MagNet's 3rd Quarter 2014 Newsstand Sales Review

When Source Interlink exited the magazine distribution business at the end of May, 2014, retailers that collectively represented 30% of the U.S. market were suddenly without service with no way to get fresh magazine product. It was the largest disruption in the history of the magazine distribution industry, considering that Anderson News represented slightly more than a 25% market share when they closed their doors in early 2009.


The following charts help explain what occurred to sales and service during the disruption. We focused on U.S. sales only in our analyses of third quarter sales. As stated previously, MagNet calculates sales based on title and issue off-sale dates. Sales included in these reports are for those titles and issues off-sale in the third quarter, 2014.

Total U.S. sales dropped by over 26% in units and nearly 20% in dollars in the third quarter, 2014. These figures include sales for all retail accounts, including those that had no service disruption. The sales for stores previously serviced by Source were estimated, based on several factors. Considering that some product delivered by Source was discarded by retailers, it was impossible for MagNet to get an accurate sales number for titles and issues delivered by Source, that were off-sale in the third quarter. We used the average sales efficiencies from the remaining markets as well as Source's historical sales efficiencies on those titles in our calculations.  A similar calculation was also used on those titles and issues delivered by Source that were off-sale in the second quarter, but were never returned to any other wholesaler. While these numbers are certainly discouraging, they don't tell the whole story as to how sales are performing in stores where there was no disruption during the third quarter.



We looked at third quarter sales performance for the 43,800 retail stores in the U.S. that had no service disruption. These sales were across most U.S. chains, but only included stores that were not being serviced by Source when they exited the business. This analysis provides a much better sales picture, continuing a trend that actually started in June. For the last eight weeks of the third quarter, dollar sales actually increased compared to the same period last year.  Overall, dollar sales were much improved throughout the thirteen weeks of the quarter, providing sales percentage changes that we haven't seen in at least six years. Dollar sales of the celebrity weekly titles continue to reinforce the fact that the price hikes made several months ago was the right decision.

As stated earlier in this newsletter, never before has our industry encountered such a huge disruption in retailer service as what we experienced in May of this year. MagNet collects new account information from wholesalers, so we are able to track how long it took for the Source accounts to begin receiving service from other suppliers. As you can see from the chart below, roughly thirty percent of all retailer accounts previously receiving magazines didn't receive any service in June. Remaining wholesalers had to sort through legal concerns, negotiate with retailers to finalize contracts, and worked with suppliers to get product shipped to their facilities in the right quantities. During July, between 30 and 60 days after Source closed its doors, nearly 90% of the previously Source serviced stores were either receiving deliveries or were in the process of being delivered. In October, five months after the disruption, 99% of the stores were back on service. There are still, in a few cases, logistical problems that some wholesalers are experiencing, as they work to develop infrastructure and improve deliveries to areas far removed from their distribution facilities. We also note through our analyses that, in some cases, title quantities going to different wholesalers could be improved. However, the industry should be commended for getting so many retailer accounts back in service as quickly as it did.


MagNet will provided more detailed analyses once fourth quarter and total year 2014 sales are calculated.
All sales are based on issues off-sale in the period described. All data is based on actual wholesale O&R records and reflect all returns processed as of 11/09/2014. Any questions or additional information requests should be submitted to