FSS Postage Rates Will Raise Issues for Cataloguers, Publications, Printers, and USPS

Because of a provision in the recently announced postal rates, mailers and printers have four months to overhaul the way they prepare catalogs, magazines, and other flat mail.

The coming changes raise a variety of uncertainties for flats mailers, printers, and the U.S. Postal Service itself. And they will make it difficult for many mailers to project how much the new rates will cost them.

The higher rates slated to take effect January 26 will require something that until now has been optional -- and little used: Flat mail going to ZIP codes served by the Flats Sequencing System will undergo FSS preparation. That means the way the mail is sequenced, bundled, and placed on pallets will be completely different from the current methods, which will still be used for non-FSS areas – as explained in FSS Postage Pricing Will Affect Magazines, Catalogs, and Printers.

“FSS machines are a critical element in the Postal Service’s strategic operations plan,” USPS’s recent rate filing says. Currently, however, the efficiency gains that FSS machines produce are limited by the fact that most flats destinating within the ZIP Codes served by FSS machines have not been prepared to maximize FSS efficiency.”

The end of this article has an excerpt from the filing that provides an overview of why USPS is requiring FSS preparation, how the preparation of flat mail will change, and how postage rates for flats mail are being restructured. But first, here are seven questions that I have about these changes. I welcome your feedback on these, either by commenting on this blog or via email at dead.tree.edition@gmail.com.

1. How does a mailer calculate how much its postage will increase? If the exigent portion of the increase is not overturned, the increase will average 5.9% but actually be higher for some mailers and lower for others. The usual method is to take a typical mailing, plug in the new rates, and see how much that changes the bottom line. But mailers now face a whole new rate structure for a portion of their mail, with most having no clue regarding such things as how many mail pieces they will have on DFSS Scheme Pallets.
2. What is the Postal Service’s Plan B? Feeding traditional carrier-route and 5-digit bundles into an FSS machine is not ideal, but it works. The reverse, however, is not true: Mail that has undergone FSS preparation cannot easily be sorted if something goes wrong with an FSS operation, such as machine down time or too much volume.
3. How will co-mail incentives be affected? Postal officials have said they don’t want FSS rates to reduce the incentives to co-mail, which creates a win-win by lowering mailers’ postage while preparing mail in a more efficient manner for the Postal Service. But it will take analyses of many different mailing across multiple classes to determine whether that goal has been achieved. And even if it has, the characteristics of optimal co-mail pools (such as the number of mail pieces) may turn out to be quite different with FSS preparation.
4. Will some co-mail deals between printers and mailers need to be reinterpreted or renegotiated? Co-mail deals often involve a comparison of actual postage costs to baseline postage (the theoretical postage if there were no co-mail or dropshipping), with some sort of guaranteed savings or sharing of savings. But I’m already getting inquiries from some mailers indicating it’s not clear how their current contract language should be interpreted in light of the FSS rates.
5. Will FSS preparation enable printing plants to run more efficiently? Creating fewer, larger bundles will reduce the amount of packaging materials needed and in theory should enable bindery lines to run faster. But are there hidden costs as well?
6. To what extent will FSS preparation reduce mailers’ bindery costs? The way printers charge for creating mail bundles varies from printer to printer and customer to customer. In some cases, customers are charged per bundle – which should mean their bundling costs will decline significantly. In many, if not most, cases, bundling is charged on a per-thousand-copies basis, but will mailers with such deals push for per-bundle charges in the future?
7. Will all printers be able to create mailings with two very different sets of rules, one for FSS zones and one for non-FSS zones? The change should be little trouble for printing plants that specialize in publications, but will it present problems for more general commercial-printing plants that only occasionally handle flats mailings?

Here's what the Postal Service has to say about the new rate structures:

FSS machines are a critical element in the Postal Service’s strategic operations plan. FSS machines reduce the end-to-end processing costs of flat-sized mailpieces by automating their sequencing into delivery order and avoiding labor-intensive manual sortation by carriers. The Postal Service has installed FSS machines in mail processing plants that process high volumes of flat-sized mailpieces.

Currently, however, the efficiency gains that FSS machines produce are limited by the fact that most flats destinating within the ZIP Codes served by FSS machines have not been prepared to maximize FSS efficiency. For example, for mail destinating in FSS zones, carrier route preparation is of no value because it yields excessive bundles that increase bundle handling costs. In contrast, the containerization of FSS mail on FSS scheme pallets enables such mail to completely bypass bundle sortation operations and be fed directly into the FSS operations. The preparation of FSS Facility pallets also improves service by allowing the Postal Service to quickly identify FSS mail so that it can undergo necessary bundle sortation and be made available for FSS processing without delay.

