Thursday, December 19, 2013

WikiLeaks Reveals Praise for Dead Tree Edition from an Unlikely Source

I was surprised to learn today that WikiLeaks had published glowing praise for Dead Tree Edition's coverage of black-liquor tax credits. Especially considering the source.

"I love Dead Tree Edition's coverage of the issue. Complex situation, but the blogger boils it down pretty nicely," wrote Joseph de Feo in a 2010 email to colleagues at Stratfor, Inc. in reference to U.S. Taxpayers' Black Liquor Tab Surpasses $30 Billion.

WikiLeaks refers to Stratfor as "a company that fronts as an intelligence publisher, but provides confidential intelligence services to large corporations," which is why it published more than 5 million of the company's internal emails. The emails reveal that Stratfor did work for the American Forest and Paper Association, which supported the black-liquor tax credits. (Note this correspondence referencing a meeting between an AF&PA official and Sen. Max Baucus, D-Montana, a key player in the black liquor story who may become the next U.S. ambassador to China.)

 "The Small Business Jobs Act that Obama just signed included a CBP [Cellulosic Biofuel Producer] modification that supposedly nets the government nearly $2 billion by removing crude tall oil's eligibility for the tax credit -- and Dead Tree Edition says that it never would have qualified anyway," de Feo continued. "So the $2 billion in savings is made up. Which would be perfectly consistent with all we've already seen on black liquor. Accuse something (falsely) of being costly, shut it down and claim the (false) savings, skewing budget numbers."

"When corporations do this, doesn't someone usually go to jail?" concluded de Feo, who was a Stratfor analyst and briefer and is now the chief operating officer at Keyframe Policy Consulting, a Stratfor spinoff.

De Feo was referring to just one of about 50 articles Dead Tree Edition has published showing how billions of dollars from federal biofuels programs was diverted to black-liquor subsidies for U.S. pulp companies. As he noted, a recurring theme of the twisted tale is how the subsidies were used to skew federal budget numbers so that Congress could shell out more taxpayer money.

The most recent article in the series is IRS Inaction Leads to Another Black-Liquor Windfall for U.S. Paper Companies.

Tuesday, December 17, 2013

How USPS Is Like an Airline, and Why That Matters

A postal official made a revealing statement last week about the U.S. Postal Service’s attempt to get higher-than-inflation rate increases.

If USPS’s “financial challenges were alleviated by the timely enactment of laws that close a $20 billion budget gap, the Postal Service would reconsider its pricing strategy,” Deputy Postmaster General Ron Stroman wrote last week in a Post & Parcel letter to the editor. The request for “exigent” rate increases – on which a ruling is due Monday --was “a last resort,” according to USPS’s #2 man.

USPS has spent years trying to pass exigent rate increases to help it dig out of the red. So why would it even think about walking away from a legal victory that could be worth a couple of billion dollars a years?

My theory: Postal officials aren’t sure an extraordinary rate increase will help the agency. They’re worried that breaching the inflation-based cap that has kept most postal rates in check will undermine confidence in the mail system, pushing mailers to switch even more communications to digital delivery.

In the simplistic thinking of some Congress members – whom USPS is apparently trying to appease with its rate request – the answer to insufficient revenue is simple: Increase your rates.

But postal officials know that higher prices don’t mean more revenue if they lead to fewer mailings. They’ve seen this movie before in the pre-rate-cap days, and the ending wasn’t pretty, including a drastic decline in catalog mailings.

It helps to understand that, as I wrote in 2009, the U.S. Postal Service is like a money-losing airline that is flying a lot of half-full planes. Many of the airline’s costs are the same regardless how many passengers are on the planes.

You can’t fly with fewer pilots or reduce the jet’s depreciation just because most of the seats are empty. Nor can the Postal Service deliver to fewer addresses just because its mail bags are not as full as they used to be.

If the airline raises its prices, competitors will lure away passengers with lower fares. At the margin, even a bargain-rate passenger is profitable; the only cost of adding one to a plane is a few gallons of jet fuel, a bag of stale pretzels, and a tiny can of soda.

Jacking up postal rates merely causes marketers to prospect more with email instead of direct mail, publishers to convert more subscribers to digital editions, and corporations to offer more incentives for customers who switch to electronic billing.

What the Postal Service needs is mostly in the hands of Congress, which structured USPS in the pre-internet days to be a cash cow for the federal government. Times have changed, and the cash cow has been milked so dry it can’t replace 25-year-old delivery vehicles that are held together with duct tape and rubber bands.

But the laws and practices that drained the Postal Service of billions of dollars remain unchanged. And, more than ever, USPS needs less not-in-my district Congressional interference that stymies reasonable downsizing of its distribution network.

What the Postal Service doesn’t need are rate-cap-busting price increases that drive away customers.

Related articles:

Tuesday, December 10, 2013

A Glimmer of Growth Amidst the Newsstand's Gloom

Despite continuing declines in North American newsstand sales the past few years, one category has experienced steady, impressive growth: bookazines.

Unit sales of the special issues in the U.S. and Canada grew at nearly an 11% annual rate from 2008 to 2012, with annual revenue up 80%, according to data presented recently by MagNet, an industry consortium.

During the same period, total unit sales of magazines decreased about 10% annually. The trend of rising bookazine sales and decreasing overall sales is continuing this year.

"If print is dead and newsstand is dead, why is it that consumers will plunk down and make an impulsive purchase to spend 10 or 12 bucks to buy a high-quality publication at the newsstand?"asked Gil Brechtel, MagNet's president, at the Magazine Innovation Center's recent Act 4 Experience conference. (Brechtel's presentation begins at about the 30-minute mark of this video.)

Bookazines, also known as book-a-zines, mooks, SIPs, one-shots, or special issues, are non-subscription publications sold via the newsstand system. They are usually published by subscription magazines, but some are published under such non-magazine brands as Philadelphia Cream Cheese, USA Today, and the American Bible Society. Brechtel's definition of "book-a-zine" includes only titles having a cover price of at least $9.99, which is probably the vast majority of special issues.

"During 2012 there were 900 bookazines released," Brechtel said. "Some did very well. Some didn't do so well." They generated $352 million in retail sales, a 20% increase over 2011. Typical subject matter included tributes to dead celebrities, in-depth looks at a single topic, and recipe books -- lots of recipe books. The top seller was a National Geographic title that brought in almost $3 million.

"Why are people buying $10 bookazines full of information they can get free on the web?" he asked. "A lot of these are coffeetable books."

The formula for bookazine success, according to Brechtel, is strong brands, high-quality cover and paper stock, and appealing content. Bookazines have the advantage of avoiding a major cause of declining retail sales -- low-ball subscription offers.

"Publishers are trying to chase ratebase so much they're basically giving magazines for free or for a very low price," Brechtel said. "If you buy Cosmopolitan 12 issues for $5 a year why in heck would you spend $3.95 for one issue?"

Bookazines accounted for more than 10% of total newsstand sales last year, and that share seems to be growing rapidly. At a couple of stores I visited recently, it was hard to find actual weekly or monthly magazines amidst all the special issues.

At Target recently: An issue of TIME surrounded by bookazines.
One advantage of the special issues is that they don't go "stale" quickly and can remain on sale for up to three months, versus a month or less for regular issues.

But that's not relevant to all locations: As some stores shrink the amount of space for magazines (though it's the most profitable category for supermarkets), there's increased pressure to turn inventory over quickly, even for successful, high-priced titles.

