Who would have thought it? WH Smith playing dirty. And choosing to
mix it with no less an opponent than Emap - a company not renowned for
its caring, sharing management ethos. Last week a row erupted when it
emerged that Smiths had delisted Heat, Emap’s struggling weekly
entertainment title. The magazine is arguably an innocent victim in a
power struggle between the newsagent chain and the magazine distribution
company, Frontline, which just happens to be owned by Emap as well as
the BBC and Campaign Media Business’s publisher, Haymarket.
Smiths wants better terms from Frontline and has picked on Heat because
it is arguably the frailest cub in the Emap pack. Having failed to meet
its circulation targets since its launch earlier this year, it has just
been through a relaunch and Emap’s management is keen to nurse it
towards health.
Can this really be the rather sleepy newsagent chain we’ve come to know
and love? WH Smith, an outfit that started life running railway platform
bookstalls - think Trevor Howard, think Brief Encounter - has often
seemed keen to retain a steam-age mentality, despite the slick veneer of
its high street stores. WH Smith is Nicholas Lyndhurst in drag,
desperately keen to make grandmothers smile.
Not any longer, it ain’t. Management has obviously been reading those
steroid-enhanced body building magazines that should by rights be
restricted to the top shelf. This isn’t the first time Smiths has
refused to stock a magazine title. But in the past, as with Private Eye,
it has been motivated by the fear that it could, theoretically, be sued
for libel.
Isn’t this latest move a bit below the belt? Tim Kirkman, the head of
press at Carat, doesn’t think so. He has no sympathy whatsoever with
Emap or Frontline. He states: ’There are only really a couple of
companies within the wholesale distribution business. That’s not enough;
together they have a virtual monopoly and people are suffering because
of it. They tend to forget that it’s the big retailers who have the
punters coming through their doors.’
Kirkman argues that there is a business opportunity for someone new to
enter the distribution market, especially if Frontline continues to act
as it allegedly has been. There’s also a case, he says, for publishers
to be a little more creative when it comes to thinking about
distribution.
’If you are a publisher, part of your job is to find the most efficient
route to market. And if you can’t do that, you’ve got to go away and
re-examine your whole business model,’ he states.
Ironically, that’s not an option for Heat. And most people agree that,
though it may not be fatal, the embargo will certainly hit Heat where it
hurts. Theresa Coligan, a managing partner at Zenith Media, argues that
it’s a cynical negotiation ploy. She says: ’The mighty WH Smith may not
be faring that well in the high street but it still accounts for around
20 per cent of magazine sales by value, and can account for up to 50 per
cent on smaller or more specialist titles. Thus it clearly knew what it
was doing when it picked on Emap’s Achilles heel - Heat - only a few
weeks into its new marketing drive. Heat has been desperately attempting
to prove its detractors wrong by reaching that all-important 100,000
circulation mark. Emap must be livid. Equally, however, Frontline is a
pretty powerful force and who knows what drove WH Smith to take this
action?’
Coligan argues that, from her perspective as a negotiator, the whole
episode represents bad practice. She adds: ’It’s a symbiotic
relationship - WH Smith needs Frontline and Frontline needs WH Smith.
Both parties should adopt a less combative stance and attempt to develop
a genuine business partnership. In all negotiations there should be a
win-win scenario; this one strikes me as lose-lose.’
Emap declined to comment last week and rival publishers are equally
reluctant to get involved. One senior publisher states: ’The background
to this dispute is all about the changing nature of the retail business.
The entry of big players like Wal-Mart to the UK and consolidation in
Europe makes it a whole new game.’
Laura James, the media director of New PHD, agrees: ’WH Smith can raise
the stakes if it wants to. It’s WH Smith’s call. After all, we’ve seen
supermarkets threatening to deny shelf space to brands when they don’t
get the margins they want. Of course, Heat stands to be hurt but I can’t
believe Emap will take this lying down.’
Some analysts point out that WH Smith could be on dangerous ground
here.
After all, it doesn’t offer anything unique. It’s all available in other
guises elsewhere and war with Britain’s publishers could rebound rather
badly.
Tim McCloskey, the deputy managing director of BMP OMD, feels there
should be a principle at stake here. He states: ’At a guess, Heat
probably only sells 13,000 through WH Smith. But everyone - publishers,
wholesalers, retailers, advertisers and readers - wants successful new
products. So for Heat to be delisted seems cynical, especially when Emap
has invested so much time and resource in the product and is working
hard to guarantee its very existence. If WH Smith fancied a scrap, maybe
it should have delisted FHM. But that would have cost everyone money and
a principle is only a principle when it costs you money.’
McCloskey is also concerned about the wider picture. He concludes:
’Entrepreneurial publishers, big and small, will be a little
disappointed. It sends a message, no matter how faint, that the
country’s biggest and best magazine retailer may not necessarily help
them nurture the new - and sometimes needy - products that are the
livelihood of publishing. This in itself raises the possibility that
other retail chains, supermarkets and independents may try to build
bridges with Emap in its hour of need.’
