Sunday, January 6, 2019

The FSS Slows, and the Red Ink Flows

Postal officials still have no fixes for a money-losing billion-dollar boondoggle, except to jack up postage rates for catalogs and magazines. 
Source: USPS reports. The Leakage metric was introduced in FY2017.

For the third year in a row, productivity of the U.S. Postal Service's Flats Sequencing System declined in 2018 – with no end in sight to the money-losing machines’ troubles.

Hourly throughputs declined 5% during Fiscal Year 2018 and are 14% below where they were five years ago, the USPS reported recently in its Annual Compliance Report. Leakage – the proportion of mail that was supposed to be run on FSS machines but wasn’t – rose from 20.1% to 21.9%.

And barely half of FSS mail – 54.2%, down slightly from last year – ended up being sorted in delivery sequence as intended. The only good news is that “Mail Pieces at Risk” -- catalogs or magazines that got jammed in the machines or needed other special handling -- dropped from 5.8% of FSS mail to 4.6%.

The Postal Service has touted various efforts to fix the agency’s flats-handling processes, but the compliance report says it “is still unable to provide an estimate of the financial impacts of these operational initiatives” because of flaws in its data-management systems. One such flaw, an Inspector General’s report revealed recently, is that FSS facilities are apparently doing nothing to track, understand, or correct the causes of leakage.

The Postal Regulatory Commission asked the USPS on Friday to explain why this year’s Annual Compliance Report makes no mention of Lean Mail Processing, which postal officials touted last year as “an initiative to make processing USPS Marketing (AKA Standard) Mail Flats and Periodicals mail more efficient.” (Puh-leeze! Lean Management is so 2017.)

Cost coverage worsens
The FSS’s failures contributed to greater unprofitability for the two main types of mail handled by the FSS machines – non-carrier-route Marketing Mail (“Marketing Flats”) and Periodicals. Rather than fixing the causes of the red ink – by scrapping the FSS machines, for example – postal officials have pressed for abolition of the inflation-based price cap on flats mail.

USPS’s costs per Marketing Flat mail piece rose an astounding 13.4%, causing cost coverage to decline from 74.0% to 68.6%. Postal officials blamed lower economies of scale, as increased co-mailing by printers shifted flat mail from Marketing Flats (17.5% volume decline) to such lower-cost categories as High-Density Flats (up 20.0%).

The cost per Periodicals piece increased only 1.3%, while revenue per piece declined by the same amount – perhaps also because of more co-mailing. The result is that the Postal Service’s highly questionable costing methodology showed that Periodicals covered only 67.54% of their costs, down from 69.33%.

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Thursday, December 6, 2018

USPS Workers Are Overpaid and Should Lose Collective-Bargaining Rights, Trump Panel Says

Claiming that U.S. Postal Service employees are paid much better than workers at FedEx and UPS, a presidential task force wants to de-fang the postal labor unions.

"USPS employees enjoy a pay and benefits premium over their private sector counterparts, although the size of this premium is likely falling,” the Trump-appointed Task Force on the United States Postal System said in a report released Tuesday.

“Based on Treasury [Department] staff analysis of 10-K filings, in 2017, total per-employee cost at the USPS was $85,800, compared to $76,200 and $53,900 at UPS and FedEx, respectively.”

(A Dead Tree Edition analysis of a USPS report largely corroborates the claim about Postal Service compensation: Average base pay for postal employees in Fiscal Year 2017 was $25.23 per hour, which works out to nearly $53,000 annually. Benefits and overtime added about $31,000 per full-time equivalent employee.) 

The panel recommended that “the Federal Service Labor-Management Relations Act be amended to apply to the USPS and its employees,” which would ban collective bargaining for postal workers’ compensation. The vast majority of USPS employees are represented by one of nine labor unions or two management associations.

Not in the mainstream media
The anti-collective bargaining proposal, which has gone mostly unnoticed by the mainstream media, “would enable the USPS to address the costs and complications with its current labor system, and allow for better workforce planning and cost control within its rapidly evolving business model,” the panel’s report says.

“USPS employees should not be afforded protections and rights not enjoyed by other federal employees."

The Postal Service spends 76% of its budget on compensation and benefits, which the panel said is “a much higher share of . . . costs when compared against other private courier companies.” That’s despite postal officials achieving “limited labor reforms” in recent years.

