Monday, December 29, 2014

The U.S. Parcel -- uh, Postal -- Service Presents Its Wish List to Congress

The U.S. Postal Service presented a long wish list to Congress today, along with a subliminal message.

“Despite challenging marketplace conditions, an inflexible business model imposed by federal law and financial issues caused by legislative constraints, the Postal Service is moving forward with a lot of momentum,” Mickey D. Barnett and Postmaster General Pat Donahoe wrote in a joint letter appearing in the agency’s annual report to Congress.

Even in the report's only photo showing letters,
(Can you spot them?) packages take center stage.

Translation: “Hey, Congress, the Postal Service is scrambling to keep its head above water because you’ve created a helluva mess. Now could you get off your butts and do something more useful than naming post offices?”

Donahoe and Barnett can afford to be forthright. Donahoe is retiring Feb. 1, and Barnett’s term as chair of USPS’s Board of Governors expired earlier this month.

As for the subliminal message: The 84-page report has 14 photos featuring parcels, one that (barely) shows letters, and none depicting flat mail. Guess what postal officials think is the key to the agency’s future? After all, USPS’s parcel business grew 9% during Fiscal Year 2014, while revenue from other sources declined slightly.

Here's how the report spelled out “What’s Needed” from Congress:

The Postal Service is urging Congress to pass comprehensive postal legislation. Among the provisions we seek are those needed to ensure that the Postal Service is self-sustaining and financially strong as well as a reliable, low-cost partner to the American people and the communities it serves. These provisions include:
  • Require within the Federal Employees Health Benefit Program a set of specific health care plans that would fully integrate with Medicare and virtually eliminate the retiree health benefits unfunded liability.
  • Adjust the FERS [Federal Employee Retirement System] payment amount using Postal Service-specific demographic and salary growth assumptions and refund any existing surplus.
  • Adjust delivery frequency (six-day packages/fiveday mail). 
  • Streamline governance model and eliminate duplicative oversight.
  • Provide authority to expand products and services.
  • Require defined contribution retirement system for future Postal Service employees.
  • Require arbitrators to consider the financial condition of the Postal Service.
  • Reform Workers’ Compensation.
  • Allow the Postal Service the right to appeal EEOC class action decisions to Federal Court.
The Postal Service continues to do its part within the bounds of existing law to place the organization in a favorable financial position, and we are proud of the achievements we have made to reduce costs while significantly growing our package business. Despite these efforts, however, we cannot return the Postal Service to profitability, nor can we secure our longterm financial outlook without the passage of comprehensive reform legislation.

The bottom line is that the Postal Service is ready to make the necessary changes to keep delivering for America. We just require the freedom to make it happen.

Wednesday, December 17, 2014

Legal Trick Means No Postage Increase -- For Now

With some parliamentary maneuvering, the U.S. Postal Service Board of Governors has apparently avoided the need to raise postage rates sooner than it wanted.

A key deadline for the rumored hurry-up rate hikes passed today when the Consumer Price Index numbers for November were announced.

As the board drew close to losing its quorum last week (because of -- what else? -- Congressional inaction) there was talk the governors were preparing rate hikes that would be announced this week and implemented in the spring. (See USPS May Seek a Rate Hike After All.) That appeared to be the last chance for the governors to raise rates until Congress got around to approving new governors.

But a Federal Register filing published yesterday revealed that the governors came up with another plan: While they still had a quorum, they passed a resolution naming the remaining members to a Temporary Emergency Committee that will "will exercise those reserved Board powers necessary for operational continuity until such time as sufficient members are available to enable a quorum of the Board to convene."

Assuming the resolution withstands any legal challenges, it means Congressional deadlock won't prevent USPS from increasing rates when it chooses. That appears likely to be in a few months, after an appeals court rules whether the 4.3% "exigency" surcharge on most postage should be increased or extended.

A rate hike approved before the board lost its quorum would have to have been filed prior to today's CPI release, which caused a recalculation of the inflation-based cap on rate increases.

The Postal Regulatory Commission now calculates that an increase based on the change in CPI during the past 12 months would be capped at 1.685%. But the Alliance of Nonprofit Mailers puts the true cap at 1.965%, because there hasn't been a CPI-based increase for 15 months. And it projects that, despite plummeting gasoline prices, the inflation-based cap is likely to keep inching up for the next few months.

Tuesday, December 16, 2014

Sales of Printed Books Are Growing? Impossible!

Amazon's current #1 book
For years, the pundits have been telling us that all forms of print media would steadily shrink and shrivel as consumers switch to digital media. But here are two recent indications from the U.S. book industry that reality will be a bit more complicated than the soothsayers would have us believe:

1) Unit sales of printed books are on track to increase this year. (Update: It's official: Sales were up 2.4% in 2014.)

2) During the third quarter of 2014, print books actually took market share from ebooks.

“The industry is poised to post its first increase in print sales since 2008,” Publishers Weekly reported last month, citing BookScan data showing a 2% sales bump so far this year.  That report was followed by two consecutive weeks of sales that were up 5% versus last year.

When I wrote in 2012 that U.S. sales of ebooks had apparently plateaued, I was chastised as some kind of Luddite even though I was merely reporting on industry figures. Booming iPad sales surely meant that more people would switch from print to digital for their book reading, meaning more e-books and the continuing decline of printed books, I was told.

“This is the second inning of a long ball game,” my cyber-friend BoSacks commented. “Digital will win and it won’t need extra innings.” He was not alone in thinking that printed books would soon become a niche format.

“Given the explosive growth of ebook sales since the launch of the Kindle in 2007, with increases in the triple digits for several years, many expected the paper book industry to remain in retreat for the foreseeable future,” Claire Fallon of the Huffington Post noted a couple of months ago. “Recently, however, ebook gains seem to have stabilized with hardcover and paperback books still comfortably dominant. In 2013, sales growth for ebooks slowed to single digits.” (Editor’s note: Industry data don’t always capture sales of self-published ebooks.)

Where's the fat lady?
“In mature markets, we are seeing solid growth in digital while print book sales are proving resilient,” says Jonathan Nowell, president of Nielsen Book.  (Note to BoSacks: Better call the bullpen. The starting pitchers are running out of gas, and the fat lady ain't ready to sing.)

