At Om Malik’s broadband Blog there is an excellent discussion about, among other things, the challenges for Apple in the pricing model for music sold through iTunes. It discusses the pricing disparity of ring tones costing (US)$3.00 and iTunes songs costing (US) 99 cents. In a comment on the main posting, Charlie Sierra notes:

Seriously this showdown is the classic battle between distribution and content. So sooner or later they’ll get in each other’s business.

Buying content to boost the value of your distribution asset is the age-old Turner/Murdoch play. I sure hope Jobs has got some super secret talent hidden away for all the impulsive 12 yros.

While the Apple/Murdoch comment is a throwaway, it does make for interesting speculation and have some bloggers talking.

I was on The Age website today and on the home page there is a link to iSUBSCRiBE, the online magazine subscription business. At iSUBSCRiBE you have access to many magazines for home delivery at prices which deliver considerable discounts. Donna Hay – 40% off; Better Homes and Gardens – 20% off; and so on.

I appreciate that Fairfax, publishers of The Age, are at liberty to attract advertising revenue. I wonder, though, if they have an obligation to support newsagents since they are their key distribution and retail network? I wonder this especially given that the iSUBSCRiBE folks are able to offer cover price discounts for magazines whereas newsagents are not. Sure iSUBSCRiBE is offering a long term subscription for a discount. Newsagents do that too but they are not able to offer the discount – especially given that they only make 25% off the cover price for each sale.

On the one hand Fairfax say they support newsagents yet on the other they are happy to make money from a business which directly and aggressively competes with newsagents and which does so based on business terms which are not available to newsagents.

I wonder how Fairfax would feel if newsagents had an alternative offering for consumers which competed directly with a core business of the Fairfax newspapers? Would they sit by and allow newsagents to promote and develop this hypothetical business which competed with The Age and the Sydney Morning Herald? Based on the iSUBSCRiBE I’d expect them to.

Foreign language newspapers are sold alone in newsagencies more often than other newspapers.

Data from over 100 newsagents and representing several million shopping baskets from this year shows that on average 85% of foreign language newspapers are sold with nothing else in the sale. The percentage for city newsagents is higher than for rural newsagents.

This represents seriously inefficient business for the newsagent.

Newsagencies are run on the basis of multiple items per sale. It is only in sales where this is achieved that the low and fixed gross profit from small ticket item sales is palatable.

Foreign language newspapers take up more floor and shelf space that mainstream daily newspapers which only adds to the challenged circumstances of their life in newsagencies.

While one could and should say that newsagents have an opportunity to entice, pursue and extract add on sales from foreign language newspaper customers, I can say from personal experience that it is easier said than done. Not many of these customers like to engage with staff. We have tried promoting products and services tailored to what we feel might interest them and while some do take up the offer, the vast majority don’t so we don’t get in their way.

A report in yesterday’s Sydney Morning Herald said that the ABC’s new lifestyle magazine, Goodlife, aimed at over 35s would be sold in supermarkets. If true and newsagents have been left off the retail roster then bugger them I say. If it’s an error in the report then bugger the SMH. It’s tough enough for newsagents let alone being forgotten in stories.

I hunted all over the ABC website and cannot find out their distribution plans.

Newsagents are important to the ABC. Our channel sells and promotes Gardening Australia, Delicious and Limelight. Gardening Australia and Delicious are both are strong titles and both are achieving growth in market segments which are challenged based on the latest Roy Morgan research readership data.

One only has to look at the launch success of Notebook and Real Living in the newsagent channel to gauge the value of newsagents getting behind new titles in ways supermarkets and other magazine outlets never support magazines.

Sony announced yesterday the availability of a firmware upgrade for its PSPâ„¢ (PlayStation®Portable) system. From the Sony announcement: “the firmware 2.0 upgrade will allow users to take advantage of the unit’s built-in Wi-Fi* capability and to wirelessly search the Internet from Internet Access Points or “hot spots”. The upgrade will also provide increased Wi-Fi security and personalization tools together with photo sharing and expanded video and audio playback options.”

This much anticipated announcement makes the PSPâ„¢ the new must have toy for the boys who want to be browsing anywhere and everywhere while playing games and doing all things multi media.

The screen on the PSPâ„¢ makes it the most attractive portable wireless enabled Net browsing device.

Watch for news and information content packages specifically for the PSPâ„¢ and similar devices. By that I mean, watch for magazines and newspaper brands publishing material online for accessing via the PSPâ„¢.

