Interviewer: Peter Houston
Jim Bilton: Essentially, Wessenden is a consulting operation where we do things from quick health checks through to long term contract management in newspapers, magazines, and extending gradually into other media. But it is very much supply chain routes to market is my own personal background, but also very much driven by data. So, market research, health checks, desk research, reader questionnaires, interviewing people up and down the supply chains and understanding how the actual processes actually work. So that’s the background.
We produce a newsletter called Wessenden Briefing, which covers holistically tries to get people out of their silos, to look at how you deliver content to your audience, whether it’s consumer or B2B. And a number of reports along the way, annual reports like media futures, where we look at the business model that sits behind what media companies are doing at the moment. And whatever anybody else asks me to do.
Peter: So the big question on my mind at the moment is, just how hard has lockdown impacted that print magazine and newspaper distribution, what’s really going on?
It’s had a massive effect. We’re actually at a very interesting stage at the moment as we’re gradually coming out of it, to see where we are. But basically, national newspapers before lockdown, so actually the first few weeks of 2020, were actually better than the average trend last year in 2019.
So national newspapers were running down at about 8% year on year in volume, magazines were about the same. Now those were better figures than 2019. So it’s actually a quite a positive start before lockdown.
Then at its worst, the lockdown weeks were, national newspapers were dropping year on year by about 28% and magazines by about 29%. So those are the top line figures. And then we forecast through to the end of the year, which is a pretty mad thing to do, it’s a bit like looking at chicken’s entrails to try and work out what’s actually going to happen!
But our best guess, which is assuming that socially distanced shopping continues, and assuming a gradual and progressive relaxation of lockdown, rather than what might actually happen, these pulses of tightening up and loosening, tightening up and loosening, which is from a business planning point of view, is absolutely impossible to predict.
But what we’re suggesting is by the end of the year, national newspapers will be running down at about 17% year on year, and magazines will come back more strongly, they will come back and we’ll be running at about 14% year on year figures, and that’s in copies sold, volume of copies sold through retail.
I mean, one of the things that we hear a lot talked about is direct to consumer advertising, delivery, that’s all increased obviously because people haven’t been going out. Is that happening with newspapers and magazines?
Yes, it is. Subscriptions, there’s been a great subscriptions boom. How many of those actually stick and what they are, national newspapers tend to be digital only, and they’re going down the digital only route very strongly. The real boost on magazines has actually been in the old traditional print subscription going through the mail.
But we need to be able to hit the consumer direct in all different kinds of ways. We’ve got postal delivery, we’ve got home news delivery that goes through retail news agents, and then the whole gig economy and people using Deliveroo, and lots of retailers are developing their own home delivery and those shops, in particular convenience stores who didn’t have a home delivery capacity are developing it now.
Co Op is testing little robots to do in Milton Keynes area, six wheeled robots to deliver automatically, it just trundles off on its own. And there are men in white vans all over the shop, the whole gig economy. So it’s a wild place out there at the moment, but getting direct to the consumer is critically important.
I struggle with this, the idea of someone going into a supermarket at the moment, and actually taking the time to browse a magazine stand. Just seems anathema to me, my experience of going to a supermarket at the minute is get in, get out as quickly as you possibly can. But is that just me or is that actually what’s happening?
That is actually what is happening. This is the scary thing for magazines in particular, is that where does impulse purchasing, and discovery and browsing fit? There’s no browsing at the moment.
So, I mean, taking one step back and looking at not just at news and magazines, but looking at general shopper dynamics, it’s lower frequency, so people are going in to make a bigger shop, so it’s a bigger basket, and it’s more efficient.
It’s not necessarily less time, there’s some interesting research that shows that people are actually spending the same amount of time, but they’re not stopping to browse. They’re being directed around the stores. They’re not looking at alternatives. It’s very purposeful, efficient shopping, and where does news and magazines, or where does impulse purchasing fit into that? It doesn’t really.
Is there better news in digital?
