service. For many newsagents, this is their primary asset. Compensation needs to be fair, it needs to be lawful, it needs to meet community standards.

While I got out of newspaper home delivery thirteen years ago, selling my decent size run, because I saw little upside, through my work with newsagents I know of many who will be affected by these moves by News.

15 likes

Category: Ethics · newsagency of the future · newspaper home delivery · Social responsibility

10 responses so far ↓

  • 1 Megan Fisher // Aug 2, 2019 at 9:58 AM

    I have enjoyed an excellent delivery service from my local newsagent for the past 25 years. I have two newspapers delivered every day, Monday-Saturday, and one on Sunday. If my local newsagent will no longer be responsible for delivering my Australian newspaper, only my Sydney Morning Herald, are they likely to choose to drop out of deliveries altogether, since their costs won’t decline by much but their income will?

    0 likes

  • 2 Graeme Day // Aug 3, 2019 at 8:52 PM

    mark,
    I believe the post here is as grave as you may think it could be ..for some the distribution agent that bought a job that was locked into a service contract.
    Some news-agents are that others have shop and retail and their borrowings were respective to both incomes. Shop and Distribution. Depending upon the “mix” will how they will recognise the way to survival.
    Contracts between Principal and Agent have previously as part of the Deregulation agreement and with Govt sanction of the day approved of the seperation arrangement which newsagents signed.
    I won’t go into market place changes and the like as it isn’t relevant because so many newsagents handed back their “unprofitable” delivery that News decided this course to be enevitable.
    Yes there will be many casualties without compensation. I don’t really know what the answer is here as you have often pointed out that newsapers are not worth the retail space and this has many followers.
    I think News had a choice -close the newspaper deliver service with after all i newsagent every week in Sydney and Regional combined handed in there delivery every week that’s 52 rounds a year or try and do it themselves as the transition for them of print to electronic has not been completed as yet by the consumer.
    This is very sad, it’s a part of history but more important it’s a loss to many of their livelyhood and all their investment.
    It poses many future probalities and one for the immediate is that as you mentioned in a recent post “selling your newsagency” is how will the Bank lend on this business when the Profit and Loss account has combined incomes that present opacity.

    0 likes

  • 3 Colin // Aug 4, 2019 at 8:49 PM

    This year we decided not to renew our lease, Malvern Papershop is no more.

    It didn’t matter that gifts had increased from 20% of sales 5 years ago to 40%. Or that books were introduced and in 3 years went from zero to $80k per annum. None of this mattered with a strip landlord where 30% of shops where empty, including the café next door for 3 years. You cannot fight centre footfall falling 15-20% per annum.

    Our decision wasn’t hard at the end. The site no longer warranted or deserved our efforts and further investment. But what made it more inevitable is outlook for the newsagency channel.

    No sector can survive the circa 20% annual declines (store sale plus store closures) faced by magazines, papers and stationery suppliers to the sector. The changes by NewsCorp reflect this pain. The changes have been forthcoming. Ovato (Gotch) surely is in similar pain where structural changes are crucial, but will not be focussed on magazine distribution, all their investment and hope is in printing.

    The NewsCorp decision is not vindictive. It is what survivors do in difficult changing markets. It will not be the only major change, others will follow and the frequency of structural change will be self feeding and accelerate.

    3 likes

  • 4 Graeme Day // Aug 4, 2019 at 9:51 PM

    Colin,
    I am sad to read this as you have been and are very realistic in an objective way re the newsagency business.
    You are absolutely correct when you say News Corp are only doing this for survival. I believe that more will come and I realise that not only High Street that Shopping Centre newsagencies and other retailers will join the closures.
    However, there is always a however, some are making it, doing very well and indeed there is no magic “mix” the mix is one that is local and needs constant revision then change which hard work it’s called as you have pointed out “retail”
    The biggest challenge as I see it is funding the cost of reinvestment (capex) and the slow rate of return say 18 months on new stock and fittings.
    In your case as you have put it no matter what you did will make up for the loss of foot trade from stores surrounding yours because of closures.
    I wish you all the very best for your futures and truly hope you get a really good break financially as well as from stress.

    1 likes

  • 5 Mark Fletcher // Aug 5, 2019 at 6:30 AM

    My core issue with the News Corp. decision is the lack of commercial respect for the nurtured asset the company is taking over in making this move. However, it has ever been thus in our channel.

    3 likes

  • 6 baz // Aug 5, 2019 at 8:02 AM

    Colin..did you have delivery runs ?

    0 likes

  • 7 Jenny // Aug 5, 2019 at 8:42 PM

    Megan, if you were my customer then yes is the answer to your question.
    If one publisher pulls the plug on distribution we would no longer home deliver for the other publisher, same costs less profit.
    Even though we do the best job we can, we do it for money not love of customer or industry.
    I am amazed that newsagents could be losing thousands of dollars if their run is taken from them, they must have massive newspaper sales through shop, home delivery and sub agents, or have already taken on neighbouring runs in which case they are doing exactly what News wants to achieve.

    1 likes

  • 8 Colin // Aug 5, 2019 at 8:45 PM

    Bad…no, we were spared that pleasure

    0 likes

  • 9 Jason // Aug 6, 2019 at 8:49 AM

    Gee, that is a backflip from there is no future in print to businesses having goodwill ripped out of them, Mark.

    Most of that goodwill should have been written off, any that remains (if properly substantiated and not just a line on a the books at purchase) can be compensated for by News. This has been a long time coming.

    0 likes

  • 10 Susan Sawbridge // Sep 22, 2019 at 3:19 PM

    This is not confined to Sydney as meetings were held in Hobart with the same model. I think you will find this will occur Australia wide. Distribution only newsagents will find they no longer have a business.

    0 likes

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