Gannett Creates Free-Paper Distribution Company in Greenville

On Dec. 28, 2004, MetroBEAT in Greenville, S.C., received a letter from The Distribution Network, offering to include the AAN-member paper in its nine-pocket newspaper racks in a number of local retailers — for a fee. The Distribution Network (TDN) had signed “the exclusive right to distribute free publications in and around their stores,” it said. In many of these same retail venues, of course, MetroBEAT was already distributing some of its 20,000 weekly copies on racks of its own — for free.

TDN was created in mid-2004 by the local Gannett-owned daily, The Greenville News. It offers to tidy up the appearance of a store’s free papers and pay each store to house and service new racks it provides. In turn, TDN makes money, as the letter to MetroBEAT detailed, by charging newspaper publishers separate fees for delivery, pocket rental and the initial set-up for each of their publications. (Not all the fees are specified; Wednesday or Thursday deliveries, for example, are by “special arrangement.”)

By Feb. 2, 2005, MetroBEAT publisher Clinta Carmichael got a different sort of letter from TDN: “Unfortunately at a number of TDN locations, instead of being removed from the premises, your racks are being put back at the front of the store on a regular basis,” the letter said.

Indeed, reports Carmichael, many MetroBEAT advertisers, whose establishments also contained MetroBEAT racks, informed her that they did not know TDN’s contract would result in the removal of the alt-weekly and any other papers that chose not to use TDN’s services. Nor did they recall this proviso being part of TDN’s sales pitch. She believes retailers’ efforts to make an “end run” around TDN, by retaining their MetroBEAT racks out front, prompted TDN’s February letter. It threatened to remove MetroBEAT racks from TDN-signed stores to a nearby warehouse for 30 days, “where they may be picked up by appointment.”

Steve Brandt, president and publisher of The Greenville News, isn’t certain why any paper should see TDN as a threat to market share. TDN wasn’t trying to get MetroBEAT out of the market, he says. The distribution program “ensures distribution at a certain number of locations” for the daily’s free publications. That includes Link (circulation 27,000), which Brandt describes as a “young reader publication” and not a rival for MetroBEAT’s readership.

Across the country, publishers of AAN-member papers like MetroBEAT call Link and similar ventures by local dailies “faux alts” and believe them to be in direct competition.

How TDN is helping The Greenville News in any other way isn’t entirely clear. The News had no trouble in distributing Link prior to the creation of TDN, Brandt says. Nor did TDN acquire many new outlets for News publications. “In virtually every case a TDN location replaced places where [we] already had distribution, but not necessarily Link,” Brandt says.

MetroBEAT’s editor, James Shannon, says he understood why TDN’s deal seemed worthwhile to businesses operating on small profit margins. But Shannon found particularly irksome TDN’s agreement with a local newsstand that forced MetroBEAT out. He estimates that MetroBEAT would have had to pay $100,000 a year “if we bought into all [TDN’s] boxes in their circulation area.” He also objected to MetroBEAT being lumped in with other publications — everything from real estate and employment papers to a parenting magazine — that had nothing in common except lack of price.

“We’re not some sort of suburban shopper,” he says. “We’re a newspaper. We should have some rights to be in a newsstand. I don’t know if that’s restraint of trade or First Amendment [rights].”

TDN’s Brandt says cries of “restraint of trade” over TDN racks make no sense. “We’ve never considered it an issue because we have so few locations compared to the universe” of options, he says. Besides, there have been no legal challenges to TDN thus far. (Shannon says MetroBEAT received legal advice early on that prompted them not to try a lawsuit.)

Storeowners knew about the need to remove non-TDN racks when they signed on, Brandt adds: “If anybody chafed under [the agreement], we were always happy” to accommodate them.

“I don’t really understand the argument” against TDN as a monopoly, he concludes. “TDN has maybe 400 locations in Greenville County,” or 40 percent of Link’s 1,000 distribution locations. The ability of free newspapers to find their readers, he feels, is thus “virtually limitless.”

“I saw it everywhere,” he says of MetroBEAT, “TDN notwithstanding.”

But as of April 11, he will be able to see it nowhere but the Internet. On that day MetroBEAT stopped printing and exists only on the Web ( Shannon, who purchased the paper’s name and Web site, is the only employee left.

