Friday, December 23, 2011

Put Down That Burger And Start Singing!

Don't you just hate shopping malls at Christmas time?

As if the Christmas rush weren't bad enough, the malls make it excruciating by pummeling you with piped-in Jingle Bells and getting whiny kids all worked up about sitting in the lap of an obese pedophile.

But seeing this video renewed my faith in the human race's ability to create beauty amidst commercial schlock -- and my hope that someone will drag Frosty the Snowman out by the dumpsters and beat him senseless. Here's some shopping mall Christmas music I could definitely Handel.

So watch, listen, and enjoy. And have a Merry Christmas, a Happy Hanukkah (with Chinese food on the fifth day), a Festive Festivus, a Soulful Kwanzaa, a Far-Out Solstice, and a Joyous New Year.

Sunday, December 18, 2011

Wanted: New Postmaster General; Must Be Able To Kiss 535 Backsides Simultaneously

Now the Congressional silliness regarding Postmaster General Pat Donahoe has gone bipartisan.

Rep. Dennis Ross indicated a few days ago that Donahoe should be fired – apparently for bowing to pressure from 20 senators and agreeing to a mostly meaningless moratorium on the closing of postal facilities. The Republican subcommittee chairman’s attack comes less than two weeks after Democratic Congressman Peter DeFazio said the PMG should be canned for trying to save money by lowering the Postal Service’s delivery standards.

All this reminds me of what we tell little children: Every time you point a finger at someone else, four more are pointing back at you. Congress is largely to blame for the fix the Postal Service is in, and any meaningful reform requires Congressional action.

Can Donahoe focus on building new revenue sources or developing long-range plans, the way the CEO of any other multibillion-dollar business would? Nope, what passes for a business model at the Postal Service these days boils down to two strategies:

1) Persuade Congress and the general public that the Postal Service will soon go broke unless Congress makes some significant changes. (I’d say Donahoe is doing pretty well in this department.)

2) Suck up to the Postal Service’s dysfunctional 535-member board of directors -- Congress, that is, not the USPS Board of Governors -- in hopes of getting it to make the tough decisions necessary to save the agency. (A well nigh impossible task, I'd say.)

With the Postal Service’s finances hamstrung by Congressional inaction, Donahoe was forced to propose radical and unpopular cost-cutting measures like reducing service standards. And when 20 senators pushed for the moratorium, Donahoe would have been a fool to brush them off.

Ross’s response, via Twitter to postal blogger Alan Robinson: “PMG is trying to delay an [sic] deflect. First Brac management change may have to start at the top.”

“BRAC” refers to a Ross-proposed commission that would determine which post offices and processing centers are closed. The irony is that, even with the moratorium, Donahoe has the Postal Service on a fast track to close facilities "at least a year earlier than any BRAC could act," Robinson notes.

“In reality, the moratorium has little practical effect,” noted Postalnews Blog, “the USPS is continuing all of the processes it must go through in order to close the facilities, and few would actually have been shuttered by May.”

Related articles:

Monday, December 12, 2011

Why Mills Can't Keep the Coated Paper Market in Balance

There’s a simple way for North American mills to prevent the prices of coated paper from collapsing next year, the “Paper Guru” pointed out recently. Simple, but it won't work.

Responding to last week’s Dead Tree Edition article about the possibility of declining prices, Jack Miller, Printing Impressions’ Paper Guru, wrote, “Uncoated freesheet producers have reduced capacity, balanced supply and demand, and maintained prices.”

“With U.S. coated mills still under cost pressures from pulp and chemicals, and with margins where they are,” he suggested, the coated mills might take out capacity to keep the market in balance. But what works for uncoated freesheet will be hard to apply to coated paper.

The North American uncoated freesheet market is dominated by two big players, International Paper and Domtar, that are financially strong and have low-cost mills. That puts them in a position to idle machines or shut down mills if necessary to keep the market in balance.

But leadership of North America’s coated-paper market has one foot in the grave and the other on a banana peel. The #1 maker is NewPage, which is under Chapter 11 bankruptcy protection, making it nearly impossible to shut down a machine or mill in the short run. Besides, NewPage claims it has already mothballed all its high-cost machines.

The #2 manufacturer is Verso, a highly leveraged firm with a debt-to-equity ratio of about 18:1. Like NewPage, it’s not in much of a position to idle machines that could be generating cash.

SAPPI is the only other manufacturer with significant market share, but it produces coated freesheet almost exclusively. Coated groundwood (AKA coated mechanical) is where the big trouble lurks.

The bottom line is that no company with the financial strength to reduce capacity has enough North American market share to make much of a difference in the supply-demand balance. That’s why industry analyst Verle Sutton recently predicted that coated prices will decrease next year until losses force some companies to idle their machines.

Saturday, December 10, 2011

Delayed Retirements, Rising Overtime Bedevil USPS Finances

Despite all the talk of restructuring and downsizing at the U.S. Postal Service, its labor costs have hardly budged in the past year.

With employees working more overtime and relatively few retiring, the agency’s cost of salary and benefits inched down by barely 1% during the fiscal year that ended Sept. 30. So far this year, the decline is a paltry 0.2% lower than the same time last year. In contrast, USPS projects that its revenues will decrease nearly 3% this fiscal year.

One barrier to cost cutting is a slowing attrition rate. In the Postal Service’s latest employee statistical report, released yesterday, the number of full-time employees had declined by fewer than 13,000 in the past 12 months, versus more than 17,000 in the previous year. Postmaster General Pat Donahoe has indicated that the USPS workforce needs to shrink by about 35,000 employees annually to reach its ideal size of 425,000 in 2015.

The dire need to reduce the workforce has spawned proposals to offer various incentives to employees who retire. But in the short run, such talk is backfiring, giving workers an incentive not to quit but to hold out instead for better retirement packages.

Overtime hours increased 9% during Fiscal Year 2011 even though straight-time hours were down nearly 4%. Once again, the trend in FY2012 is not the Postal Service’s friend: OT is up nearly 12% so far versus the same period last year.

Overtime so far this year is dramatically higher for city carriers, mailhandlers, and supervisors. Full-time city carriers and mail handlers are both averaging about five hours of overtime per week. Meanwhile, city carriers who are “part-time flexible” or “transitional” have been even busier, working more than one hour of overtime for every 6 hours of straight time.

The increased overtime for carriers is consistent with recent reports of carriers working well past dark to serve longer routes and to compensate for hiccups in the Flats Sequencing System.

The Postal Service has managed to keep wage inflation largely in check, with the average straight-time rate rising only 1.2% during FY2011, to $26.18 per hour.

Here are two more noteworthy statistics about the Postal Service workforce: There are 315 employees who are at least 80 years old and 194 with 50 or more years of service. Both numbers are increasing.

Related articles:

Sunday, December 4, 2011

Why Coated Paper Prices Look Ready for a Fall

North American prices for coated paper will decline and more paper machines will be idled next year, according to a leading industry analyst.

Even supercalendered paper, currently in short supply, could see declining prices by the middle of 2012, Reel Time Report editor Verle Sutton said in a webinar recorded a few days ago. The webinar, "Price & demand outlook 2012 for newsprint, publication papers", is still available for download from Industry Intelligence.

Sutton’s forecast runs counter to the brave talk coming out of the mills and the more bullish analysis from rival forecaster RISI. He noted that his and RISI’s 2012 price forecasts are as much as $120-per-ton apart. Sutton, always the iconoclast and often spot-on with his predictions, pooh-poohed claims that rising costs for pulp and other items will prevent prices from declining.

“Coated pricing will decline until capacity is removed. By the end of 2012, it is estimated that about 400,000 to 600,000 tons must be shut down [in North America] in order to balance supply and demand,” Sutton said.

Sutton based his prediction partly on the recent surprising weakening in demand during what should be the busiest buying season.

