Tuesday, January 27, 2015

Hurts So Good: Is International Paper Hoping To Be Punished?

Now we know why International Paper isn't joining with other North American paper companies in their recently filed anti-dumping complaint: It is supposedly one of the perpetrators.

Four paper makers and the industry's main union announced last week they were seeking tariffs against uncoated freesheet paper imported into the U.S. from five countries. The announcement listed the countries, but not the manufacturers, from which the "unfairly priced imports" were allegedly coming from.

But the complaint itself lists the alleged perpetrators, which include International Paper's Brazilian operation. IP would probably welcome the tariffs -- and not because it's been afflicted with a case of corporate masochism.

By discouraging imports, such tariffs would be likely to drive up U.S. prices for copy paper and other uncoated freesheets. With roughly one-fourth of the country's UFS market, IP would gain far more from the higher prices than its Brazilian mill would lose from reduced sales into the U.S.

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Thursday, January 22, 2015

Boo-hoo!: North American Paper Companies That Enjoyed Black Liquor Subsidies File Complaint Against Foreign Competitors' Subsidies

Please see this update to the story: Hurts So Good: Is International Paper Hoping To Be Punished?


It’s a case of the pot calling the kettle black liquor: Three paper companies that received well over $1 billion in dubious black-liquor subsidies from the U.S. and Canadian governments are suing to stop “unfair” competition from foreign competitors.

Domtar, Packaging Corporation of America, P.H. Glatfelter, and Finch Paper joined with the United Steelworkers union Wednesday to announce they had filed “antidumping petitions against unfairly priced imports” of uncoated freesheet paper (copier paper, for example) from China, Indonesia, Brazil, Portugal, and Australia. Part of their justification for seeking levies on certain paper imports is that China and Indonesia unfairly subsidized their paper companies’ exports.

Since 2009, Domtar has received more than $700 million in tax credits from two U.S. government biofuels programs that have been widely criticized as thinly veiled subsidies of the American paper industry. Both the Alternative Fuel Mixture and Cellulosic Biofuel Producer Credits programs rewarded paper makers for what they and competitors worldwide were already doing – burning black liquor, a caustic pulp byproduct, to power their mills.

Domtar, a Canadian company with extensive U.S. operations, also received $143 million from a Canadian government program that rewarded the use of black liquor at that countries' mills. The program was set up to keep Canadian pulp operations competitive in the face of the U.S’s massive black-liquor subsidies.

PCA quaffed more than $300 million from the programs itself and Boise, which PCA subsequently acquired, took in more than $200 million. Glatfelter imbibed more than $100 million from the programs. Finch was apparently not a beneficiary.

Sitting out this fight is International Paper, a major uncoated freesheet producer that pocketed well over $2 billion from the black liquor programs. IP is a truly global player with much of its production and sales outside of North America, which may make it reluctant to stir this pot even though it would probably benefit if duties are imposed.

"Foreign paper manufacturers are taking advantage of the unfair trade practices of dumping and subsidies to undermine U.S. manufacturers," said Mark Kowlzan, PCA's CEO, said yesterday.

Most of the tax credits were booked in 2009, before Congress finally closed the loopholes that enabled the paper companies to subvert the two programs that were intended to promote the use of environmentally preferable fuels. But favorable rulings from an extremely accommodating Internal Revenue Service have kept the money flowing since then, including $166 million to PCA last year.

IRS whistle blowers have complained that the rulings ran counter to law and logic and based purely on political expediency. Congress dallied in closing the loopholes, apparently as part of the horse trading to get Obamacare passed; then, with some extremely creative accounting, it closed the loopholes and used the supposed savings to help pay for Obamacare.

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Thursday, January 15, 2015

USPS Raising Rates, Imposing New FSS Rules, and Perhaps Inviting a Legal Challenge

Just in the nick of time, the U.S. Postal Service filed price increases averaging nearly 2% late Thursday on most mail except Forever Stamps.

The Postal Regulatory Commission marked receipt of the filing as 4:07 p.m., less than an hour before closing. If USPS had waited until Friday morning, the December 2014 Consumer Price Index would have been factored into the calculation of the inflation-based cap on postage increases -- perhaps lowering the cap because of plummeting gasoline prices that are leading to deflation.
No change for the Caped Crusader

The rate increases on the "market-dominant" mail classes, slated to take effect April 26, range from 1.886% for Standard to 1.965% for the Postal Service's favorite whipping boy, Periodicals. Take those numbers with a grain of salt.

Those are average increases, but I've never met an average mailer. Different types of mail in the same class may experience rate hikes that deviate significantly from the average -- especially for First-Class Mail.

To achieve the average First-Class rate hike of 1.949% without changing the 49-cent charge for a Forever Stamp, other types of First-Class mail will get larger increases, such as 2.417% for presorted letters and postcards and 10.18% for parcels. Within the Standard Class, carrier-route and letter mail will get relatively low increases, but Every Door Direct Mail will rise nearly 5% and parcels nearly 10%.

