Time for a change
Publisher dumps wholesaler over price hike
CASH flow at Time Inc. will be crimped this year — the result, sources said, of a behindthescenes battle with a wholesaler looking to force the giant magazine publisher to accept a rate hike.
But instead of caving in to the hike, Time Inc. dumped the wholesaler — the company that trucks the magazine from a warehouse to stores — and switched its business to a rival.
The moves were partly disclosed in a regulatory filing Tuesday.
Time Inc. only identified the wholesaler being dumped as “the secondlargest wholesaler of the company’s publications” — but sources fingered the jilted company as Source Interlink.
The company that won the business is referred to as the “selected wholesaler” — but it is said to be The News Group, owned by Canada’s Jimmy Pattision, already Time Inc.’s No. 1 wholesaler.
The battle could make it harder for consumers to find People or other Time titles on newsstands over the next few months.
The price hike demand by the wholesaler is not a total surprise. The sector has been under intense pressure for nearly two decades.
In the mid1990s, there were 300plus wholesalers in the US. Today, there are three major play ers: News Group, Hudson News, headed by James Cohen, and Source Interlink.
Source Interlink was probably betting that Time Inc., only days from being spun off from Time Warner into a new public company, would fold and accept more costly terms, one source said.
“The feeling on the street is that this is a new Time Inc.,” said the executive. “The old Time Inc. would have folded.” Time Inc., headed by CEO Joe
Ripp, said the dumped wholesaler was responsible for approximately 2 percent of its revenues — or just about $67 million of its $3.3 billion in 2013 revenue.
The publisher acknowledged that it expects it will take “six to 12 weeks for the selected wholesaler to fully ramp up its distribution capabilities to cover the additional retail outlets.” About $7 million in the first quarter will have to be written off as “bad debt,” the company said in the filing, as will $19 million in net sales made to the wholesaler in the second quarter. Wholesalers, in a bid to hang onto market share over recent years, would often promise better terms to retailers and then try to recover the added costs by raising prices on publishers, said one publishing executive.
A Time Inc. spokeswoman said, “The company is taking this action in order to strengthen the financial stability of its retail distribution network following the discontinued wholesaler’s failure to pay amounts due to the company and subsequent discussions with that wholesaler.”
Source Interlink did not return a call seeking comment.
Bezos’ business
Martin Baron, executive editor of the Washington Post, said that his contacts with the paper’s new owner, Amazon founder Jeff Bezos, are “pretty constant, but it is not as if he is running the business day to day.”
“He’s been good, he’s investing in us,” said Baron, speaking on a panel on the Future of Media sponsored by the I Want Media Web site, as part of Internet Week in New York.
“He’s talked about giving us runway to try new things, and he’s giving us runway,” Baron said of Bezos.
Baron said the company is adding to its staff of 650 journalists, with most of the additions in the digital realm.
The editor and the billionaire owner speak on the phone only “every one or two weeks” and Bezos gets fuller updates via inperson meetings — usually in Washington DC or in Seattle — “once every two or three months.”
But Baron was quick to duck a question on what might have motivated Bezos to buy the paper from the Graham family in the first place.
Baron acknowledged that traditional print “will be a much smaller part of the media ecosystem” in the future — and that mobile will play an increasingly larger role.