Accordingly, the Postal Service is taking three steps. First, we plan to require the previously optional FSS preparation for all flat-shaped mail pieces destinating in FSS zones. Second, in this filing we are proposing FSS pricing for presorted flat-shaped pieces in Standard Mail, Outside County Periodicals, and Bound Printed Matter Flats that destinate in FSS zones. The proposed FSS prices are designed to minimize changes in postage for flats mailers. Third, in this filing we are also proposing to introduce discounts for mail on FSS scheme pallets that is entered at the location of the destinating FSS machine (DFSS).

Related articles:

• Why the Exigent Postal Rate Increase Will Backfire 
• USPS Admits FSS Is Losing Money  
• So Far, FSS Is A Step Backward, USPS Data Indicate 
• FSS Machines Running Far Slower Than Planned

Why the Exigent Postal Rate Increase Will Backfire

Let’s be honest: Given the U.S. Postal Service’s dire financial condition, the 4.3% emergency rate increases it announced yesterday are hardly exorbitant. That won’t prevent the move from being a disaster for the nation’s mail system.

I have little doubt that some Congressman will blast the USPS Board of Governors for putting forth relatively small “exigent” (greater-than-inflation) price increases. But the micro-managers on Capitol Hill, who should be focused on getting their own house in order, need to understand why the governors aren’t pushing for more.

I think the Board of Governors is trying to make the best of a bad situation, attempting to satisfy the political pressure for higher prices without scaring away customers. I suspect they understand the dangers of any exigent increase in the context of recent Congressional inaction and downright buffoonery on postal issues.

Being part of an industry (magazine publishing) that opposes any exigent increases, I’m not supposed to say this but I will: Mail-dependent companies could probably stomach a one-time extra price increase of less than 5% if – and this is a big “if” – it were part of a larger move to put the Postal Service onto a sustainable path.

We wouldn’t like it, and we might grumble loudly. But most of us would happily pay a few more percentage points in return for ensuring the long-term health of the postal system. And we would stop putting so much energy into figuring out how to reduce our mail volumes and once again include creative use of the mail in our long-term marketing plans.

That, however, is not what happened yesterday. What we got instead was an exasperated Postal Service whose attempts to right the ship have been scuttled at almost every turn by a do-nothing Congress. Accompanying the announcement are:

• No refund of the billions of dollars the Postal Service overpaid into the federal pension system because of funky accounting.
• No payback of the billions of dollars in interest-free loans USPS has given the federal government under the euphemistic name of prepaid retiree health benefits.
• No real progress on consolidating the Postal Service’s bloated network of post offices.
• A recent reversal of progress on correcting the shamefully slow process of getting postal retirees their full annuity payments, which makes employees afraid to retire and stymies the Postal Service’s move to a smaller, more flexible workforce. (The much-maligned federal bureaucracy was making real headway until – you guessed it – Congress derailed the train of progress by failing to pass a budget, as explained in Budget Cuts Are Delaying USPS and Federal Retiree Payments.
• No action on allowing the Postal Service to start potentially lucrative ventures – even ones that wouldn’t really compete with private enterprise, such as delivering wine and beer.

All of that inaction makes yesterday’s announcement scary for the business mailers that provide the bulk of the Postal Service’s revenue. We can see what’s coming: Congress members will continue nagging the Postal Service to be more businesslike while forcing it to do something very un-businesslike – raising prices in the face of increased competition and declining demand.

What we mailers see is not a one-time price hike but rather the first of many “emergency” increases that will increasingly thrust USPS into a death spiral. Congress will keep blocking meaningful action on the Postal Service. But USPS customers (and employees) will be the ones who are punished.

As the mythical pirate captain told his crew, “The beatings will continue until morale improves.”

Except that, starting yesterday, mail-dependent companies began redoubling their efforts to get off the ship.

Don’t be surprised if more alternative-delivery ventures sprout up to deliver coupons, magazines, product samples, and even catalogs. Or if publications start providing real incentives to switch their subscribers to digital editions.

Don’t be surprised to see more “Go Green, Go Paperless” campaigns as banks and utilities desperately try to slash their mail volumes. (The “Go Green” part of the slogan is, at best, unsubstantiated, unless it refers to the bank’s cash flow and not to the environment.) Getting a large portion of its customers to switch to paper-less billing will look like a growing source of competitive advantage for companies that send a lot of bills.

