Books, Periodicals, and Newspapers

SIC 5192

Companies in this industry

Industry report:

This category includes establishments primarily engaged in the wholesale distribution of books, periodicals, and newspapers.

Industry Snapshot

According to industry statistics, there were 7,183 establishments primarily engaged in the wholesale distribution of books, periodicals, and newspapers in 2009. These establishments employed 53,354 and generated $4.53 billion in revenues. Most were small firms; nearly 83 percent had less than five employees. However, less than 2 percent of the industry's establishments generated nearly 40 percent of the industry's revenues. States with the most establishments were California with 901 firms, Texas with 623, New York with 541, and Florida with 523.

Organization and Structure

In addition to distributing books, periodicals, and newspapers, some wholesalers carried additional product lines including photographic equipment and supplies, religious and school supplies, stationary office supplies, greeting cards, art goods (including novelties and souvenirs), toys and hobby goods and supplies, electronic parts and equipment, and other durable goods.

Background and Development

From its beginnings until as late as the 1980s, according to the Wall Street Journal, the magazine wholesaling segment was primarily populated by tiny establishments operating in their own local territories with little competition. Only in the 1990s did the industry undergo a major consolidation effort. This consolidation was driven in part by aggressive supermarkets and other large retailers, a key customer base to magazine and newspaper distributors, attempting to diminish costs by ordering product for entire regions, rather than for specific local markets. These retailers flexed their newfound muscles to raise the bar for wholesalers to do business. In the ensuing shakeout, some 180 wholesalers closed their doors or were absorbed by the Big Four: Anderson, News Group, Chas. Levy, and Hudson News. Together, these wholesalers controlled 90 percent of the single-copy sales market in the country in the mid-2000s.

The explosive growth in electronic commerce also forced many wholesalers to close their doors beginning in the late 1990s. The online bookstore Amazon.com established a vast network of its own distribution outlets across the United States and maintained 10 times as much distribution space in 1999 as it did in 1998. To fight this trend, the intensely competitive wholesaler industry underwent immense consolidation by way of mergers and acquisitions in addition to the dropout of a number of players. The industry's trade association, the Periodical Wholesalers of North America, was even forced to disband, citing lack of sufficient membership.

The magazine publishing industry as a whole faced its direst period since the early 1990s, with a number of major long-running publications--including Time Inc.'s Life, --ceasing publication, and some publishers, such as the New York Times Co., exiting the magazine market entirely. While the number of magazine titles skyrocketed in the late 1990s, magazine sales at newsstands actually declined from 2.1 billion in 1996 to 1.7 billion in 2000, forcing remainder rates up to 65 percent.

Once-leading magazine wholesaler Anderson News opted in 2002 to cut its distribution by some 400 million copies in an effort to boost its average sale efficiency or the percentage of its shipped titles that are actually purchased off the rack. The industry sell-through average was about 38 percent through the late 1990s and early 2000s; Anderson News hoped to raise the rate to better than 50 percent. Meanwhile, Anderson announced a two-tiered distribution system demanding that those titles that bog down sales efficiency pay higher fees for Anderson's distribution services.

News Group, the second-leading magazine wholesaler, even began insisting that publishers pay fees to take back copies of magazines that failed to sell, breaking with traditional industry practice in which wholesalers absorbed the cost of returns. These measures reflected the growing power of the industry's major distributors, whose greater economies of scale translated into increased leverage with publishers and retailers alike. In retaliation to the potential decline in sales, magazine publishers increasingly looked to direct distribution, bypassing wholesalers altogether and taking their product directly to the retailers.

In the book segment, total book sales were on the rise, registering an increase of an estimated 2.7 percent in 2003 to $27.06 billion, though this rise was driven by blockbuster titles. Mass-market paperback sales, moreover, jumped 11.8 percent between 2001 and 2003 to reach $1.73 billion.

The sheer volume of books published, combined with tighter competition, created an emerging market for the wholesale distribution of bargain books. With so many titles published and shipped to bookstores, but with cost pressures demanding that retailers concentrate primarily on the best-selling titles, an increasing number of books were returned to publishers and sold at bargain prices. Bargain-book wholesalers thus had more product to choose from and more specialty book stores to which they could distribute those titles. Wholesalers were thus charged with finding alternative markets for these remainder books, which by the mid-2000s, had developed into a booming market niche.