Related articles:

Monday, December 2, 2013

UPS Praises Postal Service's Improvements, But Not Its Rate Hikes

United Parcel Service recently praised “impressive efforts by the Postal Service to reduce costs and improve productivity” but criticized USPS's request for emergency rate hikes.

The Postal Service’s request for “exigent” rate increases on “Market-Dominant” mail is “an unsustainable business model which can only lead to continued postal deficits and more requests to exceed the rate cap,” UPS wrote in a filing last week with the Postal Regulatory Commission. Instead, USPS’s “Competitive” products should bear a larger share of the agency’s institutional costs, according to UPS, which is a major competitor, customer, and vendor of the Postal Service.

Market-Dominant mail includes such classes as First-Class, Standard, and Periodicals, where USPS’s mailbox monopoly is a huge barrier to competition. Rate increases for such mail can generally be no greater than the rate of inflation, except USPS is seeking higher rates starting in January to compensate for revenue it lost as a result of the recent recession.

By contrast, “Competitive” services include expedited and parcel delivery, where USPS tends to compete head on with UPS, FedEx, and other private businesses. For such mail, USPS can charge what the market will bear. But much of the category’s profit gets tied up in a Competitive Products Fund that the Postal Service cannot easily access.

In the past six years, “Competitive Product revenues have grown by more than 40%, while Postal Service mail and services revenues as a whole have fallen by about 13%.”

Nevertheless, Competitive Products have continued to pay only 5.5% of USPS’s institutional costs, while the unprofitable Market-Dominant category covers the rest.

“Competitive Products’ share of total Postal Service revenue has risen from approximately 11% in FY2008 to over 18% in FY2012,” UPS wrote. “This trend is likely to continue, with Competitive Products expected to account for more than 20% of total postal revenue in FY2013 and over 23% in FY2014.”

Yet the Postal Service’s pricing strategy runs counter to the customary tactic of hiking prices based on rising demand.

“The Postal Service proposes a Market-Dominant average rate increase of more than 5.9%, while it proposes a Competitive Products average rate increase of only 2.4%, with no rate increase for Priority Mail overall,” UPS notes.

Breaching the inflation-based price cap on Market-Dominant mail will “accelerate” the ongoing decline in such mail, UPS claims.

“In short, it is unsustainable for the Postal Service to continue to rely on shrinking Market-Dominant volumes to pay the vast majority of institutional costs. The Commission should require growing Competitive Product revenues to contribute a more equitable share.”

The UPS filing doesn’t spell out the company’s motives. Its proposal would tend to cause larger price increases for the Postal Service’s Competitive Products, which go head to head with UPS’s own offerings and are gaining market share. But because it often outsources the “last mile” of delivery to the Postal Service’s vast carrier network, UPS also has a genuine interest in the health of Market-Dominant mail.

UPS’s filing doesn’t seem to be the work of a company that, as some conspiracy theorists claim, secretly wants to take over the Postal Service. Instead, its actions are consistent with its 2009 statement that, "We believe that the government plays a role in terms of ensuring that every mailbox is reached every day. That is not a responsibility that UPS would want.”

Related articles:

Sunday, November 17, 2013

A Funny Thing Happened on the Way to the Funeral of Print Media

Web publishers launching print magazines, e-book sales plateauing, slow adoption of tablet magazines, and now a profitable U.S. Postal Service: Whatever happened to the death of print?

I recall a magazine editor parading around the office in 2009 and announcing, “Print is dead.” Sure, I recognized it as the exaggeration of a middle-aged journalist trying desperately to prove he was hip to the digital age.

Still, it looked as if he had the basic trend nailed. Although I’m a print guy, I had to admit that within a few years – say, 2013 – print would probably be well along the road to Buggy Whip Lane.

A CueCat, from the author's personal collection of Magazine Failures
But 2013 is turning out to be the year that print media didn’t die. Let’s take a look at some recent events:

Postal profits
The U.S. Postal Service revealed Friday that it was profitable in the year that ended on Sept. 30. OK, the official news release says USPS lost $5 billion, but that included a $5.6 billion payment for pre-funded retiree health benefits that it skipped.

Such payments are in reality low-interest loans to the federal government that mask some of the federal deficit. They're a vestige of the era when USPS was the government’s cash cow.

The $5.6 billion is not truly an expense, and the retiree-benefits shenanigans are so politically controversial that the missed payment will probably be written off. USPS's cash position is still precarious, but better than it was.

The return of junk mail
It wasn’t just downsizing that led to a successful year for the Postal Service. The volume of Standard mail – such as direct mail, catalogs, and promotional flyers – increased 1.8%. Wasn’t everything supposed to have shifted to email promotions and online ordering by now?

Web to print
This month has already seen the launch of two significant print magazines, Allrecipes and Politico, from brands that were previously web-only. That’s the perfect rebuttal to Michael Wolff’s recent analysis for The Guardian, in which he asked, “What is the business basis for print? In fact, is there any reason print should exist?”

If Michael put a bit more effort into looking at actual data and less effort puking up vitriol all over Time Inc., he would know the answer: For most magazine publishers, print is still where the money is.

E-gads
When I headlined an article early last year Are E-Book Sales Reaching a Plateau?, many laughed off the article as wishful thinking from a print dinosaur even though it was based on an objective study.

But three weeks ago, Digital Book World wrote, “Once thought destined to reach 50% or 80% of all book buying and reading in the U.S., ebooks have stalled out on their way up to higher altitude.”

And more recently Mike Shatzkin, one of the leading commentators on the digital transformation of the book industry, actually used the P-word: “Recent evidence suggests that ebooks have hit either a point of serious resistance or a temporary plateau.”

App-oplexy
I got similar blowback for this year’s article A Troubling Sign for Tablet Magazines?, which pointed out a study showing that three-fourths of U.S. tablet owners prefer print magazines to digital editions.

Many articles have subsequently come out about the surprisingly slow adoption of tablet magazines and the struggles publishers are having with selling digital subscriptions.

“Apple is a fickle partner,” Jasper Jackson recently wrote, citing various challenges for magazine publishers. "Until these issues are dealt with, or a genuinely credible competing platform emerges, digital magazine marketers will be working with one hand tied behind their back.”

Print still struggles
Don’t get me wrong: Not all is well in the world of print media. The Web is driving most daily newspapers to the point of extinction. (I’m not na├»ve enough to think Jeff Bezos’ purchase of The Washington Post is a vote for print. Methinks his long-term vision for that hallowed journal doesn’t have much to do with putting ink on paper.)

With the continuing decline of profitable First Class mail and a Congress that can’t pass any meaningful reform, the U.S. Postal Service is still on the ropes.

Newsstand sales are still declining at about 10% annually. Retail chains keep reducing the space devoted to magazines even though it’s their most profitable category. Dysfunctional sales channels, you see, are not Apple’s invention.

So don’t expect people to ditch their laptops and smartphones, dig their typewriters out of the attic, or revert to sending handwritten letters instead of texts and emails.

Digital substitution of print will continue, but it won’t always be at the steady or exponential rates the pundits predict. An unsustainable trend cannot be sustained, and inevitable changes often turn out to be quite evitable.

A few digital innovations are immediate game changers. Some need years of refinement to catch on. (Perhaps digital magazines are in this category.) And others burst onto the scene with much buzz but soon go the way of Friendster, PDAs, and the CueCat.

As for that editor who proclaimed four years ago that print is dead? He was recently heard proposing the creation of a new print product.

