all the books, articles and conferences sounding the alarm about media concentration,
until recently not a word has been heard about an institution that is invisible
to the public but is a central part of the circulatory system for magazines
– big and small, splashy and staid, conventional and radical –
the magazine wholesaler.
In 1995, more than 180 wholesalers sent trucks full of magazines to 90 percent of the airports, drugstores and grocers in this country. As of May 2001, the number was down to four. Four! Which raises three questions: Why did such drastic consolidation happen? What does it mean? And what can be done about it?
It happened after years of wholesalers turning large profits by dictating prices and terms of delivery to newsstands across the country. Then in 1995, when national retail chains had increased their market clout through an unprecedented wave of mergers and takeovers, Safeway, Wal-Mart and others began demanding better prices for magazine delivery. Smaller wholesalers felt the squeeze and this led to rapid consolidation among the surviving wholesale operations.
The new arrangements put the greatest burden on magazines with smaller circulations such as Harper’s, The Atlantic Monthly, The New Republic and the National Review, which are already fighting for space on over-crowded newsstand. In a number of cases, wholesalers and chains may simply refuse to carry them. Also, as Nina Link, president and CEO of the Magazine Publishers of America, said at an MPA conference on March 5, the wholesalers can severely hamper "the lifeblood of the magazine industry new launches." "What will happen," Link asked, "to special interest, more narrowly focused magazines that make up the bulk of the lower selling titles and can not afford additional handling expenses?"
One possibility – it will be much more difficult for new titles to get into the system, said John Harrington, a newsstand consultant. Harrington, editor of the Single Copy Newsletter, added that although the impact on start-ups has yet to be proven, "the changes are aimed at smaller, less efficient titles." What can be done?
A number of publishers of smaller magazines have been talking about bringing a lawsuit against the wholesalers. Rick MacArthur of Harper’s magazine said, "The wholesalers have immense power. They have conspired to drive out competition and it’s going to affect smaller titles." (see page 17)
The wholesalers are already under investigation by the Justice Department for declining selection and sales at the newsstand. The New York Times reported late last year that the wholesalers have been asked to supply the Justice Department with billing records.
Anderson News Corporation of Knoxville, Tennessee, is the largest remaining wholesaler with about 40
percent of the market share. The Jim Pattison Group of Vancouver, British Columbia, which follows with one-fourth of the market, has led the squeeze on publishers, exacting a fee for delivering smaller titles. Hudson News Company in North Bergen, New Jersey handles the New York metro region, covering the smallest and densest geographic area of the four companies. Charles Levy Circulating Company of Chicago primarily handles Midwestern states, delivering to many retail chains, including Wal-Mart, Target and Stop & Shop.
These four powerhouses may have steamrolled the mom-and-pop wholesalers that dominated their local areas for decades, but it’s unlikely the feisty independent journals will go the same way. MacArthur of Harper’s said a
preemptive lawsuit may be the only way to stop wholesalers from taking over the market completely.