Magazine Circ: Behind the Ugly Numbers

The Audit Bureau of Circulations makes its twice-yearly release of magazine circulation figures today, and, as previewed here, here and here, it's going to be a nasty one. Individual results may vary, as they say in the infomercials, but the general pattern is losses on the newsstand balanced out by gains on the subscription side -- a costly trade-off for publishers.

There are two main theories for what's going on here. The cyclical one: Economic pain, and in particular the high price of gas, is forcing consumers to limit their discretionary spending. The secular one: The internet is supplanting magazines as consumers' medium of choice for news and entertainment.

Surely, both are factors. But a publishing executive I spoke with at length last week, and who is unusually keen at making sense of this sort of thing, believes neither explanation is as significant as a third, less obvious one: the effect of those high gas prices on magazine wholesalers.

Wholesalers are essentially in the bulk shipping business, so they're highly sensitive to changes in gas prices. They're also the ones who have to truck away the unsold copies that remain at the end of the week or month. In response to their vastly increased gas costs, they're now doing two things: cutting down on deliveries, and pressuring publishers to eliminate some of the waste from the processing by decreasing the draw (the number of copies they send to the newsstand) of their titles. Those changes, says this executive, are responsible for much, if not most, of the industry-wide newsstand decline.

Ironically, there is one way the weak economy is actually helping wholesalers: by eliminating advertising. Magazines carried 8.4 percent fewer ad pages in the second quarter of 2008 than a year earlier. That's 8.4 percent less paper that had to be shipped to retailers (and, two-thirds of the time, shipped back, too).