Death by a thousand (paper) cuts

A magazine distributor is doing what the Bellingham police and a prosecutor tried to do and couldn't.
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Ira Stohl, owner of The Newstand. (Bob Simmons)

A magazine distributor is doing what the Bellingham police and a prosecutor tried to do and couldn't.

If you like buying a newspaper or magazine from a literate newsstand dealer who knows you and knows what you like to read, enjoy it while you can. The independent newsstand is headed for the museum.

A magazine distribution system that seems designed to drive retailers into therapy is driving them out of business. The dominant company in that system has notified two of Seattle's three remaining independent newsstands, along with one in Portland and the only one in Bellingham, that the distributor will no longer distribute. Not to them.

The first to close will be Ira Stohl, a regionally famous First Amendment hero who owns and operates an iconic Bellingham store known as The Newstand. He still has more than a few thousand magazines and newspapers on the racks today, but he'll lock the door for good sometime around Labor Day. Stohl got a termination letter a short time ago from Source-Interlink, the largest supplier of periodicals to his store. The company no longer wants to bother with Stohl. "I've been doing business with them for eighteen years," Stohl said the other day, "and suddenly I'm not worthy."

Owners of Seattle's Bulldog News and Broadway News got similar letters saying that Source-Interlink will no longer distribute magazines to their newsstands. Lee Lauckart of First and Pike News never got the termination notice, just the termination. Starting August 1, Source-Interlink suddenly stopped bringing some two hundred titles, including the big sellers like Time and Newsweek. "They said it was a mistake," Lauckhart said this week. "I was one of the few independent newsstands they said they'd continue to supply. Now they say they're trying to get me back on, but I haven't had anything from them in three weeks."

Lauckhart plans to keep on, but he doesn't evidence much hope for the selling of the printed word, long-term. "I'm a dinosaur, about to become extinct," he says. "Every business like ours is in jeopardy."

Samantha Vanover, who runs the magazine business at Rich's Cigar Store in Portland — that city's largest independent news dealer not connected with a book store — also got Source-Interlink's form letter, with no explanation and no conditions under which the store might continue. She says there are hundreds of magazine titles she won't find anywhere else. "We're looking for some from other distributors, but we know there will be some we won't be able to get. It's ridiculous. It's a shame."

This isn't about street corner kiosks. These are full-service magazine stores that cater to people with a passion for reading. Bulldog News of Seattle offers 1,600 square feet of magazines and newspapers. First and Pike News (known for years as Read All About It) sells more than 2,500 titles in its 700 square feet, and it's the region's top dealer in foreign language periodicals, a reflection of Seattle's rich mix of nationalities.

The independents compete by stocking a remarkable variety of magazines you're unlikely to find at Barnes & Noble or Borders. Bellingham's Newstand carries more than 3,500 different titles, including magazines for followers of Bhuddism and of the roller derby. They sell magazines for those who are into knitting, grilling, Sodoku, farm life (twenty different magazines for city people who want to read about farm life) home design and decorating (120 titles), left and right wing politics, meditation, Christian worship, Christian non-worship, Paganism, Druidism, dog keeping, cat keeping, fish keeping, parrot keeping, exotic animal keeping, and exotic animal cooking. There's Primitive Bow Hunter Magazine; Cowboys and Indians Magazine; Warlords; Armchair General; Skirmish; The Walrus; Tikkun, a serious bimonthly Jewish critique of culture and politics; Philosophy Now; Cult Times; crowded shelves filled with bride and marriage magazines, along with newspapers from parts of the world you didn't know you needed to keep up with.

In one sense it's the Internet in reverse. If the net's the place to find whatever you're looking for, The Newstand is the place to find what you were not looking for and may never have heard of. The store's regulars are aware of the possibility of surprise, and that's its beauty, Ira Stohl believes. "Young people browsing this store come up against ideas they wouldn't encounter anywhere else. Maybe it starts them thinking worthwhile thoughts. Maybe it redirects someone's life, who knows? It has that possibility, and that's why I love it."

Stohl's a good-natured businessman who went to jail defending the nature of the business. In 1995 The Newstand displayed, among its thousands of titles, an awful magazine called "Answer Me!" One issue featured graphic fictional accounts of rape, supposedly written from the viewpoint of the rapist. The magazine's editors said it was a satirical attempt to show the despicable horror of the crime. A Bellingham police officer found it offensive, as did an effective number of ordinary Bellinghamsters. Whatcom County Prosecutor Dave McEachran told Stohl and his store manager, Kristina Hjelsand, to stop selling the magazine "or anything like it" or face prosecution for trafficking in pornography. They stopped selling it but displayed it in a glass case, chained and padlocked, with a sign informing customers that the Whatcom County Prosecutor would not allow anyone to buy it.

The criminal case and the civil rights case were filed at almost the same time. Civil rights won. The criminal court jury found Stohl and Hjelsand innocent. The magazine did not meet the legal test that defines pornography. A federal jury awarded Stohl and Hjelsand 1.3 million dollars on grounds of prior restraint and retaliatory justice. Stohl's attorney, Tim Ford of Seattle, said it was the biggest civil rights jury award in Washington history, up to that time. On appeal, it was reduced to $720,000.

This week, Stohl was stocking his shelves for almost the last time, and musing on the rough way his distributor let him know what was about to happen. "Just a form letter, no signature. Eighteen years as a customer and they don't have the courtesy to sign the letter." Stohl says he might find other sources for the magazines he sells, but they'd be more expensive. Independent newsstand operators already do business on a margin so thin you can see through it.