So why did the Ebook Revolution that was supposed to have thoroughly disrupted (hate that word!) the traditional book industry apparently peter out with a U.S. market share of barely 20%? There are several reasons, with lessons for other media that are undergoing digital transformations. (Take note, fellow magazine publishers):
  • Low-hanging fruit: For the first few years after the Kindle was introduced in 2007, ebook growth was explosive but also narrowly focused on certain categories. The ebook format became most popular in genres that are read from first page to last, such as novels and biographies, but is barely a blip in photography and some types of reference books. Once most of the book-a-week romance and suspense buyers bought an e-reader or tablet, further growth of ebooks had to be based on grabbing harder-to-reach fruit. 
  • Legacy publishers adapt: The pundits tend to assume that decades-old publishers will lumber along like dinosaurs, oblivious to the digital meteor strike that will soon lead to their extinction. But book publishers didn’t just sit back and watch while ebooks lowered the barriers to entry and raised the chances of success for a new wave of self-publishers. Self-published ebooks became the new slush pile, where the big book publishers went looking for authors worth signing. The big players have also studied the most entrepreneurial self- and non-traditional publishers, adapting their methods to selling both print and ebooks. It's a bit like the magazine industry (um, magazine media industry), where the Internet Revolution has led not led to destruction of the savvy but rather their transformation into multi-media ventures. 
  • On demand: Printing technology hasn’t stood still, either. In the past couple of years, the equipment and infrastructure for print on demand have blossomed – to the detriment of traditional book printers but to the benefit of book publishers. The ability to print one book at a time economically on an as-needed basis has enabled the industry to slash its inventory costs and reduce the risks of book launches. Backlist titles that were out of print for years are suddenly available again. Using POD, self-published ebook authors can easily create print editions with virtually no upfront costs. 
  • Consumers didn’t take sides: Some proponents see ebooks in terms of a holy war that is liberating authors from the shackles of Big Print (traditional book publishers). They assumed that once people “converted,” they would never go back to print. But readers didn’t get the message; few book readers have given up print entirely. They expect ebooks when they want ebooks and print when they want print. They buy e-books to read to their children, then shell out for print editions of the kids’ favorites. The same executive who furtively read Fifty Shades of Gray on her Kindle while flying to a business meeting will proudly peruse her print edition of The Great Gatsby on the flight home. 
  • Digital is not the enemy of print: Where is it written that people will buy only a fixed number of books, so that every ebook sold means the sale of one less printed book? Ebooks have drastically lowered the barriers to entry for new titles and new authors; the best usually find their way into print. That means more choices for consumers, which tends to increase overall sales. 
What of the future? Though some of my fellow print geeks see ebooks as a passing fad that will eventually lose out to "real" books, I’m not so sure.

What happens if ebook technology becomes more suited to sharing, highlighting, Post-It Noting, attractive photo spreads, and reading on smart phones? Will Amazon uses its market power to bolster ebooks at the expense of print? What happens if Barnes & Noble collapses? (Indie bookstores will pick up all the slack? Really?) Will ebook subscription services be a game changer?

I can offer only two predictions: Anyone who blithely projects that recent trends will continue unabated into the next decade will be proven wrong. And, as Jonathan Nowell of Nielsen Book says: “For the foreseeable future, we will operate in a hybrid print and digital world.”

Related articles:

Monday, December 8, 2014

USPS May Seek a Rate Hike After All

Please see the update to this article, Legal Trick Means No Postage Increase -- For Now.

Barely two months after deciding to skip the usual January price increases, the U.S. Postal Service appears close to announcing that prices will rise in the spring. As usual, the do-nothing Congress is to blame.

The Association for Postal Commerce (aka PostCom), a multi-industry trade group for business mailers, reports that USPS is readying itself for the next postal price change to be effective April 26, 2015." PostCom's "heard it through the grapevine" reports on Postal Service doings are usually right on the mark.

Rates could rise nearly 1.7% for the "market-dominant" mail classes, such as First-Class, Standard, and Periodicals. That could mean a one-cent increase in the price of Forever Stamps, to an even 50 cents.

What's driving the agency's change of plans, according to PostCom, is that Congress has failed to act on five nominations to USPS's Board of Governors, which oversees the Postal Service and must approve any rate changes. If Congress doesn't approve some of the nominations before its holiday recess, scheduled to start later this week, the board will lack a quorum until next month -- and maybe much longer if Congress deadlocks or is too busy naming post offices to act on the nominations.

With no quorum, no rate increases could be enacted. It's not completely clear whether the governors, while still having a quorum, could approve a rate increase but leave it to management's discretion when, or even whether, to file the new rates with the Postal Regulatory Commission.

The Board of Governors announced Oct. 1 that it would forgo the usual inflation-based January rate increase "in part because of the uncertainty regarding the exigent price increase." (See The Postal Service Giveth, and the Paper Market Taketh Away.)

The exigent surcharge of 4.3%, intended to compensate USPS for its losses during the Great Recession, is scheduled to expire next summer, but the agency has gone to court to increase and extend the surcharge.And some politicians have talked of making it permanent.

Also prompting the Postal Service's change of plans may be declining oil prices, which could lead to decreases in the Consumer Price Index. Normal increases in market-dominant rates are limited to changes in the CPI.

The current CPI-based ceiling of 1.678% may be the largest USPS will see for at least a few months if petroleum prices keep dropping. Unless USPS files for an increase, the ceiling will be recalculated Dec. 17 (not Dec. 15, as I originally mis-stated) when the Labor Department reveals the CPI for November.

Saturday, December 6, 2014

Donahoe Will Be in Good Shape When He Leaves U$P$



Last fiscal year, even before she was chosen to be the future the Postmaster General, Megan J. Brennan was the U.S. Postal Service's highest paid employee.

But don't fret for retiring Postmaster General Pat Donahoe. He will leave USPS on Feb. 1 with a pension having an estimated present value of more than $4 million, according to a financial report the agency filed Friday.

Brennan's FY2014 base salary of $236,536 was $42,000 less than Donahoe's. But with a $20,000 bonus and a $77,000 gain in the value of her FERS retirement plan, her total compensation of $351,655 came out $3,000 ahead of Donahoe's.

Before some grandstanding politicians tries to score points by blathering about overpaid postal executives, consider this: The CEOs of USPS's slightly smaller competitors, FedEx and UPS, earned more than $14 million and $10 million, respectively -- versus $1.8 million for the top five USPS executives combined.

Related articles:

Monday, November 24, 2014

Postal Service Starts Fiscal Year With a Bang

Maybe it was the election. Maybe it was the economy. Maybe it was even a sign that an organization that was left for dead is bouncing back.

Whatever the reason, the U.S. Postal Service revealed today it had a bang-up October, with domestic mail volume up nearly 7% over the same month last year, rather than the 2% decrease USPS was expecting.

The beleaguered agency had "controllable operating income" of $647 million in the first month of Fiscal Year 2015, more than double what it budgeted or what it earned last October. Controllable operating income excludes what is euphemistically referred to as prepaid retiree health benefits, which USPS has stopped paying, and accounting adjustments for the future cost of workers compensation cases.