Plenty of reports today (including this one) about the Playboy decision to produce a digital edition of their magazine.

Here’s the Playboy press announcement:

PLAYBOY MAGAZINE GOES DIGITAL
Playboy Enterprises Expands Its Online Offerings
to Tap into Growing Consumer and Advertising Market

NEW YORK, August 24, 2005–Playboy Enterprises, Inc. (PEI) (NYSE: PLA, PLAA) announced today that Playboy, the world’s best selling men’s monthly magazine, will launch a digital edition beginning with its October 2005 issue in conjunction with Zinio Systems, Inc., the worldwide leader in digital publishing and marketing services.

“Since the first issue in 1953, Playboy has been about lifestyles, and our readers have been among the earliest adapters to cutting edge trends and technologies,” said Playboy Founder and Editor-In-Chief Hugh M. Hefner. “The tens of millions of consumers around the world who consider Playboy to be the gold standard for entertainment for men will welcome our digital edition.”

Playboy Enterprises’ Chairman and CEO Christie Hefner added, “We see this as a natural extension of the Playboy brand. We have worked with Zinio over the last six months, offering subscription and single copies of our popular special editions, and the response has been extremely positive. By launching Playboy digital, we are offering consumers worldwide a digitized product identical in every way with Playboy’s print edition.”

Hefner continued, “The increased distribution and worldwide access will also increase our loyal advertisers’ reach to consumers, and provide additional advertising sales opportunities as we are able to meet the growing demand of companies to market online by offering ad sponsored links. From the company’s perspective, digital Playboy will be a much more cost-effective way to distribute our content and count toward ABC rate base. Moreover, because of our success with Playboy.com, we see significant opportunities for cross promotion and bundling between our Cyber Club and digital Playboy.”

Playboy readers around the world can buy a digital subscription or single copy by logging on September 13 to www.playboydigital.com or www.zinio.com. (Please note that the Playboy URL will not be live until September 13.) A subscription or single copy will be delivered instantly via the internet through a download to a PC, laptop or Mac. Digital copies will be received by subscribers automatically each month and can be read online or offline.

The digital edition will premiere on September 13, the same date that the print edition is available on newsstands in every market around the country. The issue includes the Girls of the Pac 10, a video game feature and pictorial of video game femme fatales, as well as the Playboy Interview with George Carlin.

“The preeminence of Playboy’s brand makes this a big moment for digital delivery,” said Scott L. Kauffman, President and CEO of Zinio. “The creation of Playboy’s digital editions is a strong endorsement of Zinio’s ability to generate new readers in this dynamic medium.”

With 62% market share, Zinio has over 2 million subscribers in nearly every country in the world.

The Sydney Morning Herald carries an AAP report that Federal Government Finance Minister, Nick Minchin, was asked yesterday at the National Press Club whether Australia Post would be privatised. He listed the various government businesses which are for sale or being readied for sale and commented: “There are a few other smaller business that could be considered but we’ve not turned our mind to Australia Post and we have no policy to do so.”

That the government owns a retail network that competes directly with independently owned small business newsagents is appalling. Australia Post is a tough competitor. They target newsagents with their promotions. They have only commenced this competition in fairly recent years. They are leveraging the goodwill of the postal service to hurt this already challenged small business channel.

While the mail delivery and stamp production should be controlled by the government, the retail network should be completely sold off. Some have been but not all.

Nick Minchin and the Government are wrong on this. Their refusal to even consider the sale of the retail network is proof of a lack of commitment to small business. Here they are profiting from exacting commercial success in a competition with newsagents.

A true free enterprise government would allow free enterprise to operate rather than allowing its own retail stores to profit from the customer traffic which MUST go to their retail outlets because of draconian controls on the sale of postage stamps.

Nick Minchin and the Federal Government ought to sell the retail network to individuals or to small businesses. This would demonstrate support for the small business sector.

My own newsagency is directly opposite a government owned Australia Post shop. They compete aggressively for stationery, greeting cards, phone recharge, Western Union and bill payment. They do so on unfair terms. They get better landlord treatment. They have guaranteed traffic. They control how their store is laid out. They leverage their government protected monopoly traffic so they can sell products which are crucial to my success.

Organisers of the US Open will produce regular podcasts to update tennis fans as reported at their website.