“Postal salaries have risen at slower rates than those in the private sector, collective bargaining agreements have gradually transferred a portion of health premiums from the USPS to individual workers, and the USPS has been able to lower the number of employees, from a high of over 905,000 in 1999 to around 634,000 in 2018, relying more heavily on non-career employees.”

But the panel noted that the postal workforce has actually increased by about 4% in the past three years because of the rapid expansion of package deliveries.

 “Given the expected growth in package delivery services, personnel costs are expected to continue to increase in future years, offsetting the increase in the corresponding revenue,.” the panel wrote. It didn’t address the extent to which productivity gains or package-delivery price hikes could reverse that unfavorable trend.

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Friday, November 30, 2018

Hedge Funds Buys Newsstand Giant

Chatham apparently controls American
Media, publisher of the National Enquirer
Yesterday's announcement from the owner of the country's largest magazine wholesaler seems to have flown beneath the radar, but it could have major implications for the U.S. magazine industry. 

That's why we're publishing the news release word for word, which rarely happens at Dead Tree Edition.

We'll leave the analysis for others, except for a bit of background information:
  • The News Group (TNG) is the wholesaler for the vast majority of magazine copies sold at retail in the U.S.
  • Note that JPG will retain the part of TNG that merchandises magazines. (Wholesalers, rather than the stores themselves, are usually responsible for replacing old issues with new issues and deciding how they will be displayed.) That makes sense because JPG's massive distribution business delivers a variety of other products to grocery stores and other retailers. 
  • Comag, which started as a Hearst-Conde Nast co-venture, is one of the nation's largest national wholesalers of magazines. National wholesalers represent publishers in dealings with wholesalers and retailers, managing copy placement, billing, collections, and other services.
  • Chatham's other media investments have included American Media Inc (AMI) and the McClatchy chain of newspapers. Two Chatham executives serve on the four-member board of AMI, the privately held publisher of National Enquirer and other magazines that has been in hot water lately regarding alleged payments to silence women who had affairs with Donald Trump.

Jim Pattison Group Agrees to Sell U.S. Magazine Distribution Related Assets to American News Company, LLC

VANCOUVER, British Columbia, Nov. 29, 2018 /PRNewswire/ -- The Jim Pattison Group (JPG) today announced that it has reached an agreement to sell its United States magazine distribution business (TNG), including their interest in The News Group LP, to American News Company, LLC (ANC). The sale is expected to close by December 31, 2018 at which time executive management, and the approximately 1,500 employees of the acquired businesses, will transition to ANC and continue to oversee the day-to-day operations.

"This transaction allows the publishing community to have a more significant voice in the continued development of its supply chain and efforts to secure more efficient and thereby profitable newsstand results," said JPG President Glen Clark. "The stakeholders most impacted by this business, now have an extraordinary opportunity to be directly involved in a critical aspect of their business and will be well positioned to ensure its consistency, efficiency and sustainability."

The agreement to sell JPG's U.S. magazine business includes its distribution centers, depots, vehicles, systems, retailer contracts, publisher contracts, management personnel and related employees. Additionally, ANC will also acquire JPG's ownership stake and all related assets of Retail Support Services (RSS), Magazine Information Network (MagNet), Comag Marketing Group (CMG) and Genera Solutions. ANC will enter into a long-term merchandising services agreement with TNG Merchandising (which is not part of the acquisition and remains owned by JPG) to ensure that magazines continue to be properly merchandised at retail. TNG Canada's operations (wholesale and RS2 Canada) are also excluded from this transaction and will continue to be owned by JPG and run in the ordinary course.

"We are confident that aligning a leading U.S. magazine wholesaler with our valued newsstand partners will have a significant and positive impact on all our stakeholders," said TNG President David Parry. "Our commitment to the channel, and growth of all involved, will be underscored as we continue to work closely with our vital retail customers, suppliers and employees to ensure a low cost, efficient and long-term sustainable business. TNG will be laser-focused on ensuring a seamless transition for all channel participants."

American News Company, LLC, is a Chatham Asset Management (Chatham) portfolio company. Chatham is a $4 billion hedge fund and a longtime supporter of the media industry.

