Forecast

2018 Print Forecast: Paper Prices & Postal Rates Will Rise

By: D. Eadward Tree

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Declining demand is supposed to cause lower prices, but the magazine industry’s key suppliers are likely to defy the law of supply of demand in 2018, with both paper companies and the U.S. Postal Service raising prices by a little – and perhaps by a lot.

Yes, folks, it’s that most wonderful time of year, when the kids are back in school and publishers turn their thoughts to everyone’s favorite annual task – budgets. Here to help you is Dead Tree Edition’s annual forecast of paper, postal, and print pricing, plus a few tidbits of advice and a bonus advertising forecast.

Paper Prices Will Continue to Rise

Told ya so.

In our print forecast for 2017, we warned that “significant moves in the currency markets . . . could be especially disruptive for U.S. buyers of magazine-quality paper.” The U.S. dollar promptly strengthened, making Mr. Tree sound like Chicken Little for a while.

But now the U.S. dollar is weakening, declining more than 10% against the Canadian dollar in the past 90 days. Not coincidentally, the price of magazine paper is on the rise and likely to end the year about 5% above its mid-2017 trough.

You can also blame the higher prices on single-stream recycling. The American practice of mixing paper, glass, metal, and plastics in the same bins raised the level of contaminants in recovered paper, making it a less efficient fiber source. Most U.S. mills that relied heavily on recycled pulp were forced out of business.

For a while, China’s pulp-hungry mills picked up the slack. But Chinese authorities recently responded to the poor quality by reclassifying much of the U.S.’s recovered paper as garbage and blocking its import. Panicked Chinese mills that relied on recycled have been snapping up virgin pulp, causing worldwide pulp prices to soar – and thereby increasing the cost of making paper.

The analytics firm RISI predicts prices for magazine paper will inch up another percentage point or two during 2018. Given recent trends, Mr. Tree thinks the prices could rise even more than that.

Expect a Postal Rate Increase

What we know for sure is that postal officials are planning to increase Periodical rates an average of about 2% in January. Co-mailed and large-circulation titles will pay less than the average, while smaller titles that don’t co-mail will pay more.

But the big worry is the unknown – what will come out of the Postal Regulatory Commission’s 10th anniversary review of the law that established the inflation-based cap on rate increases.

There’s been widespread speculation that the PRC’s review, likely to be revealed in the next few weeks, will ease the cap and allow higher rate hikes. Some reports have speculated about rates rising as much as 20%. Periodicals, especially those mailed by non-profits, are especially likely to get hit with rate hikes because the USPS supposedly loses money on those products.

Any significant breach of the rate cap is likely to face legal challenges, with implementation delayed at least for most of 2018. In any case, the best move for publishers is to work with their printers (or to find new printers) to take full advantage of co-mailing, dropshipping, and other methods of reducing their postage bills.

Custom Print Will Drive Growth

Ad revenue for consumer magazines will decline at an annual rate of 8.8% over the next three years, according to the widely cited PwC forecasts, while trade magazines will drop “only” 6%. That’s actually an improvement from recent reports of declines in the mid-teens.

But those are averages. The big general-interest titles are suffering mightily, while those serving specific interests, industries, or regions seem to be faring better. As in the digital world, the trend in print advertising is to targeted messages.

“Print advertising is dead – except for custom,” a veteran magazine-media advertising rep told me recently. He wasn’t whining; he’s had a pretty good 2017 in both print and digital sales.

That print success has come despite increasing difficulty selling ad pages. The same advertisers that balk at renewing $100 CPM magazine pages, he says, are eagerly shelling out 10 times that rate for custom distribution (such as an insert sent only to select subscribers or sponsorship of a magazine’s conference edition). Or even 100 times -- $10 per copy -- for custom publications. Digital printing technology makes this level of customization and targeting possible.

Digital advertising’s shift to native advertising and other forms of content marketing could be a boon to targeted inserts and custom pubs. When a company discovers what content works online, it’s not such big step to reformat that content into a printed piece that’s delivered to the company’s best prospects.

Magazine Printing Will Continue to Consolidate

The magazine industry might have grounds for filing an antitrust complaint regarding consolidation in the U.S. printing industry, except for two problems:

  • The U.S. Justice Department doesn’t understand the printing industry.
  • Magazines are no longer run by people who know anything about printing.

In the past two months, industry giant LSC Communications (AKA RR Donnelley) has snapped up two highly regarded, mid-size competitors that specialized in producing magazines, Creel Printing and Publishers Press. There was nary a peep from Justice because it views printing as a single industry with literally thousands of competitors – and therefore immune from antitrust issues.