"Since 2000, even those of us who have been relatively pessimistic on the impact of electronic communications on demand have generally underestimated the true impact of the electronic revolution on paper demand. That occurred again in 2011 in a big way."

Sutton also provided insightful commentary on the newsprint market, why prospects for the idled Port Hawkesbury mill are suddenly looking up, the outlook for European exports to North America, and whether North American mills will use coated machines to make supercalendered paper next year. But as someone who respects copyrights (especially since my day job is in publishing), I won’t reveal any more details about the Sutton webinar.

Among the many previous Dead Tree Edition articles that cited Sutton or his Reel Time Edition newsletter are:

Saturday, November 26, 2011

On USPS Privatization, George Will Strikes Out

George Will is a Pulitzer Prize-winning political commentator who has penned some of the most beautiful prose ever written about baseball. But yesterday, in opining about the U.S. Postal Service, he whiffed when it came to basic fact checking.

After a fascinating history lesson about how Sunday mail delivery was discontinued a century ago, Will threw this clunker into his commentary for the The Washington Post:

"Surely the government could cede this function to the private sector, which probably could have a satisfactory substitute system functioning quicker than you can say 'FedEx,' 'UPS' and 'Wal-Mart.' The first two are good at delivering things; the third, supplemented by other ubiquitous retailers, could house post offices."

Question for Mr. Will: When was the last time you sent or received anything via FedEx or UPS that cost only 34 cents? Or even anywhere close to 34 cents? The average price USPS charged last fiscal year for First Class and other monopoly classes of mail was 34.1 cents.

More questions: When was the last time FedEx or UPS begged for the chance to take over the Postal Service's business? When was the last time you heard an executive from one of those companies say, "Gee, we'd really like to deliver mail to every address in the country, regardless of profitability and without price discrimination; we can't wait to drive snowmobiles in Alaska and to take mule trains into the Grand Canyon so that we can complete our appointed rounds"?

Yes, FedEx and UPS are "good at delivering things." So are moving companies and obstetricians. But none are set up to do what the Postal Service does on the scale that the Postal Service does it.

Both FedEx and UPS are happy to serve businesses five days a week (or to charge premiums for weekend delivery). But going to private homes is another matter. Their favorite method of getting low-value shipments to residences is to pay the Postal Service for making the actual deliveries.

Perhaps privatization of some or all U.S. postal services makes can or should lie in the future. But it won't simply be a matter of turning over mail delivery to the private sector, especially when no one in the private sector seems to be clamoring to take over the U.S. Postal Service and all the requirements and restrictions imposed on it.

OK, Johnny, Now Greenwash Your Hands

One of the "joys" of traveling long distances on a busy holiday weekend is seeing how highway rest stops try to greenwash their way out of providing paper towels.

Shown here are two examples of hand dryers from my recent travels. The second one, in case you have trouble reading it, says "Save trees, eliminate paper towel waste, and maintain cleaner facilities with World Warm-Air Dryers."

Part of Dead Tree Edition's plan for reviving the paper industry is handing out little stickers saying "Wipe hands on pants". They could be placed under the hand dryer's instructions, right below "Rub hands vigorously under dryer."

Or how about one reading "This dryer powered by coal-fired electricity"?

Somehow, I don't think the state highway department (no, I'm not telling you which one) did a thorough environmental analysis before approving the message on the first example above: "We encourage the use of our high efficiency electric hand dryers as alternatives to disposable paper towels. By doing so, we reduce our carbon footprint and our impact on landfill capacity."

I'm not saying paper towels are more environmentally friendly than electric dryers. But I object to simplistic assumptions that all substitutes for paper are greener than using paper. (Dead Tree Edition has addressed this issue in such previous articles as Google Using Blatant Greenwash To Promote New Catalog App and Smackdown: Printed Editions vs. Digital Editions.)

Whether using an electric dryer has a lower carbon footprint and less impact on forests and landfills than paper towels depends greatly on a variety of variables, such as:
  • The energy sources of the dryer's electricity and of the paper mill. (In North America, coal is the most likely source of the dryer's electricity, while relatively benign energy sources like hydroelectric are fairly common at paper mills.)
  • The forestry practices used to obtain the towels' virgin fiber.
  • The proportion of recycled content in the paper towels.
  • The amount of deforestation caused by obtaining fuel for those power sources, such as via mountaintop removal for coal mining.
  • The energy efficiency of the hand dryer and the paper mill.
  • The proportion of people using hand dryers who end up saying, "Screw it" and finish drying their hands with toilet paper.
  • The carbon footprint of the bathroom's TP.
  • The disposal methods used for the bathroom's waste -- and the power plants' fly ash.
Speaking of not overlooking the environmental impact of electricity generation, I couldn't resist republishing these apocryphal coal-industry advertisements:

Home Solar Power Discounts - One Block Off the Grid

Monday, November 21, 2011

Are Quad/Graphics and Barnes & Noble Really on the Ropes?

Not again!

Those of us in the ink-on-paper side of the publishing world have become accustomed to our vendors and sellers going through bankruptcy reorganization. But seeing Quad/Graphics and Barnes & Noble listed recently by Business Insider among The Next 11 Big Companies That Could Go Bankrupt was a bit of a jolt.

When a big printer (Quebecor World) went Chapter 11 in 2008, it was no big surprise. Nor was the demise earlier this year of the big Borders bookstore chain. One was burdened by out-of-date plants, the other by an out-of-date business plan.

But Quad and B&N are supposed to be the strong survivors who benefit from the demise of their less nimble and innovative competitors.

BI’s list is based on research from GovernanceMetrics International that identifies companies with “an elevated financial distress probability and which have experienced high risk events that increase the likelihood of bankruptcy."

B&N is #5 on the list, with a "financial distress probability" of 6.32% and what BI calls a business model that is “only slightly more viable” than Borders’. Amazon’s new Kindle Fire and low-price black-and-white Kindles will “put pressure” on Borders and its competing Nook e-readers, BI says.

Quad is ranked #6, with a 6.25% probability of distress (during what period of time? BI doesn’t say.) It noted the big printer’s high debt and tight profit margins. BI also cited a recent analysis from The Street showing that Quad had a “quick ratio” (current assets to current liabilities) of only 0.77, which suggests questionable ability to cover its short-term cash needs.

A profile of Quad in the Milwaukee Journal Sentinel over the weekend pointed out that Quad has “lowered its full-year earnings outlook for the third time in as many quarters.” Also spooking Wall Street are declining sales in the book division, which represents only 7% of the company’s revenue, according to JS reporter John Schmid.

Seeing the stock lose more than two-thirds of its value in barely a year hasn’t helped either.

Other articles about Quad and B&N include:

Saturday, November 19, 2011

Could Forever Stamps Become Worthless? What Bankruptcy Might Mean for USPS

With news reports of the U.S. Postal Service talking to restructuring advisors and being close to bankruptcy, it’s time to ask what might seem like a silly question: Are Forever Stamps really forever?

In the past two weeks, Reuters described USPS as “on the brink of bankruptcy”, the Associated Press explored what happens “in the event of a shutdown”, and the San Francisco Chronicle says postal executives are meeting with corporate “restructuring” (AKA bankruptcy) advisors.

Canceling the $2.5 billion worth of unredeemed Forever Stamps held by tens of millions of Americans is a political non-starter. The same goes for the couple of billion dollars worth of other USPS liabilities held by postal customers, such as money orders, non-Forever Stamps, and box rent.

The Postal Service would never propose walking away from those obligations, and Congress would never approve it.

But they might not be given the choice.

When a private business goes through bankruptcy reorganization, it cedes to the court control over which liabilities get paid. Unsecured creditors (like owners of Forever Stamps) are in line behind secured creditors and often end up with nothing, as you might know if you’ve ever owned a gift card for a retailer that went Chapter 11.

