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International Circulation Management

With more than dozen high-quality computer and gaming titles appearing in well over 100 countries throughout the world, the Future Network U.S.A. is a force to be reckoned with in the international market.   And this made it all the more worrisome when, in the early part of 2002, the publisher began to notice a significant loss in international sales across the line—a drop of 15-20% over the course of little more than a year. 
            “Our international wholesalers told us this was a trend they were seeing with all imported titles, and in particular the American ones,” Holly Klingel, Vice President of Circulation, explained; “but our international sales are important to us.  We couldn’t stand by and see it happen; we had to do something.”
            Which is why, in the middle of the year, after strategizing with their international distributor and running several months of tests, Future dramatically dropped their billing prices on all their products.  “Curtis International reached out to all our overseas wholesalers, asking them to pass on the entire savings to their customers in the form of lower local selling prices,” said Mimi Hall, Future’s Newsstand Sales Director.  “They responded beyond our expectations, in some cases giving up an extra point or two of their own to bring the local cover price closer to the level of locally-published magazines.”
            Indeed, they went further than that.  Several scheduled local promotions at no expense to the publisher; at least one or two sent emails to Future, thanking them for their support in their markets.
            “They were so happy to see that Future had this kind of commitment to their market, and was willing to go so far to support sales there,” said Debbie Whelan, Director of Client Services for Export Sales at Curtis Circulation Company.  “That was why they went the extra mile.”
            Was the Future international pricing program a success?  The answer is an emphatic “yes.”  Within the first six months, sales increases had ranged from 10% to 35%; comparing test sales to control markets, where the price was not changed, the difference was even greater—about 50%.  “We continued to break even or make money on our international copies right from the start,” said Klingel.  “And over time we made up the decrease in the level of revenue from the price reductions by the increase in sale.”
            The Future program is clearly not one that would work for all publishers.  Publications with a more targeted, less price-sensitive readership; publications with fewer direct local competitors; publications without an already-substantial overseas distribution and readership; and publications with lower cover prices to begin with, all are unlikely to have benefited to as great an extent.  Future had the right combination--high cover prices, mass market consumer titles, and falling sales in a relatively large and well-established international market—to make it work for them. 


Causes of International Declines

            The conditions that led to the Future experiment still hold true for many publishers internationally, however.  Sales continue to fall from year to year and from market to market, even for very well-established titles.  A number of conditions appear to be contributing to this situation.  They include:

  1. More local product available:  “In the past 8 years we have seen a proliferation of local titles in markets throughout the world,” says Paul Bozikis, International Marketing Manager for Comag Marketing Group LLC.  “This makes it harder for U.S. imports to get a place on the newsstands overseas.”  Jack Friedman, Director of Export Sales for Curtis Circulation Company, agrees.  “Over the last 10 years or so the diversity and strength of domestic publishing programs in many countries has expanded exponentially,” he says.  “In many of these countries publishing in a variety of specialty niches may not have existed in years gone by; today, that is no longer the case.”  Locally published magazines have the benefit of lower cover prices, more timely and appropriate content, and of course publishing in the local language.  That kind of competition is hard to overcome. 

  2. U.K. exports:  Besides competing with local product, U.S. magazines must compete with magazines imported from other countries throughout the world.  In particular, and increasingly, that means the U.K.  “That the British export business is very aggressive is made more understandable when one realizes that their home market is not nearly as large as ours,” said Friedman.  “Seeking circulation from the export market is an important way for these publishers to grow.”  They do so with competitive pricing and levels of promotion that U.S. publishers are not always able, or willing, to match.

  3. Production values of competitive product: Adding to the challenge is the production quality of titles published in the U.K., Italy, and elsewhere.  With different publishing economics and available resources, many foreign publishers are able to create high-quality products—thick, glossy, and four-color—and bring them to market at lower cover prices than U.S. publishers can manage.  And thanks to the U.K. publishers, adding value through premiums has become the vernacular for publishers hoping to have a place on the worldwide newsstand.    “It used to be primarily editorial premiums—pamphlets, disks,” Bozikis explains.  “Now it has become a circus because the cover mounts are so grand they may cost more than the magazine itself!  One disk, two disks, eyeliner, hats.  Where does it end?” This ups the competitive ante on newsstands throughout the world, as retailers select the imported titles for their markets. 

  4. Price:  As domestic cover prices have inched up over the years, those increases have taken their toll on the international sales of many publishers.  Remember, the international cover price has to take into account a number of factors:

    • The cost of shipping: This is picked up, in most cases, by the importing wholesaler—and of course, that includes ALL the copies, including the unsolds. 
    • The cost of currency conversion:  When the dollar is strong, as it has been for several years, it means it is more expensive to buy American product, and the cost must go up further.  Even when the dollar grows weaker—as it has more recently—some protection is built into the local price for currency fluctuations. 
    • Import taxes:  A number of countries have V.A.T.s (Value Added Taxes) that can cause the local selling price to skyrocket.  In France, for example, the press is taxed at 2.10%--unless the ad/edit ratio exceeds 60/40%, according to Joel Fillon, Import Director of NMPP, a French importer.  At that point the tax skyrockets to 19.6%--and is passed on to the consumer in the local cover price.

