Diversifying. Converging. Fragmenting. Those are the key themes from the latest Distripress Circulation Monitor, undertaken for the international press association by Wessenden Marketing.
Last year was a bad year for Distripress members. The subtitle of the 2017 DCM report was “Surviving the Stress Test” which captured the sense of holding on through a period of unprecedented pressure. The 2018 report shows some subtle, but very significant changes.
Taking a longer view
To put things into a longer-term perspective:
- In 2014, the business was getting to grips with the prospect of terminal decline.
- In 2015, the mood had moved on from despair and denial regarding what has happening to a grim determination to face up to all the challenges.
- In 2016, there was much more optimism evident, as companies were testing new business models and finding a way forward.
- In 2017, the pressures which had been building up over previous years exploded into the open. The result was a series of company closures, mergers, acquisitions and consolidation, together with some unexpected partnerships. Both business confidence and business performance among Distripress members was falling.
Now, in 2018, confidence is beginning to recover, the underlying business indicators are looking a little more robust and Distripress members are looking more creatively and positively at the potential for opportunity in the ongoing disruption. There are three big themes running through the 2018 survey: convergence, fragmentation and diversification.
This has four distinct dimensions.
Firstly, at a macro level, the consumer trends shaping media look very similar around the world. These include such developments as the growth of voice applications and the so-called “internet of things”.
Secondly, media companies themselves are crossing old boundaries as they engage with audiences across multiple platforms. This is manifesting itself in a flurry of M&A activity as well as the growth of interesting and unlikely partnerships.
Thirdly, at a more granular level, publisher & supply chain issues are becoming more similar from country to country. How to develop a more flexible retail network as consumer shopping habits change? How to grab the consumer’s attention in-store with more creative retail promotions? How to defend retail space against the expansion of other categories which are more buoyant or profitable than News & Magazines? How to drive down cost-to-serve as the volume of product going through the supply chain declines? How to simplify in-store handling processes to make N&M a more attractive category for retail staff to handle? How to make a co-ordinated offer to the consumer across print & digital platforms and across subscription & single copy channels? And how do Distripress members manage to take a slice of some of this cross-platform action?
Fourthly, all these issues are reflected in micro-convergence within companies themselves: breaking down legacy departmental silos as platforms, channels and processes overlap increasingly. This is reflected in the growing theme of organisational change in the DCM itself.
Yet while the questions being asked are becoming increasingly similar around the world, the answers being found can be very different. To put it another way, the drivers of change are converging, but the outputs are fragmenting. This fragmentation process is operating in two ways.
Firstly, the sales trends of Newspapers and Magazines are showing an even wider range of performance, country by country, than in past DCMs: increasingly erratic and unpredictable.
Secondly, the business models of Distripress members all the way through the supply chain (publishers, wholesalers & distributors, retailers and service companies) are becoming more varied and individual as companies test new ways of working and grow new revenue streams, which leads on to the third theme…diversification.
This has two dimensions: revenue and geographical diversification.
Firstly, as the core business of single-copy print sales slows or declines, new revenue streams are being sought.
- For Publishers, that means growing subscriptions over single copies, building digital platforms next to print that complement rather than cannibalise, ecommerce and live events. It also means trying to accelerate the strategic shift from advertising revenues to content/circulation revenues.
- For Wholesalers & Distributors, it involves trying to take a bigger piece of the broader N&M distribution picture (e.g. getting involved in print subscriptions and digital editions, offering consumer marketing services to publishers, etc), taking on non-N&M product through their existing networks, or using their skills in parallel industries.
• For retailers generally, the big revenue development lies in growing an online dimension that sits next to their bricks-and-mortar presence, which is also changing in its size and profile at the same time. The other big area is to tweak the product mix and consumer offer, which is where N&M is coming under the spotlight at the moment as retailers flex the range and space devoted to the category.
Secondly, geographical diversification is also accelerating, which, in theory, plays to the strengths of Distripress members. A number of the major digital players, notably Amazon and Apple, are looking to grow outside their mature, core domestic markets to further-flung growth markets. The rationale is twofold: (1) grow top line sales and (2) defend against the rapid growth of Asia Pacific-based companies who are moving West.
The net result is a “test and tweak” environment, where every organisation is trying to do an increasing number of new things at the same time, without forgetting about nourishing what still works at the moment: trying to diversify, but not so fast as to destabilise the core business – a really difficult balancing act to get right.
As has already been noted, the background to the current wave of disruption is a growing array of tech developments in three key areas: consumer, distribution and retail.
The report lists a number of key technologies which are shaping how consumers interact with media content, with three standing out as of prime importance:
- Voice Activated Assistants which have the potential to blow apart search, brand advertising and how news and lifestyle information is discovered and consumed.
- The Internet of Things, from talking fridges to self-drive cars, all of which could carry publisher content.
- Artificial Intelligence is already being used to deliver tailored content to individual consumers. Yet AI also has an impact in advertising placement, marketing communications and the streamlining of a whole range of internal processes.
Beneath these towering, unpredictable game-changers is a long list of more mundane digital applications which publishers are currently grappling with. These range from websites with more flexible ways of allowing paid access to content through to video channels and on to more flexible and dynamic payments options for paid content.
Here the big developments are:
- Robotics. This can stretch from automated pick & pack in a warehouse through to using flying or ground-based drones to make the final delivery to the end consumer.
- Artificial intelligence is beginning to ripple through every link in the distribution process making supply chains more efficient and more tailored to the specific needs of individual customers, whether these are retailers or consumers. Driven by the smarter use of data, AI can manage the supply chain, just-in time ordering, delivery route optimisation and range & order management in a much more sophisticated way and in real time.
- In addition, blockchain technology has the capacity to streamline and reshape whole supply chains, changing who adds value and where in the whole distribution process. Yet the long-term impact of blockchain is still difficult to predict behind all the hype.
Retailers are really getting to grips with all the technologies seen in Consumer and Distribution, but with their own particular spin. Store staff who are digitally enabled with handheld devices through to robots who can answer questions and show where goods are stocked: in-store digital directories, ordering systems and digital demonstrations; shopping apps which drive and aid the whole “shopping experience” across all platforms. And so on.
Getting on with the “Day Job”
While Distripress members have to be aware of the “Big Picture” of what is happening now and what might become a reality in the future, there is still the “Day Job” of running the core business. This is where the DCM offers some important benchmarks in terms of headcount trends, the rate and focus of organisational change, publisher promotional budgets and profitability levels, the rate and nature of supply chain changes, etc.
Yet what is clear in this year’s survey is a much more lateral approach to the business challenges. Instead of focusing exclusively on making the existing supply chain and retail network work better (still absolutely essential), much more thought is being devoted to bringing new retailers on-stream and to diversify company activities much more radically than in the past.
What this year’s DCM project shows more clearly than ever before is that the membership of Distripress is both very engaged (45% of member companies took part this year) and is polarised between two extremes: between those who see only terminal decline for their business and those who think that the current disruption is an opportunity to innovate or, at the very least, to grab market share from weaker competitors.
The encouraging conclusion of DCM 2018 is that there appear to be more proactive innovators than reactive decline-managers than ever before. They are looking for the opportunity in disruption.
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