What Went Wrong with the Postal Rate Hike?

What Went Wrong with the Postal Rate Hike?
Nothing, says Time Inc.'s mail czar.
By Jim O'Brien
http://www.foliomag.com/2008/what-went-wrong-postal-rate-hike


Recent data from the Postal Service indicate that Periodicals Class mail only covered 83% of its costs in fiscal year 2007. This news comes on the heels of the "cost based rates" that went into effect last July and were designed to reduce the Postal Service's costs. Many people in the industry are now wondering "What went wrong?" The answer is that "nothing went wrong," once three basic facts are understood:
Since the new Periodicals Rates went into effect on July 15, 2007, the USPS' data only reflected 2-1/2 months of mailing under the new rate structure (the USPS fiscal year ended on September 30, 2007).

In an effort to mitigate the impact on smaller mailers, the July, 2007 rates only reflected 40% of the actual bundle and container costs. As a result, mailers did not receive accurate pricing signals and some companies actually reduced the number of drop-ship entry points. This reduction resulted in increased USPS transportation costs.

Many mailers focused 100% of their attention on implementing the new rate structure and spent very little time reviewing their mailing practices an implementing changes in 2007.

As a result of these three factors and others, the Postal Service did not reduce its costs in FY 2007. With this as a backdrop, the question now becomes, "Will the new rate structure have a positive impact on Postal Service costs in 2008?" To drive costs from the system, mailers need to make changes. Here are a few changes that are taking place at one mailer and in the printing industry.

Time Inc. is making a number of changes to its mailing behavior and these adjustments may be of use to other publishers. For starters, each title has been analyzed to determine if all or a portion of its circulation can take advantage of co-binding, co-mailing, and/or co-palletization. Today, six Time Inc. titles participate in co-mail pools and the company will soon begin to co-mail a portion of their large circulation monthly magazines. Most people think that large circulation titles are not good candidates for co-mail because they have little to gain in presort improvement, but that perception may soon change.

Todd Black, Time Inc.'s assistant director of postal operations, working in conjunction with Brown Printing and Time customer service, has developed an innovative plan for Essence magazine and other large circulation monthlies. It begins when Time customer service determines Essence's presort. The label data for the carrier route copies is sent to Brown Printing in its usual fashion and the copies are produced using selective binding. Following production, the carrier route copies are included in Fairrington Transportation's co-palletization pool and drop-shipped. Essence also has a number of copies that do not lend themselves to co-mailing (polywrapped, personalized wraps, etc.) and these copies are also included in the co-palletization/drop-ship pool. The balance of the non-carrier route labels are not presorted and customer service produces a SLIR file that is transmitted to Brown for inclusion in their co-mail pool. After manufacturing (using conventional binding) the copies are co-mailed, entered into the Fairrington pool-shipping program, and drop-shipped to 96 ADCs. As a result of this combination of co-mailing and co-palletization, virtually 100% of Essence is drop-shipped with very few sacks and a significant presort improvement.

Time Inc.'s weekly titles have also been reviewed and improvements have been made. Since these weekly magazines have large circulations and carrier route percentages in the 75% to 85% range, there is little opportunity for co-mailing and drop-ship improvement. However, certain editions of the magazines do quality for co-palletization. The best example of this is an edition of People magazine that is produced in one plant for a national distribution. Prior to the implementation of the new rate structure, this edition was placed in sacks and entered into the postal mail stream at the printing plant. Today, these copies are included in the Fairrington co-palletization pool and drop-shipped. As a result, these copies have shifted from "100% sacks and zero drop-shipping" to "nearly zero sacks and 100% drop-shipping."

In addition to the co-palletization, Time magazine co-binds its Life and Style supplement along with its regular issue four times per year. Entertainment Weekly will co-bind a special issue along with one of its regular issues in May.

