Australia’s biggest magazine group is taking some lucrative business from newsagents.

Australia’s 5,900 or so newsagents are this week receiving a nasty surprise from magazine giant, ACP, part of Kerry Packer’s PBL.

In letters sent registered post, ACP is looking to cut the amount it pays to newsagents to deliver magazines to the thousands of service stations who stock magazines and papers. It’s described internally as a “clawback”.

The letter was dated August 22. Not all petrol stations are subagents as ACP already delivers direct to them (so-called direct drop subagents).

But from March next year, the newsagents will lose a gross $400,000 or more a year in extra commission they receive from distributing magazines to the petrol stations subagents. ACP predicts that some newsagents will lose more than 30% their income which they derive from distributing ACP tiles to designated subagents.

It seems ACP has decided to do this for itself, and save the money it presently pays newsagents to delivery to the subagents.

Included in it are the Woolies-Caltex and the Coles Express-Shell venture stations across the country. ACP has been negotiating this deal for sometime in a cost cutting move.

Newsagents receive a 25% commission for selling ACP magazines. But they receive a 12.5% commission for distributing most of the vast range of ACP magazines to petrol stations within their delivery area.

Newsagents are to receive ‘compensation’ over the next six months as the ACP distribution arm, Network, takes up the direct supply of the company’s titles to the petrol stations.

ACP will delivery direct for 12.5%, thus saving half the fee they pay newsagents to do the deliveries. The compensation will see newsagents receive this fee for the next six months. It will then cut out.

They will still be paid for delivering magazines to subscribers in their area and for the normal sales from the retail area in their agencies.

News of the change came in a letter to newsagencies from the National Channel Manager of ACP’s distribution arm. In the letter, David James said.

“We are formally providing you as managing agent, with six months notice of our intention to deliver direct to the subagents listed below”

It then listed the subagents supplied by the newsagency to whom the letter was addressed.

It went on, “this in no way detracts from ACP’s commitment to newsagencies as the primary destination retailer for magazines. We will continue our ongoing investment and future development of the newsagency channel”.

“For the next months you will continue to receive your current commission from these subagents. However, to ease your administrative burden and to help you prepare for the transition you will no longer be required to make deliveries of ACP magazines for these subagents.We propose that from 4 October, 2004 each subagent will receive supply as a direct drop subagent”

“This means that the payment arrangements for these direct drop subagents will change. Until the transition on 2 March, 2005 the payment process for each subagent will be as follows.

1) Once a month you will receive a statement from Network Services in the name of your subagent.

2) You will use this to produce an invoice-preferably in 24 hours. The invoice for your subagent would be for the Network Services invoice amount plus your agreed commission for supply to the subagent.

3) Your subagent will pay you within five days.

4) You then pay Network Services the amount on the Network Services statement. You keep your commission.”

The letter says ACP is working with the newsagents’ national body, the ANF “to manage this change” and then details a list of measures ACP will offer to support the agents, such as “double Connection Points” to “help drive customer loyalty in your store”. Other promotional offers are mentioned to help agents pick up extra buyers of ACP customers so they can rebuild income from higher sales once the change happens next March.