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AD AGE SPECIAL REPORT;MAGAZINES;WHOLESALER SHIFT SCARES PUBLISHERS

By Published on .

The mass consolidation of magazine wholesalers continues to sweep the country, creating sporadic distribution problems for publishers and posing new threats for regional advertising and editorial.

"The consolidation has been massive and quick," says John Harrington, the former executive director of the Council on Periodical Distributors Associations, forced to close its office in New York earlier this year due to declining membership. He now heads consultancy Harrington & Associates and publishes newsletter The New Single Copy.

SEEKING MORE SPACE

Publishers and wholesalers are hoping that the big retailers who have been able to extract higher profit margins from wholesalers may give magazines more shelf-space or engage in more promotion of titles in-store.

But until the rolling wave of consolidation subsidies, nobody knows where it will end.

"Magazines are still getting out there and getting sold, but there's a possibility that magazines are getting missed on returns," says Michael Pashby, senior VP-marketing & member services at Magazine Publishers of America.

"Trying to get back to a smoother running situation is going to take a year or more," he predicts. Until then, it's "a logistical nightmare" for publishers.

With the new round of consolidations forcing many wholesalers into the red, publishers worry that short-term disruptions in deliveries may lie ahead, and that smaller titles and tests will have trouble getting to market.

THREAT TO REGIONAL SALES

Publishers also fear the situation may hurt ad sales in regional editions, especially in magazines like TV Guide, with 119 different local editions, or newsweeklies, which need to reach outlets quickly.

In the past, a wholesaler like Chas. Levy & Co. would have handled only one metro region around Chicago, and its longest delivery route would have been 150 miles away from its central warehouse. Today, it spans parts of four states and the longest delivery route is 1,300 miles from the warehouse.

It's a pattern being repeated across the country.

Often wholesaler trucks are rolling through new and unfamiliar regions, which has meant at times the wrong magazine has gone to the wrong site.

"I think regional advertising will become more difficult for any magazine that has significant single-copy sales," says David Leckey, VP-circulation at Hachette Filipacchi Magazines, which publishes Woman's Day. "We've probably all had sporadic problems where magazines with ads for one region of the country ended up somewhere else."

With many wholesalers shutting their doors, getting results from the field has been difficult for publishers.

"Everyone I think had problems earlier this year," says Ken Wallace, VP-publisher of Prevention at Rodale Press, which was testing three different newsstand prices at the end of '95 and earlier this year.

GETTING TOO CHAOTIC

"The test was supposed to run a full year but we suspended it earlier this year because it was getting too chaotic," says Mr. Wallace. "We couldn't read the results."

In 1990, there were 275 wholesaler companies in the country, according to Mr. Harrington. Today, that total has plunged to about 75, with the top five controlling 60% of the market.

"The consolidation hasn't stopped yet," says Mr. Harrington. "Most people figure we'll end up with about 10 companies controlling 90% of the market."

"Our industry has been turned on its head," says Joel Anderson, chairman, Anderson News, which has emerged as the nation's largest wholesaler, with an estimated 20% share. "Ultimately, I think it will prove to be a good thing-we'll be able to do more merchandising and promotions with different publishers."

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