Media Curmudgeon: Bang, Bang, Bang

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January 25, 2008

Bang, Bang, Bang

Several announcements this week sound like of the banging of nails being pounded into the coffin of the old media:

1. Wal-Mart is pulling the New Yorker, BusinessWeek, Forbes, and Fortune from its racks. As Silicon Valley Insider writes, “…make no mistake - this is a disaster for the magazine world, which depends on Wal-Mart for an estimated 20% of retail sales…” and “Wal-Mart is ruthless about maximizing every inch of its floorspace, and it's clearly decided that it's only worth keeping a handful of magazine titles on its racks.” Guess what kind of titles Wal-Mart is keeping…probably doubling shelf space for People and other celebrity gossip rags. Wal-Mart’s decision is just another nail in the coffin of the printed magazine business. During the same week, The Atlantic announced the upgrading and opening up of its website to the magazines entire content, which is symbolic of the reality that the future of magazines is on the Web, not on Wal-Mart’s racks.

2. HBO announced that it will begin testing HBO on Broadband, a service, according to Shelly Palmer’s Media 3.0 blog, “that will allow current subscribers to watch the channel’s content online.” This service is also a nail in the coffin of broadcast and cable television as we know it. As more and more television content becomes available online, TV stations will be deprecated and the battle will be between cable, telephone, and wireless companies to see who can provide the cheapest and fastest access to the Internet and its infinite store of video to consumers.

3. The FCC is currently in the process of auctioning off the part of the electronic spectrum being freed up when all television stations go digital by 2009. Whichever company wins the bidding for the biggest chunk of the spectrum will be able to offer nationwide wireless access to the Web by mobile phones or computers, thus winning the battle with cable and telephone companies and disintermediating broadcast and cable television. Companies bidding are kept confidential, so we don’t know who is ponying up the billions being bid, but everyone suspects it is Verizon, ATT and, maybe, Google. Will Google win and provide free wireless to everyone? Who knows?

But one thing is certain; we can hear the nails being pounded in the coffins of the old, old, dead media…bang, bang, bang.

Posted by Charles Warner at January 25, 2008 11:55 AM

Comments

Media Curmudgeon at January 25, 2008 9:37 PM writes:

Bill Grimes responds:

“Well, once again we disagree. Your blog is completely off base when you say that Wal-Mart pulling those four publications out of their stores “is a disaster for the magazine world.” Wal-Mart shoppers do NOT buy these magazines. The demographics of the New Yorker, Fortune, Forbes and BusinessWeek readers are as different from those of the Wal-Mart shoppers as Bush was and is from Al Gore. Furthermore, less than 10 percent of the subscribers of these four magazines are single-copy buyers. They are annual, or longer, subscribers who receive these publications by mail, mostly to their offices and to their homes.

You are correct that Wal-Mart represents 20 percent of magazine sales. And as a former Director of American Media (National Enquirer, Star, Country Weekly, and Mira among others), I can tell you that the reason is that 40-60 percent of the sales of what are euphemistically called "Celebrity Journalism" (CJ) magazines like those above and Time Warner's People and three dozen more are single-copy sales (meaning very little if any of these magazines' circulation is generated from subscription sales). These magazines are purchased by readers at checkout counters in supermarkets, newstands and Wal-Mart. The buyer of Star this week may not buy next week's issue depending mainly on shopping habits, the power or lack thereof of the magazines' covers, and other factors. Someone not buying last week's magazine might buy this week’s. The fluctuation in weekly sales can be as high as 10-15 percent. Wall-Mart accounted for 40 percent of the sales of all American Media CJ titles.

The Wal-Mart shopper demos are a PERFECT match for these publications. Wal-Mart will not be showing CJ magazines the door anytime soon because its shoppers lap up Star and People at checkout and these magazines, I have been reliably told, produce the highest percentage of profit per SKU and floor space used of any product sold in Wal-Mart! See ‘ya later Forbes and New Yorker for the miniscule numbers of Wal-Mart shoppers who even noticed these magazines – certainly they did not buy them.

Next, HBO's move to broadband will have no impact on cable or broadcast that I can see. Both these businesses have more competitive challenges than they want, but this is not among them. HBO owns its own channel and distributes it today via cable, satellite, and increasingly through the telco's new fiber-to-the-home network, which is in its nascent stages. The distributor charges the subscriber a fee for HBO and shares equally that revenue with HBO.

Now, HBO distributing its network via broadband internet to its current subscribers free will cause not one penny loss to HBO. New broadband subscribers, if any, will have to pay the same monthly fee as current HBO subscribers do via their distributor. HBO will likely gain marginal new dollars but not significant money because, as in my case, why would I watch the “Sopranos” on my 21-inch Hewlett Packard computer screen when I can watch the show on my 50-inch Samsung HDTV wall-mounted set?

In broadband I assume new viewer/subscribers to HBO would pay HBO direct – good news for HBO.

How this adversely affects broadcast or cable economically, I can't figure. You state that as more and more content goes online it will adversely affect broadcast and cable viewership, and I agree with this, although as we have seen in the example of cable drilling the nail in broadcast's coffin the nail is either very long or the wood is extraordinarily hard. My main point on your example of HBO is that broadband delivery of that network will not affect cable viewing and will generate marginally incremental revenues for HBO.

As far as your third third point on wireless, no disagreement except that "offering national wireless" for a current non-participant in that market like Google will require the commitment of huge resources and Google could find that detrimental to its broad focus on so many other opportunities today. But who knows?

digibandit at January 25, 2008 4:57 PM writes:

Walmart selling the New Yorker is like Whole Foods selling steer nuts.

Or Borders selling ammo -where i am currently heading to read the New Yorker and Fortune for free.

Now THAT"S a business model - I spend 5 bucks on lattes and we all win.

Maybe the 'Old Media" should get into value added/ - I'm sure Mitt would have an answer - he can solve anything?

dave nelson

Paul Talbot at January 25, 2008 2:01 PM writes:

The person who first sold WalMart on the notion of putting the "New Yorker" on the rack... now there's an all-star. What a stunning example of superb salesmanship.

If you took all the copies of the "New Yorker" WalMart has ever sold and laid them end to end, they wouldn't make it the length of the altar of Mike Huckabee's Immanuel Baptist Church in Pine Bluff, Arkansas.

Media Curmudgeon

January 25, 2008

Bang, Bang, Bang

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