1. NEW NEWSSTAND REALITIES

2. Forces driving change Stagnant growth Declining sales efficiency New retail formats and competitive models Scan based trading Revolution at the checkout

3. All Number in 1,000s Celebrity category: one bright spot 2004Q1 4 Titles 42 Million Units Sold Share of Market by Title 2006Q4 6 Titles 63 Million Units Sold Share of Market by Title These charts illustrate the growth of the celebrity market (size of pie) and the increased fragmentation.

4. Sales % continues long-term decline

5. Implications of low sell-through Financial –Over $1.2 billion spent on returns annually –Increased handling costs for wholesalers Strategic –Competitive disadvantage vs other product categories Environmental –Exacerbates problems with resource/energy-intensive industry –Wal-Mart’s sustainability initiative

6. Inefficiency as a symptom of deeper systemic problems Rate bases not reflective of true demand Low break-even marginal efficiencies Cost of entry “Red Ocean” – competing for growth in a mature market “Shifting the blame” paradigm Misaligned financial incentives –e.g. National Distributor brokerage model –Perpetuates “push” supply system vs. “demand-based” supply

7. Manufacturing Costs = $0.46 Average Magazine: $3.23 Cover Price $18.60 in annual ad revenue per reader Break-even sell-through of 15%

8. Manufacturing Costs = $0.46 $3.23 $18.20

9. The marginal cost of “demand overshoot”

10. Misaligned financial incentives Marginal Break-even

11. “It is difficult to get a man to understand something when his salary depends on him not understanding it” -Upton Sinclair

12. Market forces reshaping the supply chain… From supply-driven (“push”) to demand-driven (“pull”) Wholesaler efforts to adapt –ProLogix joint venture –Anderson News reducing copies distributed by 19% –Eliminating service to unprofitable stores –Eliminating marginal titles –Optimizing title mix at store level Retailers increased influence over suppliers –Wal-Mart sustainability initiative –Barnes & Noble managing inventory/assortment using POS

13. Yesterday’s Wholesale Business Model 350 Wholesale Locations

14. *U.S. Market shares only 2006: Source Purchases Ontario and Washington D.C. from Anderson Anderson Cohen News Group 30% 12% 23% 30% Source Interlink

15. Self-scan Expansion Cigarette Kiosks Albertson’s Test Single-serve soda coolers Revolutionary change at checkout

16. “No problem can be solved by the same consciousness that created it” -Albert Einstein …or by the same business practices

18. Wine Bargain Books Floral Cross-Merchandising Modules Baby Feature Elements of the Reading & Entertainment Zone

19. Key Components of the Program Objective Category Management Focus on quality of assortment, not quantity Managed promotional schedule Post-promotional analysis Commitment to waste reduction Creative fixturing High impact visual signage

20. Magazines

21. Store level data: Opportunities revealed….

22. Unprofitable segments can now be identified and quantified

23. Better balancing supply and demand ….lowering PP&D costs….improving profits

24. Targeted dealer expansion

25. Adapting to a consumer-driven market… ….requires a radical new approach From hierarchy/control…….. Focus on the parts (reductionism) Whole= sum of parts Supply chain as linear hierarchy Silos of specialization Accumulation of knowledge Power and leverage To a whole systems approach Focus on relationships between the parts (complex system) Whole is different than sum of the parts Supply chain as an interdependent network Multi-disciplinary collaboration Understanding Innovation/adaptability Alignment of goals and financial incentives