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December 18, 2014

Publishing News

Hearst Increases Frequency of Free Print Launch TrendingNY
Hearst Magazines is increasing the publishing frequency of TrendingNY, its free fashion magazine aimed at young women. TrendingNY made its debut in September and four issues were printed. Starting with the new year, Hearst will publish nine issues. Each issue of TrendingNY is distributed during the first week of the month by street teams in Manhattan, Brooklyn and Queens. Ellen Levine, Hearst Magazines’s editorial director, said the response from readers was positive. “With every pilot, we ask for reader feedback so we can tweak as we go,” she said in a statement. “Young women responded to its bold, happy, vibrant look and newsy information on trends, and felt the fast format was original and refreshing, which was our goal from the start.”

Legal Trick Means No Postage Hikes, For Now
With some parliamentary maneuvering, the USPS Board of Governors has apparently avoided the need to raise postage rates sooner than it wanted. A key deadline for the rumored hurry-up rate hikes passed yesterday, when the Consumer Price Index numbers for November were announced. As the board drew close to losing its quorum last week (due to Congressional gridlock), there was talk the governors were preparing rate hikes that would be announced this week and implemented in the spring. That appeared to be the last chance for the governors to raise rates until Congress got around to approving new governors. But a Federal Register filing published yesterday revealed that the governors came up with another plan: While they still had a quorum, they passed a resolution naming the remaining members to a Temporary Emergency Committee that will "will exercise those reserved Board powers necessary for operational continuity until such time as sufficient members are available to enable a quorum of the Board to convene." Assuming the resolution withstands any legal challenges, it means Congressional deadlock won't prevent USPS from increasing rates when it chooses. That appears likely to be in a few months, after an appeals court rules whether the 4.3% "exigency" surcharge on most postage should be increased or extended. A rate hike approved before the board lost its quorum would have to have been filed prior to yesterday's CPI release, which caused a recalculation of the inflation-based cap on rate increases.The Postal Regulatory Commission now calculates that an increase based on the change in CPI during the past 12 months would be capped at 1.685%. But the Alliance of Nonprofit Mailers puts the true cap at 1.965%, because there hasn't been a CPI-based increase for 15 months. And it projects that, despite plummeting gasoline prices, the inflation-based cap is likely to keep inching up for the next few months.

Macmillan Reaches Amazon Deal, Will Try Subscription Services
In one of the more detailed accounts of a publisher’s e-book pricing strategy and relationship with the Dept. of Justice, Macmillan CEO John Sargent told authors, illustrators and agents in a letter sent today that the company has reached a new multi-year sales agreement with Amazon for both its e-books and print books. The deal will go into effect Jan. 5. Sargent also provided some context. He noted that the house's consent decree with the DoJ expired today, which meant that that Macmillan is no longer required to allow retailers to discount its e-books. However, he added, because of a separate ruling in the Apple price-fixing case, Apple can still discount Macmillan's e-books until Oct. 5, 2017. This, he said, is something that will “ensure a muddled and inefficient market” until the Oct. 5 date is reached. The “aberration” created by the Apple ruling will, Sargent explained, "cause us to occasionally change the digital list price of your books in what may seem to be random fashion. I ask for your forbearance. We will be attempting to create even pricing as best we can.” Sargent continued: “Under our deal with Amazon, your net percentage of the proceeds will not change. You will be affected, as you always have been, by our changes in price. Your books will continue to be featured in Amazon promotions and deals.” He noted that since Amazon still holds a 64% share of Macmillan’s e-book business, the publisher will soon test the subscription model in an attempt to broaden its distribution channels. Acknowledging that Macmillan has concerns that subscription services run the risk of eroding the perceived value of books, the company will nevertheless test such services in the coming weeks with several companies that offer “pay per read” plans that offer favorable terms. “We plan to try subscription with backlist books, and mostly with titles that are not well represented at bricks-and-mortar retail stores," he said. "Our job has always been to provide you with the broadest possible distribution, and given the current financial and strategic incentives being offered, we believe the time is right to try this test.”

Magazines Canada Launches Video, Engagement Campaign for Newsstand
The Magazines Canada industry association partnered with K9 strategy+design and a team of Ontario filmmakers to create "Anything Can Happen at a Magazine Stand," a two-minute mini movie showcasing the many possible stories that can happen at a magazine stand. The concept: What you read tells the story of who you are. The goals: Bring back an element of surprise and engagement to the magazine buying experience, and showcase Canadian magazines. Consumers will see "movie poster" print ads for the campaign in Canadian magazines, inviting them to view the video and go to a magazine stand to discover their own story. They can access the mini movie on an area of the Magazines Canada site (link included in summary article below), and then use the website's store locator to find a retail outlet near them that carries Canadian magazines. They'll be invited to engage in social media, online and in the retail environment, and to view additional content—like the "making of" movie and interviews with key campaign players.
Magazines Canada summary of campaign, video embedded