Mailers of catalogs, magazines and other flat mail in the Standard and Periodicals classes will also face new rules and incentives for preparing Flats Sequencing System (FSS) mail. The impact is likely to vary significantly from customer to customer.

Flats mailers will face "required FSS preparation for all flat-shaped mail pieces destinating in FSS zones" but also "pricing incentives to reward mailers that prepare and enter flats that are most advantageous to the Postal Service."

Generally speaking, CPI-based rate increases take effect as long as the PRC determines that the Postal Service stayed within the rate cap and followed certain other rules. But there could be a different twist this time around.

A Flats Sequencing System machine
Only the Postal Service's Board of Governors can file for a rate change, but Congress has failed to fill so many positions on the board that it no longer has a quorum. Until more governors are approved, a Temporary Emergency Committee of the remaining governors is acting in place of the board.

A legal challenge to the emergency committee's authority to raise rates might delay implementation, if not block them altogether.

It would be a sweet irony if the inaction of Congress -- where a majority of members seem OK with jacking up the postage paid by business mailers -- blocked USPS from rate increases that would fall disproportionately on business and institutional mailers.

Market-dominant rates are slated to decline by 4.3% this summer when the exigent surcharge expires, but that could be altered by an appeals court or an act of Congress. Postal officials seem especially concerned with the consumer confusion that would result if the price of Forever Stamps were increased and then decreased during the same year, which is probably why they left the price alone.

When (or, rather, if) the surcharge expires, it's not clear whether other First-Class rates could again be rejiggered in a way that again enabled the price of Forever Stamps to remain at 49 cents.

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Monday, January 12, 2015

You Won't Believe What This Fortune Teller Predicts for Publishing in 2015!

 Smart phones, not-so-smart publishers, and hot new trends: 24 crazy predictions for the new year

Media consultant
When glancing at my article in the current issue of Publishing Executive, I had a revelation: Now that one of the publishing industry's leading magazines had called on me for predictions, I’ve graduated from blogger to media pundit.

And then my heart sank as I realized I had violated a cardinal rule of the International Order of Pompous Media Pundits: In its six-plus years of existence, Dead Tree Edition had never published a year-end list of predictions for the coming year.

With 2015 already under way and prognostication being new to me, I scraped up 50 bucks – Dead Tree Edition’s entire annual research budget – and headed over to Madame Marie, a local fortune teller and door-to-door magazine saleswoman.

Here are her 24 startling (mostly) predictions about magazines, the three Ps (postal, paper, and printing), social media, and publishing in general for 2015. If some turn out to be true, you can be sure I’ll be writing “told ya so” pieces in the next 12 months. And you can blame the wrong ones on Madame Marie:

1) Postal rates will not decrease, even though the exigent surcharge is set to expire this summer. Not sure if that will be from a court order or Congressional action. When I asked Madame Marie to explain, she responded, “What, you think I have crystal ball or something? All I know is, don’t ever bet on government getting rid of a temporary tax or fee.”

2) More web sites will jump into the printed magazine business. But they will not be welcomed into the fraternity of consumer-magazine publishers because they won’t have bloated ratebases or sell annula subscriptions for $5.

A postal bankruptcy would be, like, a bummer, man.
3) Three-dimensional printing will grow almost as fast as the buzz about it. By June, ad agencies will start demanding makegoods if their clients’ ads are printed in 3D.

4) USPS will announce a new strategic plan called Seven Six Three – delivering Amazon packages seven days a week, other parcels Monday through Saturday, and everything else three days a week.

5) If you think native advertising is bad, wait until you see foreign-born advertising.

6) Mark Zuckerberg’s new book club will spread like wildfire, until people start seeing spammy “sponsored” posts and photos of distant acquaintances’ new puppies in their books.

7) Despite a decent economy, the market for huge yachts will plummet as billionaires join in the new craze for tasteful displays of wealth – buying a daily newspaper. When I asked Madame Marie whether the newspapers would still struggle, she said, “If you have to ask how much money they will lose, you can’t afford to buy a newspaper.”

8) Congressional Republicans will try to push the U.S. Postal Service into bankruptcy to break the postal unions – until voters realize a USPS bankruptcy would turn Forever Stamps into Never Stamps.

BoSacks flyin' high: Our consultant's
source of inspiration and insight
9) Congress’ next attempt at postal reform will be putting USPS up for sale. FedEx and UPS will quickly say, “No thanks.” However, the idea of buying out the middleman will intrigue Amazon, until it runs the numbers and realizes that, with proper accounting for pensions and retiree benefits, the Postal Service would be profitable. And you know how Amazon hates profits. To console himself, Jeff Bezos will buy another newspaper.

