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

Author: Mark Fletcher

News Corp. enters online classifieds from MySpace

According to a report by Peter Zollman of Classified Intelligence Report (a paid newspaper industry newsletter), MySpace is moving aggressively into classified advertising. They have already introduced a Classifieds link on the main navigation bar, and classifieds categories for several cities including Melbourne and Sydney. This move by News Corp, owners of MySpace, considerably extends the social networking site into a classified advertising engine. While classifieds are free, there is a revenue stream being chased here. It’s a clever move by News.

Connect MySpace with TrueLocal, Realestate.com.au and the various other News online offerings here in Australia and overseas and you have a powerful business model.

This is a race. In Australia it is between News, Fairfax, PBL and Telstra. While many expected the Internet to lower the barriers to entry for many start-ups, acquisitions and strategic moves by the big four media companies have protected their offline brand investments in the online world.

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Media disruption

OFT acts on supermarkets in the UK

The Office of Fair Trading in the UK has announced that it is to refer to market for the supply of groceries, including newsagent lines, to the UK Competition Commission. Any independent analysis of the power of major chains has to be welcomed by small business. (I just wish we could achieve similar traction here with the ACCC and the Productivity Commission.) The OFT announcement, in part, observed:

There is also some evidence to suggest that the big supermarkets’ buyer power has increased, and that there are aspects of the big supermarkets’ pricing behaviour – below-cost selling and price flexing – which could distort competition. Although consumers have benefited from lower prices, the data does not allow the OFT to reach a firm conclusion on whether choice and variety for consumers in local markets – whether choice of fascia or on-shelf product variety – have increased. Because pricing practices and buyer power interact with local concentration to affect product variety and choice of fascia, the OFT proposes also to refer to these features in making the reference.

The OFT could have been writing about Australia.

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Newsagency challenges

Why some people stopped buying newspapers

Newspaper publishers are full of theories as to why sales are flat (in the case of some) or falling (others). Most theories, among those who accept that there is a fall, would blame disruption brought about by broadband, easier mobile access and online classifieds. Few would consider that sales are down because of the quality of the product. Newspaper publishers ought to visit newsagencies and talk with customers like ‘Joan’ a fifty something lady I talked with today. She has just stopped buying The Age after decades of loyalty. “It’s not a newspaper any more” she said to me. “All these competitions and giveaways, I have no interest”, she was on a roll. “I want news”, she said, as a demand “and when they start giving me news, real news, maybe I’ll come back.”

‘Joan’ now gets her news online but online services did not lure her from The Age. That came about because of the handling of several stories in The Age compared to what she was able to read online. In her view, The Age was not balanced in one story and its reports lacked reasonable depth in another and in the case of a third it’s story pandered to government rather than reporting facts which were negative.

While ‘Joan’ is one person, others would agree. She has not been pulled away from her favorite newspaper but, rather, pushed away. And she was sad about that. I reckon there are plenty of Joans who would be back in an instant if newspapers focused on content – hard hitting news which pursues the truth; analysis which is respected; and, less filler.

One only has to watch how much of a Saturday newspaper is thrown in the bin outside the shop to see first hand why people buy newspapers.

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Newspapers

Newsagent point of difference (range) is killing the channel

Based on my research into the cash-flow performance of magazines in newsagencies, the top five categories in order are: Women’s Weeklies, Partworks, Women’s Interests, Crosswords & Puzzles, and Teenager. While sales are stronger in other categories, longer shelf life and a lower sell through rate lead to a significant (detrimental) cash-flow impact.

The Special Interest, Sport & Leisure, Children’s, Motoring and Adult categories are all cash-flow negative. Special Interest is the worst performer and within that, the Travel & Tourism and Other segments are in trouble. Other is a catch-all segment that includes such seriously cash-flow negative titles as: New Dawn, Irish Echo, and Adbusters. These titles are not alone in causing the cash-flow problem: 90% of titles in the Other segment of Special Interest are cash-flow negative.

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FHM promotes content on PSP and mobiles

FHM has launched video content in the UK for Sony PSP devices and mobile phone content in the US. (Source: MocoNews.)

It’s not a surprise that brands such as FHM and Playboy are connecting with consumers this way. This is just the beginning. Freeing content from the page makes the stories the product and this offers a revenue model considerably beyond the traditional magazine model. This makes celebrities more valuable than ever. We have a customer who visits our shop weekly to use an internet computer to download and print (in colour) every story about the star she obsesses about. Her weekly spend is usually in excess of $50.00. If she had a place she could go and pay this amount for every story about her star I’m sure she would.

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Zoo Weekly sales update

Zoo Weekly sales information for several newsagencies suggests that while it has some fans it is not setting the world on fire. The best way to compare a new title like this is to compare sales to other titles in the segment: People and Picture are the closest comparisons. Sales for Zoo are running at between 20% and 30% of Picture. The data sample set is too small to consider this indicative of anything. In my view Zoo needs to identify a specific niche. In its present form I reckon it’s soft in terms of content of interest to prospective readers. This approach may be fine for the supermarkets. In newsagencies the title in in a segment where it is the soft (weak) product.

