MAGAZINE SALES FACE REVOLUTION : BIG FIRMS RACKING UP DISTRIBUTION MARKET.

Byline: James Sterngold The New York Times

If this were an article in a supermarket checkout magazine, the headline might read: MAG BUSINESS BLOWOUT! DISTRIBUTORS DUMPED AS BIGGIES BUY CONTROL.

This is not of the same quality, of course, as a celebrity bedroom drama or an encounter with fried-chicken-eating aliens, but the once-stodgy business of distributing magazines to supermarkets and other retail chains is in the midst of a revolution that could affect everything from the way magazines are sold to which magazines are sold.

Across the country, older family-owned wholesale distributors are disappearing or being bought by emerging behemoths, and the lowly ``take it or leave it'' supermarket magazine rack is on the cusp of what many predict will be major enhancements of modern marketing.

John Harrington, president of the Council for Periodical Distributors Associations, a wholesaler trade group, said that about 85 distributors had gone out of business or merged since last summer when the trend started, leaving about 100.

He added that by the end of this year, 10 to 20 of those wholesalers would control about 90 percent of the business of supplying magazines to supermarkets and other retail chains.

These changes are significant because chain stores are the single largest source of retail magazine sales. Total magazine sales revenue last year was $4.1 billion, of which 41.2 percent came from supermarkets and big chain stores, Harrington said.

``The industry is reinventing itself,'' said Mike Gummeson, president of Aramark Magazine and Book Services of Los Angeles, which is a unit of Aramark Corp., and one of the huge distributors emerging from the shakeout. ``It will not return to the status quo. The industry will be bigger and more profitable than it is today.''

At the same time, there is concern that these changes will ultimately reduce the number of specialty magazines reaching consumers - niche publications about subjects like crossword puzzles, physical fitness or sex - reversing a decade of growth in which the number of magazines has doubled, to about 4,000.

The fear is that huge wholesalers transporting large numbers of magazines across vast regions will not want to handle dozens of small publications.

``We're very concerned that some of the smaller titles may be delisted,'' said Donald Kummerfeld, president of the Magazine Publishers of America, another trade group. He said he had no firm information this was happening yet, but other industry experts said they, too, thought it was inevitable.

``We may need 40 crossword puzzle magazines, but we don't need 500,'' said Carol Kloster, chief executive of Charles Levy Co., a distributor in Chicago.

In addition, big publishers may lose some power to push new publications. Once, they could force retailers to place untried magazines on store shelves by making the retailers take these offerings to obtain popular publications. No more. The retailers now have more influence because they sell so many magazines and because they possess something of growing value: excellent access to consumers.

``At one time the publisher was king in this industry,'' said Daniel Friedman, chairman of the Kable News Co., a unit of Amrep Corp., and a distributor for specialty magazines like Shape, Ring, Muscle and Fitness, and Superb Word Finds. ``Then the distributor was king. Now the retailer is king.''

Some regard these changes as unfortunate. For instance, George Marcum, president of Tri-County News Co. in Santa Maria, Calif., recently lost a number of major accounts - including some Wal-Mart and Kmart stores - to bigger wholesalers, but he said the stores might be disappointed by a loss of timely, personalized service.

``Some of these retailers have put magazines in a category as though they were a commodity rather than a time-sensitive product,'' Marcum said. ``Remember that about 50 percent of magazine sales occur in the first couple of days after they hit the rack. But in some instances, these new wholesalers are covering such distances that the magazines might not reach the stores for two or three days.''

Still, most experts believe the changes cannot be stopped and that the consumer will be affected.

Frank Herrera, president of ICD/Hearst, which brings a host of major magazines to market for Hearst Corp., and other companies, said, ``There will still be niches, but there will be fewer titles in each niche.'' But, he added, ``Those who make the cut will do even better.''

Also, Herrera and others said, wholesalers will start handling products other than magazines, like paperback books or rental videos.

Magazine distribution has generally been a fragmented business. Relatively small operations controlled narrow geographic areas, often serving all the supermarkets, drugstores and other chains in their area for specific publications.

The system remained largely unchanged even after a marketing revolution affected other areas - everything from mouthwash to cereal. Retailers began to analyze which products consumers really wanted, which were most profitable and how the presentation of the products affected sales.

The new category-management techniques involved more aggressive promotion of selected products, tighter management of inventories and more pressure on wholesalers to cut costs and to share the burden of marketing. Some wholesalers were also forced to pay for access to the most attractive shelf space.

Change finally hit the magazine distributors with a vengeance last summer. A group of Safeway supermarkets in Seattle put their magazine business out for bid and ultimately reduced their wholesalers from four to one.

In quick order, other stores across the country followed suit, creating a frenzy of competition. The distributors found themselves being forced to make large, up-front cash payments to the chain stores and to increase the discounts they were offering on the magazines.

Accelerating the trend was an antitrust investigation of the magazine distributors begun by the Justice Department two years ago because of the lack of competition across geographic lines. The department acknowledges the investigation but will not say when it will be completed.

Wal-Mart, which is the largest magazine retailer, went from several hundred distributors to three after putting its business up for bid.

Judie Decker, a spokeswoman for the Lucky Stores in Southern California, a supermarket chain owned by American Stores Co., said:

``We don't have to mess with 13 different invoices from 13 different companies to do the simple job of supplying our stores with magazines. A lot of the wholesalers hadn't stepped into the 20th century technologically. Many of the small wholesalers hadn't been able to keep up with the changes because they don't have the kind of financial clout.''

To survive, many smaller companies are either merging or banding together in informal cooperatives. For instance, Marcum said his company, Tri-County News, had formed a co-op with nine other Southern California wholesalers and was bidding with them for some of the supermarket business.

CAPTION(S):

Photo, Box

Photo: Don Biggert is in charge of magazines for Tower Records, which stocks dozens of titles from large and small publishers.

Box: More Choices on the Racks