Washington Post's New Magazine Will Bypass USPS

In what may be a troubling precedent for the U.S. Postal Service, The Washington Post is about to launch a paid subscription magazine that will bypass the USPS delivery network.

Capital Business will be delivered each week to paying ($49 per year) subscribers along with their Monday copy of the Post, according to the Post’s announcement. The move suggests that the country’s newspaper industry may be ready to try a new twist on a strategy that failed in the 1990s -- competing with the Postal Service to provide home delivery of magazines.

Two networks of daily newspapers delivered a variety of consumer magazines in their home markets during the early and mid-1990s. At the time, the delivery systems for most daily newspapers (kids on bicycles using marked-up address lists) were not suited to delivering a specific package to a specific customer, so the magazines were rarely delivered along with the newspaper, a former insider tells me.

The struggling efforts collapsed when the Postal Service restructured Periodicals postal rates to encourage worksharing (such as dropshipping), which led to lower postage costs for many publishers.

But times have changed. Postal officials want to return to the practice of increasing Periodicals postage prices much faster than the rate of inflation. Newspapers have learned to deliver several products through their daily carrier network -- already capturing a significant portion of The Wall Street Journal delivery business from the USPS. And customers have become accustomed to having publications delivered to their driveway rather than their doorstep.

With major newspaper companies like Hearst and the Washington Post Company (which owns Newsweek) also publishing magazines, finding a critical mass of newspapers and magazines willing to follow the Post’s lead would not be difficult.

Getting heavily into magazine delivery would require further enhancements to newspapers’ delivery systems, but the Postal Service seems unlikely to undercut them this time around. Postal officials believe they are losing money on Periodicals, though in reality the Postal Service would be even more unprofitable without them -- especially without the large consumer magazines that tend to mail most efficiently.

Another unusual feature of Capital Business, which will focus on the Washington area, is that it “will be available only to subscribers of The Washington Post,” according to the magazine’s Web site. And its content will apparently be available on the Web only to the magazine’s subscribers.

For more information about Periodicals postage rates, please see:

• Postal Service Preparing Double Whammy for Publishers: The USPS is planning to hit magazine and newspaper publishers with big rate increases starting next year.
• Can the Postal Service Still Afford Periodicals?  The Postal Service's own numbers show that it is better off with than without Periodicals, even though it thinks the class is unprofitable.
• Increased Efficiency Led to Higher Periodicals and Catalog Costs, Goldway Says The USPS's convoluted accounting logic on Periodicals seems to have taken in the chair of the Postal Regulatory Commission.