Big growth areas
Major mail categories with significant revenue increases over October 2013 included "Permit Imprint Nonprofit Standard" (43%), Parcel Select (30%), "Permit Imprint Regular Standard" (14%), and "Permit Imprint First-Class (7%), according to an in-depth financial report also released today. Even the Periodicals class was up a bit.

In the first month with aggressive parcel rates for large business mailers, volume for Shipping & Package Services rose 14% and revenue by 12%.

Despite the higher volumes, work hours increased by less than 2% and total expenses by less than 3%.

It will take more than one strong month, however, to get one of the country's largest employers out of the financial woods. USPS is frequently on the verge of running out of cash, and it has no ability to borrow money, even for such mission-critical needs as replacing its decrepit, inefficient delivery vehicles.

Related articles:

Wednesday, November 19, 2014

Discover-ed: How Direct Mail Competes With Digital Marketing Channels

A major financial services company provides a rare peek inside its direct-marketing strategy, with lessons aplenty for printers, marketers, and postal officials


With more than $300 million spent annually on direct-mail postage, Discover Financial Services is one of the U.S. Postal Service’s largest customers. And though Discover still spends most of its direct-marketing budget on mail, it is increasingly shifting those dollars to a variety of digital media.

A Discover executive recently provided a peak inside the company's marketing strategy, demonstrating how digital media have become more competitive with direct mail and yet how good old snail mail endures as a marketing channel despite its high cost.

“Last year, for the first time, more of our new accounts were acquired through digital channels than they were through the mail channel,” Harit Talwar, Discover’s chief marketing officer, told the Postal Regulatory Commission recently.

Postage rates up; digital costs down
Though they “once were rather immature marketing outlets,” digital marketing channels “are now viable, fully effective, cost efficient channels that produce good results, he wrote. “Moreover, they are channels that tend to become less expensive over time. This is in contrast to mail which also produces good results but tends to become more expensive over time.”

“For the Postal Service to continue to play in this arena, it must maintain and improve the effectiveness of mail, push mail to work effectively with other channels, and deliver that effectiveness at appropriate price points,” Talwar wrote. He was explaining why the PRC should approve a proposed negotiated service agreement between USPS and Discover that would provide incentives for Discover to spend more on direct mail.

“It is critical to understand that for us, Standard Mail is not a monopoly product for it operates in a highly competitive market that includes a wide variety of targeted digital channels,” he wrote.

“Our digital channels are now viable, effective, cost-efficient channels with higher adoption rates that reach far more recipients at a much lower price than mail.”

“Discover has many choices, and their number and effectiveness grow every year,” Talwar added. For example, the ability to target people by interests and even location, along with new creative formats, have made web advertising far more effective than it was in the days of untargeted, undifferentiated banner ads.

He categorized Discover’s nine direct-marketing channels as email, pop-ups (including home page takeovers), paid search, banner ads, social media, Discover’s web site, mobile web, mobile apps, and direct mail.

Skipping the light Fandango
“New technologies are emerging that would allow an advertiser such as Discover to promote the 5% Cashback Bonus promotional earn category to a user who is making a dinner reservation in their Open Table® app, reading a restaurant review in their Yelp® app, or buying movie tickets from their Fandango® app.”

“More customers are signing up for a Discover card via our mobile app than initially expected.”

Contrary to popular opinion, however, email no longer competes with direct mail when it comes to attracting new customers because consumers have learned to ignore un-targeted email blasts. But email is still “a highly effective channel” for cross-selling existing customers, Talwar wrote.

“Among the targeted marketing channels, mail is about two-thirds of our marketing spend for promotion of the Discover card. Four years ago it was a bit more than 80%.” Nevertheless, Discover’s spending on postage has increased 27% during the three-year life of its current NSA – an indication of how rapidly the company’s total direct-marketing expenses have risen.

Answering the unanswered question
For the printing and mailing industries, Talwar left a key question unanswered: Why does Discover continue to spend so much money on direct mail – the vast majority of it for postage – when its cost per acquisition from digital channels is in general so much lower? But he did provide a few hints:
  • “To acquire new cardmembers, we partner with an outside source on a database of prospects. Based on credit bureau attributes and risk tolerance, we send pre-approved offers with segmented messaging and pricing, or we send invitations to apply.”
  • Some new-customer mailings go to all of Discover’s “analytic segments, while others go only to select segments. “Segmentation is based, among other things, on customers’ creditworthiness and response rates.”
  • “We market primarily to those whose credit quality is sufficient to qualify for a Discover card.”
  •  Mail is used extensively with existing customers, with “targeted offers to encourage them to activate their card, to increase their use of the card, or to take advantage of balance transfers. Mail is also used to promote our card's features and benefits, to promote business with our partner merchants, and to ‘cross sell’ our other products and services.”
  • “Mail is used in tandem with the other channels to reinforce each other and send a coordinated set of messages, or a common message across our channels to our targeted recipients.”
It's clear that Discover derives huge value from direct mail's ability to hone in on precise targets. Only mail messages can be delivered solely to prospects having good credit scores and other characteristics that make them likely to get approved for a credit card and to be profitable customers. Mail's targetability enables Discover to send different offers to different people, with especially high-value prospects getting additional mailings.

Mail is also the only reliable way to reach existing customers with a cross-selling promotion. (Yeah, there’s email and mobile apps, but do you look at every email and download the apps from all of your banks and credit-card providers?)

Talwar’s comments indicate that Discover doesn’t fall victim to “the last-click fallacy” – the belief that a sale should be attributed solely to the last communication the customer received before signing up. The company realizes that direct mail, like event sponsorships and TV advertising, makes people more likely to click on its digital offers.

“Mail is a very strong, viable, and highly effective channel, which is not going away,” Talwar wrote. “It is just not the only game in town anymore, and it is going to have to compete with these other channels, as well as with the channels that will emerge in the future if it is to maintain its position and prosper.”

Related articles:

Friday, November 14, 2014

Brennan Will Be First Woman To Lead the U.S. Postal Service

With Postmaster General Patrick Donahoe announcing his retirement today, the U.S. Postal Service's Board of Governors named USPS Chief Operating Officer Megan J. Brennan as his replacement.

When Donahoe ends his 39 years with the agency on Feb. 1, Brennan will become the first woman to hold the position of Postmaster General, 240 years after the Continental Congress appointed Benjamin Franklin to the job.
Megan J. Brennan

Donahoe started with USPS as a clerk and became PMG four years ago. He gave no reason for leaving what Dead Tree Edition has called "the worst CEO job in America".

Here is Brennan's biography as it appears on the Postal Service's web site:

Megan J. Brennan was named Chief Operating Officer and executive vice president in December 2010. Brennan leads the continuous improvement of the entire postal network operation as well as the allocations of people and resources. She reports to the Postmaster General.