The reality for publishers, though, is that only a tiny -- and shrinking -- fraction of the country’s printers is truly able to compete for their business. Unless a printing plant specializes in publications, it’s unlikely to have the bindery equipment, ad portal, co-mailing, dropshipping, digital-edition conversion, and a host of other factors and services the typical publisher needs.

Over the past couple of decades or so, the prices of publication printing have been mostly on a gradual descent (without even adjusting for inflation). But by gobbling up competitors, printers may be able to stabilize prices in the face of declining demand.

You never know when your current printer will disappear, so it’s a good time to get to know some other providers. Who knows, you might find one that’s better able to cut your postage costs or to help you produce innovative custom publications.


Author: D. Eadward Tree

Source: pubexec.com URL: https://goo.gl/JjXS7g

2017 Could Be The Year of Resurgence for Magazines

By: Sarah Hennessy

Innovation and audience-led solutions will be the key to success for magazines in 2017. While print media as a whole hasn’t been attracting the right sort of headlines, with falling audiences and sliding revenues creating a sense of overall decline, I wouldn’t write off the magazines sector.

In fact, 2017 could be the year it re-emerges as a viable medium with a long-term future. Clearly, there are challenges and the prospect of further consolidation could mean uncertainty. However, the sector has a sense of buoyancy as magazine publishers are looking at innovative ways to engage their audiences, leading to a deeper brand experience.

This, coupled with improvements in measurement that will finally catch up with multiplatform behaviour, means there will be a better growth story for magazines. One area that is giving magazines a boost is a focus on specialism.

With more than 130 launches in 2016, the outlook is positive for specialist products. Segments such as leisure interests, children’s and men’s lifestyle all saw double-digit circulation growth.

Current affairs titles, including The Economist and The Week, also saw improvements during an epic year of news, from Brexit to Trump.

The resilience of the luxury segment has been impressive and shows no signs of abating. Vogue’s successful centenary celebrations, Glamour’s move to full size and the 20th-anniversary (and biggestever) issue of Wallpaperare all examples of the robust health of the luxury end of the market. In 2017, this ground will be hotly contested as news brands set their sights on the same advertisers.

News UK laid down a marker by relaunching Luxx for The Times and poaching Lorraine Candy, editor-in-chief of UK Elle, to be luxury content director.

However, in my view, there are still too many magazines on the newsstand. It would be beneficial to see the closure of weaker titles such as InStyle in the UK, which shut its print edition in October, so that publishers can breathe greater life into those that remain.

This would allow for a more positive and compelling focus on the titles that will attract stronger support from advertisers.

Magazines are exploring brave, dynamic distribution models to secure the future of their print titles. Getting the product into the hands of the right people, whether they are prepared to pay for the magazine or not, will continue to be key.

Significant changes from Cosmopolitan (cutting its price to £1), NME (going free) and Elle (letting readers pre-order a print cover of their choice "on demand") resulted in big circulation increases and proved that pricing and distribution really can change a brand’s fortune.

Alongside innovation in print, it will also remain critical that magazine content is made available on more new platforms. Cosmopolitan has established first-mover advantage with Snapchat, reaching readers each day on Snapchat Discover. I expect to see more demand for this platform in 2017 from magazine publishers, providing Snapchat can keep pace with the resource required.

Events and brand extensions have emerged as a new revenue stream for publishers that understand their audience and are intent on building stronger relationships around passion for the brand.

Experiences such as Stylist Live, Radio Times Festival and Empire Live attract paying audiences and bring them closer to the experts they care about. These events will be bigger and bolder in 2017, with smaller pop-ups also getting in on the action. They also offer big commercial partners highly engaged audiences.

The Esquire Townhouse with Dior is a brilliant example of a commercial partnership that will genuinely deepen relationships. Magazines that think like brands across every touchpoint will be the ones that build even stronger connections with their most valuable readers.

A related point is the rise of the magazine content studio. Those that have already launched include Hearst Magazines UK’s Made, Immediate Media’s Imagine, Time Inc UK’s The Foundry and Shortlist Media’s recent addition, Family.

Significant resources, data and technology are being committed to make multiplatform, measurable content an everyday reality for advertisers. This augurs well for 2017.

The opportunity to monetise audienceled solutions, driven by data insight, has accelerated growth within publishers’ commercial teams. Finding more innovative "portfolio solutions" for brands is the key to unlocking bigger budgets for publishers and will deliver more scale for advertisers.

Significant progress will be achieved when we see collaborative relationships develop across publisher portfolios. This is where Magnetic, the marketing body for consumer magazines, can help to harness the opportunity for clients. It is vital that publishers are able to show demand and audience data across the many platforms on which magazine brands now exist.

By the end of 2017, we should see Pamco, the Publishers Audience Measurement Company, introduce Audience Measurement for Publishers, replacing the National Readership Survey in providing audience figures for the published media industry.