Q&A: People, EW Editorial Director Jess Cagle
Cagle explains how People, NBC and Dick Clark productions come together to collaborate on “The People Magazine Awards,” a new two-hour live special airing tonight on NBC, which will include an announcement of a readers' favorite People cover of the year. He also discusses how People works with the morning news shows and other key outlets (like "Jimmy Kimmel Live") to get maximum exposure for key issues, like "Sexiest Man Alive." Asked about how People's direction might change when the People and EW brands get a new president (as yet unnamed), he says: "I think it’s the same as it was. The goal for People and Entertainment Weekly is to make these brands live beyond their existing properties. The print products are going to continue for a very, very, very long time. The digital products, our websites are going to continue and grow dramatically I think in the next few years. What other digital products, what other television products, what other books, what other apps, what other sites do we create beyond what we’re creating now?...That will be the goal of the new president, to grow the existing businesses, stabilize the existing businesses, and find new ways for these brands to live. I’m looking forward to finding out who the next president is going to be and working with them."

Opinion: Why Sales of Print Books Are Growing
Pseudonymous blogger D. Eadward Tree notes recent reports in Publishers Weekly [previously reported here] that unit sales of print books are on track to increase this year, and that print books are now actually gaining unit market share vs. e-books (paperbacks' share of unit sales rose from 42% in 1H to 43% in Q3, while e-books' share declined from 23% to 21%). He suggests that "fellow magazine publishers" take note of the reasons that the "Ebook Revolution" that was supposed to thoroughly disrupt the traditional book industry has apparently petered out with a 20% market share. One reason, he writes is that once most of the book-a-week romance and suspense buyers bought an e-reader or tablet, further growth of ebooks had to be based on grabbing harder-to-reach fruit. Another: "Legacy" book publishers adapted by signing up and emulating the methods of successful self-published authors in order to sell both more e-books and more print books. (This, he says, is "a bit like the magazine, magazine media industry...where the Internet Revolution has led not led to destruction of the savvy but rather their transformation into multi-media ventures.") Another: Print-on-demand technology has enabled self-publishers and mainstream publishers to print backlist titles and launch presumed niche books with little financial risk. Also, importantly, those who said that readers would "convert" to e-books and never go back turned out to be wrong: "Few book readers have given up print entirely. They expect ebooks when they want ebooks and print when they want print. They buy e-books to read to their children, then shell out for print editions of the kids’ favorites. The same executive who furtively read 'Fifty Shades of Gray' on her Kindle while flying to a business meeting will proudly peruse her print edition of 'The Great Gatsby' on the flight home." In short, he writes: "Digital is not an enemy of print...Ebooks have drastically lowered the barriers to entry for new titles and new authors; the best usually find their way into print. That means more choices for consumers, which tends to increase overall sales." While tech or other developments could change trends again, he concludes, "as Jonathan Nowell of Nielsen Book says: 'For the foreseeable future, we will operate in a hybrid print and digital world.'"

Shanken: U.S./Cuba Thaw Great News for Cigar Aficionados
Marvin Shanken, owner of M. Shanken Communications, publisher of Cigar Aficionado, Wine Spectator and Whiskey Advocate magazines, among other publications, hailed the new U.S./Cuba trade regulations, which will among other thing allow authorized American visitors to Cuba to bring back up to $100's worth of alcohol and tobacco products as part of a goods allowance of $400. "For cigar smokers in America, Cuban cigars have long been the forbidden fruit," Shanken told Capital NY. "The cigar business was born in Cuba, and cigars made in Havana have a worldwide reputation for excellence. We yearn for the day when our readers can have the opportunity to legally buy and enjoy cigars from every country...This does not mean the end of the embargo, but it’s the dawn of a new day that brings the United States and Cuba a big step closer to normal relations. For cigar smokers, there is the promise of something bigger to come."

Book Clubs Boost Scholastic's Q2
Led by a 14% increase in its children’s book publishing and distribution business, revenue at Scholastic rose to $665.6M in Q2 ended Nov. 30, +7% vs. Q2 last year. Net income rose to $68.5M from $58.3M in last year’s Q2. Earnings in both periods include one-time charges, including a $900,000 charge reflecting severance payments and a $2.9M charge associated with its decision to close its retail store in New York City in January. The company plans to reconfigure the ground floor of its HQ building in New York to add a retail component. The sales increase in the children’s book publishing & distribution segment was driven by a 33% gain in the sale in its book cub unit where sales hit $129.6M. For the first fiscal half, total revenue was +6%, to $949.4M, and net income rose 22%, to $34.4M.


Retail News

Amazon Unveils One-Hour Delivery in NYC
introduced Prime Now, a service in Manhattan promising delivery in as soon as one hour. The service is available in parts of New York, though Amazon said it would expand to other cities next year. Amazon will charge $7.99 for delivery within an hour, though two-hour delivery is free, according to a statement. Amazon said more than 25,000 items are eligible for delivery under the Prime Now program, which is only available to customers who pay $99 for the annual Prime membership. Amazon had been testing the service with bike messengers for at least a few weeks from a building it leased on 34th Street, opposite the Empire State Building. Amazon has leased the entire building, site of a former department store, for 17 years to house office space as well as merchandise. Google offers same-day delivery service, but only for a limited number of products in a handful of U.S. cities. The difficult economics of instant delivery have caused rival eBay to scale back the ambition of its eBay Now one-hour service.