About JPG Headquartered in Vancouver, BC, Canada, The Jim Pattison Group (JPG) is a diversified group of operating businesses primarily in the United States and Canada that enjoy strong and positive market reputations, with most occupying leadership status within their respective industries. JPG's operating divisions span the automotive, advertising, media, agricultural equipment, food and beverage, entertainment, exporting, financial, real estate and periodical distribution industries. JPG has grown to be Canada's 2nd largest privately held company with over $10.1B in annual sales and more than 45,000 employees world-wide. For more information please visit

About American News Company, LLC American News Company, LLC (ANC) will, upon closing the announced acquisition, be a leading magazine wholesaler in the United States for publishers and retailers. ANC, through its subsidiary Comag Marketing Group LLC, will be a leading provider of national distribution services, including billing and collection and sales and marketing services, for publishers. MagNet and Retail Support Services, both subsidiaries of ANC, will offer licensing of magazine sales information and retail display services, respectively, to publishers and retailers.

SOURCE The Jim Pattison Group
Related Links

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Wednesday, October 24, 2018

What Is the Easy Path to Publishing Riches Overnight? A Delusion

Dead Tree Edition: the early days
When I started this blog a decade ago this month, the Get Rich By Blogging Hype Machine was just getting revved up.

Within a few years, pundits declared that blogging is dead, just as they had declared that “Print is dead” a few years earlier. (Both media have shown an annoying tendency to flash a giant middle finger at the pundits, adapting rather than extincting.)

Meanwhile, the bloggers who had been trying to make money from consulting to other bloggers had moved on – to become, I suppose, black-hat SEO experts, then white-hat SEO consultants, then social-media marketers, content marketers, or whatever the current shiny new title is for the buzzards who feed on greed and insecurity in the online world. (Other than “Facebook executives”, that is.)

So when I looked back over the biggest publishing delusions of the past decade for my recent “Decade of Delusions” article for Publishing Executive, the easy-money-from-blogging delusion didn’t make the cut. The blogosphere’s version of the sock puppet no longer seemed relevant to the publishing world in general.

People eat this stuff up
(Note to other publishers: It turns out that people love reading about how self-appointed experts got it wrong.. I’ve been amazed by the overwhelmingly favorable, and insightful, reactions to the “Decade of Delusions” article. Whatever your beat, consider publishing a list of recently exposed delusions and false prophecies on the subject.)

But I subsequently realized that the delusion hasn’t died, just morphed into other forms that can generally be categorized as “Just put it out there and watch it go viral.” For example, "Follow the secret formula for getting on the first page of Google." Or "Make a fortune by pivoting to video because no one wants to, like, read words any more."

And "Put your messages on Facebook because everyone’s on Facebook." (I know a store owner who literally drove her business into the ground by following this strategy. She put all of her limited marketing budget into creating Facebook promotions when she would have been better off with a bit of advertising and using her email list properly. Turns out “everyone” on Facebook avoids self-serving promotions like the plague.)

Book-publishing guru Jane Friedman recently advised fellow authors to stop trying to turn their books into best sellers: “It seems counterintuitive, but rather than seeking a broad audience, you should focus on a narrow one.”

Building your tribe
That’s good advice for anyone trying to build an audience. Unless you have a huge following or huger financial resources, the path to success usually starts with focusing on an under-served niche and finding, or building, a “tribe” of people with similar passions. Create a book, blog, magazine, web site, video, podcast, or whatever that serves your tribe's needs better than anyone else does. The tribe will decide if you're ready for a larger audience -- and will help you get there.

LinkedIn has done more for Dead Tree Edition than Facebook has. Sure, every once in a while someone with a big Facebook following posts a link to one of my articles, and it goes viral. But that doesn’t build a sustainable audience.

The page views from posts on LinkedIn groups are typically anemic. And God knows LinkedIn keeps revamping its groups in ways that seem designed to discourage participation. But much of the Dead Tree Edition tribe discovered this blog via relevant LinkedIn groups. They keep coming back, keep recommending my articles to others, and sometimes complain that I’m not publishing as often as I used to do. Twitter has worked similarly, doing more to build the tribe than to drive clicks.

Good old-fashioned email has been my most effective social medium -- not email blasts but rather personal emails to editors and other influencers pointing out a particular article that might interest their audience. And sometimes exchanging information with them. Getting referrals from them has brought new followers and has enabled Dead Tree Edition to do pretty well on search engines despite zero focus on search-engine optimization.

Fortunately, I started blogging not to get rich but because I wanted to understand better how the web works and because some topics weren’t getting the coverage they needed. Blogging can demonstrate your expertise, gain you new friends and business contacts, boost your personal brand, and lead to writing and speaking engagements (unless you stubbornly insist on remaining anonymous).

But if you’re just looking for a way to make money in your spare time, you’ll find that delivering pizzas is more lucrative.

Other recent Dead Tree Edition articles about publishing include: