Thursday, April 30, 2009

Ten Things I Would Do If I Owned a Newspaper Company

Let me put this as delicately as possible: Opinions about the newspaper business are like anal orifices these days; everyone has one, and most are full of fecal matter.

Despite the overabundance of punditry regarding what newspaper companies should do, I couldn't resist entering Metaprinter's "If I owned a newspaper company . . ." contest. So here goes my list, which is by no means comprehensive:

  1. Stop thinking of the company as a newspaper company and the individual subsidiaries as newspapers. That tends to lock people into the model of one newspaper per subsidiary with a single Web site that mostly rehashes what was in the printed newspaper. Each subsidiary should think of itself as the dominant provider of information and advertising in its market. That might lead to multiple publications, Web sites, and other products.

  2. Put some staff-created content behind an "ad wall." There's been a lot of talk lately about newspapers not giving everything away on the Web and putting some content behind a pay wall, but that's like trying to put the genie back into the bottle. I would make non-subscribers watch a brief ad before they can see some of the most valuable content (such as the top local stories), just as some Web sites have an ad preceding free news videos. Readers would tolerate such brief ads better than having to make micro-payments for articles that might turn out to be duds.

  3. Pamper subscribers. Invite them to a Meet the Editors event or a town-hall meeting. Does the print edition close too early to publish some ball scores? Then let subscribers sign up for an early-morning email (with a bit of advertising) that has all of the major scores. Would they like to keep up with news of their hometown or favorite sports team 1,000 miles away? Then let them sign up for an email with headlines and links from their hometown newspaper -- er, local information and advertising provider. (These email products would work best if coordinated by a cooperative of news organizations, perhaps the Associated Press.)

  4. End all talk of creating customized, home-delivered newspapers. People who advocate that have never seen newspaper carriers in action. You can customize it all you want, but the carrier careening down the street at 4:30 in the morning can't see whose name is on each paper -- and doesn't care. She's just trying to pitch the papers onto the right lawns, avoid getting caught driving on the wrong side of the street, and get home in time to get little Jimmy onto the school bus. PDFs are better suited than printed newspapers to the distribution of digital content.

  5. Challenge assumptions that most readers really want their newspapers in an e-reader format. People who think that must not have seen the revenue that inserts bring in -- or have children at home. Just wait until your little princess drops your Kindle while reading the funnies or decides to decorate it with Hannah Montana stickers. (Reminds me of the kid who loaded an "Uncrustable" sandwich into the CD drive of the family PC. Oh well, it could have been worse: At least he didn't put Windows Vista onto the machine.)

  6. Find ways to package existing content for new audiences. For example, most newspapers have a wealth of wonderful information about nearby tourist attractions. Why not create a Web site for tourists to the area? Or a free newspaper describing what to visit? (I still remember a helpful little paper I used on vacation 20 years ago that simply showed the menus of restaurants in town.) Is this a saturated market? Perhaps, but no one else has the credibility of the local newspaper. Focus on other out-of-town audiences that might appreciate some of the content, such as people thinking about moving to the area or fans of local pro or college teams.

  7. Try to get away from having a pressroom and post-press operation dedicated to a single newspaper. Except perhaps for the biggest newspapers, that often means a huge investment in capital and skilled labor that is used only a few hours daily. I would look at outsourcing production to a nearby newspaper that used to be viewed as a competitor (but probably isn't) or, conversely, at taking on such outsourced printing.

  8. Make it easier to submit news tips to each subsidiary. Some newspapers do not provide an email address for such items and instead have a painful online-registration process for submitting tips.

  9. Eliminate the Not Written Here Syndrome. With most newspapers, if it’s not written by a staff member or a wire service, it ain’t getting into the paper or onto the Web site. I have given up trying to tell newspapers when I have published an item that should be of interest in their markets, such as the likely closing of a U.S. Postal Service processing and distribution center in town or major happenings at a nearby printing plant or paper mill. From what I can tell, newspapers have done nothing with such tips -- not until the "news" was announced by a local corporation or Congressman. A local newspaper’s Web site(s), and to some extent the printed newspaper as well, should become portals that aggregate information about the area from a variety of sources. Provide links to the local college newspaper, the mayor’s Web site, and community bloggers, highlighting truly newsworthy items (with proper vetting, of course). Link to news about major local companies, whether press releases, items in trade journals, or articles in out-of-town newspapers. Invite local coaches, fan clubs, civic groups, hobby/activity groups, political groups, etc. to create blogs on the Web sites.