No one has spelled out what a “bankruptcy” or “reorganization” would mean for the Postal Service, though clearly there are thoughts in some quarters about how to void the Postal Service's labor contracts and selected financial obligations.

The point is that, whether liberal or conservative, you should be wary of any effort to present bankruptcy court as the answer to the Postal Service’s mounting debts and financial losses.

Wednesday, November 16, 2011

Print Is Dead? Not For This Growing Publication Niche

Here’s a factoid that defies the conventional wisdom about printed magazines being passé and the U.S. newsstand system having one foot in the grave: Sales of bookazines are up nearly 20% this year, according to industry consortium MagNet.

“These results seem to contradict what the industry press has long decided, that digital is killing print,” MagNet, which reports on retail sales of magazines, wrote recently in its client newsletter. "Even in these tough economic times, consumers are willing to purchase high quality publications that provide subject matter that appeals to them, even at higher cover prices.”

Pique Their Interest, Take Their Money
The lesson: “If you produce high quality titles that peek [sic] consumers' interest, even with higher cover prices, you can make money selling them almost exclusively from the newsstand, even with limited advertising revenues.”

MagNet defines a “book-a-zine” as “an issue that was not part of a title's normal frequency schedule and has a cover price between $9.95 - $19.99.” It calculates 2010 sales at just over $400 million, with some individual books bringing in well over $1 million. First-half 2011 sales were $236 million, according to MagNet, putting the niche on track to reach $500 million for the full year

Dead Tree Edition’s definition of bookazines (AKA mooks, SIPs, one-shots, specials; See Invasion of the Bookazines, Featuring the Return of the Living Dead) is broader, encompassing any non-periodical that retailers display in their magazine sections for a limited period of time. That includes products sold for less than $9.95 and those published by non-periodical brands like Pillsbury, Life, and The Old Farmer’s Almanac.

The number of bookazine titles is increasing, apparently because the products are profitable for publishers, wholesalers, and retailers, according to MagNet. After all, the price points are much higher than for typical monthly or weekly issues, the products have a longer shelf life, and no blow-in card falls out of them saying, “You idiot. For what you just spent for this magazine, we would have gladly sold you a six-month subscription. (Allow 6-8 weeks for delivery.)”

More Share of Shelf?
MagNet doesn’t comment on whether mooks are gaining “share of shelf” on the newsstand, but with their growth and profitability it seems likely that the “invasion of the bookazines” is contributing to declining sales for regular magazine issues.

There’s also no commentary on what kind of content is selling well. Dead Tree Edition's unscientific analysis finds that many mooks play to at least one of print’s strengths – such as beautiful photography, collectability, recipes (ever spilled Alfredo sauce on an iPad?), or content that lends itself to being highlighted or Post-It Noted.

MagNet thinks publishers have not tapped the advertising potential of bookazines. The challenge, industry insiders tell me, is that bookazine sales are notoriously difficult to predict; print advertisers are used to a guaranteed ratebase. Perhaps the problem could be solved by selling bookazine ads like web ads – on a CPM basis, where the exact number of impressions (books sold) doesn’t have to be known or guaranteed up front.

Or maybe they could be sold like ads in apps: “This is cool. This is cutting edge. You gotta advertise in this. Audience metrics? Fuhgeddaboudit."

Related article: Mooks and Canucks: The Bookazine Invasion Crosses the Border.

Tuesday, November 15, 2011

7 Reasons the Jury Is Still Out on Flats Sequencing

It's still not clear whether the U.S. Postal Service's $1.4 billion investment in the Flats Sequencing System will pay off, according to the chairman of the Postal Regulatory Commission says.

"The full batch of 100 FSS machines has been deployed, but it still remains to be seen whether FSS will produce economic benefits," Ruth Goldway told Multichannel Merchant recently in a wide-ranging interview about USPS's future. She indicated that postal officials had provided extensive information to the PRC about "its experiences and challenges in the deployment and operation of the FSS equipment."

"These extremely complex machines have experienced many problems. Mailers have expressed frustration with mail preparation changes necessary to accommodate FSS requirements, changes in Critical Entry Times, and service degradation," she told the publication.

Mailers had hoped FSS would reduce the Postal Service's costs of handling catalogs, magazines and other flat mail. But, more than ever, USPS claims it is losing money on the two main sources of mail sorted by FSS -- Periodicals and Standard flats.

The football-field-sized machines have helped USPS reduce costs by reducing the manual handling of mail by letter carriers, clerks, and other postal workers. But for at least seven reasons, it may be many months or even years before postal officials will know whether the investment will pay off:
  1. Declining Volume: The FSS system was designed for a relatively fixed volume of mail, but the machines are already serving larger-than-optimal territories because of decreases in the number of catalogs and publications being mailed. Further significant volume declines would hurt efficiency even more.
  2. Start-Up Woes: Reports from the field indicate recurring problems with shredded mail and machine breakdowns, but some of these problems may dissipate after USPS gets more experience with the complex machines.
  3. Wear and Tear: FSS is supposed to eliminate manual casing of flat mail, thereby enabling letter carriers to serve more addresses. But what will increases in "street time" do to maintenance costs of USPS's aging delivery fleet -- not to mention the healthcare and workers compensation costs for the carriers?
  4. Peaks and Valleys: One challenge is having machines that can sort all of the mail for their designated ZIP codes during peak periods but can also operate efficiently during slow months. Many of the machines have not been through a Christmas mailing season yet.
  5. Packaging: The rules governing how customers bundle and palletize flat mail were not written with FSS in mind. Implementing a different set of rules for FSS facilities could enable those operations to run more efficiently, but testing of alternative bundle and pallet standards has been limited.
  6. Consolidation: The Postal Service's ambitious plan to close more than half of its 400-plus mail-processing facilities would apparently result in a higher percentage of flat mail being served by FSS, as explained in USPS Consolidation Plan Means Moving or Closing Some FSS Machines. But it's not clear whether the plan will run into Congressional delays or other roadblocks.
  7. Shifting Equipment: When an FSS machine completes its shakedown, some other mail-processing equipment is freed up to be used in non-FSS facilities. But with the consolidation plans on the books, it may take years for the Postal Service to see the full benefit of moving such equipment around.

Related articles:

Thursday, November 10, 2011

USPS Going Ape Over Missing Pallets

Millions of dollars worth of pallets and trays are being stolen from the U.S. Postal Service every year, but the agency can't afford to implement systems for tracking the equipment.

Mail-transport equipment (MTE) is in such short supply in parts of the country that some businesses report that they have not been able to send out scheduled mailings. USPS has responded by approving emergency purchases of such equipment, announcing a two-week amnesty program for the return of equipment, and by stepping up enforcement regarding stolen and misused items.

The USPS Office of Inspector General is trying to spread the word that MTEs "may be used only to transport mail, and borrowers of MTE (such as private mailers) are responsible for its proper use and return."

"Over the past few years Postal Service has experienced a significant loss of plastic and wooden pallets. Since fiscal year 2005 the Postal Service has spent over $240 million on close to 19 million plastic and wooden pallets, many of which can no longer be accounted for internally or externally," the OIG wrote this week.

"Realizing the significant cost of leakage of MTE from its inventory, the Postal Service has studied both the movement of MTE as well as ways to reduce leakage. As a result of its precarious financial condition and a freeze on all information technology initiatives, two technological initiatives to better track MTE have been shelved."

This isn't the first time the OIG has pointed out how the Postal Service's cash shortage is preventing it from implementing cost-saving investments. Postal Service Can No Longer Afford Money-Saving Tactics, Study Says discusses the same problem in regards to early-retirement incentives and increased automation.

Nor is this the first time the Postal Service has publicized the issue of MTE "leakage". It released the orangutan photo above two and a half years ago as a reminder to mailers that misuse of the equipment, no matter how creative, is illegal. (See Monkeying Around with Postal Pallets, which has a first sentence with a strange resemblance to the headline on this week's OIG article. Its comments also revealed what happens to some of the equipment: It's given to customers.)