Brennan has responsibility for the day-to-day activities of 491,000 career employees working in more than 31,000 facilities supported by a fleet of over 200,000 vehicles. She is responsible for Post Offices, delivery and retail operations, facilities and the mail processing network. Reporting to Brennan are the vice presidents of Delivery and Post Office Operations, Facilities, Network Operations, Retail Channel Operations and the seven vice presidents of Area Operations.

Previously she was vice president of Eastern Area Operations. As the senior postal official she oversaw an area that encompassed Pennsylvania, Ohio, West Virginia, Delaware, Kentucky, Central and South Jersey, Western New York and parts of Virginia and Indiana. Reporting to the deputy postmaster general and chief operating officer, she was responsible for postal operations, including processing and distribution, customer service and administrative operations.

A 27-year veteran of the Postal Service, Brennan served as vice president of Northeast Area Operations from May 2005 until being named vice president of Eastern Area Operations. Prior to that, she was manager of Operations Support for the Northeast Area. In this capacity, she was responsible for coordinating and integrating processing and distribution, transportation and delivery operations throughout the Northeast Area.

Brennan also held the headquarters position of manager of Field Support and Integration, where she worked directly for the Chief Operating Officer.

Brennan joined the Postal Service in 1986 as a letter carrier in Lancaster, Pennsylvania, and began her management career as a delivery and collection supervisor. She has in-depth experience in both line management and support positions, having worked at the district, area and headquarters levels. She served as district manager, Springfield, Massachusetts, and plant manager for the Lehigh Valley and Reading, Pennsylvania, processing and distribution facilities.

Brennan is a graduate of Immaculata College in Pennsylvania. She is a Sloan Fellow and holds a Master of Business Administration degree from the Massachusetts Institute of Technology.

Wednesday, November 12, 2014

Black Liquor Hangover: U.S. Paper Industry Cheers GOP Victory After Gorging on Democrats' Handouts

Snark alert: I believe in both the laws of science and the laws of economics, which these days means I'm neither a Republican or a Democrat. So don’t try to read any political bias into the following article; it is intended to be equally offensive to liberals and to conservatives. 

The Obama Administration has enabled U.S. paper companies to pocket an estimated $25 billion in black liquor tax credits the past six years, but here’s a clear sign the tap is about to run dry: The paper industry’s trade association this week hailed the recent Republican election victories as a sign of “Americans’ real appetite for change in Washington, D.C.”

“The bureaucracy that causes delay after delay and regulations that fail to balance benefits with costs have created an atmosphere of uncertainty in the business community, making it difficult to plan for future investment when the rules change faster than they can be implemented,” said Donna Harman, president and CEO of the American Forest & Paper Association. She specifically singled out environmental regulations.

To understand this turn of events, and why the paper industry is biting the Democratic hand that fed it so lavishly, it’s time for a quick civics lesson about the political parties’ competing approaches to climate change:

Democrats want to tackle climate change head on, promoting regulations to tamp down greenhouse gases and new programs to encourage clean energy sources. But those well-intentioned programs mostly end up getting hijacked to benefit favored companies in ways that do nothing to help the environment.

The quintessential GOP approach is to scoff at climate change or the need for carbon-reducing regulations and incentives. Conservatives declare disagreement with the diagnosis (humans are speeding up dangerous climate change) because they don’t like the proposed cure (big government programs). But that doesn’t stop savvy Republicans from investing in companies that will profit from the new Arctic shipping lanes being created by the melting of polar ice.

Some liquor to ease the pain 
The Democrats’ approach started paying off for the paper companies about six years ago, when "the miracle of black liquor" in the form of round-heeled Internal Revenue Service rulings literally kept several companies afloat during a down paper market. The IRS gave the companies permission to abuse biofuel-incentive programs by collecting billions in eco-incentives for doing what they had already been doing for decades – burning black liquor, a pulp byproduct, as a fuel source.

“Industry-wide, black liquor may have cost taxpayers upward of $25 billion,” Jane J. Kim, an IRS lawyer, stated recently in a letter to select Congress members and Treasury officials. She cited Black Liquor, “Son of Black Liquor”, and “Grandson of Black Liquor” tax credits as prime examples of “IRS Management abuse.”

Her protest adds to that of William Henck, a whistleblower IRS lawyer who says IRS employees examining the black liquor credits were told by high-level agency officials “to take a position that was contrary to the law and to published IRS guidance.”

Clearly a cover-up
“There was in my opinion clearly a cover-up of the decision to allow well connected taxpayers to avoid reporting the black liquor tax credits as taxable income,” he wrote. He sees evidence that the cover-up goes all the way to the IRS’s Chief Counsel, an Obama appointee. (In one of many ironies in this twisted saga, one of the largest beneficiaries of the credits, Georgia-Pacific, is owned by the Koch brothers, who are not exactly known for their friendliness to the Obama Administration.)

There is evidence that Democrats left the original black liquor tax credits in place to win a key pro-Obamacare vote from Republican Sen. Olympia Snowe of Maine, where the credits helped a large pulp mill remain in business. (Republican legislators may not like big government in general, but they sure like it when it means bringing some pork home to their constituents. And it’s hard to say which party is worse about creating corporate welfare programs for companies that make generous campaign contributions.)

The Obama Administration and Democratic Congressional leaders also finagled with the credits and threats of additional credits to help “pay” for Obamacare. (Another civics lesson: The concept of "paying" for stuff in the Alice-in-Wonderland world of Congress has little to do with covering its costs. Don't try this at home, unless you want to take an extended tour of a federal correctional facility.)

Closing time
Paper companies are just about done squeezing the last drops from the black liquor credits. For example, Domtar said that the $222 million in earnings it booked last month because of favorable (and questionable) IRS rulings on the taxability of the credits is the last it will see of the government’s black liquor largess.

With no more black-liquor credits or other handouts coming down the pipe, suddenly big government doesn’t look so good to the paper industry.

Said the AF&PA’s Harman: “In the coming months, I look forward to working with the new Congress to help create policies that make businesses a partner in meeting the needs of society through sustainable regulations that balance environmental, social, and economic considerations.”

Translation: “We could stomach the Democrats’ big-government policies as long as the hand-outs exceeded the cost of anti-business regulations. But now that the money has stopped flowing, we might as well throw in our lot with the party that is likely to roll back those regulations.”

Related reading:

  


Thursday, November 6, 2014

USPS Network Consolidation: A Tale of 3 Pictures

A lot of ink has been spilled discussing and cussing the U.S. Postal Service's plan to close 82 mail processing centers next year. But the three images below tell the story in a nutshell.

David Williams, USPS' vice president of networks, showed these slides in a recent presentation to mailers about the "Phase II" consolidations scheduled to begin in January.