  10. Avoid sacrificing the Web sites' user friendliness on the altar of Search Engine Optimization. SEO and web analytics can be powerful tools for figuring out how to get more hits from search engines. But sometimes doing what Google likes means creating something that actual people don't like. "Newspaper" Web sites need lots of repeat business to prosper.

Wednesday, April 29, 2009

Can You Trust an Anonymous Blog with an Aggravating Name?

An anonymous commenter took Audience Development to task today for quoting yesterday's article in Dead Tree Edition about Source Interlink.

"Why would you quote an anonymous blog especially one named Dead Tree Edition," wrote "Publisher" on the magazine's Web site. "That was clever the first time or two I heard it but it is old devisive (sic) and aggravating."

Audience Development quoted Dead Tree Edition because it values service to its readers above its institutional ego. Its reporting about the filing yesterday, like the other reporting in the mainstream media, omitted the tidbit that publishers are among Source Interlink's major creditors. Bucking a long journalistic tradition of pooh-poohing others' scoops, AD rectified that omission today by citing Dead Tree Edition and by providing some additional details on Source's filing.

Did it worry that it was quoting an unidentified source whose credibility could not be checked? No, because it could verify what I wrote by digging into court documents.

The editors could also verify the trustworthiness of other Dead Tree Edition reporting -- for example, by calling the old "Corrugated Recycles" phone number and finding out it really has been taken over by a telephone-sex service. Or, for a more recent example, by reading's item today about the U.S. Postal Service moving forward with plans for a "Summer Sale", as Dead Tree Edition revealed two weeks ago.

And now for that aggravating name. "Dead Tree Edition" is what the digerati use to describe ink-on-paper publications. I adopted the phrase as this Web site's brand name to communicate that the focus would be on printed publications in an age of Web mania -- and to show that we print geeks have a sense of humor too.

I won't run from the dead-tree moniker. I have an odd fascination for that stuff that comes from dead trees known as paper, and I still love to read a well-crafted newspaper or magazine. (Yes, I'm aware of the irony of saying that in a Web-only blog.)

In my alter ego as D. Eadward Tree (Chief Arborist of Dead Tree Edition), I have attempted to be a friend to printed publications, providing tips and insights as well as being an advocate on postal and environmental issues.

"Trees are a crop -- like corn," "Publisher" writes. "Don't you eat dead corn?"

Yes, I do, and I agree with your point. Even the occasional reader of Dead Tree Edition can see that I don't buy the notions that using dead trees to make publications is necessarily bad or that putting the same content into a digital format is necessarily greener.

Dead trees are our friends.

Tuesday, April 28, 2009

Source Interlink Owes Publishers Millions

Source Interlink owes more than $200 million to magazine publishers and their affiliated national distributors, the company revealed today in filing for bankruptcy reorganization.

Except for the bank that is acting as trustee for Source's noteholders, the company's four largest unsecured creditors are the Big Four national newsstand distributors -- Time Warner Retail ($75.5 million), Comag ($53.2 million), Curtis Circulation ($42.7 million), and Kable Distribution Services ($22.9).

Other publishers on the list of the top 30 unsecured creditors are Bonnier ($2.4 million), Comag UK ($2.3 million), Harris Publications ($1.8 million), Acorn Media ($1.7 million), American Media ($1.7 million), Future Publishing ($1.6 million), Scientific American ($1.2 million), Playboy Enterprises ($1.0 million), and Meredith ($0.9 million). Also in the top 30 are Quebecor World, which itself is trying to emerge from Chapter 11 ($1.6 million), and Rider Circulation Services ($0.9 million).