This is interesting to me from two perspectives: it reduces the supply chain between subject (the open) and consumer; and, it is further evidence of mainstream acceptance of podcasting as another medium.

It is further evidence of the dramatic shift in how when and where we access and consumer news and information.

While the giveaways and competitions continue more frequently than ever (or so it seems) with capital city newspapers from all publishers, rural newspapers go about the business of relying on content to win sales.

An unscientific survey of 15 rural newsagents this week has revealed that not one of the rural newspapers they sell has used a special giveaway or any similar one off device as a retail or home delivery sales promotion in the last two months. These rural newspapers relied on content and the track record established by the masthead.

The sales data I have seen for many rural newspapers shows strong year on year sales growth. Maybe that can be attributed to their focus on being newspapers and not competition delivery platforms.

Rather than spend money on DVDs, CDs, posters, stickers and the other come-ons used by city newspapers to boost sales, publishers would do well to run focus groups with newsagents. Customers talk with newsagents. This over the counter feedback coupled with newsagent feedback will provide some valuable guidance which would satisfy customers, publishers and newsagents.

Trading Post in NSW shows how smart it can be in responding to the Weekend Shopper (News Ltd) free classifieds for items under $300 deal. It is copying the idea.

A smart publisher would add value making purchasing the title an imperative and placing your advertisement for a fee an imperative.

The Trading Post strategy is not smart but then neither is the Weekend Shopper idea. To compete with online advertising newspapers have to act like newspapers. But then newspapers are but part of the business they are in and maybe they can afford to sacrifice in order to protect what they see as the golden child.

The Age has another giveaway this weekend. A yoga DVD apparently.

I had a customer ask a couple of days ago when the next CD or DVD was coming out with a newspaper. I asked why. “Because that’s when I’ll buy it” was the answer. Okay it’s anecdotal and a one off. However, all these giveaways which are unrelated to news only serve to confuse consumers about what the masthead (brand) stands for and I have evidence from one customer to support that.

Sonja Haller of The Arizona Republic reports about the considerable growth in the free classified marketplace in Phoenix which was started by the now worldwide famous craigslist.org. This story reports could just as easily have been written in Sydney or Melbourne where free classifieds are in in 2005. Yeah there are some rules but consumers seem to be embracing them.

I’m not a fan of FREE. It devalues the brand and the service you provide. However, with the craigslist model newspapers have had to come up with something which demonstrates them responding.

I’d rather see a response which offers a more valuable advertising proposition, something which makes newspaper advertising more meaningful than the online competitor.

Online advertising company Seek has posted exceptional results which do not augur well for newspaper advertising. Today’s Australian Financial Review carries the story (pg 11) and quotes Seek Director Matt Rockman claiming 31% growth in online employment advertising versus a 6% decline for print media in the same category.

While publishers can and will replace this lost revenue by playing in the online space, their traditional supply chain faces more complex challenges. We either need to find new products and services to offer or create product which we control. Focusing on new products and or services carries the risk of being beholden to suppliers. It would be unlikely that newsagents (in their current structure) would be a key channel for any new product and or service of significant value. Therefore, my attention would be on creating products and or services which we own.

The advertising shift reflected in the Seek results will continue as will the greater influence of mobile devices in producing access to newsagent information. These changes go to the core traffic generators of newsagencies. The successful newsagents will be those who have already started building elsewhere to replace the traffic and build relevance.

Full report at FT.com. Heseltine is chairman of Haymarket, a supplier to newsagents. He is responding to the draft report from the Office of Fair Trading which, if adpoted, would radically change distribution arrangements.

Two government owned retail post offices I am aware of have changed their retail ‘story’ in the last week.

Punchier stationery displays. Greeting cards at the very front.

I know from consumer feedback at one location that this is generates confusion since there is no postal service message at the front of the shop except the Australia Post logo.

Newsagents were in the stationery and greeting card space well before Australia Post. Post should either sell each of its retail stores (to individuals) or get out of all ancillary product and focus only on postal product.

Having the government trade off their postal product monopoly in an effort to take revenue from my small retail business is offensive. What other country in the world would allow a government owned operation like Australia Post to enter a well established and well served marketplace and compete with small business owners?

A government concerned about small business would fix this right away.

I spent half an hour watching the behavior of people at a local Starbucks the other day. I to see if The Age newspaper was selling there or more often being browsed and returned to the rack.

I’ll declare my vested interest: I own a newsagency and am frustrated that The Age is being sold in Starbucks for half price – in competition with existing full price outlets.