For further reading: 35 Creative Ways to Recycle Wooden Pallets (none of which, by the way, involve orangutans or the misuse of government property)

Wednesday, November 2, 2011

Mine's Bigger Than Yours: Quad and Donnelley Squabble Over Co-Mail

The country's two largest publication printers sparred this week over who has the biggest, baddest programs for helping customers save money on postage.

Quad/Graphics fired the first salvo yesterday when it announced that "it is now breaking company and industry records for co-mail pool sizes, aggregated volume and customer postage savings."

“We now have more volume, co-mail equipment and capacity than any of our competitors," said Dave Riebe, Quad's President of Logistics & Distribution."But the key isn’t just size, it’s our unique co-mail optimization software that analyzes multiple cost components of the process – manufacturing, inline/offline co-mail, distribution and postage – to produce the maximum savings.”

It took only a day for North America's largest printing company to respond.

"We're operating the most full co-mail production lines in the industry," Thomas J. Quinlan, R.R. Donnelley's CEO, said today during the company's quarterly earnings call. "Our offer is unmatched distribution that includes co-mailing of Standard, Periodicals, and tabloid products and a co-pallet program that has the largest number of participants and the highest volume. For standard letter-size mailers, we offer tray co-palletization."

Co-mail and co-palletization are methods of combining catalogs, magazines, and letters from various customers in ways that help them take advantage of postage discounts.

When an analyst goaded Quinlan to talk about how Quad is integrating its acquisition of Worldcolor, he declined, saying "we don't talk about people outside the family." But he couldn't avoid comparing Donnelley's status to the Wisconsin-based upstart.

"We're building brand loyalty and we're driving growth. And this is done across technology immediate for print, web, mobile and social networks around the globe. No one else has that. No one else has that platform, and it's going to take them years and a heck of lot of money to try to build what we've built," Quinlan crowed.

One point on which the two companies agree is the strategic importance of mailing their customers' products in the most efficient manner possible.

“Mailing and distribution represents more than half the cost of typical catalog and magazine programs, so our ability to save money for customers in this area is a critical value,” said Joel Quadracci, Quinlan's counterpart at Quad. “Given the potential for more changes in postage rates and services in the near future, that advantage will become even more important for our customers.”

Related articles:

Monday, October 24, 2011

Postal Service Mixes Up Its Fruits

Apple,  Blackberry, whatever -- one of those fruity things.

The U.S. Postal Service touted a new app for Apple's iPhone and iPod products Friday with an illustration clearly showing a competing Blackberry device.

The monthly issue of the e-newsletter PCC Insider, which goes to members of Postal Customer Councils, noted the advent of "a new revenue stream for USPS -- and it's being generated online." The article explained that Apple's new Cards app will enable "users to create personalized greeting cards with their own text and photos and have them delivered by First-Class Mail to any address in the world."

But the photo is clearly of a Blackberry device made by Canadian company Research in Motion.

Here's the difference: An iPhone is a smartphone that can run apps. Friends tell me that a Blackberry is a not-so-smart phone (perhaps from playing too much hockey without a helmet before crossing the border) that runs "crapps", which is short for "crappy apps."

Sunday, October 23, 2011

The Magazine Industry's Identity Crisis

The business formerly known as the magazine industry is going through an identity crisis -- and we're proud of it.

"In 2001, we were a print-centric medium catering to millions of readers. Today we are Magazine Media – and our content gets read, watched, listened to, commented on, repurposed, and disaggregated," crowed MPA president Nina Link recently to the Magazine Media Conference.

In fact, what was the Magazine Publishers of America a decade ago has morphed into MPA--The Association of Magazine Media. (What's that you say, those initials should be "AMM", not "MPA"? Shhhh, don't tell.)

We used to know what we were – magazine publishers. We produced printed products that were distributed on a regular basis, usually weekly or monthly. But no one, it seems, produces only printed magazines any more.

Now we create magazine media, whatever those are. There's nothing particularly "magazine" about the Weight Watchers Mobile app, an AARP video of Raquel Welch about going "beyond the cleavage", or, but all are produced by organizations that publish magazines (though none fit neatly into the category of magazine publishers).

OK, Nina, so what are magazine media? She didn't say. But she did announce the launch of The MPA Digital Glossary of terms related to "the technology and usage of personal mobile devices . . . that offer magazine media content and advertising." Nice, a guide for us ink-on-paper types who don't know the difference between a bootloader and an eReader.

The glossary, however, doesn't define "magazine media." It doesn't even define "magazine" -- a word that no longer has a distinct meaning in a world of apps, e-editions, and bookazines.

Oh, and there's one other significant omission: The glossary doesn't define an eleven-letter word beginning with "cluster". If you've worked in magazine media for awhile, whether analog or digital, you certainly know how essential that word is to understanding the industry.

Thursday, October 20, 2011

Burrus Responds: Not Giving Up on 6-Day Delivery

Long-time postal union leader William Burrus objected today to a Dead Tree Edition article that indicated he might be giving up on trying to preserve Saturday delivery.

Burrus' blog post, Pick Your Fight, was clearly a response to my article Sunday called Throwing in the Towel on 5-Day Delivery?. In the interest of fairness, Dead Tree Edition is republishing his entire commentary below, along with some comments [in brackets].

One of the web sites that focuses on postal issues [that would be Dead Tree Edition] recently suggests that I favor "throwing in the towel" on 5 day delivery by supporting the Obama plan for postal reform. [The "throwing in the towel" phrase was in a rhetorical question, not a statement.] This analysis misinterprets my suggested course for addressing the USPS’ dilemma. The choices offered in this political struggle are:

1. Issa/Ross - Carper/McCain
a. A Republican controlled House and
b. A Democratic Chairman in the Senate who accepts the GAO report [which says the federal government didn't overcharge the U.S. Postal Service for pensions, contrary to most expert views]
2. Obama proposal that includes 5 day delivery
3. HR 1351 which has major obstacles in the House and Senate. The path to passage would require a miracle and even then you would be only half way there, requiring Senate confirmation

Each of these options is unacceptable in their present form but the Obama fight is much more targeted and would be among friends

I do not suggest "throwing in the towel on 5 day delivery” but settling on a specific target and directing all the guns in one direction. It gives you a better chance of hitting something you want to eat. [I think he's saying that the Obama plan, though flawed, is the best hope for stopping the Issa/Ross "FEATPO" (Fire Everyone at the Post Office) plan; stopping five-day delivery is a future battle.]

And to the blogger [not I] who continues to write about the timing of my retirement, I suggest that when he reaches 53 years of service at the age of 75 he will be qualified to question my decision. [That may refer to an anonymous commenter on the "throwing in the towel" article who said, "I loved that Burris (sic) retires before the most critical time in APWU history since 1970" and added, "He knew it was crunch time and he got off the ship first like a rat or cowardly captain of the ship." My question to Anonymous: If Burrus was supposed to wait until APWU and USPS were not in crisis, how old would he be upon retirement?]

Wednesday, October 19, 2011

Mailers Getting Cold Feet About Postal Service Cuts

Recent problems with slow deliveries are causing some mail-dependent companies to think twice about supporting the radical downsizing of the U.S. Postal Service. Good idea.

An influential group of publication printers sent a letter to postal management last week to “express our concerns over the recent increase of customer complaints related to the late delivery of their catalogs and magazines."

“SCF drop shipments have increased from 3-day to 5-day at a large percentage of facilities,” stated the letter from Idealliance’s POISE committee. The POISE printers produce and distribute more than 70% of the Postal Service’s flat mail. Mailers typically look to these printers for help navigating operational issues with the Postal Service, including late deliveries.