Green Zebra Contemplates Expansion
Green Zebra Grocery, a Portland, Ore.-based health-focused convenience store, hopes to open at least two more locations in the next few months, if it can raise the money, according to published reports. The company--operated by Lisa Sedlar, the former CEO of New Seasons Market, also of Portland--opened its first store 14 months ago. Plans for a second location at the end of 2013 fell through, and plans for another store, originally scheduled to open last summer, have been delayed awaiting completion of financing, Sedlar told “As soon as we raise the money we’ll go full-speed ahead,” she was quoted as saying. The original store is 5,600 square feet. The second one will be 6,400 square feet, with added space for grab-and-go items, the reports said.

Kraft Foods Group CEO Steps Down; Chairman To Succeed Him
Kraft Foods Group has announced that Tony Vernon, who has served as CEO since the company's spin-off from Mondelez International in October 2012, will retire at the end of Kraft's fiscal year on Dec. 27, and will be succeeded by the company's current chairman of the board, John Cahill. Vernon, 58, will stay on as a senior advisor through March 31, and as a director until the company's next annual meeting in 2015. Cahill, 57, joined Kraft in January 2012 as executive chairman designate, North American grocery, and became executive chairman at the spin-off. He transitioned to a non-executive chairman role in March 2014. Prior to joining Kraft, Cahill served as an industrial partner at private-equity firm Ripplewood Holdings LLC from 2008 to 2011. He also spent nine years with The Pepsi Bottling Group--including serving as chairman and CEO from 2003 to 2006--and nine years with PepsiCo and KFC, where he served in a variety of management positions, including treasurer and CFO. "While our immediate priority will be to remain focused on delivering results, we will also take a fresh look at the business to prioritize our investments and focus on sustainable profit growth," Cahill stated, adding that he would have more to say in early 2015. Kraft's sales are projected to see little change this year, while profit declines 31%, Bloomberg pointed out. For its Q3 ended Sept. 27, Kraft reported net revenues up 0.1%, and net earnings down 10.8%. In today's announcement, Vernon said that Kraft is on track to deliver full-year results "consistent with our previous expectations, despite what continues to be a challenging industry environment."

Couche-Tard to Acquire Pantry C-Store Chain
Canada's Alimentation Couche-Tard Inc. will buy smaller U.S. rival Pantry Inc. for about $861M a deal that positions it as one of the top convenience store operators in North America. The deal will add about 1,500 stores to Couche-Tard's network, boosting its presence in the southeastern and Gulf Coast regions of the U.S. and making it almost as big as 7-Eleven, the world's largest convenience store operator.

Opinion: Amazon Could Be Vulnerable to Tech Upheaval
Personal tech columnist Farhad Majoo writes: " Despite fears of Amazon’s growing invincibility, the company’s eventual hegemony over American shopping is not assured. It might not even be likely. That’s not just because investors began to question the company’s aggressive spending this year, or because its big new thing, the Fire Phone, turned out to be about as unwelcome as the flu. Amazon may face a deeper problem. Like many of the local and big-box retailers it has displaced over the last decade and a half, Amazon could itself become increasingly vulnerable to the threat of technological upheaval. The key to its vulnerability is the smartphone, a device whose scope and significance Jeff Bezos, the chief executive, has not yet managed to corral. Phones have already radically altered both the way Americans shop and how retail goods move about the economy, but the transformation is just beginning — and it is far from guaranteed that Amazon will emerge victorious from the transition. Phones are at the heart of the service offered by Postmates, one of several start-ups that are working with retailers and helping to change shopping experiences. “Everything that we’re doing is anti-Amazon,” said Bastian Lehmann, the co-founder of Postmates. Postmates runs a network of couriers who, like Uber drivers, are dispatched by phones to deliver food, apparel, toothpaste and other goods from local stores in 18 American cities. The company recentlyannounced a plan for retailers to build Postmates’ technology into their own technology systems, a way to give small stores the kind of logistical efficiencies that were previously available only to giants like Amazon. As local retailers adopt such mobile innovations, customers will be able to search stores’ inventories, purchase goods for same-day delivery, and navigate and search for help and reviews inside a crowded store. None of these technologies pose an existential threat to Amazon, but by giving physical stores some of the conveniences that Amazon has long had, they may limit its potential reach." Instacart and other services, he adds, "all have in common speed and convenience: Because they route purchases from stores, they can often shuttle goods to buyers faster than they are available from Amazon. The prices are even competitive with Amazon, which delivers most of its products, even groceries, from warehouses that are a few hours away. And speed changes everything." The columnist says his own Amazon orders have fallen drastically since he began using Instacart and Google Express for staple items. He concludes that Amazon " has been investing vast sums in speeding up its delivery service, and it has been experimenting with ideas that mimic some of the start-ups, includingusing taxi-hailing apps to deliver goods. Continue reading the main story Continue reading the main story But the challenge for Amazon is that it may not be able to do all that it wants to do to take over the nation’s retail landscape."


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