The first slide demonstrates why: The volume of highly profitable single-piece First Class letters is barely half of what it was seven years ago.
 
















The reduced volume is a major reason the Postal Service needs fewer sortation centers -- and the $750 million annual savings it estimates the consolidations will generate. ("AMP" refers to Area Mail Processing studies, USPS's process for evaluating the expected impact and savings from potential plant consolidations.)

The second slide demonstrates that the plants to be closed are spread throughout the country and are primarily Processing & Distribution Centers. Williams said the closings will be part of another "methodical, measured transition" and that, as usual, affected employees will be offered "options for staying with the Postal Service" rather than being laid off.



















The third slide shows the end result: By next October, the Postal Service plans to have only 239 processing centers, down 64% since 2007.


Other articles about USPS plant closings:  

Saturday, November 1, 2014

Donahoe Signals Change of Heart on Weekend Deliveries

Postmaster General Patrick Donahoe made a statement this week demonstrating that postal executives’ views about weekend delivery of packages have changed significantly in the past four years.

"The future will be a seven-day package world and a five-day mail world," a USA Today article quoted Donahoe as saying.

In 2010, the U.S. Postal Service released its “action plan for the future” that called for elimination of Saturday delivery, with no exceptions. But, responding to concerns about delayed deliveries of prescriptions and other vital parcels, postal officials acquiesced and changed their plan to include Saturday delivery of packages.

No one – not even the most ardent advocates of postal service or even the postal unions – was talking about adding Sunday delivery of any kind.

But in recent months, weekend delivery of parcels has gone from obligation to opportunity. The Postal Service is delivering Amazon packages in a growing number of urban markets. In San Francisco, it is testing same-day, seven-days-a-week delivery for multiple retailers and today added early-morning grocery deliveries to its test offerings in that city.

Donahoe’s comment to the newspaper suggests that the long-term plan is for Sunday to become just another day of delivery as far as parcels are concerned.

Why the change of heart?
Why are postal executives who wanted to eliminate a day of parcel delivery barely four years ago now trying to add a day?

They are seeing huge potential in the e-commerce boom, which is fueling rapid growth in business-to-residence deliveries. And they are recognizing where the much-maligned USPS has competitive advantages over its private competitors.

United Parcel Service, for example, is seeing 60+% annual growth in UPS SurePost, its low-priced option that turns packages over to the Postal Service for final delivery. FedEx’s SmartPost similarly relies on the Postal Service to for “the last mile” delivery to residential customers. Neither company can deliver to residential customers as efficiently as USPS can.

In a move to cut out those middlemen and grab more of the e-commerce dollars, the Postal Service recently reduced Priority Mail parcel rates for big mailers by as much as 55%.

Changes in its workforce have also enabled USPS to reduce its delivery costs. The average hourly rate for the city-carrier force, for example, dropped 5% in the past year as the Postal Service increasingly relied on city carrier assistants (CCAs) and other non-career employees. The agency plans to have only CCAs delivering groceries in the San Francisco test.

What’s also changing is the Postal Service’s strategic focus. The same electronic media that are cutting into USPS’s traditional bread and butter – delivering letters – are also creating profitable growth opportunities in the package business. That’s why it wants to give short shrift to traditional mail while expanding service in the package realm.

Unlike letter delivery, USPS doesn’t have a monopoly in the parcel world. But its massive delivery network and unique ability to reach every address in the country every day of the week may give it a virtual monopoly in certain types of package delivery.

Related articles:

 

Thursday, October 30, 2014

NewPage and Verso Find a Catalyst For Their Merger

Update: The Justice Department announced on Dec. 31 that the Catalyst deal will satisfy its antitrust concerns about the Verso-NewPage deal. Both the Catalyst deal and the Verso-NewPage deal were completed on Jan. 7.

Today's announcement that Catalyst Paper will buy two NewPage coated-paper mills apparently means that the merger of NewPage and Verso Paper will move forward.

Catalyst revealed that it will purchase NewPage's Rumford, Maine and Biron, Wisconsin mills for $74 million -- more than quintupling the Canadian company's capacity for making coated paper. One condition of the sale is that Verso-NewPage deal be consummated.

That merger has been delayed by federal antitrust officials, who were apparently concerned that, by owning half of North America's capacity to make coated paper, a combined Verso-NewPage would have too much market power and be able to drive up prices. NewPage's sale of the two mills, coupled with Verso's decision to close its Bucksport, Maine mill, were presumably a condition of gaining the U.S. Justice Department's approval for the merger.

Catalyst would only pay about $85 per ton of capacity to make paper that typically sells for at least $850 per ton. That looks like a fire-sale price, except that the continent's demand for coated paper is half of what it was barely a decade ago. And except that we've seen this movie before, and the ending wasn't pretty.

Justice allowed the 2007 merger of newsprint giants Abitibi and Bowater to go forward only after Abitibi unloaded one of its gems, a 100%-recycled mill in Snowflake, Arizona, to Catalyst for a bargain price. But a few years later, Snowflake hit a perfect storm -- Chinese buyers driving up the price of West Coast recycled paper, black liquor tax credits subsidizing competitors using virgin pulp, and the collapse of the U.S. newspaper industry -- and was shut down.

Both AbitibiBowater (now called Resolute Forest Products) and Catalyst ended up going through bankruptcy reorganization and emerged as smaller but healthier companies.

Catalyst makes mostly newsprint and uncoated papers in western Canada, but does have a single machine making coated groundwood paper.With the purchase announced today, Catalyst would pick up four machines that make coated freesheet as well as coated groundwood paper, plus some market-pulp capacity.

Related articles:

Thursday, October 23, 2014

Postmaster General Wins Dubious Publishing Honor

In just two and a half years, Postmaster General Patrick Donahoe has gone from hero to villain in the eyes of a leading publishing-industry magazine.

Disruptor General
Folio: named the U.S. Postal Service’s CEO this week to its Folio: 100 list of the 100 most influential people in the magazine industry, in the “disruptor” category.

“Donahoe raised postal rates by 6 percent in December, making magazine delivery more expensive at a time publishers are carefully managing their print costs,” Folio: noted. Periodicals mail volume declined more than 6% in the first six months after the “exigent” rate increase was implemented.

Folio:’s slap at the PMG was a far cry from April 2012, when the magazine hailed Donahoe because “he has pledged to support the magazine industry.” He was awarded a place on that year's Folio: 40 list of the magazine industry’s “most innovative and distinguished professionals.”

Folio: quoted him back then as saying “You don’t hear me walking around saying we need an exigent price change — that will push you, bill presenters and standard mailers out of the mail.”

To be fair to Donahoe, almost everyone in 2012 thought Congress would have to do something to relieve the Postal Service’s financial burdens, after squeezing billions of dollars from the agency in the form of pension overpayments and prepaid retiree health benefits.