The letter, which was distributed via Idealliance to numerous mailers, notes that postal management has asked the printers to support its “aggressive network optimization initiative.”

“To date, we have publicly supported the efforts of the US Postal Service, but the POISE group feels this is becoming increasingly difficult as we face these delivery issues and concerns from frustrated and unsatisfied customers.”

If they think things are bad now, they should take another look at what might happen if all of Postmaster General Pat Donahoe’s recently announced cuts are carried out. The USPS’ Radical Plan: Good in theory, potential chaos in reality, my article in the new issue of Publishing Executive magazine, explains why.

In short, it’s not that there aren’t plenty of opportunities to make the Postal Service more efficient, as noted in yesterday’s article Why Mailers Support Radical Downsizing of the Postal Service. The problem is that the groundwork hasn’t been laid for successfully restructuring USPS and ramping up its efficiency.

Real productivity improvement is built on a foundation of investments -- in equipment, technology, training, procedures, etc. Donahoe’s plan to downsize the USPS workforce by 30% in the next four years is like trying to install the roof before the foundation has been laid.

Mailers should expect more customer service problems in the next few years if politicians force the Postal Service to make huge cost cuts without giving it the resources to work more efficiently.

Related articles:

Tuesday, October 18, 2011

Why Mailers Support Radical Downsizing of the Postal Service

If you want to know why major mailers are generally supporting major cost cuts at the U.S. Postal Service, consider this recent quotation from magazine-industry veteran Tom Martin:

“When you look at the Three Ps, in 2000, printing was 45 percent to 55 percent of costs, paper was probably 20-25 percent of your costs, and postage was between 30 to 32 percent of overall costs,” the Cygnus Business Media executive told Folio: magazine. “But now the printer is probably sitting with only 32 to 35 percent of overall costs. Paper hasn't changed that much on a percentage basis but the number that has changed tremendously is postage. That's probably sitting at 42-46 percent of overall costs depending on the magazine.”

Martin’s insight rings true not just for the B2B magazines in Cygnus’ portfolio but also for the large consumer magazines – and in fact for every mail-dependent organization. While everyone else in the ink-on-paper world has been slashing costs in the past decade, the Postal Service mostly just passed cost increases along to its customers and only in the past few years got serious about real efficiency gains.

That’s why mailers think the Postal Service is ripe for some serious downsizing. (But they had better be careful what they wish for, as Dead Tree Edition will explain tomorrow in Mailers Getting Cold Feet About Postal Service Cuts.)

As for Martin’s statement, here’s what’s happened to the “three Ps”:

Prices for publication printing have been dropping at about 3% to 4% per year (NOT adjusted for inflation) for more than a decade. Prices for coated paper have fluctuated greatly but are almost exactly identical (NOT adjusted for inflation) to what they were 10 years ago.

But USPS rates for most types of postage rose faster than the rate of inflation rate during the first half of the past decade and increased in line with the inflation rate the past few years.

Postal executives complain that their rate increases are limited “only” to changes in the Consumer Price Index. But most mailers have no sympathy for those complaints: They’re happy if they can avoid cutting the prices they charge and would be ecstatic if they had the kind of guaranteed price hikes the Postal Service enjoys.

Mailers believe the Postal Service only got serious about cost cutting when it was forced to do so – by declining demand for mail and the CPI-based price cap. And despite USPS’s aggressive downsizing the past couple of years, mailers still see a system that has far too many post offices, sorting facilities, and people (especially supervisors) than it needs to handle current or future mail volume.

Related articles:

Sunday, October 16, 2011

Throwing in the Towel on 5-Day Delivery?

At the end of a lengthy analysis of the prospects for postal legislation yesterday, long-time postal union leader William Burrus made a statement that could signal a change in strategy on five-day delivery:

"His [President Obama's] proposal includes 5 day delivery which is strongly opposed by the unions but the decision must be made on which fights to engage in and with whom. Do we fight the Republican efforts to destroy the Postal Service and the unions or do we fight the Obama inclusion of 5 day delivery. This is a legislative and executive decision but it is time to decide and serious consideration must be given to the results if you don't prevail. In American Politics you can be right and lose."

Burrus has retired from the presidency of the American Postal Workers Union (APWU) but still has plenty of connections in and knowledge of Washington's ways. Dead Tree Edition has questioned his rhetoric and math at times (See Mathematically Challenged: Burrus Proposal Doesn’t Add Up for USPS and The Reinterpretation of William Burrus) but not his political savvy or inside information.

Burrus' statement suggests that the prospects are slim for getting the Obama Administration to change its mind on preserving Saturday delivery. Without an Obama push to counter the mostly anti-union Republicans, a labor-supported position has little hope for success these days.

Burrus seems to be suggesting that the postal unions save their powder for a more important and more winnable fights. Tops on the list is stopping the Issa/Ross bill that would put the U.S. Postal Service into something resembling Chapter 11 bankruptcy reorganization and potentially tear up the union contracts. Related battles are ending USPS's subsidies of the federal government that have pushed it to the verge of insolvency and opposing postal management's request to void the no-layoff clauses in union contracts.

Update: Burrus took offense at suggestions he may be "throwing in the towel" on preserving six-day delivery -- Burrus Responds: Not Giving Up on 6-Day Delivery.

Other articles on Obama's Postal Service proposals:

Thursday, October 13, 2011

Postal Study Is Bad News For Publishers

Pressure to jack up postal rates for magazines and newspapers was heightened today with the release of a long-awaited study of Periodicals class costs.

Publishers have been hoping for years that the joint Postal Regulatory Commission-U.S. Postal Service study would disprove USPS's claim that postage is covering barely three-fourths of the Periodicals-related costs. No such luck.

"After review of Postal Service responses to data quality recommendations from prior reviews, the Postal Service and the Commission agree that the cost data are reasonably accurate for ratemaking purposes," the report says.

The publishing industry has frequently criticized USPS's methods of allocating costs among classes, noting the rapid increase in costs attributed to Periodicals despite greater automation and better mailing practices.

"Over the past decade, the unit cost of Periodicals has increased faster than the cost of inflation," the report acknowledges, partly because of "the Postal Service’s inability to capture efficiencies in flat mail processing similar to those it has captured for letter mail."

"Substantial opportunities for increasing the efficiency of flat mail processing and transportation exist. Over the past decades the Postal Service has introduced many programs designed to capture some of these efficiencies. However, it is unclear how successful these programs have been."

Still, the PRC believes that "most, but not all, of the Periodicals deficit can be resolved through operational efficiencies." Some of that would entail handling Periodicals mail more like Standard flat mail (such as catalogs).

USPS, however, "believes that substantial differences exist between the characteristics of Periodicals and Standard Mail flats, and that these differences reflect mailer and reader preferences that need to be respected." Upholding those differences limits the potential efficiency savings for Periodicals.

The report spells out ways that the inflation-based cap on postage increases could be pierced to bring Periodicals revenue more in line with costs:

"A legislative change which relaxes strict inflation-based price caps by class and allows for flexible pricing reflecting market dynamics might enable the Postal Service to further remedy the Periodicals cost coverage issue. Absent this legislative change, regulatory action could fix the Periodicals cost coverage problem if the Postal Regulatory Commission intervened as part of its Annual Compliance Determination (ACD) process to raise Periodicals prices to achieve 100 percent cost coverage."

Another option is to get rid of Periodicals pricing altogether, the report says. Periodicals could be charged First Class rates for relatively fast service or Standard rates for slower service and then receive a special discount that recognizes periodicals' unique role in educating and informing the public.

Other articles about Periodicals cost coverage include:

Tuesday, October 11, 2011

Abitibi's New Name: A Portent of Things To Come?

After considering hundreds of possible monikers, newsprint giant AbitibiBowater has chosen the name of a ship that was trapped in the Canadian Arctic, abandoned, rescued by Americans, and broken up by the British.

