Monday, February 23, 2009

Rethinking the "Green" Magazine Issue

Finally! A magazine publisher is doing a “green” issue on paper that truly is environmentally friendly.

The usual approach to environmentally themed issues is to use paper with a bit of recycled content without regard to any other environmental issues or whether the recycled content is being used appropriately. But for its April issue, the “Energy and Environment Guide”, U.S. News & World Report has actually put some thought into (and dollars behind) making the issue’s paper earth friendly.

As a result, all of the issue’s body stock will be on carbon-neutral paper with fiber that has been certified as being sourced from sustainably managed forests, the publisher says. The body stock will be Electracote, a coated-mechanical paper from Catalyst Paper’s Port Alberni, British Columbia mill. Dead Tree Edition has already noted the product’s ill-advised name but has no qualms about Catalyst’s low emissions of carbon dioxide and other gases that have been linked to global climate change. Its environmental record has earned it recognition from the World Wildlife Fund and other environmental groups.

U.S. News has been looking for ways to reduce our carbon footprint," said Mark W. White, the publisher's Vice President of Manufacturing (and a member of my LinkedIn network.) "We applaud the efforts Catalyst has made to reduce its carbon footprint while maintaining the quality of its paper.”

Like most other Catalyst products, normal Electracote has a low carbon footprint because the vast majority of the mill’s energy comes from such carbon-neutral sources as hydroelectric dams and forestry waste (bark, for example). A groundbreaking study from The Heinz Center, “Following the Paper Trail,” found that a majority of American consumer magazines’ carbon footprint came from energy used to make the paper.

U.S. News is going a step further by participating in the Catalyst Cooled program, which was pioneered by Rolling Stone magazine but has had few other participants. Through Catalyst Cooled, U.S. News pays a small premium to offset what few greenhouse-gas emissions occur at the mill to make the paper. The publisher has been using Catalyst Cooled for more than a year, but this is the first time the paper will appear throughout an entire issue of the magazine.

Catalyst is careful to call Catalyst Cooled paper “manufacturing carbon neutral” because the offset only covers mill emissions, not what occurs elsewhere, such as transport to and from the mill. U.S. News says it minimizes the transport-related emissions by having paper shipped to its printer in full railcars.

Carbon offsets have been controversial because some are of questionable environmental value and because they have been seen as a license to pollute. But Catalyst has one of the best records in any industry for reducing greenhouse-gas emissions. And the offsets pay for a park-reforestation program that clearly results in carbon sequestration.

What about recycled content? Here is U.S. News' answer: “Catalyst is one of the largest manufacturers and users of post-consumer recycled pulp in North America. All of that pulp goes into lower-brightness products like newsprint. The yield (the amount of recycled pulp that ends up in the paper) is more than 85% for such products but would be less than 70% for the brighter coated paper that will be used in our April issue.” In other words, U.S. News avoided the environmentally questionable practice of upcycling.

What U.S. News does not mention is that Electracote uses far less virgin fiber than any allegedly eco-friendly coated freesheet with 30% post-consumer recycled fiber. That’s because of its light weight and the use of mostly mechanical (groundwood) pulp, which consumes far less wood fiber than does chemical (kraft) pulp.

And for those who advocate recycled paper because of its supposedly lower carbon footprint, here’s an interesting tidbit from a recent Catalyst financial report: “The Company’s overall carbon footprint increased in 2008 with the acquisition of the Snowflake mill, which is located in a heavily fossil fuel-dependent jurisdiction and whose primary energy source is coal.” The Arizona mill makes newsprint solely from recycled fiber.

There’s a place for both recycled content that is used appropriately and for virgin fiber from sustainably managed forests. Catalyst’s approach is a good model to follow – processing lots of recycled paper into pulp, using that pulp in the most environmentally appropriate products, obtaining most of its virgin fiber from sawmill residuals, supporting sustainable forestry, working to reduce its energy consumption, and trying to get more of that energy from carbon-neutral sources.

Is Catalyst really more virtuous than most other profit-driven paper companies? (And when was the last time you saw “profit” and “paper company” in the same sentence?)

Enlightened management is part of the story, but for the most part its location in British Columbia shapes its environmental outlook. Native peoples there have been practicing sustainable forestry for centuries. Hydroelectric power is abundant. Vigorous debates and boycotts shook its paper and forestry industries in the 1990s. BC has probably the strictest forestry regulations in North America. And there’s little debate in the province about whether global climate change is real – not when a plague of beetles spurred by unusually warm winters is chewing up its stunningly beautiful forests.