In the half hour I watched, no one purchased The Age; several picked it up and put it back and two took it to their table, read and returned it to the stack.

Beyond the confusion the dual pricing in close proximity brings to a brand, there is the possible lost sale because of poor policing of the browsing and reading at the table. The price of the newspaper is the price of the newspaper. The content is no less valuable in store A compared to store B. While one cold argue that it’s an up sell financially supported by Starbucks you have to wonder why then it’s not promoted more aggressively.

I wish publishers would discuss these strategies with their distribution network prior to implementation. My experience is that all this move has done is shift sales from one location to another.

Vnunet.com reports that a survey by CLX shows that it’s not young people who are driving the growth in podcasting, but the older generation.

If accurate, this survey challenges some of what is being written about podcasting being a medium embraced by young people.

CLX surveyed 8,000 US consumers and that’s a decent dataset to work with.

I’d like to see more surveys. In the meantime podcasters will need to consider the implications for what is being produced. At the same time, mainstream media companies yet to enter podcasting might see this research as encouragement to enter the fray.

I still see podcasting as a medium which sets stories free. It provides another dimension which takes a story off the page and thus has the potential to attract more people to the brand.

Bad news for major city US newspapers according to Nikki Finke writing in the LA Weekly. (Source: Common Sense Journalism.)

When the Federal Government led newsagents to the trough of deregulation in 1999, Prime Minister John Howard crowed that he had delivered a good outcome for this small business channel. It’s a claim he repeated during the 2004 electron campaign.

The Prime Minister is wrong. The job was only half done. Newsagents have been left with operational processes which disadvantage them and, indeed, provide their new competitors an unfair advantage.

Indeed, the government demanded that newsagents deregulate but did not provide funding for professional representation through the deregulation negotiation process. This say newsagents negotiating with lawyers from newspaper publishers, magazine distributors and the ACCC. A government concerned about small business would have made sure that they were professionally represented so that the discussions had some balance.

The supply and accounting processes newsagents have today are the same as in the regulated world when we had more customers and a certain exclusivity. Today, with many others taking the top selling product, we have less traffic yet onerous supply arrangements for the lesser selling product. This is choking some newsagencies.

Australia needs to decide if it wants this newsagent channel. While that sounds dramatic, the question is realistic for unless more equitable magazine supply arrangements are put in place for low volume titles, newsagents will go broke.

Magazines are important to newsagents. Hence the need for newsagents to consider the economic viability of current processes so that we can maintain our position as magazine specialists and so that all publishers have access to a viable magazine retail network.

Below are my proposed proposed magazine distributor Key Performance Indicators I’d like to see discussed between newsagents and magazine distributors. I am sure that through discussion a set of KPIs can be agreed which serve all stakeholders.

TECHNOLOGY

1. Implementation of appropriate systems in supplier offices to enable scale out decisions based on current data and not data 13 weeks old as happens today.
2. Provision of supplier invoices electronically without any cost to access the service.

SUPPLY

1. Scale out to reflect title performance in that outlet with supply to be no more than 25% above recent sell through rates except in exceptional circumstances where the additional product is expected to sell due to cover feature or special promotion. With higher scale out to be accepted for an additional fee.
2. Offering of a carrying fee for titles which do not meet minimum performance criteria so that the newsagent is paid to carry the title.
3. Newsagent to be able to easily and electronically alter order quantities (i.e. without having to call a call centre and wait on line for too long)
4. Changed supply figures not to be altered without reference to newsagent unless such change absolutely supported by sales data.
5. No cut of supply below current recorded net sales.
6. No reissue within six months of last issue of a title.

RETURNS

1. Online returns to be implemented ASAP.
2. Returns to be credited within 48 hours of provision of electronic returns data or 7 days of provision of physical returns form.
3. Returns to be called no later than the date of the next issue of the same title going on sale.
4. Agreement of record keeping requirements for returns form and immediate acceptance in the event of a distributor losing a form and the newsagent proving local store compliance with standard practice.

ACCOUNTS

1. The threat of cutting off of supply to cease in cases where there is a legitimate dispute over the amount owed.
2. Agreement in independent arbitration in the event of a credit dispute – similar to an ombudsman approach. This could be something the distributors all fund like the telecommunications Industry Ombudsman.

