Asda toughens trading terms for consumer publishers

to the supermarket. Furthermore, Asda was proposing levying a space
contribution for each new Asda store opened of £2,500 per magazine
title.

While some publishers and distributors believe Asda's proposed new
approach will result in it losing business from its trading partners,
others argue the supermarket's muscle in the marketplace will force
publishers and distributors to accede to some of its demands.

It is understood the retailer has backed down on its most stringent
demands, in particular U-turning on its demand for editorial space in
certain magazines, citing it as a mistake.

Jonathan Shepherd, chief executive of the PPA, said Asda is
"backtracking" quickly and hence the trade body is unlikely to get
involved in the issue.

Industry observers, however, believe that Asda's control of 4.8% of the
UK sales of magazines mean its demands cannot be ignored.

An executive at one leading magazine distributor said: "Asda has always
been difficult, as it is owned by Walmart, which heavily influences its
behaviour. But some of the changes we can work with, such as Linksaves
(whereby customers get an additional product or service after purchasing
a magazine), and the item set-up charge."

However, another distributor said that Asda's magazine partners will
have to evaluate whether it is financially viable for them to continue
working with Asda.

INDUSTRY VIEWS ON ASDA'S PROPOSALS ...

- "It approached this thing very arrogantly and naively. But publishers
such as Bauer and IPC will always find a way to be listed in Asda,
although the costs involved mean it doesn't make sense for the smaller
independents."

- "It is a case of a new buyer coming into a new area and asking for
basically what amounts to a retailers' wish list."

- "Asda has always been difficult. But if Tesco behaved like this, then
the Competition Commission would be on to it."

- "Publishers will be evaluating how important Asda is to them and if
they can afford to pull out (from supplying Asda)."

- "Asda is a tough negotiator because it is so heavily focused on price.
Asda has come out with more outrageous demands from brands in the
past."

4.8% - Asda's share of the magazine news-stand market - the UK's fifth
biggest

17% - IPC's share of retail magazine sales - the biggest of any
publisher in UK

89% - total market share of top 3 wholesalers: Smiths, Menzies &
Dawson

84% - combined market share of the 4 biggest magazine distributors

NOTE: all data relates to the estimated retail sales volume share for
the Jan-Oct 2007 period.