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Patent activity around search and advertising

In the past, advertising was about noise to get noticed because the advertiser and the owner of the medium never knew what those within range were interested in. The search engines changed all that and they continue to change that. Follow this link to a list compiled by ResourceShelf of advertising and search related patent activity for Tuesday March 7. Beyond this one day the list is huge. Knowing what people want or are interested in is the big thing in online advertising. Those who do it right should achieve higher sales for a lower spend. This is why we’re seeing some companies shift considerable chunks of their advertising spend online and away from mainstream media.

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Media disruption

Star gets serious

Weekly women’s magazine Star has had a make-over and is looking like a contender. This week’s edition is a dramatic improvement on the mediocre product we’ve seen until now. The next step has to the a considerable marketing campaign to win new readers and try and woo back people who have the title a go and didn’t like what they saw. Publishers of Star cold use their on-sale day (Wednesday) to their advantage in newsagencies given that by then sales of other women’s weeklies are soft having peaked Monday, Tuesday.

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How should newsagents react to the online challenge?

While every major newspaper and magazine supplier to Australian newsagents has, over the last year, invested significant sums in online businesses, newsagents have not made any similar investment. While some have developed websites to enhance customer service, none has sought new revenue streams online. In my own case we have started Inkfast to sell ink and toner online. But we’re not a typical newsagency since we have the resources on my IT company behind us. (Inkfast is now 7 months old and selling more ink and toner in a week than my retail store sells in all stationery in a month.)

Publishers are buying online business to extend the reach of their brands. I’m convinced newsagents must do the same. More interest in traditional newspaper and magazine content and lottery product will be satisfied online and this poses a considerable threat to the traffic which has been central to the performance of newsagencies over the years.

While some newsagents are successfully diversifying at the store level, the channel itself is not and I see this as a significant branding problem for all who trade under the shingle of newsagent.

I’m involved in an online start-up (more on that another time) which will actively partner with newsagents but even that will not go far enough in gaining for them a sufficiently viable connect with consumers who live online such that it replaces revenue they will lose elsewhere.

Companies like Fairfax, News Corp, PBL and Pacific are doing what they must do and I have no qualms with their online push. It is that too many newsagents remain oblivious to this which concerns me. Their associations need to educate and advise yet they remain silent.

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Media disruption

Second digital magazine conference in four months

Just four months after their first sell-out digital magazine conference, the Magazine Publishers of America are hosting a second event: Magazines 24/7: Profiting in the Digital Age. The scheduling of this event so soon after the first demonstrates the importance of a digital strategy for magazine publishers. If I were a publisher I would have been riding the digital wave for some time now since it’s where the growth is – especially in the special interest area.

Here in Australia only a handful of titles are playing actively in the digital space. I expect many more to enter this year. Digital magazines pose a threat to newsagents beyond the loss of sales. In the period of transition, while consumers migrate from over the counter to online, newsagent display of the title helps the publisher. Newsagents cannot cut the titles because of contractual obligations so they have to carry them even if loss making while publishers build new revenue models online.

The fair approach would be to recognise that at the non mainstream end of the marketplace especially titles will migrate online. This should lead to newsagents being paid for providing access to low cost real-estate to maintain presence. The only other option for a newsagent for these bottom end titles is to return them immediately and short pay the distributor account. But that only ends in tears.

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Media disruption

Can I touch you for luck?

It’s when the elderly female customer asked this question that I realised we need to touch more in our retail businesses. Not in an offensive way. The odd touch here or there at the right time provides a connect no internet business can get close to. Two people, connecting on a common interest, touching skin provides a warmth critical to our success. I understand that the social networking facilities online will change the way we interact with each other, until that is ubiquitous retailers like me ought to exploit the opportunity to touch our customers. Yes, you can touch me for luck.

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Newsagency challenges

Vogue magazine website success

MediaWeek this week reports the exceptional success being achieved by the Vogue magazine website. Half the traffic is generated by their forums – the social interaction side of the site. Social networking is a key driver of traffic for MySpace and others. That the publishers of Vogue have achieved extraordinary traffic is a relatively short time will be of interest to other publishers – especially those with readers who are likely to enjoy the social interaction. There will be a tipping point between revenue from the website versus the physical magazine.

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Media disruption

Newspaper sales on fire

Since we installed the newspaper display unit at our Tattersalls counter our sales have increased 8% on top of the year on year increase we had been achieving until that point. In a flat newspaper market such a result is excellent.

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Newspapers

Newspaper publisher Fairfax acquires Trade Me, New Zealand’s most popular website

Newspaper publisher Fairfax has made a bold move in purchasing New Zealand most visited website, Trade Me. This is a coup for Fairfax and helps put to rest the jokes about their missing out of a piece of Seek back when it was available years ago.

Trade Me is a very successful business and kudos to Fairfax for negotiating the deal. While the announcement says it will operate as a stand along business, I would expect to see integration with the broader Fairfax offering.

