Newsways Distributors keeps your 7-Eleven supplied with its piles of People and Lowriders, Stars and Cosmos.

The Glassell Park magazine distribution company supplies grocery and convenience stores, newsstands and office building sundry shops with reading material that feeds curiosity for celebrity gossip, offers other lifestyle coverage or caters to custom car enthusiasts.

Given the pervasiveness of the product, the appetite for such publications seems like it might be insatiable. Newsways saw record growth from 2005 to 2007. The company earned the No. 22 spot on the Business Journal's list of 100 fastest growing private companies with revenue of $35 million in 2007. In 2008, however, revenue dropped 5 percent to $33 million.

What does it mean? Newsways President John Dorman isn't discouraged by the drop, and said the company is growing its customer roster.

"We have noticed some softness. We are not working at a high efficiency, and are doing lower volume in a lot of our stores," said Dorman, who learned the distribution business as editor of the classified ad publication Recycler Classifieds. "But we are picking up a lot of new business."

That's happening because of a war between big distributors and the publishing companies. Two of the biggest distributors, Source Interlink Co Inc. and Anderson News LLC, sought to impose a seven-cent per copy surcharge on magazines, and publishers stopped shipping to them. Newsways is starting to take over those deliveries.

In Dorman's world, the publishers sell the magazines to the distributors at a percentage of the cover price. In turn, the distributors sell to retailers at a higher percentage.

When the magazines don't sell, the distributors reimburse the retailers and then grind up the unwanted publications. There's enough money in the pulp business to make it worthwhile.

Newsways services 3,400 stores throughout California and Arizona, and half of that business comes from convenience stores including 7-Eleven and AM/PM. The remaining 1,700 clients include liquor and grocery stores, newsstands, office building concession shops, hospital gift stores and college bookstores.

The company offers their retailers a choice of 2,000 titles, including Cosmopolitan, Vanity Fair and Star Magazine.

Industry turmoil

Magazine sales plummeted 11 percent during the second half of 2008. The downward trend is forcing some distributors to squeeze more money out of their deals.

In February, two of the industry's biggest players Beverly Hills billionaire Ron Burkle's Source Interlink and Knoxville, Tenn.-based Anderson News sought to impose a seven-cent-per-copy surcharge on publishers. Major publishers Time Inc. and Hachette Filipacchi Media U.S. Inc. refused to ship their magazines to Source and Anderson for distribution to retailers. Source backed down and didn't impose the surcharge.


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