Is that a prediction of things to come or just a failure to know history?

AbitibiBowater (AKA AbitibiUnderwater) announced today that it will become Resolute Forest Products on November 7 as it tries to leave behind its debt-burdened past and find a name that customers can pronounce.

"Resolute" means being determined or having a single-minded resolve. The word most famously appears in the name of the HMS Resolute, a British exploration ship that was abandoned in 1854 after being trapped in ice. American whalers freed her from the ice the next year and sailed her to the U.S.; the American government presented the ship to Queen Victoria the following year in a show of friendship.

After the British navy decommissioned the Resolute, the ship was broken up, with some of the timbers being used to make a pair of desks -- one for Queen Victoria and one for the U.S. President (and still in the Oval Office). Replicas of the American desk have appeared in various movies about the White House -- most prominently in "National Treasure 2: Book of Secrets," in which a hidden compartment contains an important clue.

Related article: Suggestions for AbitibiBowater's New Name.

Monday, October 10, 2011

Please Mr. Postman, Look and See, If There's a Six-Pack in Your Bag For Me

President Obama thinks beer and wine are just the thing to help the U.S. Postal Service with its financial problems.

The "President's Plan for USPS Reform" includes "acceptance of beer and wine in the mail," according to a recent presentation by Postmaster General Pat Donahoe. Current law prohibits shipping alcoholic beverages by mail.

The Obama Administration may also have altered its USPS plan in a way that would definitely give mailers a hangover, the Donahoe presentation indicated. The Administration announced last month that it would propose "a modest one-time increase in postage rates." (See Obama Supports Postage Increase: Is He Dissing the Print Industry?).

But Donahoe's description was a bit different: "Give USPS ability to raise postage rates above current price cap." Have "one-time" or "modest" been dropped from the plan?

The beer-and-wine language is also a bit mysterious: "Allow USPS to increase collaboration w/ state and local governments; e.g. non-postal products, acceptance of beer and wine in the mail." With many states having tight controls and hefty taxes on beer and wine, it's not clear how enabling the Postal Service to deliver such products would constitute collaboration rather than competition.

Perhaps the states will enjoy a spike in their liquor-tax revenues when mailers are notified of the new postal rates.

Saturday, October 8, 2011

Why Are the Postal Service's Financial Problems Such a Surprise?

The U.S. Postal Service's financial problems have, of course, been big news lately, but they should hardly be a surprise.

It didn't take a genius to see this coming; here's what appeared in Dead Tree Edition almost two years ago:

"Although the Postal Service is on track to become insolvent within a couple of years, Congress has shown no appetite for wrestling with the problems that vex the USPS. The Postal Service's requests to stem the financial tide -- by eliminating Saturday delivery and eliminating the prepaid retiree-benefit requirement, for example -- will inevitably lead to a Congressional discussion of whether postal rates should be raised."

USPS is still trying to eliminate Saturday delivery and the prepaid retiree benefits. And recent Obama Administration support for a one-time higher-than-inflation-rate increase in postal rates (See Obama Supports Postage Increase: Is He Dissing the Print Industry?) means Congress is indeed likely to discuss raising postal rates.

That article from two years ago, by the way, was about the idea of letting the Postal Service conduct national lotteries as a profit-making venture. ("Look, Marge, I won a hundred Forever Stamps!") I haven't seen that idea come up in recent Congressional discussions. But it just might.

One good thing about all the political and mainstream-media attention being paid to the Postal Service's finances is that it's finally bringing to light how Congress has made a mess of the agency's finances.

Perhaps the best "ah-hah" MSM commentary was published yesterday by Bob Sullivan, a consumer-affairs reporter for MSNBC, in explaining that USPS is not looking for a bailout:

"In fact, it's the Postal Service that’s currently bailing out the U.S. government. Politicians have been raiding Postal Service revenues for years, using them to make the federal deficit appear smaller than it really is. The fiscal gyrations are so twisted that the Postal Service is right now forced to pre-pay health care benefits for employees the agency hasn't even hired yet — in fact, for many future employees who haven't even been born yet — all to artificially shrink the federal deficit. It's these crushing accounting tricks, not the cost of delivering mail, that has pushed this 200-year-old institution to the brink."

By the way, that's not much different -- but, frankly, better written -- than what Dead Tree Edition published in September 2009:

"The billions of dollars the Postal Service pre-pays every year into a retirement-benefits fund have nothing to do with retirees and everything to do with making the federal deficit look smaller. Congress is playing an accounting shell game, with the cost of the payments being passed along to mailers in the form of higher rates. That has made mailed products increasingly uncompetitive with such electronic substitutes as email and Web sites, leading to volume decreases and excess capacity in the postal system."

Related articles: How Congress Bankrupted the Postal Service in 3 Easy Steps and How USPS Could Bypass Congress on Saturday Delivery.

Thursday, October 6, 2011

Mooks and Canucks: The Bookazine Invasion Crosses the Border

Barely a week after Dead Tree Edition chronicled the rise of bookazines at U.S. newsstands, word comes that the hybrid publications are on the march in Canada as well.

"Special interest publications -- spinoffs from a core magazine -- are definitely a growth area for traditional publishers," the Canadian Magazines blog quotes Maryam Sanati of Toronto Life telling a meeting of Toronto editors.

Her advice includes "build on your publication's core competencies," "repurpose what you can from the main book", and "be as specific as possible." Sanati's formula for SIPs: "Very specific, very vertical = very successful."

Her goal is to meet the needs of specific consumers so well that "the newsstand-only products leap off the racks."

That raises a question relevant to both Canadian and U.S. bookazines: Why do we refer to them as “newsstand-only” books when we publishers claim to have gone multimedia and multichannel? Why aren’t we calling them “non-subscription” products and selling them on the Web and in editions for Nook, Kindle, iPad, etc.?

Tuesday, October 4, 2011

When NOT To Use a QR Code

With all of the excitement about Quick Response codes among print people these days ("See, we're still relevant in the Internet age!"), it's easy to forget that they aren't right for every occasion.

A colleague in the magazine industry relates this recent incident: A customer submitted a print ad with a QR code, which my friend subjected to the Paranoid Production Manager's 3 Tests for QR Codes. (FYI, all good production managers are paranoid.):

1) Is a URL shown with the QR Code? That might not be necessary in countries like Japan where using QR codes is second nature. But in less advanced countries with more primitive phone systems and many people who don't know what to do with two-dimensional barcodes -- like, say, the United States -- not including a Web address will hurt response. Check.

2) Is the QR code readable? There are some real horror stories about promotions containing QR codes that weren't readable. Check.

3) Does the QR code take you to a web page that is relevant to the ad? Just because the code is readable doesn't mean it directs readers to the correct web page. Designer have been known to make mistakes. Check.

But then my colleague spotted a problem: The promotion was for the sale of a product that has to be shipped to the buyer, which means the buyer has to enter credit-card or PayPal data, email address, and mailing address. That's way more typing than most people want to do on the typical smartphone. The client agreed that it should remove the QR code from the ad.

Moral: Don't use QR codes if the landing page is not optimal for mobile devices.

Other articles about managing print projects include:

Saturday, October 1, 2011

Facebook Is Doomed, BoSacks Says

There are those on Wall Street who say that Facebook will be worth $100 billion when it goes public next year, but the magazine industry's favorite pundit has a different view of the company's outlook.

"I'm prepared to predict the death of facebook. It's lost its way & in oriental terms has no face. Over-commercialism & abuse will kill it," BoSacks (AKA Bob Sacks) tweeted yesterday.

So who are you going to believe -- a bunch of greedy MBAs eager to cash in on the next big thing? (Remember when Enron was a can't miss?) Or a guy who helped found High Times magazine and then started what may be the first e-newsletter?

My money's on Bo. After all, he was a magazine production guy (you can always trust us), and he frequently quotes an obscure blog known as  Dead Tree Edition in his newsletters.

