Publishing Pandamic Roundtabe with UK Publisher Jim Bilton PART TWO

BoSacks Speaks Out: This is part two of our Publishing Pandamic Roundtable with

Joe Berger, Samir Husni, Bo Sacks, Gemma Peckham, and Sherin Pierce and was joined by Jim Bilton.

Jim Bilton is the Managing Director of Wessenden Marketing.

Jim puts together a comprehensive monthly newsletter about the media supply chain with analysis of ongoing trends and observations. He has offered our readers a free issue, and I suggest you get one to see what is happening in the UK. I assure you you will walk away better informed with useful information you can use here domestically in the US. Just drop Jim a line at info@wessenden.com.

Part Two

Jim Bilton: Our UK supply chain comes in for a lot of criticism because it's perceived to be a messy fudge that nobody really controls it. There is an old adage - there's half a link to many in our supply chain - but it's knowing which bit to take out. But that fudge has created a funny stability. We are midway between France and Germany who have really structured supply chains, where publishers have a legal right to distribute. And the Wild West of America, where you flipped and you flipped on your wholesale structure, your retail terms and pay-on-scan all at the same time and handed over control to the retailer. So, why have UK publishers been so scared of SBT? Is it because of the USA. Your complete package of absolute madenss all came together at once. So, what the UK has been trying to do is to find non EPOS based ways to reduce shrink and to try and streamline in-store processes in a more collaborative way. But we've got the added complication of newspapers and magazines going through the same chain. And they've got totally different dynamics.

One of the issues - because absolutely everything is on the table now during the pandemic - one of the big issues is whether to unstitch newspapers and magazines. Again, we're different in the UK. We have a very strong national newspaper market which is obviously based on 7 day a week deliveries – magazines are 6 days per week. So, there are things we can do in the UK, like daily sales based replenishment of magazines, which we can do because magazines piggyback on the national newspapers. Which the national newspapers hate!

The national newspapers are a fairly aggressive bunch in everything that they do - editorially, circulation wise, everything. And they've got a different system in two ways. Firstly, they negotiate terms direct with retail. Secondly, they are on a per copy handling fee, not on a percentage of cover price. They made that flick years ago. Magazine publishers are still on a percentage of cover price and they hide behind wholesale. So whenever retail comes and says we want to move off of 25 percent, magazines say that’s nothing to do with us. It's those nasty wholesalers who set terms. You've got to negotiate with them.

So, you've got two products that are completely different in their pulse rates. National newspapers clearly just go straight in, straight out, whereas magazines are about copy allocation, about storage, about ring-fencing copy for sales based replenishment and so on. Yet the fear is that if you pull the two apart, they'll be a massive explosion. And there are economies of scale of both going through the same network, So one of the Plan B's - or perhaps it's Plan C! - for the national newspapers, is that they deliver direct from their regional print sites to retail, and in some locations, direct to the consumer.

Sherin Pierce: They come right from the printer?

Jim Bilton: That’s one possible model for the future.

Sherin Pierce: Magazines still come through the wholesaler then?

Jim Bilton: Currently yes. Both newspapers and magazines currently go through the same wholesale network. There are a number of hub-and-spoke houses so there are smaller magazine-only houses and there are big hubs that handle newspapers. So, it's a funny mix. News UK has always been the most disruptive newspaper publisher and they do direct-to-retail through their own operation in London, at a loss everybody assumes. But if News UK got together with one of the other big newspaper groups and they shared their print sites around the country - that's one of their options, to pack, label and deliver straight from a satellite printer direct into retail.

Joe Berger: Who owns the magazine wholesale companies in the U.K.? Does it have anything to do with the magazine publishers or retailers or just independent companies?

Jim Bilton: They’re independent companies. And there are only two companies left – Smiths and Menzies. Which has pros and cons in all sorts of ways. Being a wholesaler is not a growth business that you’d mortgage your house to get into. So, there has been some talk about publishers buying out or supporting the two wholesalers in order to preserve a robust route to market.