But in fact Congress has been unable to do anything more meaningful than name additional post offices, leaving Donahoe few options in his efforts to keep the agency solvent.

Related articles:
 

Sunday, October 19, 2014

Google Loves Print, This We Know, For Its Guidelines Tell Us So

A leaked internal document reveals Google's predilection for the web sites of print-media publishers. Why? Doesn't it know that print is dead?

Google may be on the cutting edge of technology, but its search engine is going increasingly old school by favoring the web sites of print publications.

The expense of printing and distributing publications has led most publishers to start weaning themselves from dead-tree editions. But those same costs may be a key to Google's love affair with print-media brands.

Google's idea of a highest-quality web page
Google’s preference for print pops up frequently in its guidelines for quality raters, a 160-page document that advises the Google employees who evaluate web sites in order to improve the company's search algorithms.

Publishing Executive magazine has just published my article "9 Lessons Publishers Should Take from Google's Leaked 'Search Quality Rating Guidelines'," which draws lessons and warnings from the leaked document.

But why does Google prefer print – or, more precisely, why do its search results tend to favor web sites associated with printed publications?

The rating guidelines document doesn’t explain the preference explicitly and in fact never mentions the word “print.”

Clues aplenty
But the clues are plenty: Raters are told to give high ratings to pages that “clearly come from a highly authoritative source which is known for original content creation (newspaper, magazine, medical foundation, etc.)”

The Atlantic’s "Secret Fears of the Super-Rich" exemplifies an article deserving the highest rating because it provides “a satisfying or comprehensive amount of very high quality” content “on an award winning magazine website” with “a very positive reputation.”

The guidelines contain eight references to the word “magazine,” 15 to “newspaper,” and six to the Pulitzer Prize – plus additional examples of specific publications. Almost all refer to the publications’ web sites as authoritative, high-quality sources.

Google's clear message 
The message is clear: Search results should give preference to reliable web sites with content that is free of commercial influence -- and that often means the web sites of reputable publications.

Music magazine interview has highest-quality main content
A Google search of “diet pills” will return a myriad of results. If the first page is full of pill merchants and what they say about their own products (“Melt pounds away in minutes!!!”), all but the most gullible will be inclined to look for a new search engine.

But prominent links to trusted brands like Prevention, WebMD, and The New York Times will keep people coming back to Google.

Any idiot can create a web site (even me!) and fill it with useless, biased, or just plain wrong information. And plenty have. But a printed publication can’t rely for long on clickbait and other tricks.

To cover the costs of paper, printing, postage, etc., it has to generate much higher revenue per reader than does a web site. Survival usually depends upon having both subscribers and premium advertisers, which you can't attract and retain without earning a reputation for providing worthwhile content.
The permanence of print gives magazine publishers an incentive to get it right the first time – that is, to edit, rewrite, fact check, etc. And the additional cost of each page naturally leads to weeding out the weakest content. (Many print publishers have content on their web sites that does not meet the standards for their printed publications.)

Nowhere do the Google guidelines recommend checking whether the information on a publication’s web site has actually appeared in a printed publication. The assumption is that a print-media publisher’s standards and the necessity of protecting its hard-earned reputation will spill over to its web site.

How did Google reach that conclusion? Not from the publishing industry’s time-honored BOGSAT (Bunch of Guys Sitting Around Talking) method. And not from making value judgments about which web sites people "should" visit.

Google's motive: profit (Duh!)
Google is just trying to give customers what they want. It uses data from millions of daily searches to determine what kind of results give people the information they want so that they will continue using Google.

Google’s data obviously tell it that internet users believe information on a web site that is associated with a print publication tends to be more trustworthy than information on other web sites.

In the publishing industry's endless discussions of “print versus digital,” we often miss this lesson: Print means credibility, and credibility means more web traffic.

Having a printed publication is a source of sustainable competitive advantage for a web site. Just ask web-native publishers like Style.com, WebMD, and Politico, which have burnished their reputations by starting ink-on-paper magazines.

The Daily Bust 
Too often, the “Print is dead” types – mostly aging Baby Boomers desperate to prove their with-it-ness – have viewed print as a ball and chain on their digital dreams. Following that logic in 2010, Newsweek’s entire web presence was subordinated to sister company The Daily Beast. (WTF is a Daily Beast?)

Contrast that with Newsweek’s new digital-native owners who, recognizing the strength of the Newsweek legacy and brand, relaunched newsweek.com and invested heavily in its editorial content. And then, rather than fleeing print, they did the unthinkable, resurrecting Newsweek as a printed newsweekly.

Sure, neo-Newsweek is a niche publication with a tiny fraction of the multi-million circulation numbers of the glory years. But how many people look up circulation numbers when deciding whether a web site is credible? (And maybe a magazine with a few thousand high-paying customers has the same credibility as one with millions of bargain-basement subscribers.)

Laugh at Newsweek’s new strategy if you like; many pundits already have. But for the first time in years, Newsweek recently became profitable.

Related articles:

Saturday, October 11, 2014

Third Bush on the Right, Please: USPS Grocery Deliveries Would Need Lots of TLC from Carriers

Mail carrier was recently named the most endangered job in the U.S., but the U.S. Postal Service seems to have other ideas. Its plan to deliver groceries to households in major metropolitan areas is the latest among several strategic moves that would mean more work for employees who handle the "last mile" of delivery.

Please, Mr. Postman, look and see,
Are there some groceries in a tote for me?

The Postal Service’s proposed market test of same-day grocery deliveries, apparently in partnership with Amazon, would require even more TLC on the part of USPS’s carrier force than normal deliveries, the agency revealed this week in filings with the Postal Regulatory Commission.

“All Customized Delivery items will be transported directly to a customer’s door and will be delivered [between 3 a.m. and 7 a.m.] without disturbing the recipient,” USPS revealed to the PRC. “Customized Delivery also will allow recipients to provide specific delivery instructions.”

Back door man
“Carriers would need to go to each delivery door and manage customer specific delivery instructions.” To avoid theft of the early-morning deliveries, such “special delivery instructions” could conceivably include placing the special grocery-filled totes at back doors, in hallways, into parked cars, or even behind bushes. Undeliverable totes would be returned to the shipper.

“Participants will pay a fee for the Customized Delivery Service,” USPS wrote. UPS is reportedly close to rolling out a service that, for a $5 fee or a $40 annual membership, would deliver someone’s packages to a nearby store instead of to the home.

The Postal Service has recently been encouraged to enter a wide variety of new ventures, most notably providing banking services to the poor and to rural residents. But postal executives’ new-revenue plans are all focused on leveraging the agency’s massive, every-address delivery network: not only by serving the grocery business but also with Sunday deliveries for Amazon, aggressive price cuts on lightweight packages sent by large mailers, and seeking legislative approval to deliver wine and beer.