I estimate that newsagents care currently subsidising at least 50% of the magazines they carry. This is an inequitable situation which cannot continue if newsagents are to survive. The only solutions are for under performing titles to be cut or for newsagents to be paid a fee to carry under performing titles. Maintaining the status quo will kill many of these independent small businesses.

The Prime Minister has been told of the challenges as has Fran Bailey the Minister for Small Business and Helen Coonan the Minister for Communications. They have done nothing.

The Federal Government needs to decide if it supports small business and the newsagent channel in particular. Turning its back as it has done for the last six years puts more than 20,000 jobs at risk and thousands of families’ life savings at risk. It also puts at risk the cultural, social and economic value of the unique newsagent channel.

The challenges are not that great. All it takes is will on all sides to navigate them in pursuit of a more level playing field than the Federal Government has created.

In an excellent on ed piece in the Baltimore Sun, Can newspapers reverse their decline?, Michael Socolow (Director of the journalism program, Brandeis University in Massachusetts) asks why newspaper sales and readership are falling.

Soclow considers the impact of technology and the desire for gossip over news. More important though is his question of whether newspapers themselves have contributed to the decline in sales.

Socolow says: “Newspapers sell you their credibility. That is the single most important value of any newspaper brand in the marketplace.”

I agree. Readers here will know of my frustration that newspapers too often try and build sales through competitions and not through promoting the brand and something to trust. Focus on delivering news backed by insightful and challenging analysis and make it available only in print and people will buy the product and therefore eyeball the advertisements which will generate the profits the corporations want.

Socolow goes on: “Most newspapers are offering little more than a comfortable rehash of events that their consumers are already aware of. Instead, newspapers should be challenging their readers by providing difficult-to-obtain firsthand reports from around the world that are unavailable anywhere else. They should combine that reporting with bracing, counterintuitive commentary that would provoke thought and discussion in the civic arena.”

Here here.

Competitions will not deliver loyal readers. Gossip will but at a cost to the brand. Loyal (valuable) readers come from providing quality content consistently. That’s what I hear across the counter in my newsagency.

At Akami you’ll find the Akamai Net Usage Index which they claim is the world’s first and only daily Web traffic benchmark that tracks where news is being consumed on a global basis. Akamai, is the content delivery platform for more than 100 global news portal companies.

This is not a scientific study so beware. Having made that disclaimer I report that I’ve been looking at sales data from a bunch of newsagencies. The last six to eight weeks have been hot in terms of magazine sales.

There are several partworks titles which are doing great business: Gods of Ancient Egypt, Essential Parts of Beauty; and Horrible Science. Horrible Science is a sell out in just one week! Newsagents own partworks as no other retailer touches them. They are high overhead with many retail challenges.

There’s Notebook. The new home and lifestyle magazine from FPC. Great sales.

There’s Real Living. The new lifestyle magazine from APC. Great sales and it’s only been out four days.

There’s the Marie Claire 10th birthday edition. Another sell out in a week.

There’s above average sales for Australian Women’s Weekly, Better Homes and Gardens, New Idea and Woman’s Day.

There’s the new Sudoku segment in the crossword category. Now with ten new titles on sale, none of which existed just three months ago.

There’s the university guide segment bringing six new one-shot titles this year, one of which will dominate. No other retailer carries these titles.

All of this is boosting the vitality in newsagencies – more so than our competitors because it’s in newsagencies where space is given to well promote the launches and changes. In supermarkets and convenience stores it is rare that new launches and promotions receive prominence.

We are tracking year on year sales growth for magazines of well above 20% in our own shop and above 50% of the HOT women’s weeklies segment of the category. While we have some in store drivers working this, I am seeing strong sales growth in other newsagencies which tells me that this winter is good for some newsagents in terms of magazine sales.

I’d say we’re in the middle of the hottest time in magazine sales for several years.

Now if only I could get enough stock to satisfy the customers who come in after we’ve sold out!

Mainstream media outlets have been carrying stories about RSS this past week.

Forbes carries an excellent introductory article backgrounding the technology and providing a perspective of how companies like News Corp. can leverage the opportunity through MySpace.

RSS is hot with consumers because it allows us to easily aggregate stories from a range of sources into your own daily read. It’s also hot with business because advertisers can easily track subscriptions.

Back at the sales counter of my newsagency I’m wondering how I can get in on this RSS thing. Hmmm…not in this business so I’ll just smile, share an anecdote or two and hope that the world one day turns and people want to start interacting with each other in person rather than electronically.