Feb 21, 2012

News Limited ‘in crisis’ on newspaper home delivery

There is a crisis gripping News Limited on the future of newspaper home delivery in Australia, writes newsagent Mark Fletcher on the Australian Newsagency Blog.

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

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10 thoughts on “News Limited ‘in crisis’ on newspaper home delivery

  1. wayne robinson

    I went to the Perth zoo on February 12, and the local News Limited rag ‘the Sunday Times’ was being handed out free. Perversely, it was thought necessary to enclose it in a plastic bag, possibly in case it rained. It rarely rains in Perth in Summer and unfortunately, even the Winters are getting drier too.

  2. Rob Dawson

    Pay more attention Mark. The man who designed the Adelaide solution is where nowadays? You guess it.

  3. Pete from Sydney

    Mark, no axe to grind?

  4. Gavin Moodie

    Newsagents’ difficulties are surely going to deepen as newspapers become increasingly digital.

  5. zut alors

    First the milkman is killed off, now it looks like the ‘paperboy’ is for the high jump. This is progress…

  6. Dan Gulberry


    I attended the Perth Glory v Newcastle soccer match on Saturday night. They were giving away copies of the Weekend West in plastic bags there as well.

    No idea why they were giving it away or why it was in a plastic bag either.

  7. Jack Robertson

    Interesting article. But as with broader media discussion on the ínfluence’of News Limited, what’s not made quite clear is just how weak is the hand Rupert’s dudes really play with; how much the organisation’s índustry paradigm setting’ is as much a product of smoke-and-mirrors, and the Holt Street self-chest-beating ethos, as any genuine market oomph.

    I deliver newspapers five days a week in an inner city Sydney suburb well-known as having a demographic that is nowadays weighted towards the AB/educated/media-consuming (and indeed media-employed) demographic. Put it this way: my run would almost certainly have as high a daily-delivered newspaper subsciption base as any in the country.

    So here’s today’s (very representative, typical) breakdown for my deliveries:

    Fairfax: Fin Review 12, SMH 146
    News: Australian 6 Telegraph 6

    I can’t be sure but I’d be surprised if this kind of proportional disparity isn’t fairly typical of the delivery runs throughout the cities of Australia. How this compares to the overall circulation ratios would be interesting to know. Interestingly, my local coffee shop stocks free copies of News publications but not Fairfax. We’ve all seen the ‘multiple çirculation’copies dished out gratis at the drop of a hat, though….so probably they’re all as bad each other in this department.

    Now you can possibly factor in a few News publication readers who now read online only, or get their copy at work gratis – but then you’d expect Fairfax readers’ changing habits to be proportionally the same.

    So the point in this thread’s context, I guess, is this: at least as far as my run goes (and the small biz newsagency from which I base it)…News Limited is, frankly, in no position at all to be laying down the law about how best to get the papers to the punters who want them arriving like clockwork at home. The reality for my bust-a-gut boss – and like the writer says, if you want to learn about relentlessly hard work and wafer-thin profit margins, buy yourself a newsagency – is that Rupert’s semi-irrelevant mercantile component of the rag-delivery trade could disappear tomorrow and not a jot would change in his daily commercial equation: not his profitability (ha!), not the fact that he and I have to get up every morning at four anyway (for Fairfax), not the local demand (such as it isn’t) for News on the doormat at dawn, and, to be honest, probably not the increasing bastardry and bullying with which the under-siege newsprint industry in general is tending to treat newsagency/retail outlets these days.

    Lest anyone thinks this comment is a plug for Fairfax…it seems well aware of its market weight (at least in Sydney), and is tending to lump more and more product ‘final-prep’ on…you guessed it, the small biz dude at the almost-end of the food chain (I am at the very end!). For example, once upon a time the Monday TV Guide used to get inserted into the Herald at source. Now, we not only have to do it ourselves, but also, only to those subscribers who have (apparently) nominated specifically that they want to receive it. I know media Boardrooms are under pressure to trim production line costs, but it’s not a cost savings, as such: it’s a cost transfer. I’m on a fixed-rate sub-contract from my dude; adding an extra 20 seconds per paper for a 150 run adds 50-odd minutes to my time, which, put another way, reduces my hourly pay rate by about 30 percent.

    So to all you holders of Fairfax shares, just remember, the next time you get a two cent higher dividend; or to all you middle-ranking bean counters who get a bonus for slicing another half thou’ percent off the second quarter running budget….that’s coming out of my labor, running around in pissing rain at four thirty in the morning for an extra hour or so – but same pay packet.

    So make sure you bloody well enjoy it, I say!

    Whew. Sorry about the length, folks. I have to admit: the last thing I ever expected to stumble upon in Crikey was a legitimate opportunity to play specialist Op Ed commentator (a job normally right up the other end of the news delivery chain to mine).

    Good article, Mark.

  8. john2066

    Its time to completely dismantle the newsagent’s monopoly. There is simply no reason why this business should regulated. It should be deregulated, full stop, with no compensation, not one cent, paid to the newsagents.

  9. Mike Flanagan

    In the days of The Smith’s Weekly and the Truth we used to have good newspaper wars in Melbourne where the newspaper bundles used to be painted with pitch before the agents could deliver them.
    Maybe the agents should consider a spray can instead of pitch and return the Murdoch bundles artistically inscribed. It would save them a lot of time as cutting the mastheads out each day to get a credit, as it is time consuming and labor intensive.

  10. Edward James

    We can all see newsagents are being driven out of business. The lotto franchise seems more important to many paper shops. Digital papers and magazines will put paid to the days of papers being thrown over the front fence eventually, that and the ridiculous weight of Sunday advertising papers. Edward James

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