Magazine publishers have, of late, been consumed by a row over wholesaling control. Scores of editors recently met with Tony Blair in an attempt to thwart EU plans to allow retailers to choose their wholesaler.
The proposed move would effectively shift the power from publishers to the big supermarkets. But a much bigger battle is looming, one with far more serious consequences for publishers, centring on who controls the retail price of magazines.
This latest conflict has been triggered by the developing trend of publishers using price as a key promotional tactic in the fight for market share. Some magazines slash cover prices permanently, while many more discount for short periods. Lads' weeklies Zoo and Nuts regularly adjust their cover value.
The practice has angered retailers. Permanent price cuts mean a drop in their profits, unless they can sell a lot more copies. But this rarely happens, since readers tend merely to temporarily switch out of a full-price magazine into a discounted rival. Even where it does occur, selling more copies requires more floor space and restocking efforts, which also reduces retailers' margins.
Price concerns
Retailers' ire is about to be inflamed further by the onset of price wars in two of the biggest magazine sectors - TV listings and women's weeklies - which could wipe out 拢50m of retail sale value.
The anticipated arrival of ACP-NatMag's Real People, with a 60p cover price, will create a sub-sector of three budget-priced real-life weeklies. The others are IPC's Pick Me Up and Hubert Burda's Full House, both of which launched this year and sell for 60p.
The concern among rivals is that 60p will become the perceived going rate for a women's weekly and that they will be forced to price-match. The market has long been dominated by H Bauer, owner of Take A Break, which sells 1.2m copies a week at 74p. Last month, it regionally tested a 55p cover price for the title, fuelling fears of a bloody price war.
The publisher has also been testing a 25p discount on TV Quick, bringing down its cover price to 40p. TV listings is a notoriously price-volatile market and has already suffered one flurry of activity this year when TV Choice and What's On TV, already at the cheaper end of the market, slashed prices, stealing sales from TV Quick and TV Times. A bout of price-cutting at the premium end would further dent publishers' and retailers' earnings from this important sector.
Fight for control
While publishers may be willing to sacrifice cover-price margins to maintain or increase their market share and drive advertising, retailers derive no such offsetting benefit.
Retailers have long argued that they should be able to set the margins they receive from magazine sales. They currently take 25% of the cover price, while 10% goes to wholesalers, and publishers pocket the remainder. The certainty of a fixed margin could be achieved by publishers either changing retailers' terms, or by relinquishing control over price.
Publishers are fiercely resistant to such notions, claiming that handing price control to supermarkets would devalue their brands, equating them with cans of beans or packs of cornflakes. They contend that supermarkets' own price promotions would create reader promiscuity, a handicap to selling ads. In response, supermarkets query the difference between publishers discounting and retailers doing the same.
Unclear terms
In general, retailers have supported short-term discounts on the understanding that their margin is retained, in money, rather than percentage terms. However, some publishers are now reneging on this agreement.
According to John Barn, newspaper and magazine category buyer for Co-operative stores, it is rare for publishers to state the retail terms when they communicate a price change. 'It is left to us to chase up publishers and confirm terms, and increasingly we find that they are the normal 25%,' he says. 'Some justify this by saying the promotion might end up being a permanent price change. And they always promise greater sales volume, but this rarely occurs.'
Riling retailers cannot be in publishers' interests. Supermarkets are under pressure to maximise the return on their floor space, and reducing margins on magazine sales will result in less space being devoted to magazines and fewer titles being stocked.
Barn constantly re-evaluates the titles he stocks, and if he adds one to his list, he has to remove one. Those offering the lowest margin, and which are duplicated by other titles within the same sector, are the first to go. Waitrose, for example, delisted TV Choice when it cut its price.
Small newsagents deplore the price cuts, and fear publishers are playing into the hands of supermarkets by strengthening their case for price control.
'Supermarkets will undercut newsagents on price, and more newsagents will stop selling magazines and newspapers and be turned into convenience stores,' warns Peter Wagg, a former president of the National Federation of Retail Newsagents. This, he adds will be severely damaging to newsagents and publishers alike.
DATA FILE - MAGAZINE PRICE CUTS
Company
Slashed its price from 拢2.60 to 拢1.50 in 2001 to price-match Glamour, which it blamed for a 14% loss in sales. It now sells for 4p more than Glamour at 拢1.99.
Full House
Hubert Burda's first UK title debuted in March at 70p, backed by a marketing budget of 拢9m. It subsequently cut its price to 60p to match rival Pick Me Up.
Loaded
Cut its cover price from 拢3.40 to 拢2.50 in May, a month after relaunch and two months after a 10p rise. FHM and Maxim sell for 拢3.40 and 拢3.30 respectively.
TV Choice
Reduced its cover price from 40p to 30p in January following rival What's On TV's price cut from 45p to 35p. What's On TV has since raised its price to 40p.