“I don’t have the exact figures on how many distribution sites we lost because of the tactics” of TDN, says Shannon. He calls TDN “only one factor in the decision by our owner to shut down the print version.” But TDN is also just one company employing these distribution tactics across the country — and one of the smallest at that. (Gannett spokesperson Tara Connell says it’s not a Gannett-wide company, insisting no one at corporate headquarters had even heard of it.)

Alt-weeklies are increasingly facing similar distribution programs from large companies like DistribuTech, owned by niche-magazine publisher Primedia, and Trader Distribution Services, whose Trader Publishing Company brands include Auto Mart, Employment Guide and similar fare. Both say they’re the largest distributor of free publications in the country.

Trader Distribution Services, begun in 1982, handles “2,500 free publication titles in more than 63,000 retail and public locations,” including Wal-Marts, or a total of 225 million copies per year, according to its Web site.

DistribuTech, started in 1987, boasts of handling 2,000 different free publications in 40 states each year, plus 26 million copies of Primedia’s own publications. Its “exclusive community rack programs” are in “a significant portion of the nation’s largest retail chains” — 49,000 locations in all.

Together, they’re turning the market-driven free-for-all of free-paper circulation into the exclusive domain of a few.

The tactic is not new, as AAN publishers know.

“DistribuTech put pressure on us in the past,” says Paul Curci, publisher of Philadelphia City Paper. Half a decade ago, “they threatened to remove our papers. We told them in no uncertain terms they should think twice before they touch our papers. And that seems to have been the end of it.”

But exclusive distribution deals are becoming more widespread. In some cases, AAN papers have made their own productive deals with these rack-wielding behemoths. Other papers have been shut out of retailers and lost readers.

“I’m a big fan of aligning even with your competitors and controlling distribution yourself — and doing it before the dailies do,” says Art Howe, who experienced the DistribuTech push in Philadelphia and is now part owner of LEO (Louisville Eccentric Observer) and Cleveland Free Times. He says H.L. Mencken’s warning, “Freedom of press is limited to those who own one,” is now hopelessly out of date.

“At the end of the day,” Howe says, “the person with the best distribution wins.”

Bill Shreve is about ready to give up fighting DistribuTech. As director of advertising and marketing for the 36,000-circulation Eugene Weekly in Oregon, Shreve says he has been faced for several years with DistribuTech deals in large local chains, from Blockbuster video stores to grocers Safeway, Fred Meyer and Albertsons.

“I am seriously considering revamping our circulation department and using their services,” he says. “They want to muscle us out of all the Albertsons stores.”

DistribuTech, Shreve says, didn’t just offer to rent Eugene Weekly space in its Albertsons racks. “They link it to all these other services that impact my distribution budget,” he says. “They’re trying to link their exclusivity to other services that would be duplicated services,” such as taking over non-Albertsons routes that cover the outskirts of Eugene. The proposal would affect not just the 1,200 copies of Eugene Weekly in Albertsons but another 1,700 besides.

“It’s heavy-handed” — or worse, Shreve adds.

DistribuTech wants to charge $170 a week to service all the routes it proposed, or $110 a week “just for the privilege of being in those stores,” he says. Under the more expensive proposal, “DistribuTech gets all the big drops. [Eugene Weekly’s delivery drivers] get all the little drops and they lose money.”

In a mid-March email to DistribuTech officials, Shreve noted that Eugene Weekly enjoyed the support of local Albertsons managers and remained in their stores, despite the DistribuTech contract. “You have already unlawfully removed our distribution racks from Albertsons Stores on Feb. 24, 2005,” he wrote. “If you remove any other Eugene Weekly property, including distribution racks and papers, in these stores we will have no choice but to report all known activities to local law enforcement. We will also pursue appropriate civil action.”

“This is not personal,” came the reply from Thomas S. Clauer, a DistribuTech regional director in North Highlands, Cal., “but we have a national agreement with Albertsons and need to enforce the integrity of the program.”

By mid-April, Eugene Weekly was no longer in Albertsons.

“We’re not trying to put people out of business,” says David Crawford, head of DistribuTech. “It’d be like killing the goose that laid the golden egg. We want to be a partner with these people.”