“Recycled content” may be an easy sell to consumers. But let’s hope more publishers (and other users of paper) start doing something about their carbon footprints as well.

Friday, February 20, 2009

The Conde Nast Protection Acts?

If your publications don’t have well over 100 pages per issue, don’t assume that your postage rates will increase by only 4% in May.

Even if they mail efficiently, publications weighing less than half a pound will typically experience increases of 6% to 7%, Dead Tree Edition's exclusive analysis has found, even though the Postal Service says Periodicals increases will average just under 4%. Characteristics other than weight – such as dropshipping, co-mailing, ad-edit ratio, and non-profit status – have little impact on the percentage increase for Periodicals mailers who do not change their mailing practices.

No doubt some publishers will complain, as they did a couple of years ago, that these results reflect the undue influence of Time Inc.’s lobbying at the expense of small publishers. But the gradual move to cost-based rates, which means charging more for pieces and less for pounds, has been at best a mixed blessing for Time so far because of its many relatively light weekly publications. (Have you seen how thin Time magazine looks lately?)

The real winners, both two years ago and this year, are publishers of heavy magazines that dropship extensively. You could call these postal-rate changes the Conde Nast Protection Acts, though in all fairness I should add that Conde bore more than its share of Periodicals-Class costs under the old rate structure.

The chart below shows that the rate changes for outside-county Periodicals range from a decrease of more than 20% for weight going to a delivery unit to a 1,650% increase for a 5-digit bundle on a 5-digit pallet. So we’re getting more incentive to ship to delivery units as long as we’re entering mostly carrier-route and firm bundles there.

With the new rates, co-mailing still makes sense, though at first glance some have mistakenly concluded that the incentive to co-mail is being decreased because the gap between “5-digit automated” and Basic Carrier-Route piece rates will narrow slightly. For most publishers, co-mailing will generate enough savings in other areas (such as bundles, containers, and better dropshipping) to make co-mailing even more attractive than it is now.

Publications experiencing a 4% increase will probably weigh at least 0.6 pounds and more likely 0.7 pounds per copy, Dead Tree Edition’s analysis shows. For an 8” x 10.5” magazine using a 100# cover and having four pages of reply-card inserts, that would mean 148 to 180 body pages on 40# paper. For a tabloid newspaper, that would be about 120 to 140 pages on 45-gsm newsprint.

Here are some examples of how the rates would have affected recent issues of various outside-county publications:

  • National consumer magazine with numerous demographic versions run as separate mailstreams; 692,000 mailed copies averaging 0.96 pounds; 55% advertising; three-fourths of copies dropshipped: 2.7% increase. The magazine subsequently streamlined its versioning and joined a large co-mail pool. That approach would have reduced its postage by 24% (more than 11 cents per copy!) for this particular issue under both current and new rates, according to data provided by the consultant who engineered the magazine’s distribution transformation.

  • National consumer magazine in large (multiple millions of copies) co-mail pool; 0.60 pounds; 59% advertising: 3.9% increase.

  • National consumer magazine in a similar co-mail pool; 34% advertising; 0.27 pounds: 7.3% increase.

  • Non-profit journal mailing 53,000 pieces weighing 0.62 pounds each; 33% advertising; no co-mail or dropship: 6.0% increase. Most publishers will see their weight costs (advertising and editorial pounds) decrease, but this journal’s will actually increase because most copies are going to Zones 5 through 8, which got hefty rate hikes for advertising pounds.

  • Non-profit state association newspaper with 21,000 copies, about half qualifying for dropship discounts; 11% advertising: 5.9% increase. A publication with the same characteristics except for 50% advertising would see a 5.6% increase.

Thursday, February 19, 2009

Source Interlink Was Almost in the Drink

Before Time Inc. and Source Interlink kissed and made up today, their lawyers each made some interesting statements about the other company.

Source is behind in its payments to Time to the tune of about $120 million, Time's attorney said during a hearing last week. "We had a very real concern that we were never going to collect any meaningful portion of that amount of money," Rowan D. Wilson continued. The transcript is at

Source didn't deny that it was in financial trouble: "Your honor, our client, Source Interlink, is going under, and it is going under as we speak." Source attorney Marc E. Kasowitz said. "And the reason it is going under is that it is a magazine wholesaler and the defendants who have been supplying it with magazines -- People magazine, Time magazine, Sports Illustrated and the like -- for seven uninterrupted years have now abruptly cut it off from 80 percent of the supply of magazines that is the lifeblood of its business."

