Magazine distributor Anderson News CEO Charlie Anderson is warning of an “implosion in the business” as his company attempts to impose new charges on magazine publishers, according to a report in Folio.  Anderson, which represents over 20% of magazine distribution in the U.S., is demanding that publishers pay an additional $.07 per copy distributed (gross, not net of returns) to return magazine distribution to profitability for his company.  “The business has not been profitable and has not been for a very long time,” Anderson said.  “What we are trying to do is give some stability in the channel.  Short of that, there will be an implosion in the business.”  Anderson says he believes that three of the four magazine wholesalers that distribute magazines nationwide are unprofitable. 

Anderson is also attempting to pass the inventory cost of “scan based trading,” or SBT, back to the publishers.  The distributor is currently bearing the cost of inventory in retailer stores that use SBT, since they don’t pay for magazines until they pass through the scanner.  He said his company has already invested some $70 million in inventory for retailers that have converted to SBT, and he wants publishers to absorb that cost. 

Anderson gave publisher clients until February 1st to agree to the new terms, threatening to drop their magazines if they do not comply.  Magazine publishers, already reeling from an 11.7% decline in ad pages in 2008, with more to come, are not happy, with some saying that they are trying to find alternatives to Anderson to reach stores. 

Inefficiency in the magazine distribution business was one reason for the collapse of the local ID wholesaler network in the 90s and the development of the current system, in which a handful of companies control magazine distribution in the U.S.  Now mounting costs and continued problems with returns are putting pressures on this relatively new system, with an uncertain outcome and the possibility of another major paradigm shift in magazine distribution.