There is a crisis gripping News Limited on the future of newspaper home delivery in Australia. My understanding is that there is disagreement between circulation executives in some News Limited state offices and their bosses at Holt Street in Sydney on the future model of newspaper home delivery and whether newsagents are part of the model.
The crisis in had its genesis in 2009 when somewhere between 100 and 300 newsagents handed their newspaper home delivery businesses back to News, claiming that they were not financially viable.
The company responded by saying it would undertake a major review of newspaper home delivery. At around the same time it implemented what was called the "migration project" in South Australia whereby it took control of newspaper account payments by home delivery customers, even those directly won by newsagents. This cut customer traffic to some newsagencies as accounts could be paid through News rather than the shop. News also took delivery of newspapers to key hotels and some hospitals away from newsagents, it pushed its newspapers into alternative retail outlets such as coffee shops, did deals where newspapers were included in fast-food meal deals and began a campaign of engaging with advertisers resulting in massive numbers of newspapers being given away at sporting venues, fitness centres and cinemas.
In short, News Limited responded to newsagents quitting newspaper home delivery by doing everything except working with newsagents on an alternative model. News executives will say that I am wrong and that they did
engage with newsagents on an alternative model. I know what they did and would not call it engaging
with newsagents. It was as if the company had a plan and they needed to "engage" so they could tick a box and say they had engaged if asked.
My understanding is that today there are several News Limited executives in some parts of Australia in strong disagreement with the direction being taken by the company out of Holt Street. Some of those executives remain silent for fear of their jobs.
Whereas for decades News Limited left its state-based newspaper silos (Herald & Weekly Times, Advertiser Newspapers, Queensland Newspapers, etc) to control the management of newspaper home delivery, now all decisions around newspaper home delivery come out of Holt Street. The decisions are delivered by the state silos but they are decisions out of Sydney.
Some in News want home delivery management to revert to the states where managing relationships was easier and, usually, more successful for the newsagent, News and the customer. Others in News want the company to break free from newsagents and move to a fresh model. My understanding is that News has financial models of an alternative indicating that it is not financially viable, that they could not engage contractors prepared to deliver newspapers by early morning for a few cents remuneration each.
Just over two years ago News Limited told newsagents that they were undertaking a review of newspaper home delivery and that newsagents should expect changes. News executives told newsagents that they had three options: do nothing, consolidate or specialise. Newsagents were told that to do nothing was not an option.
Last week they told newsagents that they were going to do nothing. I am told that this has shocked some in News Limited state offices.
One school of thought is that the plan the company had is not financially viable and now it needs to find a way to appease newsagents without letting newsagents increase the fee for delivering newspapers to rise to anything close to what would be necessary for it to cover newsagent costs.
This is the crisis in the company. One group wants to deal with newsagents equitably and continue the newsagent-managed home-delivery model. Others want to cut newsagents loose and strike contracts outside of the traditional newsagency model. I’m told that the dollars don’t support the latter.
News Limited controls the key levers that determine how much a newsagent delivering newspapers makes -- they set the gross margin from the delivered product, the delivery fee charges, what can and can't be delivered with the newspaper, the frequency of payment and how the newspaper is to be packaged for delivery.
By any measure, many newsagents are the working poor, often making just a few dollars an hour for work that often starts at three or four in the morning and runs through until six at night -- following a model created and controlled by News Limited. While News is not responsible for this complete picture, it has been a key player for decades and in that time has resisted many moves for fair and equitable remuneration for newsagents.
News Limited should engage in a mutually respectful business discussion with newsagents on the future of newspapers and newspaper home delivery. This should be a serious discussion pursuing a mutually beneficial outcome. News executives need to trust newsagents when they say that they will not lose customers if the fee for the home delivery of a newspaper increases. Newspaper readers are prepared to pay closer to the real cost of the service. Addressing this price anomaly will create a mechanism through which the medium-term future of newspaper home delivery by newsagents can be assured.
Newsagents with a newspaper home-delivery component to their business need to engage on this issue. They need to sort out what they want and go for it. Doing nothing is not an option.
*This article was first published at the Australian Newsagency Blog