Is the news still worth it?

Going through some old records I came across the national newspapers’ ABC figures for February 1993. Total sales of the dailies were over 14 million copies, while Sunday sales were 16.3 million.

In those days the ABCs were less detailed than they are today, but on a like-for-like headline basis, the corresponding figures for February 2013 were 8.2 million for the dailies and just over eight million for the Sundays.

The dailies market is down by over 40%, and Sunday sales have more than halved.  What has hardly changed at all, however, is the number of newspaper outlets, which at around 52,000 is more or less the same as it was 20 years ago.

Then, the average outlet sold more than 250 national newspapers a day. Today the average is less than 150, while the Monday to Friday figure is even lower at around 130 – and when HND copies are excluded from the total, the average weekday counter sale across the country is probably no more than 100 papers per outlet.

This situation has serious implications for all sections of the trade.For the many thousands of retailers whose sales are below the average level, it is questionable whether news is still a viable category.

Absurdly high carriage charges have exacerbated the effects of declining sales and reduced margins, destroying the profitability of news for these retailers, leaving only footfall as a possible reason for continuing to stock it.

The wholesalers are facing trouble, too. Declining revenues from their share of cover prices have led them into a state of high dependency on carriage charges, and any significant reduction in their retailer numbers, which seems inevitable, would severely damage their business model.

Although most newspaper publishers have until recently wanted as many outlets as possible to maximise opportunities for impulse purchasing, the sharply declining market means the cost of supplying such an extensive network is growing disproportionately.

Falling sales and increasing volatility of buying habits are playing havoc with allocation systems, and waste levels as a percentage of sales are rising steadily.

Each small bundle of weekday newspaper returns left out for collection each day, say 20 assorted titles weighing about 5kg, costs the publishers around £1.25 (net) just for the newsprint – and correspondingly more for bigger bundles.
Replicated across 52,000 outlets these costs are huge – and that’s before counting the heavier weekend editions with their magazine supplements and even higher waste levels.

Sooner or later the publishers will decide that the cost of waste resulting from universal distribution on sale or return is unsustainable, and they will introduce either firm sale terms or minimum supply thresholds – causing many more retailers to exit the market.

Some independent retailers have already seen this coming, and I am aware of two groups of mainly HND agents who, separately, are talking to publishers about working together to develop a cadre of what I call ‘super-newsagents’, combining their HND activities with sub-retailing – in effect, micro-managing the supply of news within their areas to outlets not supplied by a wholesaler.

Both groups are seeking better terms and both believe that higher margins could be paid for by reductions to the level of unsolds.

How the publishers respond to these proposals remains to be seen, but pressure is growing on all sections of the newstrade, and with sales declining at an annual rate of more than 8% the need for change is urgent: very urgent.