Samir Husni: Aren’t the U.K. newspapers, the national ones, becoming more like magazines in terms of their style, their coverage, their writing and the analysis? It feels like whenever I get my hands on a copy, I am reading a magazine rather than something that tells me what happened yesterday. I always give the example of the UK newspapers as how the future of newspapers should be. It's more like a magazine on a daily or weekly basis.

Jim Bilton: There is a view that weekly is the ideal print frequency. Sunday was always our big weekly read day. Yet Saturday has become the new Sunday. Sunday, which had all the big supplements, has now shifted to Saturday. And Saturday is a stronger day of sales than Sunday. So, all the big supplements and big reads come out over the weekend. And if you look at the inpidual days during the week, there are some really weak days. Interestingly, the Financial Times is one newspaper that has some very high peaks and troughs in sales during the week. You wonder whether it could go digital-only on, say, two days a week, which some of the American regionals have done?

Samir Husni: Not a single newspaper that has kept its frequency is doing good. People are in that habit, they don't want to think about it. Do I have a paper today or not? Especially if they were used to a daily paper. But my other question is what's happening with Condé Nast and all the other media companies? I see it was the Me Too movement this year, then Black Lives Matter after Covid. Any of that taking place in the U.K. or are we the only ones?

Jim Bilton: Yes. These are big issues in the UK too. Perhaps not as extreme as in the USA. Remember that we are very British and tend not to go around shooting people too much. So, these are big issues. But to be honest, for media companies the really big issue is working from home. That's the massive change for publishing companies in where and how they operate. Lots of people do not want to go back to working in an office every day. Particularly in a big city like London. The reality is how do I get into the office? Where am I going to sit when I get there? Will I have to queue for the toilets? Are they going to be gender-specific toilets or not? It’s these practical pragmatic issues that are on people’s minds at the moment.

Samir Husni: On a lighter note, hopefully all of the Lebanese taking over the British and American media will do a much better job. You know, the new editor of the Financial Times is Lebanese, the editor of Harper's Bazaar in the United States is Lebanese, her name is Samira, which is the feminine name of Samir.

Jim Bilton: Ah yes. The Lebanese! But it’s the Germans who are on our minds more! With Burda and Bauer between them owning a major chunk of the UK magazine business. And with Bauer going through some big changes at the moment.

Sherin Pierce: Indeed. Didn’t you say in your newsletter that Bauer reduced 10 percent of their titles?

Jim Bilton: They – like lots of publishers – are cleaning up their portfolios. But Bauer has had a nightmare getting out of Australia.

BoSacks: And they dropped New Zealand.

Jim Bilton: They've closed New Zealand. They've managed to exit Australia, but at a massive loss. Ownership is a real issue over here as to how you operate. If you’re publicly quoted, there’s a real pressure to look really digital. And sometimes people pretend to be a bit more digital than they actually are because that's what the City wants. Then there’s venture capital and private equity who have very different time horizons and priorities – not always to the long-term benefit of the underlying business. And then you've got private companies. In theory, they can take the long-term view. But have they got the cash to keep going and do it?

Standing back from the detail, people are talking about 10 to 15 percent of magazine brands be culled across the industry. I mean, nobody really knows. But it’s possible. And the market needs some reduction in title numbers – it’s over-supplied. But in the current climate, it’s all about cash. And it may not be the right titles that die. Just those that are in the wrong place at the wrong time.

Joe Berger: How extensive are smaller independent publishers in the U.K.? And I'm thinking in terms of, let's say the second or third or fourth ranking title, in terms of sales or distribution or subscriptions or ad sales or local city titles, that sort of thing.

Jim Bilton: No, city titles don't really feature over here in the same way as in the States.

Joe Berger: The 80/20 rule there as well as in your market. In other words, 80 percent of its circulation revenue, etc. is taken up by 20 percent or less.

