“When you look at the Three Ps, in 2000, printing was 45 percent to 55 percent of costs, paper was probably 20-25 percent of your costs, and postage was between 30 to 32 percent of overall costs,” the Cygnus Business Media executive told Folio: magazine. “But now the printer is probably sitting with only 32 to 35 percent of overall costs. Paper hasn't changed that much on a percentage basis but the number that has changed tremendously is postage. That's probably sitting at 42-46 percent of overall costs depending on the magazine.”
Martin’s insight rings true not just for the B2B magazines in Cygnus’ portfolio but also for the large consumer magazines – and in fact for every mail-dependent organization. While everyone else in the ink-on-paper world has been slashing costs in the past decade, the Postal Service mostly just passed cost increases along to its customers and only in the past few years got serious about real efficiency gains.
That’s why mailers think the Postal Service is ripe for some serious downsizing. (But they had better be careful what they wish for, as Dead Tree Edition will explain tomorrow in Mailers Getting Cold Feet About Postal Service Cuts.)
As for Martin’s statement, here’s what’s happened to the “three Ps”:
Prices for publication printing have been dropping at about 3% to 4% per year (NOT adjusted for inflation) for more than a decade. Prices for coated paper have fluctuated greatly but are almost exactly identical (NOT adjusted for inflation) to what they were 10 years ago.
But USPS rates for most types of postage rose faster than the rate of inflation rate during the first half of the past decade and increased in line with the inflation rate the past few years.
Postal executives complain that their rate increases are limited “only” to changes in the Consumer Price Index. But most mailers have no sympathy for those complaints: They’re happy if they can avoid cutting the prices they charge and would be ecstatic if they had the kind of guaranteed price hikes the Postal Service enjoys.
Mailers believe the Postal Service only got serious about cost cutting when it was forced to do so – by declining demand for mail and the CPI-based price cap. And despite USPS’s aggressive downsizing the past couple of years, mailers still see a system that has far too many post offices, sorting facilities, and people (especially supervisors) than it needs to handle current or future mail volume.
- The USPS's Radical Plan: Good in theory, potential chaos in reality: D. Eadward Tree's new article for Publishing Executive magazine, which explores why mailers should be cautious about how and how quickly the Postal Service is downsized.
- Postal Service Has Too Many Employees and Pays Them Too Much, Mailer Groups Say: USPS has 170,000 too many employees, according to a coalition of major mailer groups.
- Why Are the Postal Service's Financial Problems Such a Surprise?: Explores how USPS has been bailing out the federal government for years.