Media Forum: Are retailers far too powerful?

Do retailers wield too much power over newsstand publishers, James Curtis asks.

You might reasonably expect to be able to walk into the nation's favourite newsagent and purchase a copy of a venerable magazine such as The Economist, but no. After a contractual dispute, WH Smith has decided you can't buy it in its 542 high street stores. OK, so if it was Potato Weekly, that might be fair enough. A bit obscure. But The Economist? One of the nation's most revered magazines?

Although the row might yet be settled, and remembering that Economist readers will still be able to find a copy in another newsagent, the story raises the question of whether retailers wield too much power over newsstand publishers. The concentration of sales into the hands of the biggest supermarkets and WH Smith (which also has its own magazine wholesale operation, WH Smith News, serving more than 20,000 retail outlets) has raised fears that they are reducing consumer choice by focusing on the biggest-selling titles.

The issue of censorship has also been of concern to some in the magazine industry following Tesco's demands that the front covers of lads' magazines such as Zoo and Nuts should be obscured and the titles moved to higher shelves in some of its stores. A significant move when it's estimated that 50 to 60 per cent of those titles' sales are through the major supermarkets.

This might be familiar to FMCG brands fighting for space on supermarket shelves. Earlier this month, Procter & Gamble warned that retailers' demands for excessive price promotions are undermining FMCG companies' ability to invest in product development. Indeed, retailers are demanding all manner of payments to guarantee shelf space. The message from the strongest retailers is clear - pay us more or we won't stock you.

Publishers are concerned that the same treatment is coming their way.

"They've got you by the balls," one warns, adding: "The only way is to work with them."

Kelly Harrold, the head of press at ZenithOptimedia, says: "The question of retailer power is a hot topic." She says contractual disputes, such as the one between WH Smith and The Economist, are "an unwelcome hindrance" and that "supermarkets' lack of interest in more niche titles is unhelpful." Harrold concludes: "It would be a shame if only the mass-circulating titles are given the support they need to prosper, since consumers and advertisers both lose out."

Ian Locks, the chief executive of the Periodical Publishers Association, also believes that retailers' muscle-flexing threatens to undermine the UK's free and diverse press. "The fact that an iconic national and international title can be removed from the nation's leading destination magazine and news retailer is a reminder of the retailer's absolute power. Power - in the case of the press - to act as censor," he says.

"The Economist is more than able to look after itself, but there are undoubtedly titles that rely far too heavily on certain retailers and must commit more of their efforts to diversification of their sales - through subscriptions, through supporting smaller retailers or, increasingly, through electronic delivery of digital copies."

Publishers are understandably unwilling to slate retailers in public but Duncan Edwards, the chief executive of The National Magazine Company, argues that publishers should not expect any special treatment. "There should not be any right to be stocked, and the same applies to a magazine as a brand of coffee. It's business." However, Edwards says publishers can help themselves survive by maintaining a balance in their route to market, to ensure that no single retailer has a dominant position in selling their product. "For us, we have a good balance between selling magazine through retail and direct to customers. We sell 70 per cent through retail and 30 per cent direct."

From the advertiser's point of view, the issue is less pressing, with Steve Huddleston, the head of media at BT, also taking a "let the market decide" approach. He says: "I agree that you book into a publication on the premise that it's available to all, but we haven't got to a stage yet where I'm overly concerned. From a BT point of view, we won't be getting on the phone to complain." That said, Huddleston recognises that the issue is gaining momentum and advises that "this is something BT needs to watch - there's no drama right now, but it could become a problem in the future".

YES - Kelly Harrold, head of press, ZenithOptimedia

"Advertisers are keen that magazines reach all those wishing to buy them, maximising reach of their target audience. There is a demand for smaller-circulating titles, but they won't deliver the numbers required by supermarkets."

YES - Ian Locks, chief executive, PPA

"Retailers have absolute power, to stock what they wish, price as they wish or not stock at all. From a supplier's perspective, that is a lot of power. Publishers need to be resourceful in ensuring that power is not abused to the detriment of a free press."

NO - Duncan Edwards, chief executive, The National Magazine Company

"Retailers have the right to make a decision to stock, as publishers have the right to decide where their magazines are sold. These trade negotiations happen all the time." That said, it looks odd as a decision by WH Smith, because you can just walk around the corner and buy a copy of The Economist. It's the sort of magazine there's no alternative to. If that's what you want, you're not going to make do with Nuts or Anglers Mail.

MAYBE - Steve Huddleston, head of media, BT

"Sometimes retailers will say you're not doing enough for us, or doing enough to support your product, so we're taking you off our shelves. If there's a community of people concerned now, it will become more of an issue."

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