Wednesday, November 13, 2013

The Oxymoron at the Root of USPS's Woes

Is the U.S. Postal Service a business or a public service? Congress can't decide on the answer, and that indecision creates a fundamental problem for USPS, says noted postal commentator Leo Raymond.

In the Postal Points newsletter for the Association of Marketing Service Providers, Raymond recently wrote about "an ongoing oxymoron that Congress, in its meddling ineptitude, continues to perpetuate: the Postal Service cannot be cast as a public service, with a 'universal service obligation,' while concurrently being told to be businesslike in its operations."

The universal service obligation means USPS has to provide roughly the same level of service to everyone at the same price, regardless of the agency's costs to serve a particular customer. That's contrary to sensible, business-like behavior: What enterprise in its right mind would charge 49 cents to send an un-presorted letter from Hawaii to a Maine island accessible only by boat?

"Fortunately for Congress, it only has to give orders, not figure out how to implement them," Raymond noted.

Raymond was commenting on my recent article Nine Ways the Postal Service Is Not Like a Real Business, which he said "gets to the heart" of the oxymoron.

Getting praise like that from someone who's a rock star among postal geeks -- and an almost simultaneous Twitter follow from the equally prestigious "Mr. Magazine" (Dr. Samir Husni) -- almost lends an air of respectability to this blog.

Hmm, I'll have to do something about that.

Related articles:


Saturday, November 9, 2013

FSS Contractor Defrauded USPS, Whistleblower Says

A whistleblower is claiming that his former employer, Northrop Grumman, defrauded the U.S. Postal Service by providing it false information about the Flats Sequencing System.

The ex-employee “alleges that the company violated the False Claims Act in a number of ways with respect to the FSS contract [and] alleges damage to the USPS in an amount of at least approximately $179 million annually,” Northrop Grumman stated in its recent quarterly financial report to the U.S. Securities and Exchange Commission. The ex-employee also “alleges he or she was improperly discharged in retaliation.”
Magazines accidentally ejected from an FSS machine.

Northrop Grumman was the lead contractor for the FSS – 100 football-field-sized machines designed to sort catalogs, magazines, and other flat mail. The company has sued USPS for non-payment, and the Postal Service has counter-sued with a claim that Northrop’s late and substandard work prevented the FSS from realizing its expected cost savings.

So far, the FSS has resulted in higher mail-handling costs that have outweighed the Postal Service’s decreased delivery costs. But postal officials expect productivity to rise early next year when flats mailers will be required to present mail for FSS ZIP codes in a manner that is optimized for FSS.

The Washington Post has identified the whistleblower as Beau Michaud and says his complaint charges that Northrop Grumman and a subcontractor “repeatedly made false certifications about the machines’ speed, reliability and accuracy” and that they “provided the Postal Service with a fraudulent handbook for the machines.” (Update: Michaud's complaint was posted online by Save the Post Office on Nov. 10, 2013.

An FSS machine tore the cover of this mail piece.
A LinkedIn profile indicates Michaud was a technical trainer and engineer for Northrop. Someone identifying himself as Beau Michaud has reportedly been contacting postal experts to get photographs of mail that was damaged by FSS machines.

USPS has made a number of adjustments to its procedures and to the machines themselves to minimize torn covers, “foldovers,” and other damage that resulted in employees nicknaming the billion-dollar investment the "Flats Shredding System."

Northrop “intends vigorously to pursue and defend” both the whistle-blower case and the USPS litigation, its says in the SEC filing.

Related articles:

 

Monday, November 4, 2013

USPS's Own Words May Doom Its Rate Increases

The U.S. Postal Service’s attempt to enact hefty rate increases has plenty of critics, but the most damaging words against the proposal may have come from the Postal Service itself.

Postal officials claim that the vast majority of USPS’s revenue losses in recent years were caused by the economic recession of 2007-2009 – an “exigent” circumstance that could justify rate increases exceeding the rate of inflation.

But trade associations from several mail-dependent industries contend that the losses came primarily from “electronic diversion and other trends that do not qualify as extraordinary or exceptional circumstances” that would allow the cap on price hikes to be breached. And the associations point to none other than the Postal Service’s own statements to prove their point.

One coalition of mailers’ groups recently pointed out to the Postal Regulatory Commission a USPS report from last year that stated, ““Diversion of communication and commerce to electronic channels is a principal contributor to declining First-Class Mail volumes”; and “Diversion reflects a permanent secular shift in customer behavior and is more pronounced during periods of economic weakness.” [The report also states, "The Economy is NOT the Main Cause of Diversion."]

The coalition also pointed out a 2010 USPS report stating, "While the recession accelerated the volume decline, its primary cause is a fundamental and permanent change in mail use by households and businesses. Hardcopy communication of all types continues to shift to digital alternatives. More people are paying bills and transacting business online.”

“In this proceeding, in which it [USPS] must show that volume declines are ‘due to’ the recession, it now claims that the recession is responsible for the largest share of First-Class mail volume declines during the same years” and that the recession's impact "dwarfs all other factors that affect mail volumes," the coalition told the PRC. “By attributing the same volume declines to different factors in different fora, the Postal Service’s volume forecasting credibility is undermined. The Postal Service should be required to reconcile its seemingly conflicting statements.”

Thomas Thress, an economist who consults for USPS, attempted to explain to the PRC late last week how the recession and electronic diversion teamed up to deal the Postal Service a double whammy:

“I believe the recession increased electronic diversion because the steep decline in the economy created much stronger incentives for consumers, businesses and governments to find less costly ways to engage in communication and conduct financial transactions. Therefore, it seems logical that people would increase their use of cheaper electronic methods in place of the mail, and do so more quickly and more extensively than they would have done absent the economic constraints imposed on them by the Great Recession. However, it must be emphasized that the increase in electronic diversion was not the only way, or even the most important way, that the Great Recession affected mail volumes.”

Related articles:

Thursday, October 31, 2013

Layers of Redundant Management Have Been Eliminated, USPS Says

The U.S. Postal Service's public relations department responded last night to a recent Dead Tree Edition article. We are publishing the response in its entirety, without comment, except to note that article was based on a combination of verifiable facts and readers' opinions. We also note that many postal employees -- supervisors and "suits" as well as worker bees -- have complained vociferously about USPS's organizational structure. And that a significant overhaul of that structure would probably face legal hurdles.


To Dead Tree Edition

Your recent blog post, 17 More Ways USPS Is Not Like a Real Business, provides some good examples of how the Postal Service’s inflexible and outdated business model hinders our ability to compete in today’s marketplace and why there is an urgent need for passage of comprehensive postal reform legislation. We would, however, like to debunk a few myths in your list.

First, the claim that the Postal Service has “many layers of redundant management” and bureaucracy, is not true. In FY 2000, the Postal Service had 74,877 PCES [Postal Career Executive Service] and EAS [Executive and Administrative Schedule] employees. At the end of FY 2013, we only had 54,473. We have also reduced the number of Areas and Districts significantly, going from 10 Areas and over 100 District offices to 7 Areas and 74 Districts.

Regarding the item about electrical safety hazards, employee safety has always been a top priority of the Postal Service. Under terms of a recent settlement with OSHA, the Postal Service has agreed to modify its Electrical Work Plan Management Instruction and Maintenance Management Order so that significant amounts of personal protective equipment are purchased and significant hours of electrical safety training are administered. These changes are being phased in over a two-year period. We will be investing more than $5 million for 123,000 hours of training for nearly 20,000 maintenance employees. We also have distributed more than $2 million in protective safety gear.