10) Amazon will go back to working on delivery drones.

11) Wal-Mart will announce the development of anti-drone missiles that can be mounted on store rooftops.

12) A major publisher will redesign its web site, then realize the snazzy new look and upgraded user experience can’t be seen on smartphones, which represent 80% of the site’s visitors.

13) “Big data” will be so hot that tech companies will try to differentiate themselves with new projects involving “Really Big Data,” “Huge Data,” and “Massive Data.”

A source of insomnia -- and much cursing
14) Tablets will be linked to insomnia. We’re not talking about the recent study proving that using e-readers before bedtime disrupts people’s circadian rhythms and makes it hard to fall asleep. (That’s so 2014!) We’re talking about MediaVest, the ad agency that is refusing to pay for the portion of a magazine’s circulation distributed via tablet editions. As Madame Marie put it, while meditating on a 1978 copy of High Times with the BoSacks centerfold, “Magazine advertising executives will stay up all night wondering whether to grow a pair and tell MediaVest it needs a rectal-cranial extraction.”

15) With tight supply, rising prices (for now), and strong dollar, the U.S. will be the market of choice for manufacturers of coated paper around the world. Because of low energy costs and the recent shuttering of inefficient mills, North American producers will be able and willing to protect market share by cutting prices.

16) As usual, “that damned newsstand” will be a frequent utterance of magazine publishers. But in 2015 the phrase will refer to the long-neglected Apple Newsstand for marketing iPad editions of magazines. The regular newsstand system – the one that sells printed magazines – will actually register gains in 2015 after years of declining sales.
Google What?

17) The content-marketing bubble will burst when non-publishing companies realize how few people are viewing their content and that it's not generating actual sales. Some will find it more efficient to use -- perish the thought -- paid advertising.

18) Trying to ride the next big wave, a former content-marketing/social-media/SEO consultant will publish a book called How Publishers Can Profit From Chris Christie-sized Data.

19) Web advertisers will have a radical idea: Only pay for ad impressions that are seen by actual human beings.

20) Google will pull the plug on Google Plus. No one will notice the difference.
The next big thing in social media

21) The big news in social media will be a simple new app that lets people share their pain and disappointment by sending out messages saying, simply, “Oy!”

22) Magazine publishers will pour lots of resources into cool new ancillary enterprises that they will brag about at industry conferences. A few of these ventures will actually turn a profit.

23) Some magazine ads will still include QR codes. And consumers still won’t bother scanning them.

24) “Oh, one last thing,” added Madame Marie, still clutching her sacred copy of High Times. ‘Linkbait’ headlines designed to exploit people’s curiosity will take over the Internet. Even your blog will join the trend.” She’s already been proven right on that one.

Wednesday, January 7, 2015

Coated Paper Shakeup Leaves Most U.S. Capacity in Foreign Hands

Coated paper was invented in the United States, but after a major industry shakeup today most of the country's ability to make coated paper is owned by foreign companies.

This morning, two momentous events occurred nearly simultaneously in the industry that makes coated paper for catalogs, magazines, inserts, and brochures:

1) NewPage, the largest North American maker of coated paper, sold its Biron, Wisconsin and Rumford, Maine mills to Catalyst Paper, which shifted about 12% of the nation's coated-paper capacity into Canadian hands.

2) The purchase of NewPage by Verso, the continent's #2 maker of coated paper, was completed a year and a day after it was first proposed. The U.S Justice Department, fearing a combined Verso-NewPage would have too large a market share, required the sale of the two NewPage mills for the takeover to be approved.

This past summer, four U.S.-owned companies -- NewPage, Verso, Appleton, and FutureMark -- operated U.S. mills able to make about 4.8 million tons per year of the glossy paper. That was 65% of the country's coated capacity. The rest was in the hands of companies based in South Africa (SAPPI), Canada (Resolute and West Linn), Finland (UPM), and New Zealand (Evergreen).

Since then, FutureMark went out of business, Verso closed its Bucksport, Maine mill, and NewPage sold the two mills to Catalyst. That leaves two U.S. companies -- Verso and Appleton -- with coated capacity of 3.4 million tons, just under half of the country's total. The new Verso, though, is by far the largest manufacturer of coated paper in the U.S., with more than double the U.S. capacity of #2 SAPPI.

On Jan. 3, 2014, the stock price of Verso, which was seemingly on the verge of bankruptcy, was only 65 cents per share. It closed today at $3.37, an increase of 418% in barely a year.

Wisconsin-based Consolidated Paper invented coated paper in 1935, revolutionizing both the paper and magazine industries. But in recent decades, the innovations have come mostly from Western Europe and the investments have been concentrated in Asia. Even the tiny Canadian industry has out-innovated the U.S. companies, with the forerunner of Catalyst pioneering an efficient process of coating and calendering paper and Kruger building the newest machine.