Well, digital is somehow the route to discovery. Whether that’s using social media and social platforms to put content out there, whether it is using the digital newsstands; they’re at a fascinating point in their development, but digital has got to be the route for people to find out about new titles.
And that kind of falls in two sides doesn’t it, you’ve got the print side of that, people like newsstand.co.uk that are just selling all sorts of different kind of print magazines, single issues and subscriptions. So that’s one side of that. But the other side is people like Readly who are delivering digital subscriptions. And are they’re doing well?
They are doing well. There is an issue in that publishers need a balanced channel strategy, so they need to be out there. The digital newsstands aren’t the answer, but they are part of a balanced strategy to get your brand out there, to get people familiar with it, and whether they’ve come across it.
So discovery is very much part of what the digital newsstands, and it’s Readly, Zinio, Jellyfish, and so on. But there is also a move amongst publishers to build their own files, their own direct to consumer contacts, and to do that in a variety of ways, and in partnership.
We’re going to see lots of intriguing partnerships of publishers getting together, publishers getting together with bigger files, like the people like Spotify, Netflix…Spotify is going down its own route of developing podcasts and developing its services, but 5G telecoms operators who are going to be gagging for content to lock people in to their networks, there’s a massive partnership opportunity there for magazine publishers.
Do you think the fact that we are in unprecedented times means that publishers will be more likely to partner up with other publishers than they maybe have been in the past?
Yes, I think that they’re going to have to. They may be forced to by acquisitions and mergers, and I think who is left standing in 12 months time is actually going to be fairly random. It won’t actually be dependent on how good an operator that publisher actually is. But it’s their finances. It’s have they got the cash in the bank, how leveraged are they?
But yes, publishers are being forced to look at different ways of doing things. And I prefer to call it sort of reboot, I think crisis is is very negative. It’s incredibly challenging, but we’ve switched our computers off for a bit and are rebooting at the moment and all the software hasn’t been loaded yet.
So we’re not quite sure how it’s all going to work out. But it’s going to be different.
One of the things that’s happening here, and we’ve talked about this on the podcast, the idea that things that were maybe a good idea, but no one had really acted upon, all of a sudden are in the forefront and people are going, ‘Oh, my God, we need to do this right now.’ Different ways of working that makes sense now that maybe didn’t make quite as much sense before.
Yes, I mean, different ways of working, I mean, working from home obviously is the biggie and has been sort of covered ad nauseum as to what impact that is going to have.
But certainly smaller publishers, smaller magazine publishers who have been thinking about subscriptions or who had a modest ‘Let’s transition from one channel to another’ are now saying, ‘We have to do this fast.’ So it’s accelerated a lot of trends.
And when you’re looking at, should I be retail only? Should I be subs only? Should I be print or should I be digital? The idea that we’re going to drift along with the currents is gone. You’ve got to have a strategy and start to implement it quickly.
One of the things I read in your most recent newsletter is this idea of scan-based trading, which I don’t even for a second pretend to understand. But what I found interesting about the story was that you said that publishers have been resisting it for years. And now they’re actually looking at it?
Yes, scan-based trading has had a bad press, namely because of the awful way it was implemented in America years ago where essentially the retailer’s took control of the supply chain, put their business out to tender to wholesalers, rather than the other way around, sliced up to 5% off the margin, so they grabbed 5% more for themselves and ran on to EPOS data so instead of copies going in, being counted in, copies being returned to the wholesaler, being counted there, your net one off against the other, you run on the retailer’s EPOS data. That is the final standard as to what’s been sold or not, which has all kinds of implications to cash flow, to the whole processes, how clean is the EPOS data.
So the publishers have been resisting it because of how they saw it being implemented in America. What’s happening in the UK is a more progressive move to introduce EPOS data into the whole processing, because we’ve got to make newspapers and magazines simpler for retailers to handle. Otherwise, they’ll just hold their hands up and say ‘We’ve had enough,’ which essentially is what Sainsbury’s said to the supply chain a few weeks ago, to say ‘During the pandemic we can’t handle because of the in store resourcing. We can’t handle news and magazines. So help us please.’
And so EBR, this EPOS-based returns is the first step down the route to using EPOS data more widely in the in the whole supply chain.
So is it the retailers or the supermarkets in particular that are driving this now?
It’s supermarkets in particular, because still for most of them, it’s news and mags is the 1% category, it’s 1% of their turnover or less. For convenience, it’s slightly higher. WHSmith, clearly newspapers and magazines is critically important to them.
So all the retail multiples are interested in it. But they have to have clean enough EPOS data and the tech interchange to be able to go down this this route.
But having started down this route, and I don’t think necessarily it’s a bad route to go down, the issue is on what terms do you do it, and that’s where the arm wrestling is going on at the moment about the commercial terms.
I’ve got to be honest, and you’ve just said this, it has to be simpler for the retailers. I’ve been in magazines for years and I don’t understand half of this stuff, it’s just mental!
Yes, there’s all kinds of wrinkles on it. If you look at the cost model, the two massive costs that we need to take, cost out of the system, is the final mile of getting from some kind of depo – and that could be a print centre rather than a traditional wholesaler – of getting from some kind of bulk breaking point to the retail outlet.
And then the other big cost is the cost of managing newspapers and magazines within the retail outlet, checking the copies in, getting them on the shelf, replenishing them, taking them off, in what is a very complicated category, each issue is a different product. And they come on at different times of the month.
One thing retailers would love is to say, ‘Do we need six tattoo magazines? A) couldn’t you just have one superduper one please, and B) why doesn’t it come at a standard date?’ Let’s stagger the, or spread the on sale dates equally through the month. Why does everybody come on sale at the end of the month?
If we look forwards to the other side of this reboot that you’ve talked about, what does a proper, strong, sorted channel strategy look like for content distribution?
It’s got to be a balanced one, and you can’t have all your eggs in one basket. So in the latest issue of the newsletter, we look at just two dimensions. One is what channel are you using? So whether it’s retail as opposed to subs, and you can grade it retail only, retail first, subs first.
The two extremes, retail only, is a really dangerous place to be in, unless you’re one of the big brands. And interestingly, the weeklies have held up very well during lockdown. So those are the nicer engine room big products that retailers understand and can handle, but being retail only is a dangerous place to be.
I think being subs only is a dangerous place to be, because again it’s one dimensional, and you are vulnerable to postage costs, or to whatever direct to consumer mechanism that you’ve got. So a balanced strategy, I think for most magazine publishers is subs first, rather than subs only.
And then looking at the other dimension of balancing print against digital – newspapers and magazines are so different here, I think they’re very often lumped together – but newspapers are generally are about web based content and some kind of metering or paywall to gain access to that content. And when you’re in there, it’s article level.
Magazines are very different, they’re still linked to the issue and once you start to break the issue down and to atomize the issue, they are much more digital edition based, and haven’t made that breakthrough that the newspapers have on getting people to pay for bits of content, or they have to be really vertical and defined, financial information is is is one aspect, and one vertical, but I think going deep and vertically is the secret for magazines.
But again, digital only, I think is a scary place to be. I think the ideal place is subs first and digital first. That’s the place to aim for.
So some print, but lead with digital?
Lead with the digital. The consumer still, and even generation Z still with magazines still – and all the research suggests – still regard a print magazine as the gold standard. They may not want to pay very much for it, and they may consume it with much lower frequency. But print still has a place, a much more limited place than it ever did before.
But you look at the legacy players who are transitioning to digital, digital only is the last throw of the dice for a legacy operator. If you’re starting with a blank sheet of paper with a different cost overhead, different resources and so on, digital only works, but tends to work only if you’ve got eCommerce behind it.
I think you need eCommerce sitting behind digital-only to make the model work. Content only is again, a slightly dodgy thin one dimensional place to be.
I think you’re right. I think that mix is the important thing, the idea that you’ve got a print product because it gets people’s attention, but then you’ve got digital that keeps them engaged.