As for the safety of our vehicle fleet, the Postal Service maintains a very stringent vehicle inspection program that requires a minimum of two comprehensive inspections performed each year. Inspections are performed by both contractors and USPS maintenance facilities.

The Postal Service operates under the laws that apply to it and does have the power to exercise eminent domain in the name of the United States. The courts, including the Supreme Court, have cited that power as evidence of how we are a government entity.

The Postal Service continues to take the responsible actions needed as outlined in our Five-Year Business Plan to return the organization to long-term financial stability. We need Congress to do its part by passing the legislative requirements in our plan so that the Postal Service can operate more like a “real business” and provide the mail and package service our customers expect and deserve for decades to come.

Sincerely,
Corporate Communications
U.S. Postal Service


Related articles:
 

Tuesday, October 29, 2013

Viagra in a Printing Plant? What's Up with That?



A TV ad for Viagra that features a printing plant has been getting plenty of air time during World Series broadcasts – and stirring up lots of questions.

What exactly is Viagra trying to tell us – that the printing industry is inhabited mostly by old guys who, how shall we say, suffer from slow makereadies? Is the ad making a subtle reference to the industry’s limp profits in this age of digital media and online bill payment.

The ad takes place at the “K.L. Printing” plant, with the focus on a guy running a Heidelberg sheetfed press. He’s your typical star of an erectile dysfunction ad – a slightly over-the hill guy with a gleam in his eye and a bit of a lone-wolf swagger. And played by an actor who probably doesn’t know his fountain solution from a fountain soda.

Why show a printing plant rather than a more generic-looking factory?

And here's the real mystery: What is it about being a pressman that causes our handsome-but-not-too-handsome star to need Viagra? Dead Tree Edition hopes to clear up this mystery by offering a few theories (with some explanatory links for those of you who aren't printing geeks):
  • He needed more bulk and stiffness in his sheets. 
  • The plant had produced a mail piece that had failed the Postal Service’s droop test
  • The excitement had gone out of K.L. ever since they fired the strippers – when the prepress department went all digital. 
  • His butt roll got caught in a tail clamp, though I’m not exactly sure how taking Viagra would solve that problem.
  • The press’s low-rub ink was rubbing him the wrong way. 
  • Maybe it had something to do with blow-ins, but I’ll leave it at that. 
So what’s your theory?

Related articles:

Monday, October 28, 2013

17 More Ways USPS Is Not Like a Real Business

Please see the U.S. Postal Service's response to this article, Layers of Redundant Management Have Been Eliminated, USPS Says.

The recent article Nine Ways the Postal Service Is Not Like a Real Business apparently struck a chord, or maybe a nerve, generating numerous insightful comments on this blog, various LinkedIn groups, and private emails.

Though the U.S. Postal Service must live off of the revenue it generates rather than on government appropriations, it differs fundamentally from private enterprises in numerous ways. Those distinctions are more than just an interesting point of discussion. They are a key to understanding the Postal Service and how it might be reformed.

So, with thanks to many Dead Tree Edition readers, here are xxx more ways the USPS is not like a real business:
  1. The concept of “investment” is nearly absent from the Postal Service, which must live from one annual budget to the next. It is not able to access private capital markets, such as the bond market, to finance major capital investments. That prevents it from making investments that would probably pay off in the long run, such as replacement of its aging, inefficient delivery fleet and more of the kind of automation that has enabled it to increase labor productivity.
  2. Similarly, the Postal Service is hamstrung when it comes to launching new products that are not immediately profitable. 
  3. The Postal Service does enjoy low interest rates on its debt because it can borrow from the federal government. But it has reached the legal limit of its ability to borrow. And much of its debt was racked up to cover subsidies to the federal budget that were dressed up as prepaid retiree health benefits and pension-fund payments. 
  4. “Real businesses are not required to invest ALL their pension assets in low interest government bonds but instead can choose to invest then in a balanced portfolio,” noted one anonymous commenter. “The difference in average returns on pension assets of the USPS and the average returns of a typical businesses pension assets amount to over $10 billion per year.” 
  5. “They are forced to deliver to unprofitable addresses,” notes Mike Seethaler, president of Raintree Graphics in Jacksonville, FL. “If a customer is too far out and too small for us to make a profit, we don’t do business with them.” In contrast, one commenter noted, USPS “is mandated to serve all areas of the country, every address, every day.” 
  6. Speaking of unprofitable customers, USPS can’t charge higher prices for customers who are expensive to serve. People who get front-door delivery pay no more than those who receive their mail curbside or in cluster boxes. When USPS has to rely on airplanes, boats, or donkeys to get mail to remote places, it can’t charge a premium for those services. And it costs you 46 cents to send a letter from Maine to Alaska, or to send it across town. 
  7. “Real businesses report long term liabilities, like retiree health benefit liability, on their balance sheet, and only report them as an expense when money is set aside to fund the liability,” wrote Liam Skye. “USPS is the only organization that is required by law to report fixed amounts of the liability as expense, whether they put the money aside to fund the liability or not!” 
  8. Unlike most postal agencies around the world, the U.S. Postal Service is legally restricted from straying outside of its core business of offering postal services. And even its delivery-related ventures can run into problems if they compete with private businesses. “Consider the fact that USPS came up with the concept of overnight mail first,” says R.E. Perry. “It made so much money for the service that USPS bought a bankrupt airline rather than continue to pay other carriers to provide that service. Complaints that private companies could be making this money led to Congress ordering the service to sell the airline, and return to paying others to move their mail.” 
  9. The Postal Service is subject to a regulatory agency, the Postal Regulatory Commission, that has no authority over USPS’s private-sector competitors. 
  10. “Another way USPS is not like a business: It is mandated by the Constitution of the United States,” wrote Kofi M. G. W. Opantiri. (Technically speaking, the Constitution authorizes but does not require Congress “to establish Post Offices.”) 
  11. It is exempt from income, sales, and real estate taxes. On the other hand, USPS is not eligible for the kind of tax breaks that incent private businesses to expand and to become more energy efficient. 
  12. “Real businesses don't have two private police agencies who have to enforce thousands of federal rules and regulation WITHOUT reimbursement,” noted one commenter. 
  13. By law, postal workers cannot strike. But impasses in labor-management negotiations at the Postal Service lead to an unusual step – binding arbitration. 
  14. Private businesses are not subject to the Freedom of Information Act. But nor do they have the power of eminent domain, exemption from many state and local laws, and some protections from being sued. “USPS considers itself above the law,” wrote “a lady veteran.” “Some of their trucks should never be on the road.” 
  15. “Not even Wal-Mart risks electrocuting its employees,” tweeted Dave Berdych, alias Dry Mail Man, referring to OSHA’s four-year investigation of electrical safety hazards in numerous postal plants. 
  16. ‏ “No real business would have this many layers of redundant management. (bureaucracy),” responded one reader, echoing a complaint often heard from postal workers. 
  17.  “Real business management incompetence is usually dealt with a demotion or termination,” wrote another. “Postal incompetence is rewarded with a promotion.” 

Thursday, October 17, 2013

USPS Responds To Criticism of Its Annuity Estimates

For the first time I can remember, the U.S. Postal Service issued a formal response today to a Dead Tree Edition article, USPS Comes Up With Yet Another Way to Discourage Early Retirement. The response was submitted as a comment on that article, but I think it deserves to be called out as a separate article. I won't comment on the response, except to say that I'm glad USPS is apparently taking seriously the need for accurate FERS annuity estimates.