Source announced today that it was filing a "prepackaged" Chapter 11 reorganization, meaning that it has worked out a deal with its lenders to restructure its debt and continue operating. Source says its lenders are canceling nearly $1 billion in debt and providing about $100 million in additional financing. Vendors will be paid on time "if they keep our credit limits and payment terms the same," a company statement said.

With the company's stock being canceled (and worthless), the lenders will presumably end up controlling the company. It's not clear whether those lenders include the Big Four or other publishers, some of whom Source sued earlier this year in a nasty legal spat that disrupted newsstand sales of magazines in much of the U.S. More may be revealed at a court hearing on Wednesday.

A Time Inc. attorney said in February that Time Warner Retail was concerned that it would never recover the $120 million in late payments owed by Source Interlink. Source Interlink's trade debt to Time Warner Retail and the other national distributors presumably resulted from its failure to pay for magazines it had sold.

Monday, April 27, 2009

Another Delay for Intelligent Mail?

With the Intelligent Mail Barcode (IMb) program veering off the tracks, prominent mailers called for the U.S. Postal Service to hit the brakes today on the much-delayed program.

“There is a general consensus that even if the USPS stays with their commitment of May 18 it will be almost impossible for the program to begin in a successful manner,” says a memo written by Jack Widener, a respected industry consultant, that Idealliance released today to its members. Widener, a former Newsweek executive, chairs the IMb users group for the major trade association.

Dead Tree Edition has previously noted that IMb, a major strategic initiative for the Postal Service, is "a train wreck waiting to happen" because of failures in coordination, communication, and planning.

Mailers and their vendors complain that the rules and procedures for IMb are still in a state of flux. Even today, the complex and critical “Service Type Identifier Matrix” in one USPS document contained the qualifier, “Final Revision will be completed as soon as possible.

“When will the changes stop so the program can by implemented by USPS,” Widener wrote. “There are 11 open issues that are not assigned and that must be resolved with only 21 days to go.”

Among the “show stoppers” listed by another report Idealliance sent to members today is one that would force Periodicals-class co-mail participants either to “leap to electronic payment without sufficient testing or pull out of co-mail/co-pall.” The report lists other restrictions for various classes of mail on co-palletization, co-mail, palletization, and firm bundling that would result from glitches in programs related to IMb.

Perhaps postal executives realize, Widener writes, what even their underlings admit -- that USPS will not be ready on May 18 date.

If so, he argues that they should “tell us now so that all can plan accordingly and alert their customers and suppliers in the mailing supply chain. And don’t blame it on their customers; if they do this it will be not due to lack of mailer preparation. We have spent hundreds of thousands of dollars and invested people’s time to implement as soon as information was received from the USPS. But we must be given adequate time to implement the numerous changes that are happening."

Friday, April 24, 2009

Ten Numbers to Crunch For Cost-Cutting Publishers

Publishers, if you want to save some money, you had better whip out your calculator -- uh, spreadsheet.

Publishers can usually get more savings from changing what they do rather than from getting lower prices on what they already do. Changes that save money can also reduce revenue, so you can't just cut blindly. You need to have a clear picture of both costs and revenues.

Here are calculations that can shed light on money-saving opportunities:

  1. Cost Per Copy: That's easy. You just divide your costs by the number of copies, right? NO! That would give you an average cost per copy, but average cost doesn't tell you much. It will mislead you, for example, if your publisher wants to know how much you would save by reducing your ratebase. What you usually need is the incremental cost per copy -- that is, the expenses that result from each additional copy. Such fixed costs as prepress and makereadies are not part of the calculation.

  2. Cost Per Copy By Type of Copy: Production costs are generally the same for each type of copy, but distribution costs can vary widely by method of distribution. A copy that costs 2 cents to send to a domestic newsstand wholesaler might cost 25 cents to mail to a domestic subscriber or $2 to an overseas subscriber. So the potential savings from reducing ratebase might depend upon what type of copies are eliminated. Drill down further and you might discover that you should stop soliciting subscriptions in Hawaii or should raise prices in Canada.

  3. Cost Per Editorial Page: Again, we're talking about incremental cost -- the cost of adding or removing editorial pages. For many publications, more than half the production and distribution costs are insensitive to page count. Because you can't add just one page to a publication (though I've heard people ask why not), you might have to model different scenarios to get a picture of the typical incremental cost per page.