"As a result, Source's business is being destroyed," Kasowitz continued. "Its customers are leaving. Its employees are being raided by competitor wholesalers. Its bank credit is evaporating. Its vendors are threatening to demand cash in advance or cash on delivery. And if things continue the way they are going, Source will not be able to make its payroll this Friday. The result of that, your Honor, will be that the company will have no choice but to lay off thousands of employees."

The two companies announced today that they had settled Source's antitrust lawsuit against Time and its newsstand-distribution arm and that the two sides had "reached a multi-year agreement securing Source's access to Time Inc. magazine products." There was no mention of what happens to the money Source owed Time or of any settlement talks between Source and the other defendants, which include national distributors Curtis and Kable.

Wednesday, February 18, 2009

Shootout at the Newsstand

Several people have asked for my take on the current turmoil in newsstand distribution. OK, here is Dead Tree Edition's exclusive analysis: The U.S. newsstand distribution system is a mess. (Please see the Feb. 19 update to this article.)

Trade publications have been writing about problems with newsstand distribution in the U.S. since Ben Franklin was a teenager, and just today Audience Development posted an interesting piece called "A Printer's View of the Newsstand Chaos". I won't rehash what's already been published, but here are a few tidbits that might provide some perspective:
  • The crash in the market for recycled paper has helped precipitate the crisis. A year ago, a pound of unsold magazines was worth more than 6 cents in the recycled-paper market; today, it would be less than 2 cents, according to Pulp & Paper Week. That represents millions of dollars in lost revenue for the big wholesalers like Source Interlink.
  • One of the best (and most entertaining) ways to keep up with the Source Interlink vs. Time/Curtis battle is on Yahoo!’s Source Interlink message board . It has all kinds of nasty comments and juicy rumors, some of which have turned out to be true. With a click or two, you can even track Source’s stock price, which bounced up to a whopping 10.5 cents per share today, and see that its current liabilities exceed its current assets. (Not a good sign.)
  • Because of a temporary restraining order obtained by Source Interlink, newsstand distribution in much of the country is at a standstill until a court hearing on Monday (Feb. 23). Some magazines, especially weeklies, have been shredded without ever being sent to market, and some monthly magazines are likely to go on sale late.
  • Something that hasn’t been explained well in the trade press is the role of the wholesalers and national distributors. The wholesalers don’t just deliver publications to stores, they provide all the merchandising – removing old copies, putting new copies on display, counting and accounting for returns, etc. They collect money from the retailers and pay it to the national distributors like Curtis, which in turn pay their publisher clients. Two of the four big national distributors, Time Distribution and CoMag, are owned by magazine publishers.
  • And something that hasn’t been mentioned in the trade press is who owes what to whom. When some wholesalers got into trouble a few years ago (before the waste paper market bailed them out?), there was talk that some were behind in their payments to the national distributors; at least one sizable wholesaler went bankrupt. It’s not clear this time around what the accounts payable/receivable situation is.

Tuesday, February 10, 2009

Publishers' Postage Hikes Will Vary Widely

Some publishers will see their postal costs rise significantly in May, while others may actually get a decrease.

The Postal Service announced today that Periodicals postage rates will increase 3.97% on May 11, but that's an average. With the changes in specific rates for outside-county flats ranging from a decrease of 25% to an increase of 1,650% (!), there will definitely be winners and losers with these rate changes.

Perhaps the biggest winners will be relatively heavy publications with reasonable sortation (mostly carrier-route and 5-digit bundles) and dropshipped pallets. I see some situations where publications weighing one pound per copy will pay less postage.

By contrast, an equally efficient lightweight publication (averaging 0.2 pounds per copy) would see postage costs rise more than 6%. Likely to suffer even higher increases than that are titles with relatively poor sortation, extensive use of sacks, and little dropshipping.

Just a couple of years ago, postal officials resisted the idea of moving the Periodicals class to cost-based rates -- that is, charging mailers based on what it actually costs to deliver their publications. But with USPS billions of dollars in the red and Periodicals apparently not even covering their direct costs, postal officials are moving away from subsidizing inefficient mailing practices.

The current rates include charges for bundles, pallets, and sacks that cover only a fraction of the Postal Service's handling costs. In rough terms, the new rates will triple the bundle rates, increase most pallet charges by 40% to 80%, and increase most sack rates by 16% to 30%. And they'll still cover only about half the handling costs -- so be prepared for more hefty increases in these categories in years to come.

By contrast, weight-based charges will generally decrease, and most piece costs are barely budging except in the least efficient categories.

A new item that has not been fully explained would provide a discount of 1/10 of a cent per piece for copies with the full-service Intelligent Mail option when that becomes available in November.