According to OPM’s audit results, the U.S. Postal Service leads all agencies in retirement application accuracy with a score of 97% for its August 2013 submissions.

Through our partnership with OPM Retirement and the National Personnel Records Center, the Postal Service has worked diligently to provide accurate and timely information, which reduced the backlog at OPM from a 7- to 10-month delay to currently 30 days or less before retirees are placed in interim payment status.

The Postal Service recently sent offers to approximately 16,000 Voluntary Early Retirement (VER) eligible employees; twelve employees reported receiving blank annuity estimates due to a processing issue. These employees were immediately provided a revised annuity estimate.

The Postal Service provides its employees with annuity estimates that display the estimated annuity amount for employees with and without a survivor annuity. It also provides the following information listed below on its annuity estimate:
  • Retirement eligibility date 
  • Annuity computation date 
  • High-3 average salary 
  • Total actual service 
  • Accrued sick leave credit
  • 50% for FERS retirements effective through 12/31/2013 
  • 100% for FERS retirements effective on or after 01/01/2014 
  • 100% for all CSRS retirements 
  • Annual leave earned balance 
  • Terminal leave payment 
  • Cost of life insurance and FEHB coverage in retirement
The annuity estimate is based on up-to-date individual employee data and a comprehensive, validated service history for each employee, determined according to CSRS and FERS regulations. The service history identifies not only Postal Service service but also periods of military and prior civilian service and whether those periods of service are creditable for retirement eligibility and/or annuity computation.

OPM has validated Postal Service results as highly accurate as compared to actual OPM annuity determinations. The process is continually updated to reflect changes in retirement regulations; for example, estimates reflect the creditability of sick leave for the FERS annuity computation and the ability to make FERS redeposits.

The Postal Service does not provide annuity estimates for the FERS Special Retirement Supplement at this time -- the FERS Special Retirement Supplement is based on an OPM calculation of FERS service as a portion of 40 years of estimated Social Security earnings -- but we are currently working with our Supply Management office to find suppliers capable of leveraging their retirement software applications with our retirement applications to provide an estimated numeric value of the Special Retirement Supplement amount. We anticipate that this project will be completed this fiscal year. In the meantime, the Postal Service does provide a formula on the annuity estimate that shows the employee how to calculate the estimated amount of the Special Retirement Supplement using their own Social Security earnings.

We greatly value the service of all our employees, and we endeavor to do everything we can to contribute to a rewarding retirement.

Tuesday, October 15, 2013

USPS Comes Up With Yet Another Way to Discourage Early Retirement

Please see the Postal Service's response to this article: USPS Responds To Criticism of Its Annuity Estimates.


Amidst all of the postal reform proposals that went nowhere the past few years, the one tactic that has definitely worked for the U.S. Postal Service is getting employees to retire early.

The tactic would work even better if the Postal Service stopped confusing or misleading potential retirees – by providing them with incomplete or just plain wrong information about what their retirement benefits will be.

Here’s the latest chapter in this sorry saga: In the most recent round of VERA (Voluntary Early Retirement) offers, many among the thousands of affected postmasters have received annuity estimates containing no calculation of what their monthly annuity payments will be, reports Roseanne Jefferson, a retired USPS benefits manager, in her Postal Retirement column.

Drop dead
She notes that the postmasters have to decide by “an irrevocable drop dead date” whether to retire without knowing what their retirement income will be.

“Who does that?!" she asks. "Who retires not knowing how much EVEN the gross annuity is, even before any deductions are made? Seriously….do you apply for a job, get the job, and then go home and tell your spouse, hey honey, I got a job…and the spouse says….GREAT!!!, how much will you be making….and the newly employed spouse says, gee I don't know, I guess I will find out when I get my paycheck.”

“The Postal Service has done NOTHING to improve their FERS [Federal Employee Retirement System] annuity estimates,” says Don Cheney, who has been working on USPS early-retirement issues for a decade, often on behalf of fellow APWU members. “They still don’t include the FERS Annuity Supplement when it is applicable."

Confusion is rampant
"Employees don’t know when they are eligible for the FERS Annuity Supplement or how much it is,” Cheney adds. “The rules in FERS are complex, unlike the old CSRS [Civil Service] Retirement System. Confusion is rampant, because local personnel offices were abolished in 2007” when the work was contracted out.

The Postal Service’s practices violate the Office of Personnel Management (OPM) instructions, Cheney claims.In a list of annuity estimates an employing agency must provide upon request, OPM’s handbook provides this instruction (in Section 40A2.1-3, pp. 20-21): “For FERS employees eligible to receive an annuity supplement, estimate the monthly amount payable to age 62.”

The case of the missing annuity estimates is just another chapter in a story that has been unfolding for years. In 2009, for example, only 3% of the 150,000 employees offered a VERA accepted, partly because many mistakenly thought they would be subject to a penalty.

Those eligible for a VERA frequently receive FERS annuity estimates that understate their annuity payments by more than $1,000 per month. And at times many postal retirees have had to wait seven to nine months to receive their full retirement payments.

No winners
No one wins when such incompetence discourages employees from retiring. Certainly not the Postal Service, which is desperate to reduce expenses in light of declining revenues. And with half of the postal workforce being 50 or older, plenty of employees are eager to leave if they could just be sure what their retirement income will be.

By enabling USPS to replace long-time employees with lower-paid new hires and to eliminate jobs without violating no-layoff clauses, the various early-retirement drives are probably saving the Postal Service billions of dollars annually.

Just think how much greater the savings would be if the Postal Service could just do what is commonplace among large businesses – provide accurate and timely retirement information to its employees.

Related articles:

Sunday, October 13, 2013

On the 5th Birthday of Dead Tree Edition, It's Time To Reveal the Real D. Eadward Tree

Five years and 601 articles ago today, a magazine-publishing veteran took on the identity of D. Eadward Tree and launched the Dead Tree Edition blog.

Rarely has the blog focused on Mr. Tree himself, under the assumption that the 700,000-plus unique visitors (some more unique than others) who have visited over the years were looking mostly for advice, insight, or maybe even entertainment. But the true identity of Mr. Tree has become a subject of great speculation and discussion in some publishing and printing circles, prompting a few of the blog’s followers to request that Dead Tree Edition celebrate its fifth birthday by spilling the beans.

A thorough reading of all 601 of those articles provides many hints as to Mr. Tree’s identity. It’s also a great cure for insomnia, unless you are that rare bird who happens to share all of Mr. Tree’s obsessions – such as making print more environmentally friendly, getting accurate benefits information to potential U.S. Postal Service retirees, reforming the way USPS calculates the cost of Periodicals mail, exposing “black liquor” government subsidies to U.S. pulp mills, and battling “go paperless” greenwash.

So to save you the trouble, here are some clues we dug up about Mr. Tree from his writings:

In 2010, a postal executive startled a meeting of postal officials and mailers’ representatives by announcing that Mr. Tree was none other than Patrick R. Donahoe, then the #2 man at USPS. Five months later, Donahoe became Postmaster General. A coincidence? You decide.

A couple of months later came another clue – that Mr. Donahoe, aka Mr.Tree, had starred in those “If it fits, it ships” Postal Service commercials. But Mr. Tree soon pooh-poohed that by claiming he was actually married to a prominent publishing-industry pundit.

Confused yet? Just wait.

Only a Jew could have written this headline: Call a mohel, this baby's growing!. But the article Re-Righting The Bible: No More Namby-Pamby Peacemaking suggests a familiarity with the New Testament that only a Christian would have. And articles like Playboy and Virgin Fail to Hook Up suggest a total lack of spirituality.

