Buying Consortia Attracting Publishers
Paper, because it's such a large percentage of any publisher's purchase, is the first target for a consortium. In many cases, it's trying to replace the function of a merchant and take the merchant's percentage of the paper commission. However, the merchant not only acts as a consolidator by bringing various publishers together and then creating volume purchases based on their needs, but also as a lender, since merchants take some of the credit risk off the mills by extending credit to the publishers and creating their own terms.
What happens to a consortium if an individual member defaults on a payment or isn't considered credit-worthy by a mill? Do members share the risk inherent in extending credit, and how do they operate with the mills ― as a single legal entity or each member on the strength of its own credit? Fee structures should be set up depending, in part, on how the risk is shared.
The perfect consortium would consist of equally credit-worthy partners with approximately the same size businesses, using the same trim size, roll width, paper stock and printer, with schedules and workflows that spread out evenly over a month. The trick is dealing with the variables.
INBOX: What potential downsides exist for publishers joining a consortium?
SMITH: There are usually compromises that are required in order to get the best deals. Publishers need to look at what and when it buys, and whether it puts its own titles into a better or worse situation in regard to its own business goals.
Ask the following questions: Would you change paper stock, paper purchasing method, printer, schedule, or be comfortable with the risk incurred by partnering with other publishers who must also meet deadlines, payment terms and other requirements? These answers should be part of your assessment of the cost/benefit analysis.