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Sunday, January 4, 2015

Ten Words That Summarize What Happened to Publishing in 2014

OK, fellow publishing fans, you can’t be ready to face this new year without understanding what happened in 2014. Here are the 10 words (yes, “magazine media” and “native advertising” are single words) that summarize the year that just was, along with links that provide further information:

1) Quorum: Demonstrating its indifference to one of the nation’s largest employers, Congress failed to act on fix vacancies on the U.S. Postal Service’s Board of Governors, causing it to lose its quorum. It’s yet another example of USPS’s “Congressional oversight” turning into “Congressional overlooking,” except when there’s a chance to name post offices. And it's another reminder to publishers of magazines and daily newspapers that our primary means of distribution is still at risk.

Leaked Google document showed its preference for web sites
associated with print brands.
2) Penguin: As they watched their search-related web traffic soar, magazine and newspaper publishers came to realize that the evil empire of Google had now turned friendly. With its Penguin and Panda algorithm tweaks and other enhancements, the search giant increasingly referred people to credible web sites anchored by trustworthy print brands. Late in the year, Facebook also jumped onto the We Love Print Brands bandwagon.

3) Magazine media: Magazine people laughed at first at this new moniker for our industry. But now that a few magazines get a majority of their revenue from digital media and almost all have branched out into multiple non-magazine ventures, 2014 was the year the MPA-created term began to stick. We're not just magazine publishers any more, we tell anyone who will listen, but we're still having trouble figuring out exactly how to describe ourselves. That’s in stark contrast with daily newspaper publishers, who know exactly what they are: Screwed, unless they can find a patient billionaire to buy them.

Wholesaler's bankruptcy led to empty magazine racks.
4) Niche: Every month, it seemed, brought another web site that decided to delve into the magazine business, mostly with highly targeted publications. But the traditional consumer-magazine world of bloated circulation and egos continued shrinking, with stalwarts like Ladies Home Journal shutting down, others reducing their ratebase, and a major magazine newsstand distributor going belly up. A testament to the industry’s increased nichification: The number of U.S. magazines keeps growing, but the nation’s coated-paper industry finished the year with half the capacity it had just 11 years ago.

5) Antitrust: The U.S. Justice Department didn’t bat an eye when Quad/Graphics turned the large-publication printing market into a virtual duopoly by buying out Brown Printing. But it dithered for nearly the full year about the proposed merger of ailing paper makers Verso and NewPage, finally approving the deal on Dec. 31 -- but only after a major divestiture. These, after all, are the same antitrust geniuses who, deciding Amazon’s 90% share of the ebook market wasn’t big enough, went after Apple and major book publishers.

A destroyer of printed books and magazines? Nope.
6) Plateau: Even the enthusiasts who predicted a few years ago that ebooks would soon dominate the book scene finally started admitting in 2014 that ebook sales in the U.S. had reached a plateau, with a market share of less than 25%. Another supposedly disruptive force, digital magazines, also ran out of steam after achieving a much smaller share of the U.S. magazine market. The collapse of digital magazines is being aided by consumers’ shift from tablets to smartphones and abetted by Apple’s incompetence and indifference, as demonstrated by the woeful state of its Newsstand app.

7) Accountability: Advertisers began awakening to the reality that they were being duped by social-media marketing enthusiasts (“Let’s get everyone on Facebook to join the conversation about our toothpaste!”), content-marketing hucksters, and advertising impressions targeted at bots. Kraft even fired most of its advertising agencies, apparently deciding that targeting ads to people who Google “gang rape” is not the best strategy for selling “Pasteurized Prepared Cheese Product" (Velveeta).

8) Measurement: With the rising emphasis on accountability came a growing interest in measurement. The advertising industry started pushing for new ways to measure how many people see a web ad, and for how long, after realizing that a majority of the advertising “impressions” served by ad networks were never visible to an actual human being. Meanwhile, the MPA moved the goalposts on the measures of magazines’ success, emphasizing growing web audiences and omitting the depressing news about trends in ad pages.

9) FutureMark: The closure of FutureMark Paper, which was the only North American manufacturer that made coated paper containing mostly recycled fiber, provided stark evidence of a troubling development: Publishers, and perhaps the public, seem to have lost interest in using environmentally friendly paper. Or perhaps they are having trouble distinguishing between “green” and “non-green” papers.

10) Native advertising: Pundits, editors, and marketers spent the entire year debating whether native advertising was a savior or sellout for publishers. It would help if the debaters could agree on a definition for what they’re arguing about. Is it native only if it masquerades as editorial content? Does native necessarily involve the co-opting of journalists? What’s clear is that marketers are becoming disillusioned with banner ads but still see the web sites of reputable publishers as attractive venues for engaging the hearts and minds of potential customers.

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