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Commenting on Starbucks’ radical decision to close 61 Australian stores (note the terminology: stores not cafes) the Australian Newsagency Blog’s Mark Fletcher says while he doesn’t enjoy the company’s coffee he admires its business model and goes on to ask “If Starbucks can reach this decision with key factors – range, margin and buying power – working for them, what is the situation newsagents face?”

Starbucks’ coffee is distinctly average by Australian and New Zealand standards. Its cafes are so-so and its prices are sky-high. So with hundreds of small, local cafes providing better coffee, service and all-round experiences at lower prices why would anyone patronise Starbucks?

Well the chain grew fast in America because by US standards it was high quality, albeit at a premium price in a market where fragmented competition performed poorly.

Australia and New Zealand already had a coffee culture, so Starbucks simply doesn’t offer the same value proposition in this part of the world. Some time ago an US business magazine ran a story about small, boutique neighbourhood coffee shops going head-to-head with Starbucks in America and winning. In effect, that’s exactly what happened in Australia.

My local Starbucks in Australia was the branch inside the Borders Bookstore at Hornsby. Sitting down with a bucket of overpriced, weak milky coffee somehow seems more acceptable when you’ve a pile of books to check out and you’re deciding which ones to buy.

There’s an obvious link here with newsagencies — Borders competes for at least some of the business. It may make sense for large magazine specialist newsagents in prime retailing positions to offer a Borders plus Starbucks-like coffee and magazine experience.

But that’s not the answer to Mark’s question. Are newsagents in a similar situation to Starbucks?

Probably not.

First, Starbucks is large. It can standardise, it has buying power and marketing clout that small firms like newsagencies can never achieve on their own (if they acted together things might be different). But what it simply can’t do is deliver a quality customer experience at the local level. Nor can it respond to individual needs or rapidly changing tastes. Newsagencies can do both.

Despite the company’s best efforts, its coffee tends to be dished up by bored teenagers who, beyond uttering ‘have a nice day’ mantras, don’t care about customer service. That’s never going to be as good as coffee served up by cafe owners, their families and the people work with them. Newsagents have the power to ensure the customer experience is first rate.

Second, Starbucks is a corporation. It has to pay all its costs and salaries then deliver a substantial return on capital to shareholders — they probably expect something like 20 percent, anything less would have made them vulnerable to private equity firms before the US financial markets turned nasty. Newsagents need to make a capital return, but something like a 10 percent return on money invested would satisfy most owners. Maybe it shouldn’t. Maybe that’s the lesson here.

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PC World New Zealand has an ABC circulation of 15,565 and Nielsen readership figure of 148,000. That makes it New Zealand’s most-read specialist technology publication. Published monthly, in New Zealand that means 11 issues a year with a joint December and January edition.

In August 2006 Fairfax Business Media bought the New Zealand licence for PC World from IDG. In that year Fairfax acquired the bulk of IDG’s NZ business picking up four titles. IDG New Zealand sold two other titles; Unlimited and Actv8, to Infego under a separate agreement. IDG closed one title; Fast Forward.

Before August 2006 IDG published PC World. The had been published in New Zealand by IDG since 1989 when it was a tabloid supplement in ComputerWorld.

At the time of writing, PC World is typically 112 A4 colour pages. It is printed on gloss art paper, plus a cover on heavier stock. Advertising makes up about a quarter to a third of the pages. The magazine is perfect bound with a DVD disc which is inserted, not cover-mounted.

PC World New Zealand on bookstands

The magazine is mainly sold on bookstands with a cover price of NZ$8.90. This is competitive with larger, overseas published titles. You can also find the magazine in petrol stations and supermarkets. A significant number of readers are subscribers.

Most PC World readers are highly educated, well-heeled men. It occupies the same market niche as Australian Personal Computer, PC User and PC Authority. It has new product reviews, group tests, news features and plenty of how-to advice stories.

Typically well over half the editorial content is locally written. The overseas material is given a local slant and boosted with local information such as sidebars. PC World’s New Zealand staff and freelance journalists are highly regarded.

Strictly speaking PC World New Zealand doesn’t have any direct print competitors, its nearest local rival for readers and advertising revenue is ACP’s New Zealand NetGuide, but that title sells to less advanced users.

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Two bloggers posted journalist perspectives on the power of blogs. Both are recent blogging converts. Both have worthwhile observations.

In why journalists must learn the values of the blogging revolution, The Guardian’s Roy Greenslade argues that in the past journalists were secular priests pontificating to the great unwashed. He says news was a one-way traffic. Blogging, with its built-in feedback mechanisms has turned that on its head.

Maybe. Here in New Zealand, there’s often plenty of negative feedback when you write something that somebody doesn’t like. The odd thing about blogging and online news is you also get positive feedback. This is strange and unusual to some of us.

Future journalist bloggers

Greenslade goes on to write:

“I have tended to predict that future news organisations will consist of a small hub of “professional journalists” at the centre with bloggers (aka amateur journalists/citizen journalists) on the periphery. In other words, us pros will still run the show.

I’m altogether less certain about that model now. First, I wonder whether us pros are as valuable as we think. Second, and more fundamentally, I wonder whether a “news organisation” is as perfect a model as we might think.”