Samir Husni: I buy from Jeremy Leslie in England, his store magCulture. All the new magazines that arrive every month, he sends out to me. And it's almost like six, seven, sometimes 10 new titles. But their circulation is like five hundred copies. I mean, I don't think they register on the radar of magazines or sales or anything.

Jim Bilton: We've got a very vibrant craft magazine sector in the UK which is very active. And if you're looking at the number of launches, then we've still got a high number of launches, but they're smaller circulation than in the past. They tend to be low frequency or they launch as a one-shot to test the market and then see whether they can up that frequency. But what used to drive our retail market was big weekly magazine launches, but we haven’t seen many of those for some time.

Sherin Pierce: Since everyone is staying at home, maybe the craft magazines will see a resurgence in sales. Jim, has the closure of retail stores translated into subscriptions increasing during that period?

Jim Bilton: Yes, but very much driven by print subscriptions. I don't think we've sorted for magazines what digital-first or digital-only looks like. For newspapers that is very clear. It's article-based. It's article-level and website paywalled. However, when you describe what the paywall is, people are now talking about time walls, meaning the length of time you spend on the site rather than the number of articles. So newspapers are going very heavily down the digital-only subs route. We haven't quite worked out in magazines how you do that.

How do you get people to pay for lifestyle material? One of the questions is digital editions. We've never quite worked them out either. I think there's a real opportunity for digital editions to become the digital hub for a magazine instead of a website. The hub without deconstructing the issue, because that's a really big fear. Once you start deconstructing the issue, where do you end up?

Sherin Pierce: What if you had a page turning app? You want to be able to the turn page? So, it's just like a print magazine, except it's on your computer. Or on your desktop.

Gemma Peckham: That's what we do with our publication. We have the turn page technology and you can flip through it. And it's also a paid subscription. But most people still subscribe to the print edition. I still think there's a real kind of desire there for people to have a print product. People have the print product and it's not the same experience as flipping on line.

Jim Bilton: One of our smartest operators is Dennis and The Week. They have their strongest growth in a print plus digital bundle rather than print-only or digital-only. Print is declining, but still very strong. They played around with apps which looked great but where the return was very poor. Talking about digital editions, the all-you-read digital-only model is one that seems to be getting some traction over here from people like Readly? Have you come across Readly before?

Joe Berger: Is it even here?

Jim Bilton: They were essentially locked out of the States by the publishers behind the old Texture operation, who then in turn were locked into Apple News+ when they bought into Texture.

Digital editions are really perplexing. In the UK they were originally welcomed as the future of magazines. Then they were discounted as limited, interim tech – the Sony Betamax of publishing. Now, they are having a bit of a second wind. But it depends who you talk to. The digital people in publishers love apps and funky all singing and dancing tech. The finance director likes PDF-based stuff or simple page turners. The subs execs have a different view as well. And lots of digital decisions end up with the subs department. It tends to be the dustbin department where things that don’t fit anywhere else end up. And where things get spreadsheeted to death. But what are you comparing with? Are you comparing cost per acquisition on a digital edition with a postal sub?

But during lockdown, digital editions have been used a lot. As a free gap-filler to send to postal subscribers whose supply may have been interupted. Or a sampler to tempt people into a postal print sub.

Samir Husni: That's what Dennis is doing in the States. And they launched right smack in the second week of Covid after they logged up as a weekly magazine for children. And they've acquired 35,000 subscriptions. But do we need the editor of The Week, William Faulk, telling me that their subscriptions have gone up since the lockdown and that they can get the print edition or they can deliver the print edition to them? They made it available on the digital edition

Jim Bilton: Looking on publisher websites in the UK at the moment, and most of them are heavily pushing print subs. It’s only Dennis, which has consistently offered the print plus digital bundle because that's what they make the most margin on. And this is also what people want. Or certainly for a title like The Week.

