26 > 28 May th FIPP World Magazine Congress Carrousel du Louvre - Paris Single Copy and the Retail Channel: Back to the Future Jean-Louis Nachury Chairman, Chief Executive Officer Hachette Distribution Services

26 > 28 May th FIPP World Magazine Congress Carrousel du Louvre - Paris Why single copy sales are important to publishers? What are the main characteristics of an efficient distribution service? What can publishers do to support the most effective distribution system? -2-

26 > 28 May th FIPP World Magazine Congress Carrousel du Louvre - Paris Why single copy sales are important to publishers? -3-

 REVENUE What do single copy sales (SCS) markets account for? US: 20% DE:50% JP:79% UK: 89% FR: 63% Yes, it is big money! Single Copy and the Retail Channel: Back to the Future -4-

Single Copy and the Retail Channel: Back to the Future Yes, it is big money -5- What do single copy sales (SCS) markets account for?  CUSTOMER’S REACH They are also very diversified: press specialists, supermarkets, petrol forecourts, convenience stores, travel retail etc. Yes, the retail network delivers impulse purchase, sampling and image. Yes, it is key to reach your readers, whoever they are, wherever they are.

Single Copy and the Retail Channel: Back to the Future What do single copy sales (SCS) markets account for? Yes, it is big money -6-  30% of the current value of the magazine business comes from titles that are less than 5 years old.  In 2002, only 20 out of 480 launches had initial distribution figures of over 100,000; it is the massive volume of small niche titles […] that keeps the market self regenerating.  DYNAMICS Yes, it is key for rejuvenating the market

Single Copy and the Retail Channel: Back to the Future  Modern consumers look for purchasing experience and enjoy freedom of zapping. Yes, it is big money Yes, it is consumer friendly  SCS distribution is usually a variable cost to publishers, accounting for 30 to 50% of retail sales value: Yes, it is CFO friendly  SCS distribution does not rely on subsidies Yes, it is tax-payer friendly -7-

Single Copy and the Retail Channel: Back to the Future Yes, it is big money -8- What are the main characteristics of an efficient distribution service?

Single Copy and the Retail Channel: Back to the Future Several kinds of market organization Yes, it is big money France – Germany  Publishers do control National Distribution  Disposition right = push system  Guaranteed access to network for all titles  Wholesale: often regional monopolies  Publisher-driven, but weak retailing  Retail : low discount and no incentive -9-

Single Copy and the Retail Channel: Back to the Future Several kinds of market organization Yes, it is big money US - UK  National distribution (ND) is very active; sales and marketing operations are well developed  Some publishers directly control ND, some don’t  Wholesale is independent from ND and competes on most regional markets  Retail multiples are strong and setting the rules. -10-

Single Copy and the Retail Channel: Back to the Future Several kinds of market organization Central Europe  Exclusivity at retail  National distribution weak  Often several national wholesalers competing  Low operational efficiency  Retail multiples are strengthening Poland Czech Republic -11-

Single Copy and the Retail Channel: Back to the Future  There exist several market organisations in the well developed publishing markets.They are all different, but the 3 distribution layers do exist and do contribute to their success. The 3 levels are key for distribution! -12-

Single Copy and the Retail Channel: Back to the Future What happens when distribution is unstructured? China – Russia Fast growing markets, but limited by poor distribution National distributor just emerging too many small and low quality wholesalers Old fashioned and too scarce retail National distribution and regional wholesale are critical: - large/complex country  wholesale coordination - developing markets  new launches  market penetration Each publisher on its own cannot achieve this. -13-

Single Copy and the Retail Channel: Back to the Future Yes, it is big money -14- What can publishers do to support the most effective distribution system?

Single Copy and the Retail Channel: Back to the Future What are the key factors to select a National Distributor? Yes, it is big money  Intimate knowledge of market and product  Active sales towards wholesalers and retail multiples (category management, listing new titles, volume, regulation, multichannel sales, merchandising, etc.)  Financial robustness  Fast and reliable sales reporting Action-minded sales analysis -15- Selling is key: dare to be demanding to your ND!

Single Copy and the Retail Channel: Back to the Future What are the key factors to select a National Distributor? Yes, it is big money 10 HDS distribution companies recently signed the HDS Charter for International Press Distribution. By doing so, they commit themselves to deliver a range of services tailored to the needs of their clients, and to take all necessary steps to progressively develop a superior service. -16-

Single Copy and the Retail Channel: Back to the Future HDS International Press Distribution Charter

Single Copy and the Retail Channel: Back to the Future What should publishers look after in wholesale?  Willingness to test new titles  Ability to organise promotional campaigns  Regulation skills and optimisation of assortment (PoS level)  Knowledge of retail network  Ability to develop a balanced multichannel retail network Effective wholesalers are marketing-minded and retail-driven -18-

Single Copy and the Retail Channel: Back to the Future What should publishers encourage with retailers?  All networks are important and must stay balanced - Mass merchandisers - Specialised retail multiples - Professional independent network Do not only reward volume but also retail quality! -19-

Single Copy and the Retail Channel: Back to the Future  Single copy sales are important to the future of publishing  The 3 levels are key for an efficient distribution system  Publishers play a role to shape the market They should support:  a sales-minded and financially robust ND  a strong and retail-driven wholesale  a modern and balanced retail network -20- Conclusion

Single Copy and the Retail Channel: Back to the Future Thank you for your attention