"It's an odd thing about our business," says Lee Lauckhart, at First and Pike. "We can't raise our prices like others. Here in the market, you can raise the price of your fruit or vegetables when your expenses go up. We don't get to do that. You have to charge the price that's on the cover, and wait for the publishers to raise it, if they ever do. Then you get a little bit of the increase."

Magazines get to the racks of your local newsstand by way of a labyrinthine mix of publishing, transporting, wholesaling, and retailing so complex it can make you wonder if anyone really knows how it works. At the retail level, the news dealer tries to order the number of each title that he can sell, but it's a matter of hope and trust. For example, Ira Stohl hopes he can sell X-number of, say The Walrus magazine, a journal of Canadian politics and environmental issues. He trusts a distributor or wholesaler (they're different creatures, but someone else is going to have to explain in what way they're different) to deliver the agreed upon number of Walruses a few days ahead of the date shown on the cover. Some retailers set what's called a "fixed draw" with some distributors, who are then committed to delivering the same number of copies each time. Other distributors may change the size of the delivery, based on the desires of a publisher or the sales history of the retailer. In most cases there's no written contract between retailer and distributor.

The distributor takes custody of the magazines from the publisher (the distributor may also be the publisher, or own the publisher) and sells them to the newsstand operator. When leftover copies are out of date, the retailer tears off the front covers of the remainder copies and ships those to the distributor as proof that they did not sell. The distributor then refunds to the retailer the cost of the unsold copies, which are recycled locally.

The newsstand's profit derives not from an ordinary retail-minus-wholesale formula as in a sensible business, but from being granted a variable discount from the price marked on the cover of the magazine. The negotiated discount may allow the newsstand owner a margin ranging from 25 percent for a small (and starving) newsstand operator to as much as 45 percent for a Wal-Mart (more or less; this number, like so much in the magazine distribution business, is confidential).

In a simpler time not so long ago, there were 400-plus family-operated magazine wholesale/distribution businesses, who divvied up the territory and supplied the retail news dealers in their respective localities. Rampant consolidation has rearranged the geography, and those 400 are down to approximately four corporations, each with something close to a quarter of the nationwide market.

By some estimates, Source-Interlink is the largest of the four. When co-Chief Executive Officer Jim Gillis returns reporters' calls from his cell phone on his way home from work, he talks excitedly about his company's growth. He tells how Source-Interlink bought up competitors in Chicago, Philadelphia, Los Angeles, and San Diego, so that it now serves more than 114,000 retail outlets. It bought magazine companies, and now publishes 77 of its own titles catering to enthusiasts of activities ranging from motorcycling to gardening to boat building. It distributes more than a billion copies of magazines every year (of which some 700 million are returned and destroyed) and derives 5 to 6 percent profit on 2.5 billion dollars in earnings. It claims to be the largest distributor of DVDs and music CDs in the country. It even manufactures the racks on which these are displayed. Investors seem not to share Gillis's excitement. S-I's stock (SORC on the NASDAQ) has fallen from $12 to $1.50 in the past couple of years.

Gillis says the company's only doing what it must do in terminating the independent news dealers, and he's sorry the termination letters took the form they did. "That was cold," he says. "That never should have happened. The person who sent that has been beaten up with a wet noodle."

When he talks about Ira Stohl, Gillis sounds like someone who has unintentionally created hurt feelings between old friends (they're not). "He's got great support there in Bellingham," Gillis told me. "We've had more than twenty letters from Ira's customers telling us what bad guys we are. I even called Ira personally to explain why we had to do this."

Well, now.

"Mr. Gillis called to say he was too busy to talk," Stohl says, "but he said if it was true that I was an 18-year customer, he would be pleased to call and talk to me some day when he has more time. 'If it was true!' Does he think I made that up?"

"I told him, why are you calling?" Stohl continues. "What is there to talk about? If you're gonna call, tell me what you can do."

"And he said, these were his words, 'I can do anything.'"

But he can't really, Gillis told me. Bellingham's too far north to do anything. So is Seattle, so is Portland. Too far from Source-Interlink's West Coast distribution center in Ontario, California. Gillis says the company can no longer make money serving the independents on this corner of the map. His company will — no surprise — keep supplying our region's Wal-Marts, Barnes & Nobles, and other chain store retailers, even if they're a buck's worth of gas father from the Southern California warehouse.

"That's different," Gillis says. "Those are specialty retailers, and the publishers will help pay our shipping costs to their loading docks. They won't subsidize the shipping to the smaller guys."

The smaller guys will find other sources of periodicals now provided by Source-Interlink, but while they're searching, their customers will wander. "If I decided to stay open," Stohl says, "I'd have to send some of my customers to my competition while I went looking for new suppliers. Once my regulars have gone elsewhere, some of them won't come back. It's a permanent disadvantage that goes on forever."

In recent days, Source-Interlink, the corporation that did to Bellingham what the police and a zealous prosecutor could not, has displayed a sense of irony. Having notified Stohl that it will no longer serve his store, S-I's accounting department demanded that he pay immediately for some $6,000 worth of items shipped to The Newstand earlier this summer. Or else. "If payment is not made within seven days of the date of this letter," the letter warned, "We will have no alternative but to stop service."


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About the Authors & Contributors

Bob Simmons

Bob Simmons is a longtime KING-TV reporter who has been writing news for print and television for 65 years.