Samir Husni: Did The Guardian do a test that if you subscribe to the digital edition, you get the print edition free? As opposed to, if you subscribe to the event, you get the digital. And a lot of people actually subscribed to the digital to get the free print edition of the free market.

Joe Berger: Unintended consequences.

Samir Husni: Is the Observer still being published on Saturday?

Jim Bilton: Yes. It’s The Guardian on Saturday and The Observer on Sunday. Both big print editions. But the Guardian is pushing up its print cover prices beyond normal newspaper prices. At the weekend, both titles are well over £3. They are really milking it. The Guardian is clearly going down the digital-only track.

Sherin Pierce: The Boston Globe is $6 for the Sunday edition.

Jim Bilton: Yes, it's interesting. Looking at France, where the print supply chain is imploding in a slow motion car crash, there has been a very different take on the future between the newspaper and magazine publishers. It's clear that the French newspaper publishers aren’t prepared to sustain their print supply chain for too long because they're going down the digital-only route very quickly. Whereas magazine publishers are much more invested in having a more stable print supply chain.

Joe Berger: Jim, here in the states, one of the reasons the the retail newsstand chain kind of imploded starting back in ‘95 is that as a Category to retailers, it sort of lost its luster and was no longer a must-carry kind of operation. You just used it because you wanted T.V. Guide, or you wanted the Seven Sisters. But by 1990, T.V. Guide had lost a lot of circulation, the Seven Sisters had lost some of their luster. Some of the titles had been sold off a few times. I'm wondering if maybe some of the problems happening right now in the U.K. or in France, as you just described, this similar rationale only 20, 30 years later, that magazines and newspapers have lost their must carry status?

Jim Bilton: I think so. I mean, let's take Tesco, who are now our biggest magazine retailer. They've edged ahead of WHSmith. Now Tesco is 14 percent on its own. I think they regard magazines as a customer service. And an important differentiator. So, the category is still important to them.

An important point to make about supermarkets in the UK is that magazines have never had a consistent checkout position – which has pros and cons. So magazines are a mainline category. There's a big range in most of the of the Tesco outlets. The bottom line is they were losing money on magazines not that long ago. Now they’re making a modest profit. So, as long as that is maintained, magazines are a customer service. It’s part of what shoppers expect when they go into a Tesco outlet.

Tesco is fairly unique in having a buyer who's been there for years. Buyers normally last for about 18 months. Someone comes in from biscuits and says, you know, this doesn't work. I want to chuck it all out. And then they get worn down by the supply chain above them. But I think when this guy at Tesco moves out, that it is actually more important than anything else, because he is the great defender of the category in the company. This personal dimension is often underestimated when we think about the magazine future at retail.

It's all in the mix at the moment. Generally, the range of magazines at retail has been reducing. So are CTNs (confectioner / tobacconist / newsagent) - specialist newsagents are closing or converting to the convenience format. These tend to be independent outlets

But again, there’s a very different profile for newspapers versus magazines. So, it's still about 70 percent of newspaper sales go through independent outlets, whereas its only 19 percent for magazines. Magazines are much more grocery and multiple biased, which is another reason why the newspapers feel that they they might go their own way.

Samir Husni: Jim, I interviewed the editor of Big Issue magazine. One day they changed it to sell through retail. Are there any numbers? I mean, are there people that are buying it from the retailer instead of the states?

Jim Bilton: I don't know what the numbers are. They've come up with a digital edition and they are trying to recruit people to be direct subscribers. It's a fairly unique product in that the purchase is essentially a charitable donation. So they're going down the digital route and they've launched the digital edition from nothing in a matter of weeks.

The print copies went into Sainsbury's, first of all. And then some convenience stores. And they put put the cover price up. So they've done a number of things. Hopefully they will survive in one form or another, even if publishers just give them charitable donations.

Yet as lock-down eases, the street sellers – 2,000 of them – will be back on the streets again from the start of July. With protective equipment and contactless card readers. Good luck to them!

Bo Sacks: Thank you everyone.