Transcript Realities at Retail

Realities at Retail
Gil Brechtel
President and Chief Executive Officer
Magnet
Realities at Retail
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Magazine Information Network (MagNet)
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Owned by the major US wholesalers
Recognized as the newsstand industry’s only central data repository
Capture US and Canadian wholesalers’ store level allocation, sales and
return information at least weekly
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125,000 retailer accounts and 8,000 titles
Receive retailer Point of Sale information daily or weekly from retailers and
wholesalers
Provide data and consultancy services to publishers and national distributors
Newsstand Industry Historical Sales Perspective - 2003-2007
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Wholesaler competition started in 1995
Significant margin shift from wholesalers to retailers
Most smaller players exited the business and four major wholesalers
dominated servicing large geographical areas with regional distribution
centers
Wholesalers put more pressure on publishers for discounts
Reduced service and overhead costs in an attempt to maintain profit levels
Despite all of the cost cutting, sales actually increased between 2003 and
2007
Sales Trends From MagNet
2003 - 2007 Magazine Category Sales and Retail $ (Millions)
$4,993
(+9.7%)
$4,551
5,000
4,500
4,000
3,500
3,000
Sale Units
Retail $
2,500
2,000
1,500
1,180
1,209
(+2.4%)
1,000
500
0
2003* (CP $3.86 / EFF 33.27%%)
2007* (CP $4.13 / EFF 37.80%%)
Realities at Retail
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Newsstand Industry Historical Sales Perspective - 2008-2012
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The economy tanked in early in 2008 bringing magazines sales with it
The sales decline continued through the end of 2012
• Celebrity and newsweekly title sales losses a major contributing factor
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• Small titles ceased publishing, dropped by wholesalers or left newsstand
Technological advances, social media and mobile affected newsstand sales
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Celebrity title information and major news stories available to consumers in real
time through social and digital media
iPad - Release in early 2010 provided another platform to receive content
Facebook - 400 million users in 2010, now 1.1 billion, 665 million every day
Smart phones - Represent 55% of US mobile phone use– 130 million people
Kroger Supermarkets reduced average customer checkout wait time in 2,400
stores from 4 minutes to 26 seconds using infrared cameras and technology
Wal-Mart testing “Scan & Go” system in 200 stores
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Customers scan barcodes of products they are buying and bag them as they
shop
Self checkout screen reads barcodes and prompts customer to pay
Sales Trends From MagNet
2008 - 2012 Magazine Category Sales and Retail $ (Millions)
$4,834
5,000
4,500
4,000
$3,427
(--29.1%)
3,500
3,000
Sale Units
Retail $
2,500
2,000
1,500
1,067
713
(--33.2%)
1,000
500
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2008* (CP $4.53 / EFF 35.24%%)
2012* (CP $4.81 / EFF 32.28%%)
Sales Trends From MagNet
2008 - 2012 Celebrity Weekly Sales and Retail $ (Millions)
1,200
$1,001
1,000
$765
(--23.6%)
800
Sale Units
Retail $
600
400
280
196
(--30.3%)
200
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2008* (CP $3.57 / EFF 35.18%%)
2012* (CP $3.91 / EFF 32.08%%)
Sales Trends From MagNet
2008 - 2012 Top 1000 TItle Sales and Retail $ (Millions)
4,000
$3,542
3,500
$3,095
(--12.6%)
3,000
2,500
Sale Units
Retail $
2,000
1,500
867
664
(--23.4%)
1,000
500
0
2008* (CP $4.09 / EFF 35.50%%)
2012* (CP $4.66 / EFF 32.62%%)
Sales Trends From MagNet
2008 - 2012 Outside Top 1000 Title Sales and Retail $ (Millions)
$1,292
1,400
1,200
1,000
Sale Units
800
Retail $
600
$331 (--74.4%)
400
200
200
48 (--75.8%)
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2008* (CP $6.45 / EFF 34.27%%)
2012* (CP $6.84 / EFF 28.27%%)
Sales Trends From MagNet
2012 Q1 vs 2013 Q1 Sales and Retail $ (Millions)
$900
900
$801
(--11.0%)
800
700
600
Sale Units
500
Retail $
400
300
188
161
(--14.5%)
200
100
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2012* (CP $4.78 / EFF 32.70%%)
2013* (CP $4.98 / EFF 31.50%%)
Realities at Retail
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Largest quarterly sales decline compared to same period previous year
in memory
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Top 50 titles and titles ranked lower than 1000 in sales contributed 97% of
the sales loss – $96M
Titles ranked 50-1000, over 50% of the business collectively performed fairly
well
Contributing factors:
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Continual high unemployment along with tax increases at the beginning of
2013
22 million unemployed or “underemployed Americans” May, 2013
4-6% reduction in take home pay effective January 1, 2013
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Many major weekly titles had 12 issues in 2013 compared to 13 in 2012
975 fewer releases in the first quarter this year – 6.3% less than 2012
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Consumers have less discretionary income
Mainly non-weekly titles no longer on the newsstand or cutting frequencies
Non-weekly title sales flat much of the third and fourth quarter last year
Competition from new media for content delivery and consumers’
leisure time
Realities at Retail
