Postal Update

5 Ways Magazine Publishers Can Maximize Postal Savings

By: D. Eadward Tree

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A big party I recently attended illustrates a principle behind what I’ve consistently found to be the greatest source of waste, the greatest source of potential cost savings, and the biggest differentiator between competing printing proposals for all but the smallest-circulation magazines.

And because of likely regulatory changes, new opportunities for postal savings (or waste) are likely to arise, even for publishers that already have their houses in order.

As we entered the celebration, my companions and I were directed to a row of tables to pick up our preprinted, must-be-worn nametags. We acted on instinct: Ms. Bush veered to the left toward the beginning of the alphabet, Ms. Leaf headed straight toward the middle, and I bore right toward the end of the alphabet.

It’s then we discovered why so many people were milling about and calling out to each other: The 300 nametags were placed on the tables in random order.

The simple solution, of course, would have been to presort the digital list of attendees in alphabetical order before printing the nametags. In the same way, it’s much easier for a publisher to presort its mailing list so that addressed copies can be grouped by metropolitan area, ZIP code, and letter-carrier route than it is for the U.S. Postal Service to sort through randomly addressed magazines.

When the postal presort process works well, most copies end up in bundles that contain at least six copies for the same carrier route. If the printer has enough volume and a strong transportation network, most such carrier-route bundles are placed on pallets and dropshipped to a USPS facility close to the final delivery addresses. Freight and handling are minimal for the Postal Service, except for the letter carrier who opens a bundle, sequences the copies with her other mail, and delivers them.

USPS rates and discounts reward such efficiency, charging only about 25 cents to deliver each half-pound (about 140-page) magazine under this scenario.

But for a nationwide mailing list of only a few thousand addresses, most copies end up in sacks (the Postal Service hates sacks), are handed off to the USPS far from their final destination, and go through multiple handlings before being delivered. The postage for that same140-page magazine under this scenario could cost 65 cents.

Contrary to what some critics have charged, the deck is not stacked against small-circulation publications. Printers often use co-mail or other mail-consolidation techniques to combine multiple publications into one large, efficient mailing. And larger publications often have multiple versions that can split their mailing into numerous small, inefficient lists.

The Postal Regulatory Commission’s recent proposal to bail out the Postal Service with additional rate increases is likely to be challenged in court. (See USPS Bail Out Could Hike Postal Rates 41% in Next Five Years.) But one part of the proposal makes perfect sense -- forcing the Postal Service to provide rate discounts more in line with its resulting cost savings.

The incentive to move copies into carrier-route bundles would increase by at least 25%, perhaps moving add-a-name from an exotic tactic to the mainstream. Enhanced discounts would up the ante for printers, perhaps leading to better dropshipping or more multi-title firm bundles.

Here’s a guide to getting the maximum savings out of your postal presort and to being prepared for the coming regulatory changes:

  1. Be choosy about printers: Unless postage is less than 25% of your production costs or your audience is geographically concentrated in one area, use a printer that produces enough magazines to offer mail consolidation and an extensive dropshipping network. A less specialized printer can’t save you enough on printing to make up for the lost postage discounts.
  2. Make postage part of any printing negotiation: Give the competing printers a copy of your mailing list (under a non-disclosure agreement) and see what kind of postal savings they project or will even guarantee. Not all presort tactics or co-mail programs are the same, and in some cases such alternatives as selective binding may work better.
  3. Combine all your address sources: Some publishers have multiple address lists – e.g. subscribers, advertisers, VIPs, and hair salons. Unless one of these groups gets a distinct edition, present them to the printer as a single list, even if they’re going to be co-mailed. Otherwise, you’ll end up paying the printer for some false savings – savings that you could have achieved on your own just by consolidating your mailing list.
  4. Optimize your versions: I once worked with a title that had more than 40 different versions because of regional and demographic sections. Some versions -- such as the one for women in Southern California who got a “last-copy” cover wrap -- were sent to a fraction of 1% of the entire mailing. A few simple rules -- such as creating only one edition for each cover wrap -- cut the number of versions by more than half, generated huge postal savings.
  5. Press for creative solutions: The 10-cent postage reduction for each copy moved into a carrier-route bundle, plus the benefits of dropshipping, are so great that printers often stop there. But if you often mail multiple copies to the same address (as happens for many trade publications), firm bundling can yield significant savings even if it means pulling some copies out of co-mail. With add-a-name, carrier routes with exactly five copies get an additional copy, resulting in a lower postage bill despite mailing more copies. With a bit more work, large co-mail pools may be able to achieve more savings from high-density carrier routes and from dropshipping to USPS delivery units.

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

Postal Service Eyes January Rate Hikes

By: D. Eadward Tree

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The U.S. Postal Service is planning to raise virtually all rates a bit in January, apparently including a one-cent hike of the Forever Stamp, to 50 cents. And it’s also hoping it will soon get the power to implement larger rate hikes.

The USPS will raise rates for both market-dominant mail (such as First Class and Marketing Mail) and competitive mail (such as Priority Mail) on Jan. 21, 2018, postal officials told mailing-industry representatives this week.

The average rate increases for market-dominant classes are limited by an inflation-based cap, currently close to 2%. A postal official indicated that rates would rise from 1% to 3% for most market-dominant products, according to attendees at a meeting of the Mailers Technical Advisory Committee.

Postal officials didn’t spell out what any of the new rates would be. But a statement that the increase for letter mail would be about 2% almost certainly means that the price of the popular Forever Stamp for First Class letters will rise from 49 cents to 50 cents (a 2.04% hike).

The new rates for flat Marketing Mail and Periodicals would provide greater incentives to create efficient mailings, which is good news for catalogs and magazines that are co-mailed, as well as for printers that provide co-mail services. But it means higher-than-average rates for small publishers that don’t take advantage of such mail-consolidation programs.

The USPS is most likely to file the new rates with the Postal Regulatory Commission in October. As long as the PRC determines that the USPS proposal meets certain standards, such as not violating the price caps, the new rates will take effect without modification.

Next month, the PRC is slated to announce the results of its 10th anniversary review of the law that created the price cap. If it determines that the law’s system for regulating market-dominant rates is not meeting the law’s objectives, the PRC can modify or replace the system.

Postal officials argue that, because the system fails to meet the objective “to assure adequate revenues . . . to maintain financial stability,” the PRC should loosen or eliminate the price cap. But a significant PRC overhaul of the rate-making rules would probably lead to legal challenges that could delay implementation of any changes.


Author: D. Eadward Tree

Source: deadtreeedition.blogspot.com URL: https://goo.gl/55tsn8