When the changes have been completed on the Time Inc. magazines, Black estimates that 23 Time Inc. titles will be using co-mail or co-palletization for all or a portion of their print order. Black states that, "There are cost savings out there for everyone, regardless of your size or vendor. My advice to other mail owners is to dig deep into each mailing to find what portions you can better presort and drop ship right now. For the portions that can't, ask why and keep asking why until each mailing is optimized."

In addition to the changes being made by the Time Inc. titles, the printing/logistics industry is opening new co-mail facilities and adding new machines to handle a wide variety of products. Black recently visited the new R.R. Donnelley & Sons co-mail facility in York, Pennsylvania. In response to increases in customer demand, Donnelley already has expansion plans for this new facility. York complements Donnelley's existing facility in Bolingbrook, Illinois.

In March, Black will visit the ALG Worldwide Logistics facility also located in Bolingbrook. ALG is a logistics firm that provides co-mailing and drop shipping for the print industry.
Quad/Graphics has developed a multifaceted program that now includes: Multi-Mail (co-mail); Multi-Wrap (offline for poly wrapped Periodicals); Multi-Bind (co-binding); and Multi-Blend (inline combination of previously bound Periodicals with magazines that are being bound). These options provide a great deal of mail-piece design and production schedule flexibility for their clients while still creating volume that maximizes presort and drop ship efficiencies. Quebecor World Logistics continues to invest in solutions that will enable them to co-mail a greater range of product (specifically thin and poly wrapped mail pieces). By the end of 2008 they will double their capacity with new state of the art co-mailers.

Fry Communications in Mechanicsburg, Pennsylvania is now offering its customers onsite co-mailing, selective binding, blended mail at the mail table level, and co-production (co-binding). Fry reports that they are seeing substantial growth in the number of copies co-mailed and increasing interest from clients who previously were not interested in taking advantage of the reduced distribution costs. In addition, Fry now has customers who use them as a co-mailer but not as a printer. As Fry's pool size increases, the opportunity for savings increases as more copies move from a 3-digit sort level all the way to carrier route presort.

If the changes at Time Inc. and the printing/logistics industry are representative of more global Periodical Class change, we will most likely see a significant reduction in Postal Service costs and a corresponding improvement in cost coverage throughout 2008. Such changes will go a long way toward keeping Periodicals Class mail well within the CPI rate cap in future years.

Going Postal: Arguing for Media Diversity, Debate & Democracy

Going Postal: Arguing for Media Diversity, Debate & Democracy
BY John Nichols
http://www.thenation.com/blogs/thebeat?bid=1&pid=247107

Those of us at The Nation have been banging on for some months about the issue of postage rates. In particular, we've been expressing deep concern about the radical restructuring of those rates in a manner that favors magazines with large circulations and transfers costs to small- and mid-circulation publications.

On the rack of journals of opinion, The Nation is indeed a large publication. Along with its ideological opposite, the conservative National Review, The Nation's circulation makes it one of the major jousters in the current clash of ideas. But against consumer magazines that are less engaged with the political and policy fights of the day than with the pursuit of mass circulation and the advertising dollars that follow it, The Nation definitely falls into that "mid-circulation" range of publications that is taking a huge hit as big media companies flex their muscles in the regulatory sphere.

This fight is about more than one magazine, and more than one ideology. Representatives of journals of opinion from across the ideological spectrum are united in their loud objection to the stacking of the distribution deck against publications that explore the issues from libertarian, old-right, new-right, centrist, liberal and progressive perspectives.

The message delivered at today hearing of the US House Committee on Oversight and Government Reform's subcommittee that deals with the postage service was a fundamental one: The sort of publications that the founders imagined as the essential documenters and arbiters of our democratic discourse are being threatened by federal policy making that favors size over content, that favors bigness over quality.

Scott McConnell of The American Conservative magazine explained in testimony submitted to the Federal Workforce, Postal Service and District of Columbia Subcommittee of the House Committee "the postage increases we are facing under the new provisions are little less than catastrophic.