An object of fantasies?
What’s clear is that he works in the magazine industry and is a self-described “print guy” (even a printing geek) and “an environmentalist who buys a lot of paper.” But he’s definitely not part of what he calls “the New York publishing elite.”

His LinkedIn profile places him in Hawaii, which should narrow things down a lot. But he claimed in an interview that the Hawaiian thing was a (lame) joke and that he actually inhabits a parallel universe.

He hangs around bookstores and doesn’t date Cosmo readers, he told us three years ago. And regarding a magazine cover of Rosie O’Donnell that has now appeared three times on Dead Tree Edition, we note Mr. Tree’s comment, “Hubba, hubba, Rosie in a bathrobe!” Perhaps a glimpse of his secret, twisted fantasies?

In early 2010 he revealed that he has a nephew – and an apparent appreciation for James Brown. An article he wrote last year for Publishing Executive magazine pays homage to The Who (See me, Sniff me, Touch me, Peel me) and Madonna. And the opening sentence of his next PubExec article ripped off “should threaten to undo us” from Martin Luther’s “A Mighty Fortress.”

Rather diverse musical tastes for one person, wouldn’t you say?

Has it ever occurred to you that Mr. Tree is confused about his own identity?

Tuesday, October 8, 2013

What's Weighing Down the Postal Service?


The internet and the economic downturn have not been kind to the nation's postal system, but it's also been burdened by problems that were, and are, completely avoidable.

I, and other postal commentators, have spilled a lot of ink (and pixels) explaining how billions of dollars have been needlessly taken from the U.S. Postal Service to overfund its pension and retiree health benefits. The chart above from Rafe Morrissey of the Greeting Card Association shows clearly that USPS's payments are way out of line with what's typical for government agencies.

"Both funding levels are substantial financial strains . . . and do not allow for fair competition in the marketplace," says the slide, which is taken from a free webinar that Morrissey is presenting tomorrow (Oct. 9, 2013, 2 p.m. Eastern, 8 a.m. Hawaiian) called "A commonsense solution to the postal service's budget crisis."

Morrissey, the GCA's Vice President of Postal Affairs, will present the association's plan for reviving the Postal Service, which advocates nationwide implementation of cluster boxes and adopting a host of other changes while preserving Saturday delivery and avoiding above-inflation rate increases.

For more information on the Postal Service's pension overpayments and "prefunding" of retiree health benefits, see Congress Hears the Truth About Postal Service Finances, which describes the USPS Inspector General's rather forthright Congressional testimony on the subject.

Saturday, October 5, 2013

Nine Ways the Postal Service Is Not Like a Real Business

The hand wringing about the U.S. Postal Service’s broken “business model” doesn’t fool us. The “dot com” at the end of “usps.com” doesn’t fool us. The nagging of politicians and pundits who say USPS should operate more like a business doesn’t fool us.

Despite all the talk about the Postal Service being a business, regular people understand it has the soul of a government agency and in fact is not allowed to act in a businesslike manner. Here are nine examples of how USPS is not like a real business:

  1. Real businesses underfund their pensions. The Postal Service overfunded its pension plan (to the benefit of the federal government, not postal employees).

  2. When a too-big-to-fail business gets into financial trouble, the federal government often props it up with interest-free loans in the name of economic stimulus. When the Postal Service ran into financial trouble, Congress insisted that it continue lending interest-free money to the federal government in the guise of prepaid retiree health benefits. 

  3. A real business with thousands of employees might pay its CEO $50 million a year, and no one bats an eyelash. But if the Postmaster General, who oversees 600,000-plus workers, earns 1% of that amount ($500,000), watch the politicians fall all over themselves lambasting the Postal Service’s lavish spending.

  4. Real businesses are governed by a board of directors, generally consisting of about a dozen leaders who are or soon become intimately familiar with the enterprise. But the supposedly independent Postal Service in reality is governed by a 535-member board known as Congress, whose members generally know nothing about the USPS’s operations except how to get a post office named and how to prevent it from closing.

  5. Board members of a real business have powerful incentives, like stock options, to make the company run more efficiently. But a member of the Postal Service’s real board (that is, a Congressman) only has incentives to preserve inefficiencies that maximize the number of postal employees and facilities in his district.

  6. When the board of a real business fails to act, board members get punished with a lower stock price and the prospect of not being re-elected. When the Postal Service’s real board of directors fails to act, postal customers get punished with higher prices.

  7. Real businesses make money on monopolies – at least until the trust busters come along. The Postal Service has a government-protected monopoly on the mailbox, but it comes with such onerous conditions that the monopoly is unprofitable.

  8. Real businesses make campaign contributions and use lobbyists to curry favor with members of Congress. The only “campaign donation” USPS makes is the franking privilege, which enables Congress members to send free mail to constituents (usually just before election time). USPS's lobbying efforts are limited severely by law.

  9. A real business that is billions in debt, has too many locations and employees, and is subject to strong union contracts would have declared Chapter 11 by now. The law would be on its side as it tried to walk away from most of its debts, scale back its operations, and even slip out of its union contracts. The Postal Service, however, apparently cannot turn to the bankruptcy courts – one more example of how the law treats it as just another government agency even though it’s supposed to operate like a business.
Do you know of other ways in which USPS is not like a business? Add a comment to this blog post or email them to me at dead.tree.edition@gmail.com. I can keep your comments anonymous if you'd like. And please see the follow-up article, 17 More Ways USPS Is Not Like a Real Business, which is based on insights from Dead Tree Edition readers.

For background information on some of the items listed above, please see:

Sunday, September 29, 2013

FSS Postage Rates Will Raise Issues for Cataloguers, Publications, Printers, and USPS

Because of a provision in the recently announced postal rates, mailers and printers have four months to overhaul the way they prepare catalogs, magazines, and other flat mail.

The coming changes raise a variety of uncertainties for flats mailers, printers, and the U.S. Postal Service itself. And they will make it difficult for many mailers to project how much the new rates will cost them.

The higher rates slated to take effect January 26 will require something that until now has been optional -- and little used: Flat mail going to ZIP codes served by the Flats Sequencing System will undergo FSS preparation. That means the way the mail is sequenced, bundled, and placed on pallets will be completely different from the current methods, which will still be used for non-FSS areas – as explained in FSS Postage Pricing Will Affect Magazines, Catalogs, and Printers.

“FSS machines are a critical element in the Postal Service’s strategic operations plan,” USPS’s recent rate filing says. Currently, however, the efficiency gains that FSS machines produce are limited by the fact that most flats destinating within the ZIP Codes served by FSS machines have not been prepared to maximize FSS efficiency.”

