INDUSTRY INSIGHTS

2015 Q1 Newsstand Sales Results

Unit and dollar sales, which were down 15.6% and 9% respectively in the fourth quarter, 2014, improved slightly in the first quarter 2015, with units declining 14.2% and dollar sales dropping 8.3%. Unfortunately, we see nothing on the horizon that provides hope that newsstand sales will have a significant turnaround in the foreseeable future. The continued rise in social media and mobile technology use is influencing how consumers view and absorb content.

However, it is our opinion that decisions being made by publishers to reduce their allocations, partially driven by wholesaler demands for subsidies, is having an impact on the steady sales decline. In 2014, wholesalers distributed 256 million fewer copies than they did in 2013. Obviously, a major reason for the fewer copies distributed was the disruption in business caused by the Source demise. Yet, in the fourth quarter of 2014, when almost all of the retail accounts serviced by Source were being serviced by other wholesalers, nearly 60 million fewer copies were distributed than in the fourth quarter, 2013. In the first quarter of 2015, wholesalers distributed 31 million copies less than they did in the first quarter of last year. Yet sales efficiencies continue to decline, reaching an all-time low of 27.9% in the first quarter of this year.

Our opinion is the old adage "cut the draw, cut the sale" is being brought to fruition here because as publishers cut their newsstand print orders and resulting wholesaler allocations, copies are moving from high volume accounts being regulated by wholesaler distribution systems to cover frozen or make order draws being placed in lower volume accounts where publishers are mining for sales opportunities. We see this occurring on most titles when we run our analyses to determine where the current store allocation is equal to or less than the average sale in that store. It is surprising how many accounts are involved. Which means that these stores aren't currently receiving enough copies to cover the average sales volume that they previously produced. We suggest that wholesalers and publishers work together to ensure that enough copies are being provided to wholesalers to gaurantee that all potential sales are covered.

While there were some titles as well as entire publishing lines that had sales increases in the first quarter, overall the sales trend continues to decline. MagNet, like other interested industry participants, has continually recommended that the industry find a way to work together, with major publishers, distributors and wholesalers developing a strategic plan to engage retailers to again focus on our category. But currently, we see no signs that indicate this is happening. Instead,  we see some retailers removing checkout pockets and reducing the size of mainline fixtures. Without a concerted effort by the major industry leaders to sell the overall value of our products to retailers, the loss of retailer real estate dedicated to magazines will continue as sales decline. Magazines at retail are an impulsive purchase. If consumers can't find our product, they can't purchase it. 

As you review the charts below you will notice that the trend continues whereby the loss in sales in smaller retailers and the declining sales of smaller titles have a large influence on the overall sales numbers. There were over 8,000 fewer retail accounts being serviced in the first quarter of this year compared to last. Many of them had been serviced through Source's Retail Vision division. 
US & CDN COMPARISON Q1 2015 VS Q1 2014

*NOTE: Foreign titles omitted from Canadian totals


The average cover price of a unit sold in the first quarter increased by 36 cents, or over seven percent. Two factors contributed to this huge jump. The higher cover prices on many of the weekly titles, as well as a continued publisher focus on producing book-a-zines that have cover prices ranging from $9.99 and higher, helped drive the average cover price on a unit sold to an all-time high. This is a good sign for the industry as it shows that consumers are willing to pay higher prices for quality printed magazines. 

 

Sales efficiencies, which averaged only 29% in 2014, continued to slide, reaching 27.9% in the first quarter. While it may be difficult for publishers to grow newsstand sales, there is no reason why they couldn't improve their newsstand profitability by focusing on higher sales efficiencies and reducing their PP&D costs. But, as indicated in our opening comments above, this has to be done in such a manner to ensure that reduced allotments aren't hurting sales.

TITLE RANK COMPARISON Q1 2015 VS Q1 2014

The average dollar sales decline of the top 25 titles was mitigated by the higher cover prices on the weekly titles. Titles ranked 101 to 1,000 actually had a slight overall sales increase. This is not a same title comparison. We are comparing the overall sales of the titles ranked in this group in 2014 to whatever titles ranked in this group in 2015. The Q1, 2015 sales results in the 101 to 1,000 title group was influenced by higher priced book-a-zines titles, as the average cover price of a unit sold in this set of titles was $6.70.

As has consistently occurred in previous quarters, the largest sales decline is in the group of titles ranked below 1,000 in sales. These titles represented about $81 million in sales in 2014, but only about $43.5 million in 2015, first quarter. Overall dollar sales declined by about $60 million in the 1st quarter, 2015 compared to the same period last year, with about $38 million of the loss coming from the small titles.

NATIONAL DISTRIBUTOR RANK Q1 2015 VS Q1 2014

   

Title sales are assigned to the national distributor currently billing each title. There has been fairly significant movement of titles between national distributors over the last year. We did not include a marketing company report for the first quarter, 2015. As stated previously, some publishers bill through one national distributor but use another for marketing services. We will include a marketing company report when we report first half numbers.

PUBLISHER RANK Q1 2015 VS Q1 2014


 

The publishers who performed well in the first quarter all followed the same formula. More releases, many with higher cover prices. Penny Press for instance had 13% more releases and their average cover price increased by about 23%.  Time Inc.'s numbers benefitted from more book-a-zines releases under their THEI brand, as well as the higher cover price on People Magazine. Harris Publications also increased their number of releases, focusing on more book-a-zine product.

CATEGORY RANK Q1 2015 VS Q1 2014

The women's category continued its sales erosion, dropping over 15% this year compared to last. Publishers who operate in this space distributed over 5 million fewer copies in this quarter than they did in 2014 first quarter, and sold about five million fewer copies. The puzzle category had a great comparative sales quarter, assisted by an overall 18% average increase in cover prices. Penny Press and Kappa both had overall dollar sales increases.

 

Sales in the Health and Fitness category grew with the additional sales generated by Dr. Oz, the Hearst publication that had sales of $3.6 million, that weren't in last year's numbers. Category totals where dollar sales outpace unit sales, indicate that overall average cover price increases occurred this year compared to last. Titles in the Food/Wine, Lifestyle and Hobby categories all had hefty cover price increases on average.
TOP CHAINS Q1 2015 VS Q1 2014

The top ten chains in Q1 2015 represented 53.3% of total sales, compared to a collective market share of 51.8% in 2014. The top ten chains in alphabetical order are Albertson's/Safeway, B&N, CVS, Hudson News Terminals, Kroger Co., Loblaws, Publix Supermarkets, , Target Corp., Wal-Mart U.S., and Walgreens. This trend will probably continue as smaller retail stores exit the business. Even the top 100 chains' combined sales beat the overall business trends, which again indicates that we are losing smaller retailers.

CLASS OF TRADE RANK Q1 2015 VS Q1 2014


 
The top five classes of trade, Supermarkets, Supercenters, Drug, Bookstores and Terminal accounts represented 80% of the business in the US and Canada in Q1. Each of those classes of trade increased their market share compared to last year, with the exception of Supercenters which declined slightly. Club Stores increased their market share while C-Stores, traditional newsstand accounts and all other types of stores that sell magazines declined. 

All sales are based on issues off-sale in the period described. All data expressed in millions. All data is based on actual wholesale O&R records and reflect all returns processed through 5/18/2015. Any questions or additional information requests should be submitted to businessinsights@magnetdata.net.

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