Monday, October 27, 2008

Big postage increases ahead for magazines?

Magazine publishers expecting a small increase in postage rates next year may be in for a double whammy, our contacts are indicating. Contrary to popular opinion in the industry, Periodicals rates could increase by more than the rate of inflation next year, especially for inefficient mailers.

The U.S. Postal Service seems likely to implement extra-high rate increases next year for Periodicals-class mailers who use sacks instead of pallets, especially if the sacks are not dropshipped, several contacts say. The thinking is that the Postal Service can no longer afford heavy subsidization of sacks and other practices that cost it so much money. Political pressure has prevented USPS from passing its full cost of handling sacks on to the customers.

The big rate increases for sacks would be good news for publishers that mail their magazines mostly on dropshipped pallets, but they might also be in for a surprise. By law, the average rate increase for each class normally would not exceed the annual rate of inflation, currently just under 5%, so usually a large increase for some publishers would mean a small increase, or even a decrease, for others.

The second part of the whammy is that the Postal Service may soon issue a decision on whether it is at least breaking even on the Periodicals class. If Periodicals is a money loser, as some claim, then the Postal Service may be forced by law to implement large Periodicals rate increases.

USPS is slated to announce rate increases for all classes of mail in February, for implementation 90 days later, in May.

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