The contentious struggle to impose scan-based trading

It's sometimes entertaining to see the big guys duke it out, but not when the implications are so major for magazine publishers large and small, in the U.S. and in Canada. I'm referring to the nasty fight between Time Warner, publishers of such heavyweight newsstand titles as Time and Fortune, and Anderson News, the largest U.S. single copy distributor. A story in MediaDaily News suggests that Anderson's plan to move to scan-based trading has so infuriated Time Warner that it may withdraw its titles from Anderson; this would have the result of not being able to find those titles at, for instance, hundreds of Wal-Mart stores. One might wonder why Time Warner would want to cut off its own nose to spite its face, but it gives some idea of the stakes in the whole issue of scan-based trading.

Scan-based trading has been a long time coming and isn't here yet (and it's still a ways off in Canada) but it would effectively significantly shift the cost burdens of the single copy supply chain to publishers from wholesalers. Magazine barcodes would be scanned at checkouts and retailers would only pay for -- and publishers only get paid for -- copies that are sold. Put another way, publishers would bear all the costs of unsold copies.

Compare this with the current consignment system whereby publishers get paid for the difference between the magazine draw (the copies delivered to the store) and the returns. (As one waggish publisher put it, under the current system, he didn't care if somebody bought his magazine, stole it or it fell off the delivery truck -- he still got paid.)

"Many industry observers say Anderson's position has merit: by forcing publishers to bear the cost of unsold copies, it provides greater motivation to maximize newsstand sales," says the story.

For now, cooler heads are prevailing and there is a week-long truce between Time Warner and Anderson while they see what they can work out. The implications if Anderson prevails is that there will probably be a cascade of similar decisions that brings in scan-based trading on both sides of the border sooner rather than later.