The Shrinking SBT Iceberg

Last week the Alliance for Audited Media (AAM, formerly known as the Audit Bureau of Circulation), announced that it would allow for the calculation of "shrink" in determining the single copy sales of it's audited magazines. While this wasn't unexpected, it goes a long way towards the recognition that there's a whole new way to look at both the delivery, sales and returns processing of newsstand copies.

Shrink is commonly considered to be copies that were stolen from the rack by the retailers customers or employees. It can also be copies that are damaged and unsalable. Sometimes copies simply disapear and can not be accounted for. Under more traditional sales terms with magazine wholesalers, if a retailers customers were engaged in poor behavior, too bad. Unreturned copies were considered to be sold and had to be paid for. Apparently under the new proposed terms of SBT that the News Group has presented, shrink will remain the responsibility of the stores. I think this is the right place for it to remain.

There are now more copies sold through SBT retailers than the traditional method of determining sales (deducting returns from deliveries). Therefore it seems apparent that once all of the calculations are figured out, every publisher, large or small, who uses the services of AAM auditing is going to take advantage of this.

This should be a benefit the three hundred or more titles that have their circulations audited.

For the rest of the print newsstand world, this may not mean all that much.

But this will: Last Friday, the IPDA (The International Periodical Distributors Association), released a link to an article that any publisher with single copy sales at an SBT participating wholesaler should pay close attention to.

IPDA is a trade organization comprised of national distributors and publishers. Their goal is to work with other participants in the supply channel of the single copy magazine and book sales industry. Throughout the year they provide a wealth of information and research relevant to the single copy sales world. They work behind the scenes with retailers promoting the sales of our category. You can subscribe for free to a daily news digest they put together outlining important details in the single copy sales, magazine publishing, and retailing industries. If you're currently subscribing to the BoSacks newsletter, "The New Single Copy," or Samir Husni's blog, I would urge you to subscribe to the IPDA feed. The articles they glean will provide you with excellent balance and insight into many issues affecting our industry.

The article, by IPDA president Jerry Lynch, describes some important developments regarding SBT. In particular, it discusses the recent decision by AAM to allow for the reporting of shrink in single copy sales for audited titles and a list of "Best Practices" goals that IPDA suggests as the industry moves forward with the more universal deployment and acceptance of "Pay on Scan".

Overall, the objectives are quite notable and make sense. They range from the goal to "Engage all parts of the suppy chain" to the recognition that "shrink and its casual factors must be identified...reported and mitigated over time." Read the lists of goals. If we can make this work, we could see wholesalers return to some semblance of profitability. This would be a good thing because if wholesalers can be assured that their businesses are profitable, then we can all focus on selling magazines.

But as this process moves along, the questions on my mind, as a representative of smaller and medium sized magazine publishers, is two-fold:

1) Are the ultimate goals of these "Best Practices" the increased and expanded sales and marketing of magazines?

And,

2) If we know more quickly the final sales by store and chain and issue of these magazines, are we advancing forward the final payment for these magazines to all participants in the channel. Will this allow magazine publishers to share in a stabilized industry and focus on creating more publications we can sell?

At present the answer to question number 2 seems to be "No". Two of the three major wholesalers recently requested a longer term to pay on less frequency titles (Quarterlies, bi-annuals and annuals) citing the difficulties in carrying the inventory costs associated with these longer on-sale magazines with their SBT retailers. I've also had discussions with wholesalers who cite slow payments from retailers as a major impediment to their long term profitability. 

I have no real problem with this technology. Quick access to sales data is very 21st century. It's a necessary part of our work today. But the end result of this process has to be the sales of more magazines. It's important for wholesalers to reduce their costs. They've been working at this since consolidation began back in the '90's. But you can only reduce costs so much. Now it's time for them to be profitable. You can only do that by selling more product.

And that's the same issue many publishers have. I recently took a call from one of my clients after posting an updated POS report to him. "I like getting this sales data so quickly," he said. "Now why can't I get paid more quickly too?" 

Why, indeed?