A Buying Co-Op for Smaller Publishers Gains Traction in Production Cost Area
Advertising cooperatives—in which magazines team up to blanket certain areas by offering package deals to advertisers—abound in the magazine industry but as costs continue to skyrocket, there are surprisingly few co-ops that exist on the back-end to pool resources for buying products and services such as paper. Publishers need to explore alternatives and in the case of one of the industry’s biggest expenses—paper—that could include the creation of more buying co-ops, according to Paul Cumisky, director of cooperative supply chain for Quebecor World.
The industry's one major buying co-op, the Integrated Media Consortium, is seeing returns for members. Launched in February 2005 by publishing veterans Bill Walker and Alan Douglas, the co-op was designed to give small to mid-sized ($3 million to $200 million in annual revenue) publishers the benefits of lower costs on printing, paper, shipping and general office expenses by consolidating volume purchasing. Today the co-op includes 12 members, the most recent being SpecComm International, which joined in February.
The consortium features 17 different preferred partners (read: vendors) and 15 different cost centers, covering everything from paper, reprints, telemarketing services and Web services research. "We work with best-in-class providers to deliver win-win propositions," says Walker. "The cooperative is not going to be successful if we just beat people up on price because our partners aren't going to make any money. The only way for us to be successful is to bring them more business." For larger or more technical matters—such as circulation and manufacturing—the co-op has organized a series of committees. "We will send out requests for information to the market leaders for paper or circulation services, telemarketing services, and other supplier products and services," says Walker.
Consolidating Needs With Others
The biggest costs—paper and manufacturing—are naturally getting the most interest from members. Stamats Business Media is using the co-op for telemarketing costs as well as fax and e-mail distribution, and is close to signing up to get paper discounts for its seven different publications, according to executive vice president and chief financial officer Peter Stamats (who also serves as treasurer for the consortium). "Being a smaller company, it gives us a chance to consolidate our needs with others," he says. If Stamats gets the paper contract signed, the subsequent savings will be in the neighborhood of $75,000 per year.
Beyond the Dollars and Into Best Practices
For Rob Brai, director of manufacturing at Northstar Travel Media, the co-op enables publishers and vendors to share ideas as well as pool resources. "The cooperative can go beyond just savings," he says. "You can share best practices. Saving money is a driving force but there are other things a cooperative can bring."
Northstar has saved $50,000 on paper buying through the co-op. However, some publishers have been slow to heed their example. "We and another publisher in the co-op were the only ones buying our own paper," says Brai. "Others were buying paper through their printers. We tried to open people's eyes to the pros and cons of that and that would mean taking on more responsibility. People were reluctant to do that. In my experience, buying paper through the printer doesn't educate you."
Ultimately, the changing dynamics of the publication paper market may act as a catalyst. Pricing will force publishers to re-evaluate their purchasing process, says Brai.
"People are reluctant to change but at some point they may not have any choice," he adds. "Capacity is being taken out of the marketplace and mills will then have the leverage to raise prices. It's all going to come to a head. It's been a slow progression but this will jumpstart changes in buying paper."