I'll be offering more analysis and commentary on the new Periodicals rates in the coming days. Feel free to email me your comments (at If you send me the Form 3541 for an actual mailing, I'll even do the analysis and tell you how much the postage would change with the new rates.

Monday, February 9, 2009

Expanding, Tweaking, and Rethinking FSS

The U.S. Postal Service is expanding its Flats Sequencing System and testing some tweaks, but it is also taking another look at a competing strategy – sorting letter and flat mail together.

USPS last month added 202 more ZIP codes to the areas that will be served by the 100 machines in the first phase of FSS, bringing the total to1,993. USPS has been adding zones to the first phase in response to the declining volume of catalogs, magazines, and other flat mail. The number of Standard-class flats, which are mostly catalogs, was 17.3% lower from October through December 2008 than a year earlier, the Postal Service recently reported.

FSS is explained more fully in the newly updated “Unofficial Guide to Flats Sequencing”, which includes links to various USPS documents and a video.

USPS is testing “automated unbundling” of flats going into FSS, which would require only two employees per machine instead of five to seven, a postal official told a mailers group recently. He also said USPS is already working on plans for the second phase of FSS.

Last month, USPS received proposals for the “Next Generation Mail Processing System” (NGMPS), which would sort both letter and flat mail “walk sequenced to each carrier’s route”, in the words of the request for proposal. The list of interested vendors has 14 companies, including Northrop Grumman, which is building the FSS machines.

Postal officials a few years ago discussed the possibility of sorting letters and flats in one stream, but decided that would be impractical because of the varying shapes and sizes. Delivery-point sequencing now handles more than 90% of letter mail, while Phase I of FSS is to handle an estimated 20% of flats mail when it it is fully implemented late next year. The idea behind the technologies is to have letter carriers spend less time sorting and more time delivering, which means fewer carriers are needed.

"Designed solutions should consider the use of specifically designed letter and flat mail input subsystems, or use feeders currently deployed within the Postal Service,” the RFP says. It’s not clear whether USPS is targeting the new technology for FSS areas, non-FSS areas, or both. Because the huge FSS machines (16 feet tall and about three-fourths the size of a football field) are not suited to sparsely populated areas, postal officials have indicated that at least 20% of delivery points, and perhaps many more, would never be served by FSS.

“The most efficient processing scenario would be a one feed solution for letter and flat mail, independent of delivery points, limited only by a maximum volume, which would provide a merged letter and flat mail product in delivery point order,” the RFP says. The system should have “a small footprint,” it adds. The RFP says a contract for “a study, concept design, and simulation deliverable” will be awarded by April.

Meanwhile, USPS is still working with industry to determine the best way to package flats going into FSS. Until the new rules are implemented, perhaps next year, copies going to FSS areas will be packaged in the traditional manner – e.g. in carrier-route bundles. USPS will probably ask mailers to strap but not shrinkwrap copies going to FSS machines. Printers are advocating a single set of packaging specifications for FSS and non-FSS to avoid complications in their post-press operations.

Mailers will be encouraged or required to put FSS and non-FSS copies on separate pallets, but those pallets will be dropshipped to the same locations, postal officials indicate.

One postal official recently refuted my assertion that FSS would be targeted to commercial districts that get a high volume of flats mail; he told a mailers group that FSS would be targeted for residential areas. There were indications a couple of years ago that many commercial districts would be served via FSS, but perhaps the decision to go slow on including First Class flats in has changed that thinking.

Thursday, February 5, 2009

Use Rail to Lower Your Carbon Footprint

Hey publishers, how would you like to surprise your paper suppliers, do a good deed for the earth, and perhaps save a few bucks?

Here’s how: Ask each mill how much of the paper you buy would fit into its most efficient railcar. The answer will vary from 120,000 pounds to nearly 200,000, depending upon the type and basis weight of the paper, the roll sizes, and the rail lines being used.

When you get an answer, try to order your paper from that mill in railcar increments, especially if it’s paper you use on a regular basis. Switching the shipments from truck to rail will eliminate more than two-thirds of their greenhouse-gas emissions.

Let’s suppose the answer you get from a mill is 160,000 pounds and that you need 240,000 pounds this month and another 240,000 next month. If you order 320,000 this month and 160,000 next month, all of the paper can ship in full, efficient railcars. If that’s too big a hit to your company’s cash flow, ask about the availability of 60-ton (120,000-pound) railcars. You could also place the first order as “at least 240,000 but no more than 280,000 pounds” to give the mill some flexibility to work out an efficient solution, such as combining your order with other paper going to the same printing plant.