As a result, if you buy your own magazine on a foreign newsstand, the price you will pay, when converted back into dollars, is going to be a lot higher than it is in the U.S.  This means that every newsstand copy of an American publication purchased in a foreign market represents a pretty big financial layout for the consumer.  And to that we have to add:


5. Industry consolidation:  And you thought you could get away from it if you got out of the U.S.!  But overseas markets have begun to respond some of the same pressures that we have been seeing for a number of years in the U.S. market.   Remember, a number of our own key chains—WH Smith, Press Relay, Ahold—are international chains or have foreign ownership.  Choices made by retailers here reverberate in other markets as well.  Foreign newsstands are also beginning to face the challenges of overcrowding, and make similar decisions to limit their product lines.  To many publishers, this can result in a higher bar to entry or expansion in the foreign market.  “Generally speaking, over the past 4-5 years many import distributors have been looking at their bottom line in a way that didn’t exist in the past,” Friedman commented.  “As a result, they are much more cognizant of magazines they are bringing in and what they are contributing—or not contributing—to their bottom line.”


It’s Still Worth It, Though

            With all the challenges they face, however, publishers are still finding it possible to survive and even thrive in the international market.  New and existing U.S. publishers continue to launch their products in markets around the world.  And more publishers continue to publish local or licensed editions of American product in key international markets.
            There are a number of good reasons for an American magazine to maintain an international presence.  While some publishers maintain that international circulation is meaningless to their advertisers, others see the additional copies sold as valuable additions to rate base.  “A reader is a reader,” the Vice President of Circulation of a leading international consumer publication remarked.  “Whether someone buys my magazine at the corner grocery or at the Heathrow airport, that’s circulation to me.”  And while international sales represent a small portion of the overall circulation of most publishers, for some it can equal, and even exceed, their U.S. sales.  International represents a significant portion of the newsstand sales for the high-tech titles from CMP Media, for example—an anomaly explained by the targeted nature of the readership and the respect commanded by American sources of information in the high-tech field.
            Revenue is a second good reason to commit to international circulation.  It is in most cases a misconception to believe that it is more expensive to sell copies on the newsstand overseas than at home. Remember, the importing distributors will usually pay for freight; they buy the product at a competitive discount; and there is no RDA to be factored in six months down the road. 
            As an added bonus, efficiencies on international sales tend to run a bit higher than domestic efficiencies.  Because of the cost of import, distributors regulate to higher efficiencies, saving themselves and the publisher the cost of excessive unsold copies.
            Not all markets are alike, however, and savvy international circulators will tailor their strategies to the country.  Potential is greatest, for obvious reasons, in the larger English-speaking countries, and a good portion of sales of American titles will be found in the U.K. and Australia.  At the same time, the U.K. tends to be the most difficult, and expensive, market to enter.  Wholesaler discounts are higher, and the publisher is required to pay for shipping, making it much more difficult to make money or break even.  Gaining access to the retailers, who have strict authorization requirements, can be a challenge to a U.S. publisher.  And once authorization and distribution are achieved, order regulation can be expected to take its toll.  Retailers will place their orders on the basis of recent issue net sales, so allotments will be cut from issue to issue, and attrition can be rapid.  To even stay on the newsstand in the top retailers in the U.K., U.S. publishers are finding it necessary to bag on premiums periodically, or to add value in some other way—through sweepstakes, contests, or two-for-ones, for example. 
            In other markets the key challenge is space limitation.  In Italy, as in other countries, imported magazines are sold primarily at kiosks—small newsstands whose space is so restricted that your title might not be displayed at all, but stored or stacked out of sight.  A customer looking for it would have to specifically ask for it.  To make some headway, the challenge will be to get seen, or to make sure your potential readers know to ask for your title.  Ways of accomplishing this might include buying a promotion at point of sale or cross-promoting—including an ad or flyer for one title in the pages of a sister publication.
            In many countries, imported press is carried mainly by a small number of outlets—it could be as few as a dozen—located in places tourists and other English speaking people are expected to shop.  A focus here might be to work with these outlets to increase sales potential by providing posters, cover over runs, or giveaways to the customers.  Elsewhere, the magazine importer might be testing new classes of trade—specialty, for example, or a few top mass market outlets.  In such a case, working with the distributor to defray some of the costs or provide promotional materials could yield long-term results.
            A circulator working internationally is not working with one homogenous market but many individual, even unique, ones.  And this of itself is what helps to make the international market so rewarding.


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