(Revised) Some Final Thoughts on the Anderson News Anti-Trust Suit and the Way Forward

Note: I turned to a tech savvy friend once and asked, "Is it me, or is this program wacked?" He looked up from his tablet and said without missing a beat, "It's you."

 I accidentally set the timer wrong for the release of the post below.  If you are a subscriber or followed the link from Twitter, Facebook or LinkedIn, you may have seen it this morning. It needed additional editing before release and I now present it to you as it was supposed to go out into the ether. In case you are wondering, I actually did score higher on my English SAT than this morning's release may have suggested.

One aspect of the newsstand distribution industry that continues to fascinate me is how little each link in the distribution chain seems to know about the other. This lack of understanding is often compounded by the tension and historic mistrust each participant in the channel seems to have for each other. Add to that the apparent lack of interest the leading publishers seem to have in attempting to rescue, reinvent, or repair the broken distribution model and you have a perfect recipe for the continued downward sales trend we keep experiencing.

Lunch, and a few extra points....

Industry consultant Baird Davis once described the Anderson News Company (A major wholesaler servicing upwards of 40% of the national market in the last decade) as having "a strange naivety about both the magazine and retail industries...they serve." I experienced this once while on a call at Anco headquarters in Knoxville. One of their managers took me aside and castigated a client I represented for turning down their inquiry into getting an increased discount.

"Why aren't they sharing some of their ad revenue with us?" he demanded. "They have millions. Look at everything we have to do to distribute their magazine."

I pointed out that the publisher was a high dollar cover price title with a discount that was already 5 points above the industry average. On top of that they paid the industry standard RDA and had spent over $100,000 in retail promotions that year either directly with retailers serviced by their company, or in programs directly administered by their company.

That wasn't good enough apparently because we continued to argue about this for some time.

The discussion ended. We didn't pay the additional discount. They chose not to expand the title (which at the time was experiencing double-digit growth). Several of his colleagues decided to invite themselves to join us for lunch. I paid.

Despite that experience, I genuinely liked almost all of the people I worked with at Anco and thought that for the most part, they did a pretty good job for most of my client titles. But I was also struck by how little they seemed to understand how magazines got produced and why publishers even started new titles. Was this inspired by the necessity to work so closely with their retail customers? Or was it caused by the inherent distrust that publishers had for wholesalers and vice versa? Does each link in the distribution chain really need to understand how each part fits into the whole?

To be fair, publishers often fail to understand the nature of the wholesaling and retailing business. Sometimes the rules that make the system work mean little tot them. Publishers amusingly sometimes see me as more of a representative of the wholesaling and national distributing industry and often talk about how they feel we (the people who work in the industry) speak an unintelligible language. And are mostly corrupt.

I bring all of this up because from the time Anderson News went out of business until late July of this year, the former wholesaler had been engaged in an anti-trust lawsuit against surviving wholesalers TNG and Hudson News. Also included in the suit were all four major national distributors and many of the larger publishing houses like Hearst, AMI and Conde Nast.

In a fascinating twist, the presiding federal judge, Paul Crotty, intimated that some of the actions that Anderson News had taken just prior to shutting down may have violated the rules of anti-trust.

The judge was reported as saying, "If there were ever an antitrust case of the pot calling the kettle black, this is it.”

The upside of the dismissal of this case is that finally, the publishers, wholesalers and national distributors who were involved in the suit can now focus their attention and resources on the business of selling magazines at retail.

The questions I have asked myself since the suit was dismissed this summer are, "Is it just a little too late?" and "Do they really care?"

In 2009 there were four major magazine wholesalers in the US, several specialty distributors beyond Ingram and Media Solutions, and more than twenty regional magazine wholesalers. Since then, the number of national wholesalers is down to two. Only Ingram and Media Solutions service the larger bookstore chains and each one has exclusive arrangements. There are now fewer than 20 regional wholesalers.

One telling change we see since the closure of Anco and the spectacular flop of Source Interlink in 2014 is that national distributors are increasingly reluctant to offer anything in the way of direct advice to publishers when it comes interactions with wholesalers. TNG or Hudson decide want adjustments to per copy distribution fees? Your national distributor may speak to you in very neutral tones and suggest that you make the decision on your own. How are other publishers responding? They can't say.

Is it a stretch to wonder if the recent expenditure of multiple millions in lawyers fees has made them a bit gun-shy? With only two large wholesalers covering upwards of 90% of the business can they really serve their traditional purpose as the publishers banker? Are they advocates for the publishers? Can the remaining two wholesalers really interact effectively with multiple publishers and national distributors?

This could be a great time to come up with a way to revamp a declining industry, reignite how people look for and shop for magazines. Change the way magazines are merchandised, the way publishers and wholesalers are compensated.

In the meantime many smaller, start-up and niche publications are selling their magazines at retail. Look at the "Stockists" page on Kinfolk Magazine and you'll notice that they are distributing their magazine without the benefit of a national distributor or a traditional mass market wholesaler. They use Ingram for some of their bookstore business and the rest they do themselves. Moreover, they can be found in less traditional chains such as Anthropologie.

Kinfolk flies solo

Startup The Great Discontent followed suit and their stockists page is similarly filled with a few national chains, independent bookstores, and stores that probably don't carry many magazines at all. Browse the shelves of your local bookstore some day, look at all of the high-priced startup indie fashion and lifestyle magazines and you'll notice that many of them seem to be following this "do it yourself" attitude when it comes to their circulation.

To celebrate the release of their September fashion magazines, major publisher Hearst Magazine painted a delivery truck hot pink and sent it out into New York city to sell copies of all of their September fashion magazines. It is interesting to note that the truck was not owned by New York City wholesaler Hudson News and it appears that Hudson was not consulted about the promotion.

Does this portend a sea change in how magazines are distributed? Perhaps. We need new blood and new ideas on how to market our publications. But we also need relatively easy access to the retail market. How we approach squaring that circle may determine what the future of single copy sales will look like.