The more you use of a particular paper and the more frequently, of course, the easier it is to order in full railcar increments.

A friend of Dead Tree Edition who makes it a policy to order full railcars says paper mills are always surprised, pleasantly so, when he asks about their ideal railcar shipments. And he has some advice: When the paper is shipped, check whether the amounts per railcar match what the mill said was ideal. The mill may have given you a theoretical answer that didn’t take into account the particulars of the paper you order. He also notes the longer lead time for rail shipments.

And what about the savings? Full railcars is generally the least expensive way to ship paper over land, so you may be able to get the paper supplier to share some of those savings with you. I have even heard of paper contracts that had one price for rail shipments and a higher price for truck shipments.

Monday, February 2, 2009

How about some free printing?

Here's a way for American printers to make money producuing magazines: Don't charge for the printing of subscriber copies.

There's a catch (acually two catches), of course: In exchange, offer to co-mail the copies as long as you get to keep all of the postal savings.

Let's focus on a certain major publisher of monthly magazines that does no co-mailing. Suppose that its prominent 700,000-ratebase title has a 128-page (plus 4-page cover) issue and mails 650,000 copies. It would probably pay about $45 per thousand, not counting makereadies or consumables, to print the magazine using two 64-page offset presses plus a cover press.

Mailing on its own, the magazine probably gets carrier-route sortation for 35% to 40% of its copies. That would increase by about 50 percentage points if the copies instead went into a co-mail pool at one of the major publication printers, where mailstreams of 4 million or more are commonplace. With carrier route costing 10.2 cents per piece less than the next-best sortation level, the savings on piece rate alone would average roughly 5.5 cents per copy -- or $55 per thousand.

Co-mailing would also create more efficient bundles and pallets, reduce the number of sacks, and enable the printer to dropship the magazine more extensively. (Printers generally will not dropship sacks.) Such savings would probably equal at least a penny per copy ($10 per thousand).

So the printer would be giving away printing worth $45 per thousand but would receive $65 per thousand in postal savings. That net of $20 per M is more than printers receive in shared postal savings from some co-mail clients.

Let’s look at the same publisher’s magazine that has a ratebase of 200,000, with most of the copies going to affluent subscribers. It probably prints on 32-page presses, so the printing of a 128-page issue would probably cost a bit more than for its larger sibling – say, $54 per thousand.

Because of the magazine’s audience, it probably gets better sortation, perhaps 25% carrier route, than do most magazines mailing nearly 200,000 copies. But it’s still in the sweet spot for co-mailing. Going into a major co-mail pool would generate piece savings of at least $65 per thousand. And on a per-copy basis, the savings from such other items as bundles, palletization and dropshipping would be greater than for the larger title, probably another $20 per thousand.

So with Dead Tree Edition’s plan, the printer would net about $31 per M -- $85 in postal savings minus $54 in foregone printing charges. The publisher would have been far better off paying for the printing and doing the usual co-mail deal; under one printer’s formula, that would be about $59 per M. (For an explanation of how to analyze the publisher's savings from co-mail, see Steve Frye's excellent piece in the October issue of Publishing Executive.)

Oh yeah, the other catch: If magazine publishers nickel-and-dime their printers to cut print prices by 50 cents per M but leave savings of $40 or $60 per M on the table, what makes you think they’ll be smart enough to take the free-printing deal? Even some publishers that are co-mailing are doing some questionable things with their mailings, but that’s a subject for a future article.

After Standard flats postal rates were restructured in 2007, the catalog industry jumped into co-mailing with both feet. The magazine industry, which has had more than a decade to get on board and has even greater incentives to co-mail , has been a much slower sell for co-mail programs. Too many have a production “silo” that doesn’t bother to consider distribution.

You’d better blow up those silos fast. The next round of postal rates, due to be announced next month for implementation in May, are likely to be especially rough on inefficient mail in both the Periodicals and Standard classes. (See “Postal costs to go up less than 4% -- maybe” for details.)

If you have a legitimate reason for not co-mailing a standard-sized monthly magazine having between 25,000 and 1 million mailed copies per issue, please write to me at The only possible reason I can think of is demographic versioning, which might make selective binding (arguably a form of co-mailing) more efficient. Even then, co-binding is a possibility. And careful analyses would reveal that many demographic-advertising offerings are unprofitable, especially when the lost postal savings are figured in.

If you’ve run into some bad reasons not to co-mail, please pass those along as well. I already have a few candidates for the 10 Lamest Reasons Not to Co-Mail, but I’d love to hear yours.