Christopher L. Walton, editor of UU World, the terrific quarterly magazine of the Unitarian Universalist Association of Congregations explained that, "It is disturbing to learn that the new rates abandon the long-standing American tradition of supporting a diverse marketplace of ideas with a fair and uniform postage rate for periodicals. Historically, the periodicals rate allowed small journals of opinion to reach a national audience. But the new rates reward high-circulation periodicals with discounts that smaller-circulation periodicals simply cannot qualify for. Instead, we face a steep and unfair increase in mailing costs.

In These Times editor Joel Bleifuss, with his usual laser focus on the core issues involved, informed the committee that, "In August 2007, In These Times, an independent magazine based in Chicago, was hit hard by a 23 percent postal rate increase. This complex new rate structure, designed by and for the benefit of the largest publishing companies, has severely impacted our small magazine's ability to do business. We face an immediate threat to our financial health. These reckless postal rate increases are aimed at the heart of our nation's independent press. I urge you to ask the spokespeople of the media conglomerates whether they would support these increases if their mailing costs had risen 23 percent. This is a democracy issue. The founding fathers, in their infinite wisdom, created a system that made it cheaper for smaller publications, irrespective of viewpoint, to launch and survive. In 1792 the United States Congress converted the free press clause in the First Amendment from an abstract principle into a living reality for Americans by providing newspapers with low postal rates. These low rates were crucial for the growth and spread of the abolitionist movement, the progressive movement and, later, the civil rights movement. More broadly, they have been central to the development of participatory democracy in general. Today, low postal rates remain crucial to the survival of independent American publications like In These Times."

Not all testimony was submitted in written form. Some of it was delivered personally. Among those appearing before the committee was Nation Publisher Emeritus Victor Navasky, who now serves as director of the Delacorte Center for Magazines and Delacorte Professor of Magazine Journalism at Columbia University's Graduate School of Journalism and director of the Columbia Journalism Review.

Navasky told the committee that he hoped to speak "not only on behalf of CJR and The Nation, and on behalf of small-circulation political journals, but also on behalf of the highly influential readers of these periodicals -- journals in general, editorial writers, legislators and their staffs, non-profit executives, corporate public affairs officers, the academic community, students and teachers, among others. In other words, all of those engaged in, and informed by, the public discourse these magazines exemplify."

Navasky explained to the committee in prepared remarks that, "I have never understood why of all the services government provides--defense, education, environmental protection, health, housing, highways and the rest--only the mails are required to break even or make a profit. The founders, who saw the mails as the circulatory system of our democracy, made no such presumption. George Washington himself was in favor of the free delivery of newspapers (which, by the way, in those days were often weekly and usually partisan, and as such the equivalent of today's journals of political opinion). These journals, whose core franchise is public discourse about public affairs, are, like water, national defense, public highways and public education, a public good and as such it would seem to me ought to be paid for out of public funds (i.e. general tax revenues)."

The author of A Matter of Opinion admitted "this view is generally regarded as quaint and unrealistic--utopian, as it were--and so the rest of what I have to say does not depend on it, but I thought in the interests of full disclosure, and the hope that it might set some of you to thinking, that I ought to share it."

With that, Navasky outlined a number of practical steps the committee, Congress and the United States Postal Service could make to right the imbalance created by a wrongheaded rate restructuring. Among other things, he proposed reviving a very good proposal by former Arizona Congressman Mo Udall- a liberal Democrat who was supported in the initiative by conservative Arizona Senator Barry Goldwater --to allow the first 250,000 copies of all publications to be mailed at reduced rates. Or, Navasky suggested, why not embrace legislation proposed in 2002 by Bernie Sanders, then the congressman from Vermont and now the senator, that proposed a moratorium on postal increases for magazines with a low percentage of advertising content, low circulation or non-profit status?

Ultimately, however, Navasky proposed a practical and necessary fix for an immediate crisis: Noting that the postal service has the flexibility, working in tandem with Congress, to roll back and/or redistribute rates in the short term, he proposed that Congress ask the USPS to extend non-profit rates to small-circulation political magazines.