I just wonder what will happen to all the stuff people have put on their Facebook pages when that social network circles the drain. Maybe they'll be able to port it over to their Friendster accounts.

Tuesday, September 27, 2011

Invasion of the Bookazines, Featuring the Return of the Living Dead

Blame it on the mooks and their zombie buddies.

Because of all the doom and gloom about the U.S. newsstand system (you know it’s bad when an industry consultant’s blog is called From the Foredeck of the Titanic), Dead Tree Edition decided to launch an in-depth investigation. Which means I ventured out to the magazine sections of three stores.

I was trying to figure out why, as MediaPost reported recently, the combined retail sales of 68 major magazines are barely half of what they were a decade ago. It wasn’t hard to spot one of the culprits.

At first, all seemed OK when I eyed the prominently placed magazine section in a big discount store. There were lots of familiar titles – National Geographic, TIME, Us, Readers Digest, and Better Homes & Gardens. But a closer look showed they were impostors.

The well-known magazine logos weren’t on magazines at all but on mooks – AKA bookazines, SIPs (single interest publications), one-shots, or specials. By whatever name you call them, they are sold in the magazine section of stores but have no specific issue date, can’t be obtained as part of a subscription, and tend to hone in on a single topic that’s in keeping with the magazine’s brand --like Christmas Cooking from Better Homes & Gardens, Us: Stars of 2011, or TIME’s Beyond 9/11: Portraits of Resilience.

Mook sales are usually excluded from the industry statistics reported by the trade press.

The intruders mostly have the same characteristics – little or no advertising, glossy high-quality paper, perfect binding, relatively high cover prices, and on-sale periods of about three months instead of the one month or less typical of real magazines.

The Zombies
Much of the retail space once dedicated to prominent weekly and monthly magazines has been given over instead to these magazine spinoffs. Also taking oxygen away from the sales of real magazines are SIPs published by such non-magazine brands as Pillsbury, the Mayo Clinic, USA Today -- and Life.

Three times Time Inc. has killed Life magazine, only to resurrect it for such bookazines as 100 Photographs That Changed the World and El Papa de Juan Pablo. No wonder they call it Life: This zombie just won’t stay dead!

Also enjoying living-dead status is U.S. News & World Report, which closed down its only print magazine late last year but in one bookstore had four different mooks – Best Colleges, Best Graduate Schools, Best Hospitals, and Amazing Animals. (Wait, shouldn’t that last one be Best Animals? Or maybe Best Veterinary Hospitals? How about Best Obedience Schools?)

The "Best" books all deviate from the usual bookazine model by running ads -- lots of ads in the case of Best Hospitals, way more than the real magazine used to have. My contact at U.S. News says the new 344-page Best Colleges book is the company’s largest “issue” in at least two decades, and maybe ever. It sounds as if the magazine business is looking pretty good for U.S. News now that it’s out of the magazine business.

One-shots used to be the province of enthusiast magazines testing out ideas for a new title: Sportscar Convertible is doing well, so let’s try a SIP called Corvette Convertible. If the response is good enough, we’ll solicit subscriptions and start publishing bimonthly.

But that door is closed. The beleaguered newsstand distribution system no longer has the patience to give untested niche titles a shot.

Favorable Economics
Bookazines from well-respected brands are another matter, and the big publishers are happy to play along even if that diverts attention from their periodical issues. Consider the economics, as exemplified by Better Homes & Gardens: The 232-page October issue is priced at $3.99, but its 144-page SIP siblings – I saw three in one store – sell for $9.99 each.

Here’s my analysis: As consumers have gained greater ability to find exactly the information they want or need, the traditional mass-market magazine with its mishmash of loosely related articles is looking increasingly irrelevant to them. (The October issue of National Geographic has articles on the teen brain, surviving cancer, whale sharks, and Ansel Adams. Who's the target audience?)

But in an age of link-baiting and belly-fat ads, consumers still trust respected magazine brands. When those brands offer content -- whether a mook or an app -- that’s laser-targeted to their needs or interests, suddenly the wallets come out. (A National Geo mook called Wildlife: The Greatest Photographs? Let me see that.)

I was one of those who snickered last year when the Magazine Publishers of America changed its name to The Association of Magazine Media. Now the name is actually starting to make sense.

Just don’t ask me to define “magazine media.”

If you actually made it to the end of this article, you might enjoy suffering through these other Dead Tree Edition analyses of the U.S. magazine industry:

Thursday, September 22, 2011

Bad Customer Service Is Built into the Design of U.S. Post Offices, Report Says

Have you ever stood in a long, slow-moving line at a post office and wondered why only one employee was helping customers?

The problem is the way the traditional U.S. post office is structured, with delivery and retail operations in the same building, according to an Inspector General’s report released today. It’s high time to separate those functions in many urban and suburban areas, says the report, entitled “Retail and Delivery: Decoupling Could Improve Service and Lower Costs.”

“Unlike most retail stores in the private sector where employees are called up from the back office when lines are long to serve the customer, the focus in Postal Service shared facilities is the exact opposite. A clerk’s first priority is often back room operational support activities — even if that means a retail customer waits longer in line.”

Managers of a typical post office “primarily focus on delivery performance and cost control over providing retail service or promoting revenue generation. In fact, their performance evaluations often guide them to focus on meeting delivery cost and service goals to the exclusion of retail service or revenue generation goals. “

“There is no inherent business need to have retail co-located with delivery. If reasonably increased workforce flexibility is allowed (by allowing some retail clerks to work a half day, for example), the business need for coupling could effectively disappear. The recently approved contract with the American Postal Workers Union (APWU) introduced new scheduling flexibility for career employees that might support this change.”

Twice as many U.S. postal facilities have both delivery and retail operations than have only retail operations, the report says. By contrast, private delivery companies and the best foreign postal services put delivery operations in commercial areas near major transportation hubs and retail operations close to where customers live and work.

Retail and delivery have been coupled in U.S. post offices for 150 years, the report says, but that model no longer makes sense in densely populated areas, according to the report.

“Carriers once spent more than half of their day manually sorting mail at the local carrier office before delivering it, but now devote slightly more than two hours per day to this function.”

“With carriers spending less time in the office, more mail can be delivered by each carrier and there is less need for letter carriers in each facility. With fewer carriers and the removal of local sorting equipment, there is idle floor space in facilities and less need for carrier vehicle parking.”

“The Postal Service could consolidate two nearby postal facilities into a single carrier-only facility and relocate it to a lower-cost facility with better connections to transportation links. This would produce savings by reducing both facility and transportation costs and by designing a space geared specifically toward efficient delivery operations.”

Wednesday, September 21, 2011

Seven Losers and Four Winners in the NewPage Bankruptcy

The recent bankruptcy court filings by NewPage have been blessings for some and curses for others. Here's a look at the scorecard two weeks after the big U.S. paper company went Chapter 11:

Loser #1) Port Hawkesbury employees: NewPage has basically deep-sixed its money-losing Canadian mill, walking away from severance obligations and an underfunded pension plan, not using any of its debtor-in-possession funds to keep the mill running, and leaving many suppliers holding the bag. NewPage has put the mill up for sale but also revealed that it loses $4 million per month on the operation. Unless the muscle-bound Canadian dollar suddenly goes into the tank, a new owner won’t be able to make a go of the mill unless it can avoid NewPage’s pension obligations, reduce labor costs, and perhaps keep part of the operation (two paper machines and a pulp mill) idle.

Loser #2) Nova Scotia: It’s not just the mill’s employees who are suffering; the whole province seems to be getting sucked into the Port Hawkesbury vortex. The provincial government is shelling out $15 million to prop up logging operations that are getting stiffed by NewPage, the power company (owed nearly $10 million) says the loss of such a big customer will force it to raise rates for everyone else, and rail service to part of the province may no longer be viable.