  4. Cost Per Ad Page: The prepress costs per ad page are typically lower than for editorial pages, but the postage costs for U.S. copies can be much higher. In fact, because of the editorial discount, some publishers have a negative postage cost for additional editorial pages.

  5. Inefficient Page Counts: Sometimes you can save money by adding pages because you are moving from an inefficient to an efficient press configuration. If you use 32-page web presses, it can take five presses to print 92 pages but only three to print 96. Knowing that some page counts are inefficient might lead to new makeup rules (e.g. the number of body pages must be divisible by 8) or to greater use of remnant ads, house ads, standby editorial pages, and other methods of adjusting to last-minute changes.

  6. Distribution Cost Per Pound: A lot of publishers are looking at reducing basis weight or changing trim size these days. The paper savings are easy to calculate, but you won't have the full picture unless you know how much you pay in freight and postage for each pound. "Heavier Paper Can Save Money" has more resources on this subject, including the need to adjust for waste and why you might want to break out these costs by type of copy (e.g. newsstand vs. domestic subscriber.

  7. Cost of Versioning: Having different versions of a publication can lead to a variety of additional costs, such as press makereadies, press stops, inefficient press forms, selective binding, and polybagging. Dwarfing all of those for some publications is the hidden impact on postage. Mailing public-place copies separately from subscriber copies, for example, increases piece costs and reduces dropship discounts for both groups. The same thing happens when complimentary copies or copies with special onserts or cover wraps are mailed separately from other copies.

  8. Benefits of Versioning: Having a separate women's edition or putting cover wraps on expiring subscriber copies might be worth the extra cost if they generate enough money. But take a close look. In a time of declining ad pages and reduced ratebases, a versioning program that used to make sense might have outlived its useful life.

  9. Costs of Inserts: There are horror stories about sales reps letting advertisers run supplied inserts for free if they also buy an ad page, under the mistaken assumption that the advertiser bore all the costs of the insert. But whether supplied or "we print", inserts increase a publisher's postage, freight, and bindery costs and often lead to inefficient makeup. That goes for circulation inserts as well.

  10. Inserts Revenue: This is another case of focusing on profitability, not just costs, by seeing whether the revenues justify the expenses.

Wednesday, April 22, 2009

Ecologomania and Printed Products

If two recent reports from paper companies are any indication, it may soon become common for printed products to use ecologomania and ingredient lists to demonstrate their environmental friendliness.

Note the 10 environmental logos (above) on Cascades' 2008 sustainability report, which are truly an example of "ecologomania" -- the word I've coined for the display of numerous logos for such environmental certifications as sustainable forestry, recycled content, and energy source.

Catalyst Paper's 2008 sustainability report relies more on data than logos to communicate the company's environmental commitment. Its tell-all report provides mill-by-mill data on greenhouse-gas emissions, water usage, solid waste to landfills, and other items.

It also reveals the kind of data paper companies historically have held close to the vest, such as the amounts of various materials used by the company. Factoid: The company used almost as much precipitated calcium carbonate (PCC) as it did fossil fuels.

Both the sustainability report and Catalyst's annual report have what looks like a food product's list of ingredients, showing the inputs and emissions from producing the paper for the report. Note that paper is high in natural fibers.

Another factoid: The carbon footprint of Catalyst's manufacturing operations more than tripled last year when it purchased a 100%-recycled newsprint mill in Snowflake, AZ from AbitibiBowater. That mill's greenhouse-gas emissions per ton of product were at least 9 times higher than that of any other Catalyst mill. So much for the simplistic notion that you can reduce carbon footprint simply by switching to paper with recycled content.

With all of the environmental buzzwords swarming around these days, especially today, vague communications blathering on about corporations’ supposedly green practices don’t carry any weight any more. Increasingly, publishers and paper companies may be expected to back up their claims with hard data and third-party certifications.

Monday, April 20, 2009

The Greenwashing Media Award Goes to . . .

While countless words are published about the environment in honor of Earth Day this week, it's time for the publishing industry to confront its involvement in an egregious, and rather bizarre, form of greenwashing.

