SIC 5192
BOOKS, PERIODICALS, AND NEWSPAPERS



This category includes establishments primarily engaged in the wholesale distribution of books, periodicals, and newspapers.

NAICS Code(s)

422920 (Book, Periodical, and Newspaper Wholesalers)

Industry Snapshot

Book, periodical, and newspaper wholesale distributors in the early and mid-2000s enjoyed luxuries rare for wholesale industries: leverage and power. In fact, their strength relative to retailers and publishers produced no small amount of ire among those sectors. To counteract what they saw as overly aggressive tactics on the part of wholesalers to cut costs at their expense, major retailers

SIC 5192 Books, Periodicals, and Newspapers

and publishers looked for ways to band together and bypass the distribution middlemen altogether.

Organization and Structure

Book, magazine, and newspaper distributors tend to be small, with more than half of the 3,345 in operation in 2003 employing fewer than six individuals; a mere 3 percent employed 100 or more people. In contrast, 622 businesses employed 100 or more in 1987. In addition to distributing books, periodicals, and newspapers, some wholesalers carried additional product lines including photographic equipment and supplies, religious and school supplies, stationary office supplies, greeting cards, art goods (including novelties and souvenirs), toys and hobby goods and supplies, electronic parts and equipment, and other durable goods.

Background and Development

From its beginnings until as late as the 1980s, according to the Wall Street Journal, the magazine wholesaling segment was primarily populated by tiny establishments operating in their own local territories with little competition. Only in the 1990s did the industry undergo a major consolidation effort. This consolidation was driven in part by aggressive supermarkets and other large retailers, a key customer base to magazine and newspaper distributors, attempting to diminish costs by ordering product for entire regions, rather than for specific local markets. These retailers flexed their newfound muscles to raise the bar for wholesalers to do business. In the ensuing shakeout, some 180 wholesalers closed their doors or were absorbed by the Big Four: Anderson, News Group, Chas. Levy, and Hudson News. Together, these wholesalers controlled 90 percent of the single-copy sales market in the country by 2003.

The explosive growth in electronic commerce also forced many wholesalers to close their doors beginning in the late 1990s. The online bookstore Amazon.com established a vast network of its own distribution outlets across the United States and maintained 10 times as much distribution space in 1999 as it did in 1998. To fight this trend, the intensely competitive wholesaler industry underwent immense consolidation by way of mergers and acquisitions in addition to the dropout of a number of players. The industry's trade association, the Periodical Wholesalers of North America, was even forced to disband, citing lack of sufficient membership.

Current Conditions

The magazine publishing industry as a whole faced its direst period since the early 1990s, with a number of major long-running publications—including Time Inc.'s Life, —ceasing publication, and some publishers, such as the New York Times Co., exiting the magazine market entirely. While the number of magazine titles skyrocketed in the late 1990s, magazine sales at newsstands actually declined from 2.1 billion in 1996 to 1.7 billion in 2000, forcing remainder rates up to 65 percent.

Leading magazine wholesaler Anderson News opted in 2002 to cut its distribution by some 400 million copies in an effort to boost its average sale efficiency or the percentage of its shipped titles that are actually purchased off the rack. The industry sell-through average was about 38 percent through the late 1990s and early 2000s; Anderson News hoped to raise their rate to over 50 percent. Meanwhile, Anderson announced a two-tiered distribution system demanding that those titles that bog down sales efficiency pay higher fees for Anderson's distribution services.

Number-two magazine wholesaler News Group even began insisting that publishers pay fees to take back copies of magazines that failed to sell, breaking with traditional industry practice, in which wholesalers absorbed the cost of returns. These measures reflected the growing power of the industry's major distributors, whose greater economies of scale translated into increased leverage with publishers and retailers alike. In retaliation to the potential decline in sales, magazine publishers increasingly looked to direct distribution, bypassing wholesalers altogether and taking their product directly to the retailers.

In the book segment, total book sales were on the rise, registering an increase of an estimated 2.7 percent in 2003 to $27.06 billion, though this rise was driven by blockbuster titles. Mass-market paperback sales, moreover, jumped 11.8 percent between 2001 and 2003 to reach $1.73 billion.

The sheer volume of books published, combined with tighter competition, created an emerging market for the wholesale distribution of bargain books. With so many titles published and shipped to bookstores, but with cost pressures demanding that retailers concentrate primarily on the best-selling titles, an increasing number of books were returned to publishers and sold at bargain prices. Bargain-book wholesalers thus had more product to choose from and more specialty book stores to which they could distribute those titles. Wholesalers were thus charged with finding alternative markets for these remainder books, which by the mid-2000s, had developed into a booming market niche.

Industry Leaders

With 9,660 employees, Ingram Industries Inc. was among the largest wholesalers in the industry. Based in Nashville, Tennessee, the firm distributed over 175 million books each year to a network of some 30,000 retail outlets. The Ingram Book Group also maintained a strong presence in the library market. Wholesale book distribution accounted for over half of the firm's total sales of $2.2 billion. In 2002 in order to boost efficiency, the firm consolidated its distribution centers into four supercenters.

Baker & Taylor Corporation, of Charlotte, North Carolina, was the leading distributor to public, school, and specialty libraries in the United States. The firm was also a major supplier to Internet retailers and independent bookstores and operated support services for Amazon.com and barnesandnoble.com. Baker & Taylor brought in revenues of $1.12 billion in 2002 while employing 2,750.

The nation's largest magazine wholesaler, Anderson News Company, of Knoxville, Tennessee, distributed magazines to some 40,000 mass merchandisers, grocery and convenience stores, bookstores, and other outlets across the United States. According to the consultant firm Harrington Associates, Anderson claimed about 32 percent of the market for magazine wholesaling in North America.

News Group, based in Fort Mill, South Carolina, was the second-leading magazine and newspaper distributor. A subsidiary of the Vancouver-based Jim Pattison Group, News Group accounted for about one-fourth of its parent company's $4.2 billion in revenues in 2003. News Group controlled an estimated 27 percent of the North American magazine distribution market by the mid-2000s, up from just 3 percent in 1995.

Chicago-based Chas. Levy Company was a leading distributor of books and magazines throughout the Midwest, controlling 13 percent of the North American magazine market. To concentrate on its core operations Chas. Levy closed the doors of its newspaper distribution centers. The firm maintained a payroll of 6,500 employees.

Hudson News Company of North Bergen, New Jersey, was another leading industry player, with 11 percent of the market share in magazine distribution and a particularly strong presence in the healthy New York-area market.

Further Reading

"Happy Returns?" Folio, January 2003.

Monti, Ralph. "Direct Distribution Can Offset Single-copy Falloff." Folio, 2002.

Rose, Matthew. "Circulation Trouble: Magazine Wholesaler Pressures Publishers, Adding to Their Woes." Wall Street Journal, 5 March 2001.

Rosen, Judith. "Forecast: Clear Saleing Ahead." Publishers Weekly, 1 October 2001.

Van Dyke, Geoff. "More Newsstand Headaches." Folio, March 2003.

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