The end of this article has an excerpt from the filing that provides an overview of why USPS is requiring FSS preparation, how the preparation of flat mail will change, and how postage rates for flats mail are being restructured. But first, here are seven questions that I have about these changes. I welcome your feedback on these, either by commenting on this blog or via email at dead.tree.edition@gmail.com.
  1. How does a mailer calculate how much its postage will increase? If the exigent portion of the increase is not overturned, the increase will average 5.9% but actually be higher for some mailers and lower for others. The usual method is to take a typical mailing, plug in the new rates, and see how much that changes the bottom line. But mailers now face a whole new rate structure for a portion of their mail, with most having no clue regarding such things as how many mail pieces they will have on DFSS Scheme Pallets.
  2. What is the Postal Service’s Plan B? Feeding traditional carrier-route and 5-digit bundles into an FSS machine is not ideal, but it works. The reverse, however, is not true: Mail that has undergone FSS preparation cannot easily be sorted if something goes wrong with an FSS operation, such as machine down time or too much volume.
  3. How will co-mail incentives be affected? Postal officials have said they don’t want FSS rates to reduce the incentives to co-mail, which creates a win-win by lowering mailers’ postage while preparing mail in a more efficient manner for the Postal Service. But it will take analyses of many different mailing across multiple classes to determine whether that goal has been achieved. And even if it has, the characteristics of optimal co-mail pools (such as the number of mail pieces) may turn out to be quite different with FSS preparation.
  4. Will some co-mail deals between printers and mailers need to be reinterpreted or renegotiated? Co-mail deals often involve a comparison of actual postage costs to baseline postage (the theoretical postage if there were no co-mail or dropshipping), with some sort of guaranteed savings or sharing of savings. But I’m already getting inquiries from some mailers indicating it’s not clear how their current contract language should be interpreted in light of the FSS rates.
  5. Will FSS preparation enable printing plants to run more efficiently? Creating fewer, larger bundles will reduce the amount of packaging materials needed and in theory should enable bindery lines to run faster. But are there hidden costs as well?
  6. To what extent will FSS preparation reduce mailers’ bindery costs? The way printers charge for creating mail bundles varies from printer to printer and customer to customer. In some cases, customers are charged per bundle – which should mean their bundling costs will decline significantly. In many, if not most, cases, bundling is charged on a per-thousand-copies basis, but will mailers with such deals push for per-bundle charges in the future?
  7. Will all printers be able to create mailings with two very different sets of rules, one for FSS zones and one for non-FSS zones? The change should be little trouble for printing plants that specialize in publications, but will it present problems for more general commercial-printing plants that only occasionally handle flats mailings?
Here's what the Postal Service has to say about the new rate structures:

FSS machines are a critical element in the Postal Service’s strategic operations plan. FSS machines reduce the end-to-end processing costs of flat-sized mailpieces by automating their sequencing into delivery order and avoiding labor-intensive manual sortation by carriers. The Postal Service has installed FSS machines in mail processing plants that process high volumes of flat-sized mailpieces.

Currently, however, the efficiency gains that FSS machines produce are limited by the fact that most flats destinating within the ZIP Codes served by FSS machines have not been prepared to maximize FSS efficiency. For example, for mail destinating in FSS zones, carrier route preparation is of no value because it yields excessive bundles that increase bundle handling costs. In contrast, the containerization of FSS mail on FSS scheme pallets enables such mail to completely bypass bundle sortation operations and be fed directly into the FSS operations. The preparation of FSS Facility pallets also improves service by allowing the Postal Service to quickly identify FSS mail so that it can undergo necessary bundle sortation and be made available for FSS processing without delay.

Accordingly, the Postal Service is taking three steps. First, we plan to require the previously optional FSS preparation for all flat-shaped mail pieces destinating in FSS zones. Second, in this filing we are proposing FSS pricing for presorted flat-shaped pieces in Standard Mail, Outside County Periodicals, and Bound Printed Matter Flats that destinate in FSS zones. The proposed FSS prices are designed to minimize changes in postage for flats mailers. Third, in this filing we are also proposing to introduce discounts for mail on FSS scheme pallets that is entered at the location of the destinating FSS machine (DFSS).

Related articles:

Thursday, September 26, 2013

Why the Exigent Postal Rate Increase Will Backfire

Let’s be honest: Given the U.S. Postal Service’s dire financial condition, the 4.3% emergency rate increases it announced yesterday are hardly exorbitant. That won’t prevent the move from being a disaster for the nation’s mail system.

I have little doubt that some Congressman will blast the USPS Board of Governors for putting forth relatively small “exigent” (greater-than-inflation) price increases. But the micro-managers on Capitol Hill, who should be focused on getting their own house in order, need to understand why the governors aren’t pushing for more.

I think the Board of Governors is trying to make the best of a bad situation, attempting to satisfy the political pressure for higher prices without scaring away customers. I suspect they understand the dangers of any exigent increase in the context of recent Congressional inaction and downright buffoonery on postal issues.

Being part of an industry (magazine publishing) that opposes any exigent increases, I’m not supposed to say this but I will: Mail-dependent companies could probably stomach a one-time extra price increase of less than 5% if – and this is a big “if” – it were part of a larger move to put the Postal Service onto a sustainable path.

We wouldn’t like it, and we might grumble loudly. But most of us would happily pay a few more percentage points in return for ensuring the long-term health of the postal system. And we would stop putting so much energy into figuring out how to reduce our mail volumes and once again include creative use of the mail in our long-term marketing plans.

That, however, is not what happened yesterday. What we got instead was an exasperated Postal Service whose attempts to right the ship have been scuttled at almost every turn by a do-nothing Congress. Accompanying the announcement are:

  • No refund of the billions of dollars the Postal Service overpaid into the federal pension system because of funky accounting.
  • No payback of the billions of dollars in interest-free loans USPS has given the federal government under the euphemistic name of prepaid retiree health benefits.
  • No real progress on consolidating the Postal Service’s bloated network of post offices.
  • A recent reversal of progress on correcting the shamefully slow process of getting postal retirees their full annuity payments, which makes employees afraid to retire and stymies the Postal Service’s move to a smaller, more flexible workforce. (The much-maligned federal bureaucracy was making real headway until – you guessed it – Congress derailed the train of progress by failing to pass a budget, as explained in Budget Cuts Are Delaying USPS and Federal Retiree Payments.
  • No action on allowing the Postal Service to start potentially lucrative ventures – even ones that wouldn’t really compete with private enterprise, such as delivering wine and beer.

All of that inaction makes yesterday’s announcement scary for the business mailers that provide the bulk of the Postal Service’s revenue. We can see what’s coming: Congress members will continue nagging the Postal Service to be more businesslike while forcing it to do something very un-businesslike – raising prices in the face of increased competition and declining demand.

What we mailers see is not a one-time price hike but rather the first of many “emergency” increases that will increasingly thrust USPS into a death spiral. Congress will keep blocking meaningful action on the Postal Service. But USPS customers (and employees) will be the ones who are punished.

As the mythical pirate captain told his crew, “The beatings will continue until morale improves.”

Except that, starting yesterday, mail-dependent companies began redoubling their efforts to get off the ship.

Don’t be surprised if more alternative-delivery ventures sprout up to deliver coupons, magazines, product samples, and even catalogs. Or if publications start providing real incentives to switch their subscribers to digital editions.

Don’t be surprised to see more “Go Green, Go Paperless” campaigns as banks and utilities desperately try to slash their mail volumes. (The “Go Green” part of the slogan is, at best, unsubstantiated, unless it refers to the bank’s cash flow and not to the environment.) Getting a large portion of its customers to switch to paper-less billing will look like a growing source of competitive advantage for companies that send a lot of bills.

Even without knowing whether yesterday’s proposal will stand up to litigation, business mailers all over the country are already asking the same questions: How can we reduce our mail volumes enough next year to counteract the price increase? And, longer term, how can we get out of the mail altogether before these price increases get totally out of hand?

Related articles:
 

Monday, September 23, 2013

Almost Live, From the Cutting Edge of Publishing

The reports I'm getting indicate that the Publishing Business Conference today in New York was bubbling with new ideas, new ventures, and even a few new words.

"Content is king-er than ever," several tweeters quoted one speaker as saying. Others tweeted "re-assetizing" and "transclusion" as additions to publishing's language. Or should I say "languages," since the conference is a mashup of book, magazine and web publishers?