All of those growth efforts are far more labor intensive – and higher priced – than USPS’s traditional job of delivering letters. The Postal Service is also adding thousands of new delivery points every day, requiring more travel time for carriers even if mail volumes don't grow. So it's premature to assume that letter carriers will soon go the way of buggy-whip makers.

Market disruption? 
To gain the PRC’s approval for its proposed two-year “Customized Delivery” market test of grocery delivery, USPS must show that the venture would not disrupt existing markets or rely on “unfair” competitive advantages over private businesses.

Starting later this month, USPS wants “to test and develop a long-term, scalable solution to enable expansion of customized delivery to additional major metropolitan markets across the nation.” It might also test other delivery times during the day.

“The Postal Service will negotiate price with each customer [presumably the grocer, not the consumer], in part, based on the pickup schedules specific to each customer.” USPS also hopes the test will determine “the optimal pricing structure for this type of service.”

San Francisco test  
The agency recently conducted a smaller-scale test of grocery delivery in the San Francisco area. City carrier assistants – non-career postal employees – delivered about 160 totes per day to 38 ZIP codes, according to postal officials.

“In the current process,” USPS told the PRC, “the retailer brings groceries already packed into retailer-branded totes, some of which are chilled or include freezer packs, directly into Postal Service destination delivery units (DDUs) between 1:30 a.m. and 2:30 a.m."

“The totes are all the same size and color, and have a QR code on the outside. The Postal Service receives a manifest file from the retailer containing the address and QR code number for each tote. This file is used by the Postal Service to dynamically route totes and create a line of travel for each route.”

“These deliveries are unattended — the CCA will not ring the doorbell or knock on the door. The carrier places the totes in a location designated by the consumer for delivery.

“Totes are scanned [sometimes with an iPhone] at key steps in the process to provide tracking and visibility through to delivery. CCAs wear postal uniforms and lighted caps as a safety measure and for easy recognition by the public.”

[Editor’s note: Perhaps such lighted caps should also be provided to carriers who have to make normal deliveries after sunset during the winter months.]

Related articles:

Wednesday, October 8, 2014

Ten Ways to Celebrate International Print Day

Today is the first International Print Day, when lovers of ink on paper are taking to social media to share cool printed projects, success stories, and helpful information.

It's very early morning (U.S. Pacific time), and I'm already seeing more than one "#IPD14" tweet per minute, most of them with relevant links.

But we here at Dead Tree Edition headquarters have our own way of honoring special days (like wearing all-natural condoms to celebrate Earth Day). So here are our 10 suggestions for making this day really special:
Nice Frisbee you've got there.
  1. Moon the next bank that sends you a "Go Green, Go Paperless" message.

  2. Hand someone’s tablet to her three-year-old child. (“No, Mr. iPad does not like to be dropped. Can you say “ouch”? Can you say “cracked screen”?)

  3. Calculate the percentage of emails received today that you don't read; be sure to check your spam folder. Now compare that to the percentage of mail pieces you receive today that you don't look at. 

  4. Tell the IT department you want to include a scratch-and-sniff promotion in your next email blast. “C’mon, I saw something like this in a dead-tree magazine. If those geezers can do it, you can too, right?”

  5. Mail a handwritten note to someone you are trying to impress. And have the rescue squad on standby in case the recipient can’t take the shock of receiving personal mail.

  6. Visit your "Print is dead" friend, go into his pantry, and tear the labels off all the cans and packages. Just think, you'll be helping him realize his dream of going paperless. (While you're at it, maybe you should remove all the paper from his bathroom as well.)

  7. To the tune of “YMCA,” sing “C-M-Y-K,” and make up new, print-friendly lyrics. Don’t forget the arm motions. Take a selfie when you’re doing the “K” and post it to your Facebook page.

  8. Use your Kindle as a Frisbee.

  9. Watch the Viagra-in-a-printing-plant TV ad and think of the suggestive, print-related sweet nothings he’ll whisper to his wife when he gets home. (“Hey, baby, let me get rid of your PMS by converting it to process colors.”)  

  10. Buy a book. Not an e-book, which can only be rented (regardless of what the sellers say). A real ink-on-paper book. And read it.

Thursday, October 2, 2014

The Postal Service Giveth, and the Paper Market Taketh Away

October began with both good news and bad news on the cost front for publishers of magazines and catalogs.

Because of announcements made on Wednesday, publishers can scratch the usual January postage rate increase from their 2015 budgets but should probably count on price increases for coated paper.

The U.S. Postal Service Board of Governors announced it would not raises prices on "market-dominant" mail classes early next year, contrary to its usual practice of implementing inflation-based price hikes in January. They have the authority to raise rates 1.58%, which could have led to a 1-cent increase for Forever Stamps as well as higher postage for direct mail, catalogs, newspapers, and retail flyers.

"The governors decided not to seek a change for mailing and shipping products and services in January in part because of the uncertainty regarding the exigent price increase.The Postal Service will continue to evaluate pricing strategies and will communicate about any potential price change filings in early 2015, including advance notice to customers of any price changes."

As noted in Postal Rates in 2015 Could Rise or Fall -- or Do Both, USPS is currently slated to reduce market-dominant rates by 4.3% in the second half of next year when the exigent surcharge expires. But postal officials have gone to court in hopes of increasing or extending the surcharge. And they hope to avoid a price cut when the surcharge expires by implementing an inflation-based price hike at the same time.

The bad news came from Verso Paper, which is closing its Bucksport, Maine coated paper mill. That, coupled with the recent closure of the FutureMark mill in Illinois, could mean an end to rock-bottom prices for magazine-quality paper in 2015.

Verso revealed that Bucksport has been unprofitable for years. Paper industry insiders say the same is true of FutureMark. As the old saying goes, the best way to make a small fortune in the paper business is to start with a large fortune.

Verso, teetering on the edge of bankruptcy, says the Bucksport closure will not affect its proposed merger with NewPage, which is under extended antitrust review by the U.S. Department of Justice. By the time Justice gets done, there may not be anything left of Verso to merge.

Related articles:

Sunday, September 28, 2014

Forever Stamps: Not a Sexy Investment

Sales of Forever Stamps spiked shortly before the 3-cent price increase in January, dropped slightly for a few months, and have now returned almost to normal.

Some people stocked up to beat the price increase but not many bought more than a few extra months' worth of stamps, numbers released Friday by the U.S. Postal Service suggest.

Thanks to the temporary "exigent" surcharge, January's increase to 49 cents was the largest since Forever Stamps went on sale in 2007. That led to speculation about people hoarding or even investing in Forever Stamps.
 
