Comag in a precarious position

Comag is in the magazine distribution business. It is the kind of operation that fulfils very useful roles in the publishing economy but this role is largely hidden and ill understood. Sad news this week as it appears that its owners and investors, two of the world’s biggest magazine companies: Conde Nast and Hearst UK, are pulling out of their joint venture and withdrawing their support. Comag is important as a link in the export chain for many British consumer magazines and perhaps even more important for the import of US publications to the UK market, If you buy a US consumer magazine in the UK there is a good chance that it will have a Comag price sticker on it.

There has been no full explanation of why business became so rough for Comag in 2016, but news reports suggest that last year the company lost £4 million. It is probable that this unexpected and painful loss was caused by foreign exchange fluctuations. If Comag was buying magazines from US publishers on a discount from the US published price and selling these copies at £ prices that had been agreed and negotiated with large UK distributors, then Comag would have been subject to a  very uncomfortable squeeze. This could be seen as a lesson in reverse Brexit. A weak £ should encourage exports and squeeze imports. This was the squeezing imports side of the equation, but the British importer pays the penalty. Whether a weaker pound will help the UK magazine companies that export to the rest of the world is not so clear.  Consumer magazine publishers do not want to increase sticker prices even if they can see inflation coming. Perhaps a weak £ will simply ease the margins of the companies, similar to Comag, that arrange for distribution of British published magazines in the US, Canada, Australia and elsewhere.

The big lesson for magazine publishers is simple: get some efficient digital distribution in place, and consider offering your loyal subscribers a print/digital combination at a competitive price. That way temporary disruption of the physical distribution network should be simply temporary.  An efficient digital distribution will also mean that your magazine subscriptions can also be sold directly into overseas markets at prices that go straight to your bottom line.

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