I'm talking about touting Web content and digital editions as being environmentally friendly and disparaging ink-on-paper editions, which are still the major source of revenue for most traditional publishers. For example, one magazine's Web site recently admonished readers to reduce their carbon footprint by signing up for a digital edition -- right next to an article about the huge amounts of electricity that Web servers gobble up.

But the worst offenders are the vendors of digital-publication software, such as Nxtbook, Texterity, and Zinio.

"When you publish with Nxtbook Media, you're making a very green decision -- one that's good for both the bottom line and the environment," says the Nxtbook Web site without providing any data or justification for its questionable environmental claim.

Fortunately, Don Carli, the Godfather of Green Media, played the role of Bovine Fecal Matter Police in an excellent interview recently with Metaprinter:

"When subjected to 'cradle-to-cradle' lifecycle analysis, e-reading is not nearly as green as many naively assume it is," says Carli, founder of the Institute for Sustainable Communication. "Computers, eReaders, and cell phones don't grow on trees, and their spiraling requirement for energy is unsustainable."

Computers and other electronic equipment require various metals and petro-chemicals in the manufacturing process, electricity (often coal-powered) to live, and "at the end of their all-too-short useful lives . . . become the single largest stream of toxic waste created by man," says Carli. In contrast, "much of print media is based on comparatively benign and renewable materials."

I should note that Amazon and Sony seem to have had the good sense not to claim that their e-book readers are an environmentally friendly choice. Not so with the publishing-industry vendors who create editions of publications that can be read on computers.

So I now have the honor of presenting Dead Tree Edition's Greenwashing in Media Award jointly to Nxtbook, Texterity, and Zinio.

As punishment, their executives should be forced to use their own company's digital-edition software to read an entire digital facsimile of a magazine on a small laptop computer. Trying to read something that is taller than wide on a device that is wider than tall is a truly painful experience.

Saturday, April 18, 2009

I Got "mine", But I Don't Get It

Time Inc. just spent at least $2, probably more, to produce and mail me a beautifully printed customized magazine called mine. Just one question: Why?

Actually, I have lots of questions, like why a big publisher with lots of smart people goofed on so many aspects of this much-hyped project.

But the fundamental question is why anyone at Time Inc. or Lexus, the sole advertiser, thinks the project is worthwhile. It's as if someone said, "Let's figure out how to spend as much money as we can on mine without creating any value for the advertiser."

Subscribers to the free magazine signed up on a Web site, choosing to receive content from five of eight possible Time Inc. or American Express titles and entering some information about their personal preferences. The magazine consists of 36 pages -- a cover, four personalized Lexus ads, a customized table of contents, and six pages from each of the magazines selected for the mash-up. Rex Hammock's blog has a nice little slide show depicting his copy.

The text stock is brighter and much heavier than that used in National Geographic. I'm guestimating it's at least a 70# coated #2. The extremely smooth surface, moderate paper gloss, and high print gloss allow for some striking photo reproductions.

The saddle-stitched magazine is printed using a very high AM (that is, not stochastic) line screen, with a bronze PMS border on all of the editorial pages. The opening page of each six-page section has only the source magazine's logo in black type, the bronze border, and the page number -- a bit of a waste.

But there are plenty of other questionable features of mine:

  • Needless complexity: The combination of saddle stitching and six-page snippets creates far more versions of the editorial sections than are necessary because each printed signature contains content from two different magazines. It's no wonder some subscribers received the wrong sections. Here's a way to create a simpler magazine with more editorial content and probably a lower cost: Offer eight pages of each of the five selected titles in a (selectively) perfect-bound magazine. That would have created much less complexity and probably would have allowed the editorial pages to be printed offset instead of digitally, at significant savings without loss of quality.

  • Pointless personalization: All of the personalization is with text -- such as subscriber's name, town of residence, and selections made on the multiple-choice survey. But nowhere does it show the nearest Lexus dealer, much less a map from the subscriber's home to that dealer. The gimmicky, clumsy personalization does nothing to drive sales or even to create interest in Lexus.