Loser #3) Paper buyers: Spot deals for supercalendered paper disappeared almost overnight when the Port Hawkesbury closure was announced. Contract prices for SCA and the closely linked lightweight coated (LWC) papers are also rising despite declining demand.

Loser #4) Bondholders: Owners of the junkiest of NewPage bonds will probably receive nothing, and even owners of more senior bonds who expected to come out OK might have to accept some equity in a restructured NewPage in lieu of cash.

Loser #5) Suppliers: At least 25 suppliers of such items as chemicals, energy, and timber to the American arm of NewPage got stuck holding more than $1 million each in accounts receivable when the company went Chapter 11. Their prospects are better than those that supplied Port Hawkesbury, but most are unlikely to receive full compensation.

Loser #6) Cerberus: The folks who brought us the Chrysler and GMAC bankruptcies can now add another turkey to their resumes. The Chapter 11 filing wipes out the big hedge fund's stake in NewPage.Cerberus now seems to be moving more toward simply investing in companies rather than trying to buy and run them.

Loser #7) StoraEnso: With NewPage defaulting on the lease of one of its Port Hawkesbury paper machines, StoraEnso is taking a $180 million hit because it is the guarantor of the lease. Stora had already written off its 19.9% equity stake in NewPage, which was a holdover from the sale of Stora's North American assets to NewPage.

Winner #1) Duluth employees: All of NewPage’s U.S. mills will probably continue running as long as the company is in bankruptcy court. (After three years of writing about ink-on-paper industries, I've seen this movie before. Can you say Tribune, Source Interlink, Quebecor World, AbitibiBowater, White Birch, etc.?) But the future looks especially bright for Duluth, the only NewPage mill besides Port Hawkesbury that can make supercalendered paper.

Winner #2) UPM: The Port Hawkesbury shutdown makes UPM’s recent purchase of the Madison, Maine mill look like a winner because of higher prices and a tight market for SCA paper. Although NewPage’s travails may cause investors to get jittery about other highly leveraged paper companies (which may be why Verso's stock price is down a bit), Finnish giant UPM seems to have the size, strength, and diversification to ride out the storm and to profit from NewPage's weakness.

Winner #3) The Katahdin region of Maine: Ever since the one-machine Millinocket, Maine supercalendered mill closed three years ago, there have been various attempts to reopen it that eventually petered out. But the latest investment plan already seemed to have legs before getting a shot in the arm from Port Hawkesbury's demise. Like Port Hawkesbury, Millinocket has one of the few machines capable of making an SCA for offset printing that rivals the quality and printability of more expensive coated groundwood papers.

Winner #4) Lawyers: Because NewPage filed for Chapter 11 without a “prepackaged” restructuring plan, a passel of lawyers will be kept busy for months sorting through the claims and interests of various creditors. Remember, the first rule of bankruptcy law is that, regardless of who else gets stiffed, the lawyers always get paid.

Related articles:

Tuesday, September 20, 2011

Obama Supports Postage Increase: Is He Dissing the Print Industry?

The Obama Administration proposed above-inflation increases in postage rates Monday, just a week after the Postal Service indicated it had backed off of just such a rate hike for fear of hurting the printing industry.

The President released a deficit-reduction plan that would "permit USPS to seek the modest one-time increase in postage rates it proposed a year ago."

A week earlier, Deputy Postmaster General Ron Stroman explained in an interview why the Postal Service had decided not to pursue such an "exigent" rate increase: "One of the things we have seen in ongoing discussions with the print industry is that the industry itself is functioning with very close profit margins. We have been very concerned that we not raise prices too high because you just drive people out of the business."

The USPS proposal a year ago, which was rejected by the Postal Regulatory Commission, had average rate hikes of 5.8% for the market-dominant classes of mail. But for Periodicals mailers the increases would have been in the 8% to 9% range.

The president's plan would also "give USPS the ability to better align the costs of postage with the costs of mail delivery while still operating within the current price cap." That may refer to postal executives' desire to impose the highest rate hikes on products on which USPS allegedly loses money, such as Standard flats (catalogs) and Periodicals mail.

The president's plan would also "reduce USPS operating costs by giving USPS authority, which it has said it will exercise, to reduce mail delivery from six days to five days." That's an about face on Saturday delivery: Just seven months earlier, Obama released a budget proposal that included the usual language about requiring six days of delivery and banning the closing of small post offices.

Related articles:

Friday, September 16, 2011

USPS Consolidation Plan Means Moving or Closing Some FSS Machines

The network optimization plan announced yesterday by the Postal Service would apparently require the relocation or shutdown of some of the football-field sized Flats Sequencing System machines.

The vast majority of the 47 processing centers that operate the huge machines would be spared the ax. In fact, more than half of the FSS facilities would take on the sortation of mail from other buildings that would be closed. The consolidation plan would apparently result in a higher percentage of flat mail being sorted by FSS than occurs today.

But five FSS centers with a total of nine machines are on the list being considered for closure. Mail processing now done in Dallas; Van Nuys, California; and Los Angeles (Peck Annex) would be moved to nearby facilities that do not currently have FSS machines. (The original version of this article included Orlando, but the facility there that is on the study list is not the one with FSS machines.)

Work now done in Stamford, Connecticut and Fox Valley, Illinois would be consolidated into nearby centers that are already operating FSS machines. Also, a study of whether to consolidate the work now done at three Massachusetts locations into one includes two facilities that each have three FSS machines -- Middlesex-Essex and Northwest Boston.

The network optimization plan would close more than half of the 487 facilities that now process mail. But facilities with FSS machines tend to be large operations in major metropolitan areas, making them more likely to gain work from consolidation than to be closed.

FSS was supposed to revolutionize the handling of such flat mail as catalogs and magazines, which have traditionally involved much manual handling. The last of the 100 Phase I machines was turned on this past summer. It seems unlikely that any of the machines would be idled, but moving them would be no small feat.

The machines have enabled the Postal Service to eliminate thousands of carrier routes, but with the declining volume of flat mail it's not clear whether the $1.4 billion investment was worthwhile for USPS. For mailers, FSS means mail has to arrive at a sorting facility earlier in the day to receive next-day delivery. (See Special Mail Processing of 'Hot' Publications To End Friday.)

Also on the chopping block is the processing and distribution center in Lancaster, PA, which was supposed to be the test site this summer for a smaller footprint version of the FSS, nicknamed “FSS Lite”. It’s not clear whether that test has gone forward. In fact, with so many small and medium-sized processing centers being targeted for closure, it’s not even clear whether FSS Lite or FSS Phase II will ever be needed.

Related articles:

Thursday, September 15, 2011

How Congress Bankrupted the Postal Service in 3 Easy Steps

With all the confusion in the news media about the U.S. Postal Service's financial problems, finally one writer nails it on the head.

In Next Washington Debacle: The Broke Postal Service at Seeking Alpha, columnist Rick Newman succinctly summarizes "how Congress has made the mail service a national embarrassment":

1) Hamstringing its finances: "The postal service faces unusual limits on its ability to manage costs, such as an obligation imposed by a 2006 law to 'prefund' a large portion of its retiree healthcare plan, instead of a more typical pay-as-you-go arrangement." Newman doesn't mention that the prefunding is an accounting trick used to understate the size of the federal budget deficit.

2) Making it obsolete: "Congress has ... micromanaged the postal service through a strict set of rules governing what it can and can't do while fulfilling its mandate of universal mail service."

3) Waiting until disaster is near: "The USPS has been seeking sounder finances and greater independence for several years, yet Congress has sat on its hands to the point that default seems likely and insolvency is even possible."

Newman concludes that postal reform "won't happen unless Congress relinquishes its own prerogative to interfere. Don't stand by the mailbox waiting for deliverance."

Other recent articles about the Postal Service's financial problems and cost-cutting efforts: