What: Source Interlink is closing its Distribution Company after Time Inc, one of its main clients switched its business to a News Corp. owned whole sale distributor called TNG. Additionally Source Interlink is rebranding its enthusiast magazine division to TEN Media.
Why it matters: The closure of Source Interlink Distribution reflects the tremendous financial pressure that both magazine publishers and their distributors have been facing as the Internet has decimated newsstand sales and as retailers hand over prime shelf space to other products like candy and gum. There are now only two major U.S. magazine wholesalers: TNG and Hudson News.
Source Interlink Distribution, the second largest U.S. magazine wholesaler and a company that for decades has distributed many major magazines including many Hispanic ones, is closing. The company, based in Bonita Springs, FL, employs around 6,000 workers.
The decision to close was mostly motivated by Time Inc's decision 10 days ago to stop using Source Interlink as the distributor for its magazines because of unpaid fees. “One of our largest suppliers has recently decided to cease supply and move in a different direction,” Michael L. Sullivan, the company’s chief executive, wrote in a letter to his other clients that was obtained and published on Thursday by Bob Sacks, an industry consultant who produces his own newsletter. “As such, it’s with a heavy heart that I am writing to advise you that Source Interlink Distribution Company will be discontinuing all operations in the near future.” In a filing to the Securities and Exchange Commission last Tuesday, Time Inc. said it would not be able to collect $19 million of expected revenue from sales made to the discontinued wholesaler during the second quarter of 2014. It also said it would have to write off $7 million of what it called “receivables” that it had booked in previous quarters.
In the last five years, the retail magazine business has shrunk 40 percent, to less than US $3 billion.
TNG, owned by the News Group, has agreed to take over most of Source Interlink’s distribution duties for Time Inc. Time Inc. said it would lose US $1 million in transition costs. Jill Davison, a Time Inc. spokeswoman, said that the regional markets that Source Interlink served — Southern California, Chicago and the Mid-Atlantic States — might face shortages of popular Time Inc. magazines like People and Sports Illustrated for up to 12 weeks. In the S.E.C. filing, Time Inc. estimated that this loss of sales could be around US $4 million. According to the New York Times, The battle between Time Inc. and Source Interlink, based in Bonita Springs, Fla., reflects the tremendous financial pressure that both magazine publishers and their distributors have been facing as the Internet has decimated newsstand sales and as retailers hand over prime shelf space to other products like candy and gum. In the last five years, the retail magazine business has shrunk 40 percent, to less than US $3 billion. And while there were hundreds of magazine wholesalers in the 1990s, the industry has consolidated into just a few major players in recent years: Source Interlink, TNG and Hudson News.
Rebranding of Enthusiast Magazine Division
Source Interlink also announced that it is rebranding its enthusiast magazine publishing division to TEN:The Enthusiast Network. The division caters to male interests such as Automotive, High-Tech, and Action Sports with over sixty individual titles including well known magazines such as Motor Trend, Automobile Magazine, Hot Rod, Stereophile and Surfing. The umbrella brand used until now was GrindMedia. In 2007 Primedia sold its Enthusiast Media division to Source Interlink in a deal that netted Primedia $1.15 billion in cash in exchange for a group of more than 70 magazines, including Motor Trend and Soap Opera Digest and 90 consumer web sites. The deal left Primedia to focus on a series of free print and online consumer guides published by its Consumer Source unit.e Officer. “We are the world’s premier network of enthusiast brands — we create and deliver content every day that informs, entertains, inspires and connects with enthusiasts. We are dedicated to enabling enthusiasts to pursue the passions that define their lifestyle.”
“The Company’s future focus will center on its iconic core brands and their connection with the consumer across all forms of media,” said Dickey. “We are now putting in place the foundation to operate as a truly independent content creation and media services company, and the rebranding signals both the scale of the changes and scope of our ambitions.” Dickey was brought on board as CEO of Source Interlink in late February 2014, and has since been working with the executive team on the company’s next chapter.
“Our new corporate branding fully captures the essence of our businesses as authentic, credible enthusiast media brands,” said Norb Garrett, Senior Vice President/Group Publisher. “We will be transitioning over the next 90 days from our GrindMedia umbrella brand into the TEN: Action/Outdoor brand within TEN: The Enthusiast Network. At the root of it, our business is built upon the individual brand strength of our vertical properties such as Surfer, TransWorld Skateboarding, Powder, TransWorld Motocross, GrindTV.com and more, and they remain our core focus and we continue to expand our media capabilities and grow our audiences.”