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News Ltd’s T2020 & the impact to a buyer

6th March 2013.  News Limited have announced the trial implimentation of T2020 has come to an end.

For newsagency buyers, this brings removes the uncertainty. As the newsagency’s structure will not have to change now, prior trade performance should remain an indicator of future profits available to a buyer.

Newsagency buyers considering to buy a newsagents business that had home delivery have always had the choice to keep the run, or not sign a News Ltd contract, and start their new business as Retail only.

The annoucement can be found here; a News Ltd website is being created to provide updates here; and your Newsagencies For Sale Broker will gladly take a call to discuss how this assists in your buying consideration.

News Ltd will now encourage voluntary consolidation of delivery runs to help newsagents create economy of scale.

Retail margin of newspapers remains the same at 25% (12.5+12.5%) for those with a distribution and retail contract. Existing sub-agents remain the same with 10-12.5% margin on their newspaper sales.

So what lead to this latest announcement ? Read below.

August 2012.

Whilst newsagents work through the changes due to News Ltd’s T2020 over the coming months to a year or so, and some will consider tendering for the new distribution area, this webpage is focused on what this all means to someone considering to purchase an existing newsagents business that may have had a delivery run.

If you are presently talking to a General Broker or direct with a newsagent on a Private sale/purchase; there is a chance you may not get a full case by case understanding of the implications of T2020, so you need to contact us today.  It is highly unlikely any General broker will be briefed or understand the changes proposed and how that will effect the newsagency profitability going forward. 

So first up, What is T2020?  In very simple terms, it is the re-mapping of territories that newsagents deliver to. This has been implemented to make Newsagencies more profitable going forward.

In followup to our blog entry here, on August 9th 2012, News Ltd have announced their plans for delivery & distribution going forward.

The Announcement available here, is also followed up by a FAQ available here. 

There is also an updated FAQ available here. and a letter to the associations dated  23rd October available here. 

If any of these links are broken, please email us for a copy of the documents.

As suspected, moving forward for the most part, this change will likely separate Retail Newsagencies from Delivery & Distribution businesses. Retail Newsagencies will be able to concentrate on their in-store customers, without the tired distraction of having started so early in the morning. These changes will bring QLD Newsagencies in line with the setup in southern states.

Newsagencies are sold on the basis of expected “maintainable earnings”. The current average home delivery run throws 300 papers a morning Monday to Friday, more on weekends, and perhaps services a round of sub-agents for papers & magazines. As the new model expects 10,000 News Ltd papers a day, it is highly unlikely any delivery business will maintain as part of an existing retail newsagency business, instead these new delivery businesses will become profitable entities in their own right.

Again, this is case by case, as regional agencys may not logistically be caught in this change.

A prospective newsagency buyer needs to understand what the revenue and costs of the delivery aspect meant to an existing newsagency, so they can make an informed judgment on the profitability of the Retail newsagency alone. This has to be worked out case by case.  General Business Brokers are unlikely to have done the research, been invited or attended a variety of industry meetings, and spent the time needed to fully grasp the newsagency industry, so make sure you contact us at Newsagencies For Sale  to get the best assessment.

Our quick review of existing sellers has raised well over 50 questions, each question crucial to making an informed judgement. Do you or your diversified General Broker know what to ask, or what further to ask, subject to the first answers ?

Note : This announcement by News Ltd does not factor in what will happen to magazines and non-News Ltd product delivered within the existing serviced territory. The outcome of this will be clearer in time.

Buying a newsagency is all about making an informed judgement. Astute buyers will be able to determine the diamonds in the rough from the paddies in the field. There are no-brainer opportunities to be had for buyers working with a broker who truly specialises in this industry.

We see this announcement as a healthy change. With the trend of print media and digital subscriptions, Newsagents rarely grew their delivery business without taking over adjacent territories; but real growth is available in the Retail shop of a newsagency, from numerous new and embraced revenue streams (ask our brokers).  This change will allow newsagency owners to get a far better return for their time, by concentrating on their Retail space.

On the other hand, it will also eventually create profitable and desirable Delivery businesses. 

The Phase 1 zone of Brisbane Southside has been mapped and expressions of interest have been called for submission by Oct 5th & tenders due by Dec 21st. Phase 1 consolidates 57 existing southside territories, into 3 new territories. These 3 new territories stop around the Browns Plains/Algester line, and areas west and north are yet to be mapped along with Gold Coast & further regions. Those maps are likely to be available Jan/Feb 2013. News Ltd are looking to have full implimentation of Phase 1 by May 2013.

As someone considering to buy a newsagents business; you need all the facts to make an informed judgement. You should only trust a Broker that truly specialises in the industry you are looking to purchase a business in. Newsagencies For Sale is the dedicated specialist newsagency brokerage for newsagencies.

If you are seriously considering a newsagency to purchase, and there are plenty of good reasons why you should, call one of our dedicated Newsagency Brokers today to get an honest evaluation of the potential impact to the business you are considering to purchase.