The Fairfax announcement provides no indication as to whether Trade Me will open in Australia nor whether the investment has any relevance to Australian newsagents. The latter is important to me because Fairfax demands a lot from its newsagent channel in support of challenged product (newspapers). Newsagents could reasonably ask if they fit with such an acquisition. The reality is probably not and that’s okay – newsagents need pursue their own future in response to the disruption to their core products of newspapers and magazines.

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Newsagency challenges

Shame on Qantas, Australia Post and the Australian Government

Government owned Australia Post and Qantas owned Jetstar are proving the value of being mates now that they are closer to selling Jetstar tickets at Post Office outlets. More here at my small business blog. More here too at news.com.au. Small business travel agents are being done over by Australia Post the same as newsagents. That’s the value of government ownership for you.

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Newsagency challenges

Famous window display

We’re using flash lights to draw attention to Famous in the window of one of our shops. This 5MB movie file shows the impact. The challenge with Famous is its covers. Anecdotal consumer feedback suggests the covers are soft.

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The Eva Longoria extreme make-over

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The latest covers of Ralph and FHM feature Eva Longoria, or so they claim. Which one is the real Eva? Or, has Eva undergone an extreme make over? The Ralph cover looks somewhat ‘touched up’. I wonder what Eva and her people think of this – but then maybe it’s what comes with being a celebrity because of your body.

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Dinosaur poster units being promoted to newsagents

Newsagents are being encouraged by one of their associations (the Australian Newsagents’ Federation) to install scrolling poster units from a company called Moving Tactics. These units hold 20 magazine posters and scroll through, promoting the products in store. I see several problems with these units:

Customers spend little time in line in a newsagency so point of purchase displays need to move through their messages quickly.

Newsagents are contracted to provide a certain number of poster facings to at least one supplier. Using this scrolling unit would not, in my view, release them from that obligation yet the promotional material suggests otherwise.

Mechanical poster display units are dinosaur units – LCD is the way to go if you want your store to look relevant today. As I have discussed here I use an LCD unit in my store with excellent success.

Reaction time is slow given the archaic technology. Take the Powerball jackpot. If the $22 million does not go off this Thursday I would want the $33 Million promoted in a consistent marketing message in store from Friday morning.

These units make newsagents lazy. We’re better off creating stories in our shoops based on what is appropriate for us and for our customers. Abrogating that responsibility to a company located far away from the action of our shop is lazy.

Hopefully there will not be much take-up of this offering. Newsagents will gain more from active involvement in their businesses than giving the opportunity over to someone else.

I’d rather see newsagents use LCD screens like I and others are using. The association would have been smarter in visiting these innovative newsagencies and seeing LCD technology working well.

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Newsagency challenges

Australia Post further distances itself from stamps

The latest Australia Post (27/2) catalogue distances the government owned corporation further from the Act under which it operates. Less than 2% of the promotional space in the catalogue is used to promote postage stamp product. The Government continues to turn a blind eye while the government owned shops take more sales from small business. newsagents, photographic shops, stationers and telco shops. This underscores the cynicism of the Government’s recent decision to protect Qantas from competition and force consumers to continue paying too much to travel between Australia and the US.

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Newsagency challenges

The best blogging newspaper in the world

Jay Rosen and fifteen of his students at New York University set out to determine the best blogging newspapers among the US major dailies. Their report names the Houston Chronicle as the best. The post is an excellent benchmark for any newspaper actively engaged in blogging. It also legitimises blogging for the newspapers yet to discover the medium and prods those who support what I’d call ghost blogs – blogs which are not the real deal.

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Newspapers

Newspapers and disruption

Newspapers Next: a project aimed at helping newspaper publishers find disruptive innovation. A project of the American Press Institute this looks like a valuable practical project. Disruption has happened and will continue to happen in publishing. Joining the game in this way helps publishers find a wave to ride. It sure beats publishing stories in your pages that all is well in newspaper land.

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Media disruption

This magazine should go out of business

I’ve had a small publisher contact me complaining that if newsagents stop stocking product because it does not perform then companies like his will close as they will lose a very cost effective retail channel. In his case, I receive 2 copies of his $6.95 monthly magazine and usually sell one. I earn $1.74 commission. The retail space costs me $3.00 per month. The title and pocket cost me $1.50 per month to service. So, I have to generate $4.50 per month from a title to break even before I start to recoup non real-estate and labour operational costs. The $1.74 from this title represents a loss for me so I should stop stocking the title. (Achieving that with some magazine distributors is challenging because they believe that I do not have the right to stop supply of a title not performing in my shop.)

Back to my dialogue with the publisher. he says if newsagents stop carrying his title his magazine will fold. Maybe it should fold because right now he is only surviving because newsagents like me are prepared to carry his title for a loss. In effect we’re investing our capital in his business every month. That doesn’t make sense to me.

This small magazine needs to find a publishing model which works for it rather than leech off the ignorance and good will of small business newsagents.

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50 magazines which should be taken off newsagent shelves

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.

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Newsagency challenges