  • Pointless ads: The personalization gimmick was supposed to highlight the customer's ability to customize a new Lexus 2010 RX. But nowhere do the ads mention customization. In fact, the only mention of Lexus is in one of the ads, and that's in small type on the back cover. So when the second ads begins, "We know how much you love . . .", some readers will assume the "we" is Time Inc., not Lexus.

  • Expensive postage: The magazine was mailed presorted First Class at a cost of probably more than $1 per copy. Standard class would have cost less than half of that. All Time Inc. got for the extra money was faster delivery, which is kind of irrelevant for something with months-old re-purporsed articles, including one that touted's "breaking news coverage" of a 2008 European soccer event.

  • Awful ad copy: With all of the unemployed journalists around, you'd think Lexus could have done better than run-on sentences like this: "With more usable cargo space for your matching designer luggage, and an available Heads-Up Display for keeping your eyes on the road because the LA Freeway can be tricky on your way to the beach." We're supposed to be impressed that the references to designer luggage, LA Freeway, and the beach were personalized (in grey type to emphasize the gimmick). But it left me wondering how the cargo space would help me navigate the LA Freeway, what a Heads-Up Display is, and whether that random comma had eaten the sentence's subject and predicate.

  • Tiny photos: The high production values are wasted on some photos that are smaller than a postage stamp. I needed a magnifier to make out what one of those mini-photos was depicting, and I still can't figure out how it relates to the article.

Thursday, April 16, 2009

A New Chapter (Eleven) for Paper

On a day when North America's largest newsprint producer (finally) went Chapter 11, here is a small piece of good news for the paper industry: Half of the respondents to a Dead Tree Edition poll expect little or no erosion in coated-paper prices during the next few months.

AbitibiBowater, aka AbitibiUnderwater, gave up trying to re-refinance its massive debt and filed for bankruptcy protection today in both the United States and Canada. The company, also a significant maker of coated and uncoated groundwood papers, has arranged debtor-in-possession financing that will help it continue operating while the courts restructure its debt.

Some newsprint customers, anticipating the filing, have been talking to competitors to ensure adequate supply if AbitibiBowater collapsed, even asking at least one paper company to re-enter the newsprint business. (Sort of like asking someone to head up the George W. Bush Fan Club, isn't it?) But all indications are that the company's mills will continue producing.

AbitibiBowater's move "will have greater implications for the company than for the newsprint market," writes Jim Rosenberg, a senior editor at Editor & Publisher.

One of those implications is that employees will not receive bonuses that were due them for 2008 performance, though I'm not sure what kind of performance bonuses are due for taking the company's stock from $20.47 to 47 cents in the calendar year. All incentive compensation for 2009 has also been suspended.

The filing puts the final nail in the coffin for the idea that the merger of Abitibi and Bowater would give one company enough market share to manage newsprint supply so that prices wouldn't collapse. More than ever, AbitibiBowater will be pressured to maximize immediate cash flow rather than managing supply to keep prices up.

Now as to that poll: Dead Tree Edition asked readers to vote on what the price of 40# coated #5 would be in July. When the poll was launched, RISI's Paper Trader had the market price as $900 per ton ($45/cwt.); the March number was $880. Half the voters thought the price would be at least $860, including 10% who thought it would be $900 or higher (wonder what they were smoking -- or what paper company they work for).

Only 29% voted for a crash, with pricing of less than $820, while another 21% voted for a modest decrease to the $820-$859 range.

Now I'm asking my readers another question: What will be AbitibiBowater's fate? Cast your vote in the poll, which appears on the right just above the "Featured Articles" listing.

One more question: Why was Google Adsense, which places ads based on the content of a Web site, posting an ad for E-Harmony on Dead Tree Edition today? Perhaps with all the talk of black liquor here lately it thought that romance was just around the corner.

