SCUTTLEBUTT

Circulation Management, April 1, 2003

CATHLEEN BLACK, PRESIDENT, Hearst Magazines, speaking at this year's Retail Conference:

"If the future is a distribution system that's flexible, efficient, technology-driven and offers a win/win across the supply chain, we are never going to get there from where we are now. Because where we are now as an industry is a newsstand distribution system that's broken. What's most troubling is that we are without a shared sense of urgency to fix it...

"As one of the guys in our company said, 'Flat is the new up." (Alluding to 2002 data showing overall 2002 single-copy units to be barely up, rather than declining.)

"Magazines are good partners for retailers. We are a consumer value in those stores. But unfortunately, positive, vital signs are often overshadowed by far because of threats to the system...The hassle factor is causing magazines to lose display space to other categories that are easier to manage and track.

"Reluctance on many sides to invest in a broken system and the lack of urgency in finding solutions is causing the downward spiral to accelerate...The only solution is to redesign, rebuild and rewire...and that won't happen over a long weekend. It can only happen through a series of well planned, well-executed steps."

"The first step centers on the goods that travel through the system...I would argue that [customer] connection is more important for magazines than for any other medium, because magazines are more a part of our readers' personal lives than any other medium...If we fail at connection, we'll see it in lower sell-throughs and the loss of repeat buyers...Some might say that putting out a magazine is not rocket science. I would agree. I actually think that it's harder than that. There are no formulas, like in physics or chemistry...Success is often counter-intuitive...The ones that are successful have defined a need, rather than a market or a demographic.

"None of this means very much as long as we keep pouring the fruits of our editorial efforts into a system that is broken. There are two ways to look at solutions: What we do ourselves and what we do as components of the system. Efficiency starts with working smarter...At Hearst, we're shredding 7 million fewer copies this year than last year...The knee-jerk reaction, though, is to simply distribute fewer copies...But that is a very high-stakes gamble, with the stakes being nothing less than the place reserved for magazines on the retail shelves. Our goal is absolutely to reduce draw, but without losing presence or sales. We need to have those magazines in the right outlets, in the right places in those outlets, at the right time. But to do that over the long term, we need a whole lot more information than we have now, and we need it a whole lot faster. Your editors and my editors are stymied month after month when they cannot get daily access to numbers that are dependable...If Michael Gould, the chairman of Bloomingdale's, knows on Monday morning what went on Sunday, isn't there some way that we as publishers can create a system that allows our editors as they're choosing covers and content to understand what's happening?

"Another good way to reduce draw, of course, is to sell more copies...It's true we've made huge strides. We have databases that can tell us how a cover celebrity or a topic performs for other magazines at newsstands across the country. We're all beginning to use the Internet to hold focus groups on cover lines and subjects, and we've started many more editorial processes, whether they be focus groups or quick-input questionnaires, to allow us to have a better sense of what is or is not working...

"But no magazine, no company, can do this alone...The only solution is a shared solution. My concern increases when I look around the industry and see that only a handful of players are stepping up to the issues. By stepping up, I mean putting in the time, the people, the resources, the thinking, the organization and the investment into fixing a system that impacts the entire industry. We need to step up today, not tomorrow...I see us going in one of three directions. One is to do little or nothing to fix the system, which of course risks its collapse. That would narrow our options considerably. Another direction is to find a new way to market, but we don't believe that there is a new way to market out there. The third, which we strongly support, is to rethink and rebuild relationships between publishers and our wholesale distributors - to take the basic pieces of the system and put them back together in ways that work better...It all comes down to a few simple things. Number one, we must continue to give readers new and more compelling reasons to spend their increasingly scarce free time with us, and we must do that with a level of speed and flexibility that is new to our business. Second, we must stop pointing fingers and start thinking about solutions. And last - and I suggest that this is the key - we must have the patience, the will and the sense of urgency that it will take to create these solutions."