Postal Service May Boost Ride-Alongs

The U.S. Postal Service is preparing some price breaks for the money-losing Periodicals class, sources tell Dead Tree Edition.

The most likely change to the Periodicals class, which is used by magazines and newspapers, seems to be a revamping of the “ride-along” pricing and regulations. Ride-alongs are items not eligible for Periodicals treatment on their own, such as product samples and catalogs, that are mailed along with a Periodicals publication.

Postal officials are likely to allow more than one ride-along per publication and to lower the prices for them, especially for ones weighing less than an ounce, sources say. Although USPS is losing money on the Periodicals class, attracting more ride-alongs would be profitable for the agency because including one in a publication hardly changes the Postal Service’s handling costs.

The rate was originally set at 10 cents per ride-along because of concerns that the Periodicals class would cannibalize the more profitable Standard class. Postal officials feared, for example, that cataloguers might just enclose items with magazines rather than mailing them separately.

The arcane formula that was established for setting the ride-along rate has caused it to rise much faster than the rate of inflation, to the current price of 16.5 cents per piece. That has kept annual volume low – fewer than 100 million pieces in the 12 months that ended in September 2008 and probably even lower this year.

It also turns out that the main interest in ride-alongs is for innovative advertisements and single-advertiser supplements, not for catalogs and other items cannibalized from Standard mail. Publishers cite advertising proposals involving seed-impregnated paper, shampoo samples, magnets, and Band-Aids as among those that have been nixed by the high cost of ride-alongs.

There has also been talk of special rates to help Periodicals publishers attract new subscribers, according to one source, but there are questions about whether to help grow a class on which USPS loses money. Some point out that Periodicals’ profitability problem is mostly a matter of fixed costs, and perhaps of a flawed USPS system for allocating costs, so additional newspapers and magazines are likely to be profitable for the Postal Service.

Since not many publishers are increasing their ratebases these days, it seems likely they would use a new-subscriber program not to grow their circulation but to displace non-mail sources of new subscribers. Some publishers tell Dead Tree Edition that they are planning to use this year’s Summer Sale on Standard Mail to obtain new subscribers who might normally come from subscription agents.