First Class Forever Stamp revenues were up 10% in December 2013 and 35% in January 2014 over the previous year, temporarily netting USPS more than $300 million in additional cash. Then came the drought: The number of stamps sold was down 18% in February, 17% in March, and 12% in April.

By comparison, the 1-cent increase in January 2013 caused hardly a blip -- a 5% increase that month and then a 9% decrease the next.

In the past three months, revenue from Forever Stamp sales has been essentially flat versus the previous year. With the price increase, that means fewer stamps were sold.

But the decrease wasn't much more than would be expected  from the long-term trend of declining First Class letter mail.

If the surcharge expires next summer, as currently scheduled, the price of Forever Stamps will probably decrease for the first time, most likely by a penny or two. But those who own 49-cent stamps will not receive rebates.

Despite email and online billing, people are still mailing plenty of letters: In the 12-month period from September 2013 to August 2014, the Postal Service sold more than 13 billion Forever Stamps, worth more than $6 billion.

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Monday, September 22, 2014

Postal Rates in 2015 Could Rise or Fall -- or Do Both

The outlook for changes in postal rates for the next 12 months is murkier than it's been in years.

A rate hike, a decrease, an extension of the temporary “exigent” increase, and even an increase and decrease a few months apart are all plausible 2015 scenarios for First Class, Standard, and Periodicals mailers. That uncertainty is a far cry from the past few years, when "market-dominant" postal rates inched up each January based on the rate of inflation.

The 4.3% exigent increase that was implemented in January is the source of the unusual uncertainty. That surcharge is supposed to disappear after it yields the U.S. Postal Service an additional $3.2 billion, presumably in mid-2015.

The three-judge panel considering an appeal of the exigency case seems unlikely either to eliminate the rate hike or to make it permanent, according to Stephen Kearney, executive director of the Alliance for Nonprofit Mailers. But based on the judges’ comments and questions during recent oral arguments, his reading of the tea leaves foresees a decent chance the judges will remand the case to the Postal Regulatory Commission with orders to revise it.

Big risk to mailers
“The big risk to mailers in the remand outcome would be a possible determination by the PRC that the exigent rates would need to raise more than the $3.2 billion in their original order,” Kearney wrote in a summary of the oral arguments. That could result in hiking the surcharge or in extending it.

The main issue in the case is how much revenue USPS lost as a result of the recent recession, as opposed to revenue it would have lost anyway from increased usage of email, online billing, and other digital media.

“The judges seemed to agree that the PRC was right to accept the recession as an extraordinary event under the statute as well as the need for a special rate increase to cover the recession-caused losses,” Kearney said.

However, the judges indicated that the PRC’s decision was unclear regarding how the Postal Service’s recession-related losses were calculated, Kearney wrote. And they questioned whether the PRC’s methodology fell short of counting all the losses.

Two choices
"The judges likely will decide between two choices: to defer to the expert regulating agency and let the PRC order stand, or to remand the case back to the PRC and tell them to do a better job determining and implementing methods to quantify the revenue that the USPS lost as a result of the 2007-2009 recession.”

With the judges taking one to three months to issue their order and the PRC possibly needing additional time to reconsider the case, it could be well into next year before we know the outcome. And even an order upholding the PRC decision would not completely clear up what will happen to postal rates next year.

Mailers and postal officials are still arguing over how to decide when the $3.2 billion target has been reached. One issue, for example, is whether to count the surcharge on all Forever Stamps sold during the exigency period or only on those that are actually used.

USPS officials could implement the usual inflation-based price increase – probably in the 1%-2% range -- in January. But that could mean a 4.3% decrease a few months later if the exigent surcharge expires as currently planned.

Postal officials have indicated they might postpone a January rate increase in hopes of building up enough rate-increase authority to keep rates level when the surcharge expires. However, if the PRC order is upheld and inflation continues at a tortoise’s pace, USPS's rate authority would probably fall a couple of percentage points short, leading to price decreases.

But remember that, in Washington, “temporary” measures to increase government revenue have a way of becoming permanent. For mailers, there’s a danger that Congress will let the Postal Service keep the extra surcharge in place to keep the agency solvent, to preserve Saturday delivery, to stop some postal facilities from closing, or to finance new delivery vehicles.

Or just because.

Related articles:

Saturday, September 20, 2014

A Lesson in Magazine Printing from the Ghost of Robin Williams

Surprise, surprise, there were no takers for the copy of TIME magazine purporting to show the ghost of Robin Williams.

Despite the Dead Tree Edition article being picked up by the Naples (Florida) Daily News and several web sites, no one could scare up $10,000 and enough gullibility to bid in the eBay auction that ended Friday.

But those of you with more dollars than sense and a passion for printing errors need not despair: Almost immediately, the Kennewick, Washington-based eBay seller "warnecathe" relisted it, again with a minimum bid of 10 Gs.

Williams' ghost reportedly showed up at his mansion a month ago, but the scores of printing and publishing geeks who commented on the TIME cover were not fooled. The consensus was that the cover, along with the back cover, was simply printed without enough black ink.

A few correctly pointed out that I was wrong in saying the cover could not have been printed shortly after the press started up. Newsstand copies of TIME are bound before the subscriber copies, but the covers are printed at the same time.

Several commenters guessed that the copy was printed just after a blanket wash, a process for cleaning debris off a press in the middle of a printing job.

A blanket wash causes paper going through the press to get little or no ink, so the paper coming out of the press is supposed to be diverted to the waste stream until the color returns to normal. But in this case "the pressman was just a little too quick in deciding where the waste stopped and the good sheets started," wrote Tom Kenny of Pictorial Corporation, on the LinkedIn group Print Production Professionals. "We wouldn't be discussing this if the error didn't produce such a metaphoric image. It's the ghost in the machine."

In the blink of an eye
Another one of the 34 comments in the PPP group provided more detail: "The black ink is way way down, the magenta and yellow are down a bit, the cyan a hair more than the magenta and yellow," wrote Eric Eliel of e2 Communications. "Looks very much like they just washed the blankets and the press was coming back to color."

"Keep in mind, the speed at which modern heatset [press] webs run, at 2000+ feet per minute, translates to about 17 copies per second at speed. The presses should come back to color after a washup in about 50 to 100 copies, which is about 3 or 4 seconds. This 'color' issue could occur in a blink of an eye, literally."

Sandra Jones of Best Version Media explained why the faulty cover couldn't have been noticed and pulled out during the binding process: "Being a subscriber copy, it would have come off the stitcher already buried in a postal bundle."

And no one disagreed with the assessment offered by Grace Savides of Independent Printing: "Wow, that eBay seller is quite the opportunist. It's amazing how little shame some people have. Glad no one's put a bid on it yet."