The wide-ranging Distripress Circulation Monitor (DCM) 2017 report underlines three key points. First, that 2017 has turned out to be a really tough trading year globally. Second, that consolidation and disruption are hitting press supply chains around the world, not just in the UK. Third, that this “stress test” can produce positive and creative improvements as well as financial disasters.
The pressures which had been building up over the last few years, both in individual companies and also in the global industry, burst out into the open in 2017. The result has been a series of company closures, mergers and acquisitions, consolidation and new partnerships. This process has been taking place for some years, but never at the pace and scale seen in 2017: 77% of Distripress members reported that they were seeing structural change in their domestic News & Magazine supply chain (significantly up on the 67% seen in the previous year’s survey) with 30% describing it as “radical change” (up from 25% the year before).
How the industry has changed
Previous DCMs have charted the changing themes and moods in the global industry.
* In 2014, the business was getting to grips with the prospect of terminal decline.
* In 2015, the mood had moved on from despair and denial regarding what was happening to a grim determination to face up to all the challenges.
* In 2016, there was much more optimism evident, as companies were testing new business models and finding a way forward.
* In 2017, the environment was tough and Distripress members were divided between those who were feeling very anxious about the future and those who were seeing the challenging conditions as an opportunity: a chance to reshape their organisation and to grab market share from weaker competitors.
Two factors behind the changes
The current “stress test” demonstrates two key factors. The first is that the marketplace that everyone is operating in has become more complex. This has three key dimensions:
1. The sales of press products are becoming more volatile and unpredictable. Yet, behind that fact lies a stronger belief in the quality and longevity of print brands.
2. The business models of individual companies - where and how they make money – are flexing and becoming more complicated.
3. The operational activities and process – how and why things are done in particular ways – are being examined and challenged.
The second factor is the change in how Distripress members are dealing with this shifting marketplace.
* Focusing more on the organisation – its skills, culture and structure.
* Building scale and efficiency in every aspect of the business.
* Diversifying and trying to apply the organisation’s skills and experience in new ways and with new customers.
* Attempting to cooperate and partner in new ways, although this is leading to some frank and blunt discussions on occasions, especially with other links in the supply chain.
* Shifting the industry’s focus from supply chain processes (which are still important and still need to be sorted out) to the retailer and the end consumer, as they are the people who are really changing press distribution globally.
What does ‘change’ look like?
Consolidation is the big theme. While it is most obviously hitting wholesalers and distributors, it can also be seen among publishers. Yet, it is among the “middlemen” where the stresses are emerging most obviously currently. Consolidation does have some upsides in a cold, Darwinian way: “We have grown our market share due to the closure of a major competitor” is the simple comment of one distributor. The companies who survive the stress test are usually better placed than they were before. However, the survivors must also face up to the brutal truth that consolidation often simply buys people time rather than providing permanent solutions: that is unless some more strategic thinking and restructuring takes place. The other big theme is the growing pressure at retail. This has a number of distinct dimensions, including the shrinking universe of retailers selling press products in the mainstream supply chains and the reduction of shelfspace and attention being given to the News & Magazine category by retailers generally.
What consolidation means in practice
The first issue is cost-cutting which is a key focus in most operations. This has positives and negatives. On the downside… “We are finding it difficult to continue to decrease costs in line with the falls in revenue. We are having to work much harder, produce more and save costs to maintain performance. We are now heavily understaffed.” On the upside… “The fall in revenues has made us look much more creatively at how we run our business and we have become more efficient and profitable as a result.”
The second issue is diversification. Publishers have been doing that for some time with content being delivered on an increasing range of platforms, both print and digital. Yet, it is among wholesalers and distributors where some creative and lateral thinking has been taking place most recently. For them, this means providing a wider range of distribution, marketing and logistics services both for publishers and for other non-publishing clients. A number are also actively trying to get involved in the supply chain for digital magazines.
Linked to these two issues, there is a growing concern about supply chain processes (are they as efficient as they could be?), the role of the middlemen (could they be cut out completely or their role – and cost – reduced?) and the need to invest in IT to release the full power of the data that is already being collected.
How is change being viewed?
There appears to be a real and growing difference in perspective and priority this year. Currently, publishers are looking down their supply chain and are most worried by what is happening to their middlemen. By contrast, wholesalers are looking both up the chain to see a declining flow of product and promotional funding from publishers and down the chain to observe what is happening at retail, which seems to be worrying wholesalers and distributors more than it does publishers.
The opportunities in change
However, to balance all these negative factors, there are some strong positives that Distripress members can also see shining through the very real challenges ahead. These are driven by confidence levels which are down on last year, but which are still very robust given the market conditions. In terms of opportunities, there are two dominant themes. Firstly, a firm belief in the improving quality of the editorial products on offer. Secondly, and equally important, is seeing the clear opportunities that are still felt to be available in developing the retail channel. Other opportunities include driving improvements to the current supply chain, the chance to develop the sales of digital products, developing the subscription channel, expanding into new geographical markets and using data to drive smarter copy allocations.
The big themes
There are five recurring themes in this year’s DCM. First, the rate of change and disruption accelerated in 2017. Second, this year has defined the future shape of the distribution industry for some years to come. Third, the world of press distribution is fragmenting as business performance becomes more varied, volatile and unpredictable from region to region around the world. Fourth, the world of press distribution is converging as the challenges and issues become increasingly similar around the globe. Fifth, the best operations are getting better: they are looking more creatively and positively at their businesses.
2017 has turned out to be a tough year in most parts of the world: tougher than 2016 in terms of actual business performance. Yet those companies surviving the stress test are looking more creatively and positively at their businesses. Those that remain will be in much better shape to face 2018 and the longer-term future.
The Distripress Circulation Monitor is available to non-Distripress members at a cost of £340. Contact Tracy Jones (Managing Director). Email: tracy.jones@distripress.org / Tel: +44 7710 080591