In 2007 and 2008, magazine wholesalers Source Interlink Cos., Anderson News Corp., and the News Group continued a concerted effort to improve efficiency by drastically cutting the number of copies of magazines they distribute. Anderson News Corp. and the News Group did not specify the number of copies they would drop, but Anderson News Corp. did state it was targeting an efficiency rate of 45 percent in 2008 and 50 percent soon thereafter. Anderson had cut 140 million copies in the fall of 2006.

Before cutting 57 million copies across all categories from its overall distribution of 1 billion copies in 2007, Source Interlink Cos. was operating at a 34 percent sell-through rate. The cuts helped improve efficiency to 38 percent by early 2008. Source planned to cut another 40 million copies from its distribution in 2008, hoping to reach a 50 percent efficiency rate by the summer of that year. All three major distributors making cuts announced that single-copy sales have held steady or increased over the time frame of the distribution cuts.

Current Conditions

Wholesalers found themselves in an increasingly difficult economic environment during the late 2000s and into the early 2010s. Magazine subscriptions held relatively steady around 267 million, slipping just 2% between the first six months of 2009 and the first six months of 2010. In fact, according to GkK MRI Research, overall magazine readership actually increased by over 5 percent between 2005 and 2010, reaching nearly 190 million. However, newsstand sales continued to fall unabated. According to the Audit Bureau of Circulations, compared to a year earlier, single-copy sales dropped by 5.6 percent in the first six months of 2010, 9.1 percent in the second six months of 2009, 12.4 percent in the first six months of 2009, 11.1 percent in the second six months of 2008, and 6.3 percent in the first six months of 2008.

The root cause of the declining sales include both the rise of digital access to content--especially on mobile devices--and a deep recession that had consumers spending less. Impacted by the converging economic factors, in 2009 industry leader Anderson News attempted to stay afloat by charging 7 cents per magazine copy delivered. However, its customers declined to pay, forcing 92-year-old company to close its doors in February 2009.

Anderson News's abrupt exit from the wholesale industry left about 25 percent of the magazine market unattended, causing shortages at the newsstands and general upheaval in the industry. The News Group purchased what remained of the Anderson News, taking over 15 distribution centers 60 depots, 1,300 trucks and 4,000 employees. The merger gave News Group gave 46 percent of the market share. In addition, the near-collapse of the supply chain allowed Anderson News to renegotiate more favorable terms with retailers, with whom wholesalers historically have a contentious relationship over margins.

Although some readership was expected to return to newsstands as the U.S. economy recovered, book, magazines, and newspapers alike were undergoing revolutionary changes in readership formats during the early 2010s with the rapid infiltration of digital devices or eReaders such as the Kindle and the iPad. While magazines were frantically trying to figure out how to jump aboard the digital bandwagon, they were also looking to keep consumers at the newsstands with special and commemorative issues, which commonly sold better than regular monthly issues.

Industry Leaders

Ingram Industries Inc., the largest wholesale book distributor in the United States, had 5,400 employees in 2009. Revenues for Ingram, based in Nashville, Tennessee, were $2.1 billion in 2009. Among its assets, which also include digital distribution, its business group Ingram Content Group includes book wholesaler Ingram Book Group.

Baker & Taylor Corporation, of Charlotte, North Carolina, was the leading distributor to public, school, and specialty libraries in the United States. The firm was also a major supplier to Internet retailers and independent bookstores and operated support services for Amazon.com and barnesandnoble.com. Baker & Taylor brought in revenues of $2.26 billion in 2007 while employing 3,600.

News Group took over as the nation's took magazine distributor with the purchase of Anderson News in 2009. The firm operated in 42 states in 2010, distributing over 4,500 magazine titles and 10,00 book titles, totaling some 2 billion copies a year. Source Interlink had $2.25 billion in sales in 2009, including distribution of CDs and DVDs. Based in Bonita Springs, Florida, Source Interlink employed 8,000 people. Hudson News of North Bergen, New Jersey, employed 2,000 and recorded sales of $2.98 billion in 2007. Chicago-based Chas. Levy Company was a leading distributor of books and magazines throughout the Midwest.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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