Although he would not discuss the DistribuTech contract, Crawford says some papers — those that have long been in stores that sign on with his company — have been “grandfathered in” to DistribuTech racks, sometimes even without a fee. But he understands AAN papers’ objections to being the golden eggs.

“I think they’ve enjoyed free distribution for many years,” he allows. “I’m sure that [the new distribution cost] doesn’t sit well with most of the people in your association.”

Lee Mednikow, head of Trader’s paid circulation program, says free distribution has become scarcer because “as stores started to give more value to what I call their non-selling floor space … they said ‘I gotta generate revenue from all this.'” Plus, handling Trader’s eight- to 20-pocket displays is easier for stores, he believes, than dealing with every publisher: “They know that they can call one person to make a request” for service.

Stores are “very security conscious,” he adds. “They want to limit the number of vendors who enter their store. It’s always been an issue.”

Although he’s “not at liberty to discuss our contract,” Mednikow says, he believes publications that pay to be in a Trader rack see better results afterwards. “The variety is what draws the consumer to that display,” he says.

Some alt-weeklies have made their accommodations with large distribution companies, with mixed results.

Boise Weekly, with a 33,000 circulation, got a half-rate deal with DistribuTech two years ago to be in Idaho Albertsons stores, according to owner and editor Bingo Barnes. “I don’t think we could afford a doubling of our rate,” says Barnes, whose contract for space rental is up at the end of this year. But, he notes, while “the circulation cost has gone up to have your papers in these locations … going to Albertsons is beneficial for us.”

Several months ago, Boise’s local Gannett daily, The Idaho Statesman, subcontracted to manage the city’s DistribuTech sites. The Statesman also publishes Thr!ve, which Barnes describes as a faux alt, as well as other free publications. Gannett’s move signaled only one thing for Boise Weekly: “We now have a faux alt right above us in a cubbyhole,” Barnes says. Previously, there hadn’t been room in the DistribuTech rack for Thr!ve. “It’s like the fox guarding the henhouse. When a slot becomes available, The Idaho Statesman is the first to know,” he surmises.

The Statesman itself, of course, is in Albertsons’ newsstand section with the other papers that charge a few coins.

Jim Rizzi, publisher of Salt Lake City Weekly, has dealt with both DistribuTech and Trader in his years working for AAN papers, including two decades with the New Times chain. In Denver, for instance, “When [DistribuTech] first started in paid circulation, they came in guns blazing and we had no choice.” He signed on but saw the rates rise astronomically, so he pulled out. In the late ’90s in Los Angeles and then beginning in 2002 in SLC, he has been much more satisfied. “I find them great to work with,” he says now. “They’re responsive. They’re much more flexible than they used to be.”

Rizzi recently managed to keep his publication in the health-food grocery chain Wild Oats, despite the chain’s contract with Trader for racks. “Because we’re there and established, our only concession is we can’t use our racks, but we don’t have to pay [Trader],” he reports. It was a deal negotiated by Wild Oats itself, Rizzi says — because the stores wanted to keep the Weekly.

When John Heaston sold Omaha, Nebraska’s The Reader in the late 1990’s he was just beginning to use paid distribution services in Nebraska, says his younger brother Ben, now The Reader’s circulation manager. When the elder Heaston bought back the paper in 2002, he found unpaid bills for distribution in Wal-Marts via Trader, Ben reports. Also, the paper had been kicked out of two smaller grocery chains for the contents of its classified ads, despite paid distribution deals with American Classified, another large purveyor of consumer publications.

Today, Ben Heaston says, The Reader has boxes outside half the local grocers American Classified handles. It isn’t yet back in Trader-managed racks, but Heaston says he keeps good relations with Trader’s circulation manager, helping the company find suitable locations for its large racks at local colleges, restaurants, bars and other places where space is the main concern. He seems confident that he’ll be able to return the paper to large outlets soon, without it costing the 20,000-circulation Reader a dime. In fact, he says, he doesn’t plan to pay anyone anymore for circulation.

“If you get the store to really want you in there,” says Heaston, “they can write you into the contract, and you can get around that whole DistribuTech/Primedia thing.”

Marty Levine is the news editor of Pittsburgh City Paper.

Leave a Reply