This is an exciting development – albeit a long overdue one. The rigorous methodology of AMP – which combines a digital panel with 35,000 face-to-face interviews – will allow publishers to monetise de-duplicated audiences across all of their platforms.

It should be a leap forward in enabling cross-platform planning for a substantial number of brands for the first time and providing a more accurate picture of consumer demand for magazine content. Much will depend on the nature of AMP’s launch but, if it is effective, it will have a profound impact in terms of improving inventory management and commercial relationships.

This boost for the sector is one of the many reasons to be excited about magazines in 2017.


Author: Sarah Hennessy

Source: fipp.com URL: https://goo.gl/vlXDOw

2017 Print Forecast: Tiny Price Hikes With a Chance of Disruption

By: D. Eadward Tree

Unless Congress stuns the world by doing something about the U.S. Postal Service other than naming more post offices, publishers on average will experience slightly lower postal rates in 2017 than this year.

In fact, for all of the “Three Ps” of print magazine publishing — Postage, Printing, and Paper — publishers should be more concerned about disruptions than price increases next year.

Postal

Now that postal officials seem to have backed away from backdoor rate increases related to the Flats Sequencing System, the most likely scenario for 2017 is a single, inflation-based rate increase of about 1% in January. The resulting rates will still be more than 3 percentage points below where we began this year, before the “exigent” surcharge expired in April.

The financially strapped USPS has gained support in Washington for reinstituting some or all of that surcharge, but good luck getting a postal bill through a divided, deadlocked Congress. After all, the Postal Service’s Board of Governors has now become the “Board of Governor,” as Congress has failed to fill vacancies for eight of the nine non-management seats.

The downside of inaction on Capitol Hill is that the Postal Service remains saddled with the same bizarre only-inside-the-Beltway accounting rules that drove it to the brink of insolvency a few years ago and that still hinder any long-term planning or investment. The USPS, for example, desperately needs to replace its inefficient and downright dangerous 25-year-old-plus fleet of delivery vehicles. But its inability to borrow money or float bonds means the fleet overhaul is proceeding at a snail’s pace.

The Postal Service’s precarious finances feed the political support for above-inflation-rate postage increases, which could hit the Periodicals class especially hard if Congress becomes less deadlocked. The budget woes can also lead to poor service, and sometimes, poor decisions.

In the midst of the last recession, for example, postal officials eager to rein in the costs of handling flat mail hurriedly rolled out the Flats Sequencing System (FSS) despite testing that showed it wasn’t ready for prime time. More than five years later, the huge machines are still not operating as intended.

The good news on FSS is that mailers and postal officials have apparently worked out a compromise on FSS pricing. Postal officials want to expand the areas served by the FSS machines, believing that they will run more efficiently with higher volumes of mail.

But mailers pushed back, noting that they generally pay more for FSS mail than for traditionally sorted mail that mostly ends up in carrier-route bundles. They threatened litigation, noting that shifting more mail to FSS would amount to a back-door price increase that would violate the law that limits rate increases to changes in inflation.

Postal officials recently revealed a plan to expand FSS coverage without affecting publishers’ postal bills: Mail packaged for the FSS machines will be priced as if it were going to non-FSS zones. (For you postal geeks, that means a return to the practice of virtual presorts to determine which copies would have been in carrier-route bundles, placed on SCF pallets, etc. — then an actual presort that will place the magazines in bundles and containers in a way that is optimal for the FSS operation.)

Printing

The move away from FSS postal rates should be favorable for printers that use practices like co-mailing to reduce publishers’ mailing costs. Co-mail deals usually call for the printer and the publisher to share the postal savings. The current FSS pricing structure is not as friendly to co-mail as is the non-FSS structure, so the shift to FSS pricing has squeezed printers and caused some to pass along FSS surcharges to their customers.

With such FSS risk apparently off the table, and demand for publication printing continuing to decline, 2017 could be a good year to renegotiate printing contracts.

But that declining demand also makes it likely that some printing plants or even entire companies will shut down, which can saddle their customers with unexpected costs and transition issues.

Paper

Publishers have enjoyed gradually declining prices for paper this year. But the paper companies are in such bad shape that any further price reductions will lead to mill closures and tighten the market.

In fact, RISI, a paper-market analytics firm, assumes more capacity reductions are imminent and predicts that prices for magazine-quality paper will rise 1-3% early next year.

Publishers should also be aware that significant moves in the currency markets, which are rarely foreseen in advance, could be especially disruptive for U.S. buyers of magazine-quality paper: A sudden weakening of the U.S. dollar against other currencies could force some Canadian mills to close and would tamp down supply from overseas, which would lead to shortages and price spikes.

Author: D. Eadward Tree

Source: pubexec.com URL: https://goo.gl/GIk1MA