Demise of magazine wholesaler claims 6,000 jobs

Written By Unknown on Jumat, 30 Mei 2014 | 18.18

About 6,000 people are about to be tossed out of work now that the nation's No. 2 magazine wholesaler — Source Interlink Distribution — will be closing its doors.

"While we have made significant progress in finding mutually agreeable solutions with publishers and national distributors alike, one of our largest suppliers has recently decided to cease supply and move in a different direction," Michael Sullivan, CEO of Source Interlink Distribution, wrote in a memo to publishers.

"As such, it's with a heavy heart that I am writing to advise you that [SID] will be discontinuing all operations in the near future," the unsettling Sullivan memo, obtained by Media Ink, continued.

Wholesalers truck magazines from warehouses to retailers large and small and have been under enormous pressure for years as newsstand sales have tumbled.

In the mid-1990s, there were more than 300 wholesalers. With SID's closing, there are now just two survivors — TNG, owned by The News Group, based in Canada, and Hudson News.

In the five years ended in 2013, as the retail magazine business has shrunk by 40 percent, to less than $3 billion, according to industry sources, SID was growing.

Last year it added the Rite Aid and CVS chains nationwide, and already had about 75-to-80 percent of the Barnes & Noble stores and more than 1,200 Walgreens.

But to get the retailers to jump ship, SID had to promise them much better terms. It thought it could introduce a more efficient way of doing business by eliminating the archaic return systems.

SID wanted to calculate sales only when titles were scanned at registers. Traditionally, every magazine shipped — known in the industry as "the draw" — counted as a sale.

Publishers balked at SID's scanned method because it did not account for "shrinkage" — items that are stolen, damaged or lost somewhere.

While shrinkage might only be in the 3 percent-to-7 percent range, in the hardscrabble world of publishing margins today, those lost sales loomed large.

It's one of the dirty little secrets of publishing, that magazine publishers end up shredding the bulk of the magazines — perhaps as much as 70 percent — produced for sale.

The latest wholesaler crisis burst into the open on Monday when Time Inc., in a filing with the Securities and Exchange Commission, said it had dropped SID — identified in the document only as its "second largest wholesaler" — and given the business to a company identified as its No. 1 wholesaler.

That company was fingered by sources to be TNG, owned by The News Group, headed by Jimmy Pattison.

But that was only the most visible crack in the system.

Bauer Publications, publisher of Woman's World and celebrity titles like In Touch and Life & Style, had quietly decided to stop using SID about two to three weeks ago.

Bauer declined comment.

In the final move, on Wednesday, Curtis Circulation, a national distributor that serves as the banker for American Media titles such as the National Enquirer and Star, and Rodale titles like Men's Health and Runner's World, also said it would stop shipping to SID.

Ironically, the only entity still using SID was the Comag operation that handles Condé Nast and Hearst titles.

Comag is owned by The News Group's TNG and Hudson News, the two biggest remaining wholesalers, which will now control about 80 percent of the market.

Public gets booked

For the first time ever, Book Expo America, is inviting the public inside the Javits Center to meet and mingle with authors.

The price tag is $25 for adults and $5 for children under 12.

An estimated 10,000 tickets have been sold for Saturday's public session — what is usually the slowest day of the Expo.

More than 80 authors will be on hand for what is being billed as Book Con — being run by ReedPop, the same folks who produce ComicCon.

The first several days belong to publishers, trying to drum up interest among bookstore owners for titles that will be hitting later this year.

Patterson swipe

The battle between Amazon and Hachette Books over pricing on e-books continued to dominate conversations on the convention floor of Book Expo America.

Best-selling author James Patterson drew attention at a luncheon when he took a swipe at Amazon.

"The future of our literature is in danger," he told the lunch crowd, where he was accepting an award for helping small book sellers. "Amazon wants to control book buying, book selling and even book publishing,"

Amazon for its part seemed to be maintaining a very low profile as the bookish crowd seemed largely set against Amazon's play in the latest battle.

One agent said he was having a hard time finding any Amazon presence at BEA.

"If they have a booth, it better be bullet proof," he said, in jest. In reality, Amazon did have two tiny books — one for its Kindle e-reader and other a kids book — stuck in an out-of-the-way booth for books in translation.


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