Wednesday, April 15, 2009

The First Shall Be Last

It seems that the Good Book is right about the meek inheriting the earth, or at least the U.S. publication business. Consider:
  • Big-city dailies are closing or going into bankruptcy, while small-town papers thrive because they were doing "hyper-local" long before it was cool.
  • Publishing Group of America has grown rapidly by placing its magazines (such as American Profile) into weekly papers rather than duking it out with Parade and USA Weekend and the defunct Life for big-city dailies.
  • Major magazines are shutting down while niche titles spring up.
And look at the newsweeklies. A few years ago, the pundits talked about the battle between the two giants owned by Fortune 500 companies, Time and Newsweek, and wondered when they would drive smaller, independent U.S. News & World Report out of business.
The Economist was too much of a niche product to be considered, and The Week wasn't taken seriously because it did no original reporting and merely compiled and rewrote what had already been published. Now the two little (by circulation) British imports are prospering and actually growing circulation.

U.S. News has turned its weakness into a strength, abandoning the weekly business altogether, creating rankings for everything that moves (the latest is nursing homes), and launching digital and Web products left and right.
And what of the Big Two? They have shrunk to a shadow of their former selves in both ratebase and page count and can’t seem to figure out the Web.

Time can't scoff at The Week any more, not after it caught heat for picking up a poorly researched blog item that allegedly listed the 10 most endangered U.S. newspapers. At least The Week avoids opinion pieces masquerading as journalism.

Now we hear that Newsweek has decided to slash its ratebase, pattern its magazine after The Economist (You know, like requiring people to pay actual money for a subscription.), and copy the Web strategy of U.S. News.

The 21st Century will not be kind to mass media. It’s no longer enough to create good content, as Time and Newsweek still do. You have to provide people something they really want and can’t get anywhere else.

Sunday, April 12, 2009

Pulp Fiction: Eco-Credits for Black Liquor

A federal program intended to promote the use of renewable fuels is instead encouraging U.S. paper companies to pursue some rather "un-green" practices, such as substituting virgin pulp for recycled pulp.

If the "black liquor" tax loophole persists, it could turn the market for publication papers topsy-turvy and lead to public backlash against paper companies -- and perhaps their customers.

At least two U.S. containerboard mills recently switched from recycled corrugated to wood chips as their fiber source because of the loophole, and others are probably doing the same, Pulp & Paper Week reports in its April 10 edition. (As I wrote in "Hey, Big Boy, Can I Recycle Your Cardboard?" four months ago, the market for recycled corrugated was already so weak that perhaps it's a good thing that the "Corrugated Recycles" phone number was taken over by a phone-sex outfit.)

Most, perhaps all, U.S. kraft-pulp mills are receiving or have applied for alternative-fuel credits for using a mixture of black liquor and a bit of diesel to power the mills, according to Kevin Mason of Equity Research Associates. The credit is worth roughly $200 per ton of pulp, he estimates, which means the federal government could theoretically end up paying out $10 billion for these credits. The current market price for kraft pulp is about $600 per ton.

The credits come from 2005 transportation legislation intended to encourage the use of non-fossil fuels, but the effect for paper companies is just the opposite: For decades, kraft-pulp mills have been using black liquor, a pulp byproduct, for power, but they can only receive the fuel credits if they mix some fossil fuel into the black liquor.

The credits also give paper companies a perverse incentive to use kraft pulp instead of mechanical (groundwood) pulp. Mechanical pulp is usually considered environmentally preferable to kraft because it uses fewer trees and causes less pollution.

Kraft pulp is generally more expensive to make than mechanical pulp, which is one reason that freesheet papers command a price premium over papers containing mechanical pulp. But the fuel credits might actually make kraft pulp cheaper for many mills.

So why should such mills make 50# #4 coated groundwood when it would be more profitable to sell 50# #3 freesheet at #4 prices? And why should a company sell a groundwood-substitute at a discount to uncoated freesheet when it would be cheaper just to make the uncoated freesheet?

I don't blame U.S. paper companies, many of which have undergone massive downsizing, for taking advantage of a perfectly legal loophole that could bolster their anemic bottom lines.

But others will. And in an era when the general public mistakenly views digital content as being greener than paper-based content, that could end up being a huge public-relations nightmare for those of us who toil in the dead-tree world.

Friday, April 10, 2009

USPS Playing "Let's Make A Deal"

To counteract its declining revenues, the U.S. Postal Service is rolling out incentives to certain organizations that increase the number of items they mail.