Here are some of the most insightful tweets I've plucked from conference goers who used the hashtag #PBC13:

  • Hearst email database has 10 million addresses. Do any traditional book publishers have even 1 million?
  • Near full screen mobile ads interspersed every few pages get 10-12x click thrus than web
  • Today, everyone is a publisher. And, everyone is a marketer. It's how well you do each that differentiates you from the pack.
  • You can't collaborate effectively with Word files and email
  • Brook's Law: Adding people to a late project makes it later
  • We're making a transition to mobile. Sometimes we're dragging advertisers with us.
  • Both HuffPost and Livingly reporters are writing, video, coding, If you had to wait for engineer, too late. 
  • "We're in the midst of a renaissance for content" publishers. "This gloom & doom stuff is BS."
  • the "network" book - the book is dynamically, incrementally updated as people add notes to it
  • Authentic, personal, and live event video cuts through the noise. Nothing longer than 2 min.
  • “If you're looking to make money, your point of purchase shouldn't be covered in barbed wire."
  • Ebooks a stalking horse for print. How much sell b4 go to print? $1,000
  • The more you narrow yr focus, the more people you reach. No one book is for 'everyone'
  •  "Don't do what everyone else in your industry's doing." 
  •  no such thing as a solo entrepreneur or innovator hire/partner to complement your weaknesses - true true true!! 
  • Successful innovation is solving a problem in a new way. 
  • What My Mom Wants To Know About #eBooks: Why are there errors in the eBook that aren't in the printed copy of the same book? 
  • When will publishers realize they don't make books anymore? They make content destined for containers" (books, #eBooks, web, apps). 
  •  "The future is knowing about your customers and giving them what they want." Data helps, but it's not the future, always been true. 
  • Most of us judge reliability of info by how good it looks. We're moving back to traditional sources. 
  • While Google is one of the biggest polluters with all those servers, digital has the appearance of being green 
  • "Irony: most successful magazine ever was focused on what's on television." (That's a reference to TV Guide, I assume.)
  •  "A newspaper reader who dies isn't replaced by a new reader. 
  •  "Reading no longer linear nor static" good mantra for the future

Friday, September 20, 2013

Settling the Great 'What Is A Magazine?' Debate

The definition of “magazine” and whether a magazine must be a printed product have been favorite topics of discussion, and debate, among publishing folks in recent years.

Publishing pundits BoSacks and Mr. Magazine have been sparring over the issue for years at various events and via social media (as described in Print vs. Digital: The Great Mr. Magazine vs. BoSacks Tweet-Off). I’m sure when they appear together at the Publishing Business Conference next week that they’ll put on the gloves once again – and that it will be quite a show.

But, for me, a circulation colleague recently put an end to the debate with a straightforward answer: “I don't care where you read it – print, tablet, laptop, or a big tattoo on your momma’s backside – if it counts toward ratebase, it’s a magazine.” (A more polite version of that quotation appears in my new article for Publishing Executive, 6 Things Magazine Publishers Should Stop Doing Now. Oh well, it’s not the first time I’ve been censored by PubExec’s editors.)

I’m still a print guy and mostly read magazines and newspapers in their dead-tree versions. And I’ve heard friends in the industry grumble about how the hype about tablet magazines isn’t paying off and that Apple Newsstand is even more dysfunctional than the real newsstand system.

But none of that matters. The point is that only one thing counts – whether we satisfy and even delight our customers, be they readers or advertisers. If we have readers who want our “paginated content” in digital form and advertisers who are willing to pay for those eyeballs, who are we to argue about whether that digital product is a real magazine?

For further reading:
  • Is Ratebase the Magazine Industry's Crack Cocaine? explains what ratebase is -- and why so many in the publishing industry detest it. I feel their pain but haven't heard of a viable alternative. 
  • Bezos Needs To Learn the First Rule of Newspaper Ownership scored a dubious hat trick: Three cyber-friends -- BoSacks, Denis Wilson of Publishing Executive, and Jim Sturdivant of Media Shepherd -- castigated me for focusing too much on pleasing advertisers rather than readers. But at least noted publishing consultant Alex Brown left a comment defending me, stating "the sweet, rosy, unicorn-filled future of publishing as something that readers/viewers will sustain has more cracks in it than we have mortar to patch."  
  • A Troubling Sign for Tablet Magazines? Maybe their time will come, but so far tablet versions of magazines have been a disappointment for most publishers. Even tablet owners prefer to read magazines in print.

Wednesday, September 11, 2013

It's Time To Put the Content-Marketing Snake Oil Back Into the Bottle

A magazine-publishing colleague sent me this rant that I thought was worth sharing:

I know you’re impressed by the content being put out by some non-publishers, but it’s time to put a halt to the snake oil and Kool-Aid being handed out in the name of “content marketing.” Some marketers are losing all sense and perspective.

I got word that a big ad agency wanted to talk to my publishing company about content marketing for its financial services client, so I set up a call with a team at the agency. Their specific task is to promote the client’s “529” college savings plans.

“We love your content about how parents can save and invest money,” the team leader said. No surprise there, since some of our advertisers like to promote their 529 plans adjacent to articles geared to parents.

”OK, are you interested in using the articles on a web site or in other media?” I asked.

“Oh, we don’t want to publish the articles, we just want to link to them from the client’s Facebook page, and the legal department wants us to get your permission.”

A quick look at the Facebook page showed there was already a link to one of our articles that fell squarely into the “fair use” category. Only a paranoid corporate lawyer, or outside counsel trying to keep the meter running, would ask for written permission to publish such links.

Seeing that there was no money to be made from licensing our articles to the agency’s client, I took a different tack: “Since we have so many articles that are relevant to your client’s target audience, have you considered running ads adjacent to such articles?”

“Oh, the client has no budget for media buys,” came the response.

OK, I get it. The client is spending probably north of $100,000 for a high-priced agency to create a Facebook page that has fewer than 2,000 “likes,” even though the only real people who “like” a bank’s FB page are bank employees and retards. [Editor’s note: I apologize for my friend’s slur against the mentally handicapped. I know several mentally retarded people, and none of them are stupid enough to waste time on Facebook.]

And the purpose of the page is not to drive traffic to the client’s web site but instead to web pages that advertise competing 529 plans. Meanwhile, the client is spending not a penny to promote its own products. Brilliant!

A simple explanation: Stupidity
There’s a simple explanation for what my colleague experienced: The client has been reading the work of too many content-marketing experts (who a year ago were social-media experts and two years ago were SEO experts). It asked the agency for three things: 1) Social media: Check. 2) Content marketing: Check. 3) No paid media (AKA advertising): Check. Never mind that the agent isn't supplying any content or doing anything that passes as marketing.

Yes, I'm impressed by some of the web sites and publications that non-publishers have created (See The Content Marketing Craze: 7 Ways Publishers Can Fight Back), but most of what passes for content marketing these days is crap.

Fortunately, some brands are jumping off the bandwagon and realizing that good content isn’t free. You either have to pay professionals (and I don’t mean that intern in the PR department) to create it, or you have to pay someone else for content that was created by their professionals (such as magazine writers and editors).

These brands are also realizing that just because they build it -- and post it, and tweet it, and like it --  doesn't mean people will come. Their wonderful content will not “go viral” unless they spend money inviting relevant consumers to see that content. In other words, unless they advertise.

Related articles about content marketing from Dead Tree Edition and other sources, with pithy quotes from each: