Australian Newsagency Blog

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Newsagents face a 50% cut to margin following News Corp. fee hike

Mark Fletcher
July 12th, 2020 · 23 Comments

Wrapaway, a niche magazine and newspaper distributor, late yesterday wrote to NSW / ACT newsagents advising them of a cut to their commission (gross profit) from 25% on their titles to 12.5%. Their letter to newsagents explains that the move has been brought about by a 500% increase in what News Corp. charges them to deliver their product.

This is another of many changes in the News Corp. that are impacting and will impact newsagents.

The challenge for impacted newsagents is when is it too much, when do you quit suppliers. While financially  such a move may make sense, when it comes to niche titles, such as foreign language titles, you may accept a reduced margin to maintain your specialist status.

The other options of course, is to increase the cover price.

If the Wrapaway letter is accurate and News Corp. has increased their charges by 500% the company needs to fully explain the basis for this increase, it needs to prove that such an increase is necessary.

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Category: Ethics · Newsagency challenges · Newsagency management · Newspapers · Social responsibility

23 responses so far ↓

  • 1 Peter // Jul 12, 2020 at 10:10 AM

    Most probably Wrapaway have previously had a pretty generous deal to piggyback with Newscorp deliveries. Now that Covid is having significant affect on Newscorp revenues they are reassessing all arrangements, large and small to try and stem some of the red ink. In good times, sweet deals slip under the radar. We will see more of this.

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  • 2 Mark Fletcher // Jul 12, 2020 at 10:12 AM

    I’d prefer to know the actual facts. For now, though, the fact is that newsagents have had their margin cut in half on the back of a claimed 500% fee increase by News Corp.

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  • 3 Distroguy // Jul 12, 2020 at 1:35 PM

    500% fee increase by News Ltd? Yet Fnet and NDS are paying drivers approx 75% less than drivers received years ago!

    And, the Country carriers are getting less than they were 10 years ago, so News Ltd cannot blame the increase on their linehaul contractors!

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  • 4 Mark Fletcher // Jul 12, 2020 at 5:19 PM

    Hey Distroguy, thanks for your contribution. It’s disappointing to hear about this treatment.

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  • 5 Colin // Jul 13, 2020 at 10:28 AM

    The use of ABN sub contractors working at below fair hourly rate is an issue regulators should be pursuing. There have been some half hearted attempts regards Uber and the like, but the situation for many is becoming dire and will get worse as unemployment creates a greater supply of persons prepared to sub contract at ever lower hourly rates.

    The likes of Newscorp will be reaping the benefit of declining cost of distribution. They need to justify their 500% increase. It appears to me to price gouging by a monopolistic supplier.

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  • 6 Peter // Jul 13, 2020 at 4:03 PM

    Who or what is “Fnet and NDS” ?

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  • 7 Chris Russell // Jul 13, 2020 at 8:37 PM

    Distroguy, I take interest in your slanderous comments about NDS & Fnet on this blog to date as totally incorrect and with no basis or merrit.

    I understand if you have been affected by change, but change to the industry in Metro NSW is ill directed toward NDS & Fnet.

    We meet all our legislative requirements in operating a business.

    If you have anything you want to ask or clarrify, I suggest you do so directly, via our office. I would be happy to have such a discussion to provide accurate information.

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  • 8 Mark Fletcher // Jul 14, 2020 at 8:23 AM

    I am told that Wrapaway is looking at ways it could maintain 25% for newsagents. If true, it’s good news.

    Still nothing from News Corp though and the claim of a 500% increase in costs to Wrapaway.

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  • 9 John Fitzpatrick // Jul 14, 2020 at 5:20 PM

    Chris Russell, Please provide the information here, a public forum.

    Detail the rates NDS & Fnet pay to drivers.

    How hard can it be?

    If the rate (including Super and your payment of Workcover for these drivers) is under the General Transport Award ALNA uses – then Drivers are being ripped off.

    It’s that simple.

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  • 10 Graeme Day // Jul 14, 2020 at 9:53 PM

    It is a ridiculous situation when Chris Russell offers clarification of some accusation (which there is no
    offered proof whatsover, in a public forum) and John have challenged for a repsonse by way of declaring his answer to be on a public forum.
    Get real who are you judge and jury? to do this. Answer his request, talk with him and then when satisfied or not publish your response and stop grandstanding.
    i don’t know Chris or the circumstances however trial by public forum is just self focus after all you have not even put your case for Chris to answer.
    I am interested in the truth not trial by media. This or any other media.

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  • 11 Mark Fletcher // Jul 15, 2020 at 7:01 AM

    John, what we know from Queensland is that the News Corp approach there to new distributor / driver arrangements in regional areas is that News Corp requires an ABN, eliminating consideration of the award.

    Graeme, this is not a trial. It’s an unmoderated forum where people can talk, transparently. I think that would be useful in this. situation.

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  • 12 MARK R // Jul 15, 2020 at 10:21 AM

    Graeme , John has every right to ask the question even though you may not like it .

    Here in SA we have drivers employed by sub-contractors so they are at arms length to the company who holds the contract with News Corp.

    The best solution is for Fair Work to audit the freight companies and the sub contractors who employ drivers

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  • 13 Graeme Day // Jul 15, 2020 at 1:36 PM

    Mark R it’s not that I dont like it it’s whether it is fair or foul play to publicly address one’s employment contracts for all and sundrie to evaluate.
    it’s not for anyone else other than the one’s concerned.
    Most and I mean over 50% of newsagents would object to someone exposing tgheir private conditions of employment to everyone on this Blog.
    How much cash do you pay your workers? in your case probably none, in other cases it could be a lot
    either way most would not like to discuss their staff arrangements on an open blog.
    I beleive it’s a bully tactic and an unnecessary one especially when a solution has been offered to the accuser.
    The rest is up to the regulators the same as the Hospitality Industry-Woolworths and Coles These bodies have the responsibility.
    Those who live in glass houses should not throw stones.

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  • 14 Steve // Jul 15, 2020 at 4:21 PM

    Putting the contractor issue aside it appears that the proposed solution here by Wrapaway is not viable. We the newsagent should not be expected to fund their rising costs.

    Not sure about others but we for one will not miss their distributed magazines from our store and will not be stocking should the proposed cut to our margins proceeds. Sorry Wrapaway but an increase to your cover prices may be the only chance of your survival and others in the supply chain unless you are able to find other cost savings. Based on the input from Distroguy not sure that other cuts are feasible.

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  • 15 Mark Fletcher // Jul 15, 2020 at 4:22 PM

    Steve, I would not be surprised if they respond to you cancelling supply with an offer to maintain 25%.

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  • 16 Graeme Day // Jul 15, 2020 at 6:39 PM

    Nana has addressed the problem and achieved a 25% reinstatement of gross profit margin to 25%.
    it was never the fault of the distributor who is just a condute within the state of play.

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  • 17 Steve // Jul 15, 2020 at 9:21 PM

    Graeme I believe Wrapaway are still searching for a solution to their increased costs and that they have at this stage only agreed to delay their proposed cuts to our margins for 2 weeks whilst searching for an alternative solution. As NANA have rightfully pointed out to them a 50 per cent cut to our margins is not sustainable. The recent move by Gordon & Gotch to also involve Newscorp in their delivery process is now clearly a concern.

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  • 18 Graeme Day // Jul 15, 2020 at 10:19 PM

    The alternative Steve is to add the extra charges to the Retail price and explain to the consumer as to why.
    Dramatically this will draw results however damage has been done.
    If costs have risen above the want of the product then the end consumer has spoken.

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  • 19 Mark Fletcher // Jul 16, 2020 at 7:03 AM

    I think facts are needed before this issue can be reasonably discussed. Wrapaway has claimed a substantial increase in costs applied by News Corp.

    A useful allied discussion could be had around changes to the nature of employment. The Victorian government yesterday published interesting independent research on this. While it focussed on the gig economy, there has been discussion flowing from this work about people transitioning from traditional employment to sub-contract ’employment’ through them getting an ABN and being paid as a supplier and not an employer.

    There are consequences when you drive costs down. Paying less will result in less of a service – except in the case of newsagents who for decades accepted being paid less yet still provided the same level of service.

    While the current issue is top of mind for those impacted, I do think there is a broader conversation to be had here.

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  • 20 Graeme Day // Jul 16, 2020 at 7:41 AM

    Mark, There certainly is a bigger issue here than the single “blame game” JobKeeper alone is an issue of employment costs versus productivity.
    We are living in an uncertain World borfering on instability in all facets of life Health threats, Social disruption, financial upheval and climate change .
    The on the “who gets what slice of the pie” has always been the recipe for revolt and disruption.
    The market place will decide. News Corp have taken on the home delivery, a not sustainable situtuation long term, if it is expected to pay everyone along the way a fair price. It is cost for transition to be successeful or not.
    Newsagents bare the same cost for their own transition to their individual new business model.
    Assistanceand vision are the requirements here for a sustainable retail future.
    This post from you is much a better focus one that could bring many new suggestions to the fore.
    Yes the lowering of employment costs will bring on lower productivity and lower consumption and this will further the rate of recession or depression envisaged by some ecnomists , business mogels and financial wizards. Best to get ahead of the game now for there is no time left to waste.

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  • 21 Colin // Jul 16, 2020 at 9:13 AM

    The PM has already he has indicated he is prepared to think outside the box on Fairpay and business regulation issues. Hopefully the unions will be open minded and concede the award system of setting wage rates is over complicated and that penalty rates are bad, especially for small businesses.

    The unions need in return to set their sights on gig economy regulation and ensuring the sub contractors, casuals, abn holders etc actually get the minimum hourly wage after business related expenses are deducted.

    If they achieved this the upheaval would be massive. There are an enormous amount of people working for below award wage rates and exploited by the rorting of the current regulations.

    But careful what you wish for. A decent fair system would also catch all those paid outside the books, the unpaid friends and relatives.

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  • 22 Utam Singh // Jul 17, 2020 at 3:47 AM

    I can’t understand how these large corporations circumvent fair work responsibility. Whilst small newsagencies are being audited for fair work compliance and it is in our contracts by all agencies we sign up with eg News Corp , Lott’s how come the same rules don’t apply to them.Contractors are clearly a no no when doing same work for same employer daily.

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  • 23 Peter // Jul 17, 2020 at 4:06 PM

    By God sir the Boards that control these great organizations are the crerme of the crop and you, me with all the rest well, were the great unwashed.

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