By now, you will have heard about the announcement from Fairfax Media regarding the cover price increases of the Sun-Herald and the Sydney Morning Herald. According to Fairfax, these changes are to be effective from 22 April 2012 onwards.
If you haven't read NANA's comments about Fairfax's proposal, you will find them on our website at nana.com.au.
I thought I would communicate to you this way to explain further what Fairfax is trying to do, what is NANA doing in response, and what this means for our Newsagents industry.
Essentially, what Fairfax is saying is that they need to increase their retail prices in order to meet the rising costs of being in business. NANA completely understands that. Newsagents are businesses too and we too, from time to time, have to increase our prices in order to meet the rising costs that Newsagents incur.
But what Fairfax is proposing is a flat-fee structure, thereby disconnecting the remuneration of Newsagents from the retail price of the newspapers. Gone will be the existing contracted commission structure which fundamentally ties Newsagents' remuneration to the newspapers' retail prices.
Quite frankly, all Newsagents must continue to be open to new business models that produce positive outcomes for everyone. So, in that context, I am open to the idea of a flat-fee structure so long as it is fair and reasonable to everyone.
As described in NANA's published comments previously, and they are all published on NANA's website, there are a number of problems with Fairfax's current proposal.
The first question should be whether the existing remuneration arrangements for Newsagents as a starting point are economically appropriate in the first place. Hence, introducing a 10% increase in remuneration off an arguably low base may not be the right basis and therefore will not produce the right outcomes, especially if Newspaper publishers are seeking the cooperation of Newsagents to increase their circulations.
Another question is even if we accepted the fundamental change to a flat-fee structure, how will Fairfax consider the annual increases incurred by Newsagents in terms of labour costs, insurance costs, transport costs, and other regulatory and compliance costs? Will Fairfax guarantee at least an automatic CPI increase?
On that note, it is worth understanding that in the great state of Victoria, our Victorian Newsagent cousins have had a flat-fee structure with Fairfax for some time now, and they do not have an automatic minimum increase, let alone an annual increase based on CPI. You can read the comments for yourself from NANA's sister association, the Victorian Authorised Newsagents Association. Their comments are available from NANA's website.
The other big question is whether Fairfax has the legal power to make such a change. Fairfax is correct that under your existing contracts, in section 4 as well as schedule 2, Fairfax can make adjustments to your commissions and remunerations from time-to-time. But changing from a commission basis to a flat-fee remuneration basis may not be an adjustment under section 4 or schedule 2 of Newsagents' contact. NANA views this to be a fundamental structural change of the existing contract, whereas Fairfax sees it as an adjustment.
For some time now, NANA has been assembling legal opinions before we take the next step. Fairfax believes they have answered NANA's questions. We don't believe so.
Hence, this disagreement with Fairfax might ultimately be settled legally and in a court of law.
Whatever the direction, NANA will keep NANA Members informed in the coming future. In the meantime, please feel free to contact NANA by e-mail or call us at the office. We will be only too happy to keep you up to speed.