Magazine distributor’s demise is beach readers’ loss
Don’t count on the gossip rags for your beach reading.
A national shortage of magazines could hit this summer after the nation’s No. 2 wholesaler abruptly shut down, leaving publishers scrambling to find a replacement to truck their magazines to stores.
The sudden demise of Source Interlink Distribution means that People, Us Weekly, In Touch, Glamour, Cosmopolitan and other favorite glossies may go missing at some retail outlets — at least in the short term.
The timing couldn’t be worse for the celebrity weeklies. Summer is traditionally their top-selling season as many consumers soak up the breezy reads along with the sun.
Barnes & Noble, which received between 75 percent and 80 percent of its magazines from SID, is said to be switching to smaller wholesaler Ingram, which had been handling about 20 percent of B&N’s orders. Stephanie Fryling, vice president of purchasing for magazines at B&N, didn’t return a call for comment.
SID was also the exclusive national supplier to Costco, CVS, Rite Aid and A&P supermarkets, and handled Walmart stores in Pennsylvania and the South.
Time Inc. said Monday that disruptions from its decision to dump SID in a squabble over rates could last up to three months and shave $12 million off its earnings this year. But a well placed executive said that may be overly optimistic.
“There could be six to nine months, maybe a year of total disruption to the marketplace,” the exec said.
Added another source, “Tens of millions of dollars are at stake for publishers.”
Executives predicted that the cost of trucking magazines to market and processing returns would rise, creating more price pressure on publishers at a time when they can least afford it.
The two biggest wholesale survivors expected to inherit most of the business are TNG, owned by Canada’s New Group, and Hudson News. Time Inc. is already shifting its business to TNG.
SID, which is putting 6,000 people out of work, told publishers that it might work out something to smooth the transition.
“In light of this unfortunate turn of events, we are willing to discuss arrangements for an orderly transition of our retail customers to successor wholesale distributors,” CEO Mike Sullivan said in a memo Thursday to publishers.
SID grabbed market share by promising retailers a better percentage cut on the magazines it sold at retail. It aimed to recoup the cost by pushing for better terms from national distributors and publishers.
Those demands included later payment terms and a move to get publishers to foot the bill for magazines lost, stolen or damaged at the retail level.
SID is owned by asset-management firm Oaktree Capital Management, which split the distribution business from the media side that publishes Motor Trend, Hot Rod and other special interest titles.
SID “issued an ultimatum to the publishers and it backfired,” one source said.