PROTECTING THE ROUTE TO PROTECTING THE ROUTE TO MARKET - WHEN RETAILERS MARKET - WHEN RETAILERS

WANT TO TAKE CONTROLWANT TO TAKE CONTROLSally Cartwright

HELLO!

CIRCULATION 502,679

Source: ABC July – December 2000

• THE COST OF POSTAGE

• NO TIME ADVANTAGE

• THE AVAILABILITY OF NEWSAGENTS

HELLO! SUBSCRIPTIO

NS

HELLO! RETURNS 18%

25%

34%UK INDUSTRYAVERAGE

THE ENVIRONMEN

T AND THE MAGAZINE

USA/UK/GERMAN MAGAZINE USA/UK/GERMAN MAGAZINE MARKET COMPARISONMARKET COMPARISON

US UK Germany

Total Market Value (US $M) (Circulation & Advertising) 25400 5400 8300Circulation Market Value (US $M) 9900 2600 3600Circulation revenue per capita (US$) 36.6 44.0 43.6% Retail Sales 21 89 52% Subscription Sales 79 11 45Retail Sales Value - RSV (US $M) 2500 2310 1860% Sales Efficiency 35 70

UK MAGAZINE MARKET UK MAGAZINE MARKET RETAIL GROWTHRETAIL GROWTH

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

% C

hang

e ye

ar o

n ye

ar(@

199

9 Price

s)

Source: Wessenden Marketing, JM \ SD \ WHS wholesale data

UK RETAIL MARKET SHARES 1993 - UK RETAIL MARKET SHARES 1993 - 20002000

S'mkts High Street Indep CTN Mult CTN/Conven Travel

1993 2000

New Entrants have gained Significant Share at the expense of the traditional sectors.New Entrants have gained Significant Share at the expense of the traditional sectors.

UK MARKET DYNAMICS - UK MARKET DYNAMICS - PUBLISHERS/DISTRIBUTORSPUBLISHERS/DISTRIBUTORS

•Retail market value growth slowed to 1.5% from 10%.

•Number of Consumer titles grown by 45% in last decade to 3,200.

•Industry unsolds costs now $230m.

•Publisher/Distributor consolidation.

•Subscription sales still only 11% of market

•Internet “bubble-burst” means investment back into printed media.

UK MARKET DYNAMICS - UK MARKET DYNAMICS - WHOLESALEWHOLESALE

•Wholesaling is a relic of the former dominance of the local newsagent.

•Market value growth over the past ten years has supported profitability.

•The wholesale sector will continue to concentrate.

UK MARKET DYNAMICS - UK MARKET DYNAMICS - RETAILRETAIL

• Outlets selling Magazines grown by 30% in 7 years

• New sectors growth

• Supermarket sales growth will slow

• Multiple retailer frustration

• Independents are intrinsically marginal businesses.

WHAT’S HAPPENED IN WHAT’S HAPPENED IN THE LAST 12 MONTHS?THE LAST 12 MONTHS?

• Tesco/WHS announced “National Direct” in March 2000

• PPA/NPA fought back

• Tesco dropped ND in October 2000 - consensual industry approach

• WHS dropped ND in Dec 2000

• Industry “8 point plan” agreed

• WHS announced planned sale of Wholesale arm in Feb 2001

RETAIL REQUIREMENTS FROM RETAIL REQUIREMENTS FROM BLUEPRINTBLUEPRINT

IMPROVE CONSUMER

OFFER

REDUCE WASTE

SIMPLIFY SUPPLY CHAIN

INCREASE MAGAZINE

SALES

THE BLUEPRINT - A THE BLUEPRINT - A NATIONAL SERVICE OFFER NATIONAL SERVICE OFFER

Retail Store

Regional Wholesalers

Printers Retail HQPublisher/Distributor

CPU ELEMENTSCPU ELEMENTS

• Allocation system, including SBR system.

• Information Warehouse.

• Central invoicing and cash collection facility.

• Central customer service facility.

• Simplified in-store handling systems

SUMMARYSUMMARY

• Magazines doing well

• Facing up to major challenges

• Diversifying successfully

• Print on paper will be major revenue stream for many years to come

…and to close…just look at two new sectors

2,030,498 EVERY MONTH

7,900,000 EVERY MONTH

Source: ABC July – December 2000