I’d be concerned about Greenslade’s conclusion if I agreed with his hub and periphery prediction. My vision of the future of journalism is that it is more like a sports league with professionals operating on one level, semi-professionals working at another and the amateurs elsewhere. And, as with the English FA Cup, there’s always potential for the occasional upset.

Towards the end of his piece Greenslade writes:

When we journalists talk about integration we generally mean, integrating print and online activities. But the true integration comes online itself. The integration between journalists and citizens. Of course, there should be no distinction between them. But journalists still wish to see themselves as a class apart.

Funny, I’ve never thought of myself as being a class apart from my readers. I’ve always regarded them as my employers.

New Zealand blogger Bernard Hickey writes he feels liberated as a blogger. He likes the speed of the medium, the feedback and the ability to connect to his audience. As Hickey says, he is now a blogging evangelist.

Hickey’s blog interests me because it serves an audience that is relatively ignored in New Zealand. For want of a better label his target is middle class, aspirational and liberal in the British sense, not the American sense.

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The Australian newspaper says illegal downloads are the reason music sales fell to their lowest point in 23 years. It is no longer online.

According to the paper 1.8 billion albums sold in 2007. That’s roughly the same number as at the start of the CD sales boom in 1985.

MP3 downloads have an impact – but they are not the whole story. The Economist reported earlier this year EMI can’t even give CDs away to younger listeners.

Illegal downloading harder, riskier

Thanks to music industry-lead legal actions against downloaders, p2p services and ISPs, illegal downloading is now harder than in the late 1990s and the early years of this decade.

That was when Napster and other services were at the peak of their popularity. Surviving p2p networks are now filled with spam. They have music industry-generated dummy files designed to make downloading difficult.

This aside: the music industry was the architect of its own decline.

The last serious flowering of popular music was in the late 1970s and early 1980s – I know, I was there. An explosion of new talent appeared as punk rock and new wave. It morphed into dozens of other fresh new music styles.

New wave music, creative boom

That burst of creativity gave us acts as diverse as The Clash, The Jam, Talking Heads, The Smiths and the Ramones.

Accompanying this was a commercial blossoming. Hundreds of entrepreneurial, at times idealistic, record companies and related businesses arrived on the scene.

Similar waves arrived in the 1950s with original rock and roll. Then again in the 1960s with the Beatles and rock’s second coming. A third wave was from 1967 through to the early 1970s. Each successive wave  had a creative and commercial aspects.

Around the time CD sales took off, the record industry began a process of consolidation. This left four major companies accounting for most global sales. About 70 percent in the USA, more in some other western countries.

Squeezing out innovation

Along the way the new mega-companies trimmed their rosters of acts. They began playing it safe; which meant squashing innovation and creativity. They also started mining their back catalogues more than in the past. I can’t quote numbers, but old music accounts for a sizable share of today’s total sales.

As a result, there are fewer signed artists. There is less room for commercial mavericks to flourish. The remaining acts are more predictable and controllable. That’s great for large corporations reporting to shareholders, not so good for nurturing new talent.

Independent record companies still pick up bright new acts. But sooner or later they the majors get hold of them and the squelching starts all over again.

Which means the music industry would be in serious decline now even without illegal music downloading.

Even so, I’ve decided to make sure my music collection is one hundred percent legal.

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Mark Neely asks Is ‘Born Global’ the new normal for software start-ups?

Anyone who has played the board game Risk knows the smartest strategy is capture Australasia before setting out to conquer the world. Risk may have been a powerful metaphor in the past but it doesn’t apply to business in the digital age.

When the product you’re exporting weighs nothing and can travel to its destination at the speed of light, geographic barriers are meaningless.

New Zealand tech companies learnt this early. They latched on the Born Global idea earlier than their Australian counterparts. That’s partly because they are further out on the fringe of the global economy. But they were treading down a tried and tested path.

Global only  option for New Zealand start-ups

Unlike Australian firms, New Zealand companies had little choice. The local market is tiny and poor by OECD standards.

Almost every successful NZ business of the last 20 years has exported from day one. The list includes children’s clothes, fashion, biotechnology and booze as well as software and online services.

Most of the economic factors Mark mentions in his post (market size, ex-pat community etc) apply in spades to New Zealand. Here, exports are about 30 percent of GDP. In Australia exports are roughly 20 percent of GDP.

Incidentally, both figures are depressingly low by OECD standards where the average is almost 50 percent of GDP.

Tiny economy, aware of global issues

New Zealand is a tiny economy, but everyone working in it is painfully aware of its relative international insignificance. I’d argue Australian businesses are misled by their seemingly large and buoyant economy and are more complacent about exporting. That Risk strategy looks smarter in Sydney than Timaru.

One significant difference is NZ start-ups don’t tap into overseas investment as much as Australian firms – if this impression is wrong please let me know. Instead our entrepreneurs opt to cash out of their businesses at an earlier stage – in many cases when their business and products are still immature.

I’m not a finance expert, but this tells me New Zealand companies suffer from poor access to venture capital – or if they have access to VC funds, they don’t have access to the right kind of venture capital.