Postal officials are reportedly working on a "Summer Sale" program to encourage businesses and non-profit groups to send more direct mail, catalogs, and other Standard-class mail this summer. Sources say it would offer rebates of 20% to 30% for mailers that increase their Standard mail during July, August, and September of this year.

The Postal Service will reportedly file the Summer Sale proposal with the Postal Regulatory Commission this month. The PRC would then have up to 45 days to rule on the proposal.

The program reportedly grew out of discussions between Postmaster General Jack Potter and CEOs of printing and paper companies about how to increase USPS's volumes during the off-peak summer months. It would apparently be more politically acceptable than Potter's other idea for countering low summer volumes -- temporarily reducing deliveries to five days a week.

Details of another volume-based discount, the Saturation Mail Incentive Program, were released by the Postal Service this week. That will provide a rebate of 2.2 to 4.0 cents per piece only on incremental business during the 12-month period beginning May 11, 2009. Intelisent's Postal Affairs Blog has posted a fact sheet with the details. (Don't bother trying to find this same information via

Some will question how the Postal Service can offer discounts when it is losing money. But that line of thinking overlooks the fact that much of the Postal Service's costs do not vary much with volume. For example, a letter carrier doesn't take nine times longer to deliver nine pieces to an address than to deliver a single piece.

USPS's incremental costs for additional catalogs or presorted letters is much lower than the postage on those catalogs, especially during the slow summer months. Shelling out rebates for incremental off-peak business is somewhat akin to money-losing airlines offering last-minute discounts to fill empty seats.

Don't expect any special discounts for Periodicals-class postage, which is used to mail most magazines and newspapers, because of complaints that the class is not covering its costs. But some publishers would be able to receive rebates on such Standard-class mailings as subscription solicitations and free newspapers.

Saturday, April 4, 2009

Flats Sequencing Hits Some Bumps

Declining mail volume, budget cuts, and equipment problems are forcing the U.S. Postal Service to rework its plans for the Flats Sequencing System.

The deployment schedule for Phase I of the system has been pushed back a couple of months, while the coverage area for the 100 machines has been expanded. Some of the 32 original Phase I facilities will get fewer of the enormous machines than originally planned as postal officials adjust to declining volume for catalogs, magazines, and other flat mail.

Those machines will go instead to about a dozen locations that will be added to Phase I, according to one source. And one of the original 32 locations -- the controversial proposed new building in Aliso Viejo, CA -- has been canceled along with other capital projects because of the Postal Service's dire financial condition.

(See "The Unofficial Guide to Flats Sequencing" for more information about the multimillion-dollar FSS program, which postal officials hope will revolutionize its delivery of flat mail.)

Postal officials revealed in February that they would be redeploying some of the machines and that some FSS facilities, contrary to original plans, would get only one machine. But the Postal Service's "FSS Deployment Information" Web site still shows the 100 machines going to only 32 facilities, including Aliso Viejo.

Plans for FSS developed during a time of growing flats volume. But the number of flats handled by the Postal Service declined more than 13% in the past two years, and postal officials now assume that the volume will continue shrinking. As a result, the first 100 machines are now slated to serve more than 2,000 ZIP codes instead of the 1,300 in the original Phase I plan.

FSS machines have been operating in Dulles, VA for a few months but failed an acceptance test recently because they were missing "throughput targets," William Galligan, USPS's senior vice president of operations, told a Mailers Technical Advisory Committee in February. Postal officials are working with the contractor, Northrop Grumman, to correct the problems and hope to resume testing later this month.

There is some good news on the FSS front: Dead Tree Edition's prediction four months ago that FSS would lead to money-saving consolidations of the Postal Service's dropship network is starting to come true. One dropship location on the list of predicted consolidations, in Kansas City, KS, has already been slated for closing, while the one in Winchester, VA is the subject of a consolidation study.

Galligan also told recently that FSS, along with changes to the dropship network, would correct much of the Periodicals class's problem with cost coverage. The Postal Service says its Periodicals revenue covers barely 85% of the cost of delivering newspapers and magazines, leading some to advocate higher rate increases for the class.