That's not a final fix. But is an appropriate move in a moment of crisis by a postal rate increase that will, if it is not addressed, hinder the free flow of ideas and opinions in America.

"It is no accident that the president of The Nation and the publisher of National Review, two periodicals on the opposite sides of the political spectrum, recently teamed up to write an Op Ed essay sounding the alarm," concluded Navasky. "Such small political journals -- which, by the way, carry the most discourse -- bear the heaviest rate increases. The unpopular ideas and opinions that these journals propagate and circulate today often turn out to be tomorrow's wisdom. They act as intellectual and political gadflies, they prod their larger and staider colleagues, they question conformity and complacency. By helping them recover from the grievous wound inflicted upon by the recent rate increase, this Committee will have deepened and strengthened our democracy."

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Magazines feeling postal pinch

Magazines feeling postal pinch
High-circulation periodicals enjoy discounted rates, while smaller publications get hit with steep rate hikes.
By Teresa Stack and Jack Fowler, TERESA STACK is president of the Nation. JACK FOWLER is publisher of the National Review.
http://www.latimes.com/news/printedition/opinion/la-oe-stack28may28,1,5257005.story?coll=la-news-comment&ctrack=1&cset=true


THE COST OF getting magazines into your mailbox will shoot up July 15. How much? It depends.

Magazine publishers are facing a radical postage rate restructuring that favors those with large circulations and transfers costs to small- and mid-circulation publications.

Past increases to periodical postage were applied fairly equally across all publications. But this time, things are drastically different — and potentially damaging to the diversity of voices that our founders strove to foster when they created the national postal system.

Our respective magazines — the Nation and the National Review — sit on opposite ends of the political spectrum and disagree on nearly every issue. But we concur on this: These proposed postal rate hikes are deeply unfair.

It is not simply that we want to avoid a massive increase in our mailing costs, though that is a factor. More important to us is that we believe in a vibrant marketplace of ideas (where we each think our ideas will prevail). We are not afraid of intellectual competition; we welcome it.

For this latest round of rate hikes, the U.S. Postal Service proposed a 12% increase that would have affected magazines more or less equitably. Then, in an unprecedented move, that plan was rejected by the Postal Regulatory Commission, the body responsible for setting rates. Instead, it approved a complicated pricing system based on a proposal by Time Warner Inc., the largest magazine publisher in the country. Rather than base rates on total weight and total number of pieces mailed, the new, complex formula is full of incentives that take into account packaging, shape, distance traveled and more.

It adds up to this: discounts for some periodicals; as far as we can see, mostly the huge-circulation titles associated with firms like Time Warner. At smaller magazines like ours, rates will go up 15% to 25%. Research by McGraw-Hill Cos. concludes that the rate increases for some small-circulation publications could hit 30%.

Time Warner and the Postal Regulatory Commission say this scheme rewards efficiency. But the rates appear to have been adopted with little research into their effect on publishers and with no meaningful public input.

How will small magazines that operate on the economic margins — yet have an outsized effect on public discourse — accommodate $500,000 (in the case of the Nation and the National Review) in additional postage expense? Will we be forced to cut back on reporting, raise our prices, reduce our staffs or our number of pages to stay afloat? For some titles, the change may prove fatal. It certainly will make it more difficult to start a new magazine, and publishing will be less competitive as a result.

Time Warner and the postal commission seem to have little understanding of the crucial role the Postal Service has played in establishing an open marketplace of ideas. It has always been a central policy of the Postal Service to use its pricing mechanism to encourage smaller publications and competition.

Since the time of James Madison and the founders in the 1790s, it has been understood that low rates for small publications make it possible to have the rich, open and diverse media that a self-governing people require. This is what is at stake today. And because so much of the material online originates in print magazines, these postal rates could have the unintended effect of shrinking the digital marketplace of ideas as well.

We urge the relevant congressional committees to hold a hearing to investigate this coming crisis before it is too late. The last 215 years of postal policy were instrumental in the creation of the extraordinary free press we have in the U.S. today. We should not begin to overturn this magnificent tradition.


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