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Newsstand sales environment has impacted the supply chain
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Many publishers have stopped publishing titles or moved only to digital
format
Retailers cutting back on space as sales decline
Top Chains Share of Market
2012 Rank
Chain HQ
2008 $
2012 $
$ Var
1
Wal Mart Stores/HQ
$659
$498
-24.3%
2
Barnes & Noble Inc HQ
$261
$227
-12.8%
3
Kroger Co/HQ
$236
$177
-25.1%
4
CVS/Caremark Corp
$158
$122
-22.6%
5
Safeway Inc/HQ
$162
$116
-28.8%
Top 5 Sub-total
$1,476
$1,141
-22.7%
ROM
$3,358
$2,286
-31.9%
Total
$4,834
$3,427
-29.1%
Realities at Retail
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Newsstand sales environment has impacted the supply chain
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Many publishers have stopped publishing titles or moved only to digital format
Retailers cutting back on space as sales decline
Wholesalers with high fixed costs explore other opportunities to increase sales as
financial losses continue
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Anderson News Company, the largest magazine wholesaler closed its doors in
early 2009, creating a vacuum while other wholesalers attempted to service the
effected retailers
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Many small retail accounts stopped handling magazines as they couldn’t get service
Major Southern wholesaler on shaky financial footing
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Retailer demands for SBT has impacted their cash flow positions
Wholesalers not really interested in expanding marketshare in current environment
So are printed magazines and newsstand sales really dead or on life
support?
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Currently, 75% of consumers still prefer to read magazines in print – Deloitte’s
2013 Consumer Media Survey
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88% last year
78% of consumer magazine publishers’ revenue derived from print – MediaWeek
Current consensus of opinion is that print is more profitable than digital and
newsstand is more profitable than subscriptions
Realities at Retail
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A deeper dive into the numbers shows that many titles are prospering in
this tough newsstand environment
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Both specials and regular frequency titles
Book-a-zines – high cover priced specials have prospered during the same
five year period
2008
Retail $
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$194,750,000 $231,303,000
2010
2011
2012
$263,043,000 $293,756,400 $352,016,000
Units
19,244,000
22,134,000
22,406,000
24,594,000
29,102,000
CP
$10.12
$10.45
$11.74
$11.94
$12.10
So if print is dead why are consumers spending so much on high cover
priced newsstand only products?
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2009
No subscriptions
Little or no advertising and no rate base to meet
Brands sell – Time, Life, Us, Meredith, Taste of Home usually successful
High quality cover and paper stock and good pagination very important
Top Book-a-zines 2012
Book-a-zine Sales Sample
2012 01
Sales
2013 35
360,300
Sales
2012 16
203,600
Sales
2012 28
195,800
Sales
191,300
Dealers
50,700
Dealers
53,300
Dealers
46,600
Dealers
49,500
Retail $
(000’s)
$3,368
Retail $
(000’s)
$2,468
Retail $
(000’s)
$2,018
Retail $
(000’s)
$2,529
Index
+130%
Index
+120%
Index
+64%
Index
+164%
US Price
$11.99
US Price
$9.99
US Price
$12.99
US Price
$9.99
Sales Increases in Quarter 1, 2013
2012 12
Retail $
+23%
2012 12
Retail $
+51%
2012 12
Retail $
+24%
Sales Increases in Quarter 1, 2013
2013 01
Retail $
+6%
2013 01
Retail $
+11%
2013 01
Retail $
+9%
Sales Increases in Quarter 1, 2013
2013 02
Retail $
+15%
2013 02
Retail $
+46%
2013 02
Retail $
+5%
Distribution And Expansion Works
2012 10
2012 08
2012 10
Draw
+73%
Draw
+86%
Draw
12%
Retail $
+67%
Retail $
+105%
Retail $
+34%
Dealers
+55%
Dealers
+18%
Dealers
+11%
Distribution and Expansion Works
2012 10
2013 02
2012 21
Draw
+23%
Draw
+136%
Draw
Retail $
+56%
Retail $
+384%
Retail $
+257%
Dealers
+25%
Dealers
+60%
Dealers
+13%
29%
Realities at Retail
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Secrets to newsstand success:
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Be proactive – Don’t give up on the newsstand
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Work with your distributor or consultant to look for opportunities for dealer
expansion and sales
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Insist that your title’s distributions are worked more that a few times per year
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You can increase your newsstand profitability by reducing your newsstand
production and distribution costs without a sales loss
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Produce titles that pique consumer’s interest to beat the competition for the
consumers’ dollars in a tough economy
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Consumer’s perceived value of the publication is very important
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Newsstand is the only place in the magazine world where the consumer must
decide in a very short time period whether or not they are getting the “bang for the
buck” with their purchase
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With fewer advertising pages and current cover prices, too many titles are failing
the “Thud Factor” test
Newsstand can be your most profitable source of revenues, but you
have to work at it!
• Thank You For Your Attention