Source showdown snags SI, others

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Source Interlink Distribution, the magazine distributor that has been battling with publishers over rates and contracts since mid-January, has filed an antitrust suit against a number of publishers and other distributors.

The suit, filed Monday in US District Court in Manhattan, alleges that multiple companies worked together in a scheme to drive Source Interlink out of business. The list of defendants is a who's who of the consumer magazine world, with Bauer Publishing Co., Time Inc., Hachette Filipacchi Media and the recently restructured American Media Inc., alongside various Source Interlink competitors, including Curtis Circulation Co., Hudson News, Distribution Services Inc., Kable Distribution Services Inc., The News Group and Time Warner Retail Sales and Marketing.

In the filing, Source claimed that the defendants were deliberately cutting off Source's supply of magazines and spreading “disparaging rumors” about the company's financial stability. The court papers go on to say that the defendants were trying to force Source Interlink to sell its distribution infrastructure to Hudson and News Group at a massive discount.

“Plaintiff magazine distribution company is asserting a claim of damages, alleging the defendants are part of collusive anti-competitive scheme and alleging that the defendants publishers are spreading rumors and writing letters with false rumors about the plaintiff's business,” reads the court filing.

Source Interlink is seeking court action to stop the “anticompetitive” behavior and also is asking for damages, costs and fees. Marc Kasowitz, of New York firm Kasowitz, Benson, Torres and Friedman is representing Source Interlink but declined to comment further.

This suit is the last straw for Source Interlink, whose troubles started in January, when it tried to impose a seven-cent-per-copy rate hike on its publishing partners. Fellow distributor Anderson News also tried to increase distribution fees, and publishers refused both. Anderson News has since ceased operations, while Source was forced to cancel the price increase.

Publishers continue to snub Source Interlink, and many are searching for alternative distributors to make sure their titles get to the newsstands this week.

“We believe the lawsuit is without merit, and we will defend ourselves vigorously,” Time Inc. spokesperson Dawn Bridges said of the case. Other defendants named in the suit declined comment or could not be reached as of press time.

The standoff between Source, one of the nation's largest magazine distributors, and publishers has interrupted the flow of major magazines to newsstands. Source Interlink reported controlling more than 40% of US magazine distribution before Anderson News ceased operations.

The Sports Illustrated swimsuit issue, which traditionally sells very well on newsstands, is one notable casualty of the suit and bad timing. It is slated to hit newsstands today, but may have trouble getting out. Celebrity gossip titles, another magazine rack impulse-buy, also are feeling squeezed: only OK!, from Northern and Shell, and Us Weekly, from Wenner Media, have cleanly made it into widespread distribution this week. Time's People and In Style, on the other hand, are going to need help from other distributors to make it to racks in Wal-Mart and other major sale points.

Average newsstand sales for consumer magazines are already in decline. The ABC reported that single-copy sales were down more than 11% between 2007 and 2008, and if shoppers can't find the magazines in their usual stores, it's doubtful that these numbers will increase.

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