Even without knowing whether yesterday’s proposal will stand up to litigation, business mailers all over the country are already asking the same questions: How can we reduce our mail volumes enough next year to counteract the price increase? And, longer term, how can we get out of the mail altogether before these price increases get totally out of hand?

Related articles:

• Why Potter Is Freezing Postal Rates, And What It Means For 2010  
• Mailers Rallying Against Rumored 10% Postage Hike
• Is the Postal Service Really Broke? 
• Congress Hears the Truth About Postal Service Finances

 

Almost Live, From the Cutting Edge of Publishing

The reports I'm getting indicate that the Publishing Business Conference today in New York was bubbling with new ideas, new ventures, and even a few new words.

"Content is king-er than ever," several tweeters quoted one speaker as saying. Others tweeted "re-assetizing" and "transclusion" as additions to publishing's language. Or should I say "languages," since the conference is a mashup of book, magazine and web publishers?

Here are some of the most insightful tweets I've plucked from conference goers who used the hashtag #PBC13:

• Hearst email database has 10 million addresses. Do any traditional book publishers have even 1 million?
• Near full screen mobile ads interspersed every few pages get 10-12x click thrus than web
• Today, everyone is a publisher. And, everyone is a marketer. It's how well you do each that differentiates you from the pack.
• You can't collaborate effectively with Word files and email
• Brook's Law: Adding people to a late project makes it later
• We're making a transition to mobile. Sometimes we're dragging advertisers with us.
• Both HuffPost and Livingly reporters are writing, video, coding, If you had to wait for engineer, too late. 
• "We're in the midst of a renaissance for content" publishers. "This gloom & doom stuff is BS."
• the "network" book - the book is dynamically, incrementally updated as people add notes to it
• Authentic, personal, and live event video cuts through the noise. Nothing longer than 2 min.
• “If you're looking to make money, your point of purchase shouldn't be covered in barbed wire."
• Ebooks a stalking horse for print. How much sell b4 go to print? $1,000
• The more you narrow yr focus, the more people you reach. No one book is for 'everyone'
•  "Don't do what everyone else in your industry's doing." 
•  no such thing as a solo entrepreneur or innovator hire/partner to complement your weaknesses - true true true!! 
• Successful innovation is solving a problem in a new way. 
• What My Mom Wants To Know About #eBooks: Why are there errors in the eBook that aren't in the printed copy of the same book? 
• When will publishers realize they don't make books anymore? They make content destined for containers" (books, #eBooks, web, apps). 
•  "The future is knowing about your customers and giving them what they want." Data helps, but it's not the future, always been true. 
• Most of us judge reliability of info by how good it looks. We're moving back to traditional sources. 
• While Google is one of the biggest polluters with all those servers, digital has the appearance of being green 
• "Irony: most successful magazine ever was focused on what's on television." (That's a reference to TV Guide, I assume.)
•  "A newspaper reader who dies isn't replaced by a new reader. 
•  "Reading no longer linear nor static" good mantra for the future

Settling the Great 'What Is A Magazine?' Debate

The definition of “magazine” and whether a magazine must be a printed product have been favorite topics of discussion, and debate, among publishing folks in recent years.

Publishing pundits BoSacks and Mr. Magazine have been sparring over the issue for years at various events and via social media (as described in Print vs. Digital: The Great Mr. Magazine vs. BoSacks Tweet-Off). I’m sure when they appear together at the Publishing Business Conference next week that they’ll put on the gloves once again – and that it will be quite a show.

But, for me, a circulation colleague recently put an end to the debate with a straightforward answer: “I don't care where you read it – print, tablet, laptop, or a big tattoo on your momma’s backside – if it counts toward ratebase, it’s a magazine.” (A more polite version of that quotation appears in my new article for Publishing Executive, 6 Things Magazine Publishers Should Stop Doing Now. Oh well, it’s not the first time I’ve been censored by PubExec’s editors.)

I’m still a print guy and mostly read magazines and newspapers in their dead-tree versions. And I’ve heard friends in the industry grumble about how the hype about tablet magazines isn’t paying off and that Apple Newsstand is even more dysfunctional than the real newsstand system.

But none of that matters. The point is that only one thing counts – whether we satisfy and even delight our customers, be they readers or advertisers. If we have readers who want our “paginated content” in digital form and advertisers who are willing to pay for those eyeballs, who are we to argue about whether that digital product is a real magazine?

For further reading:

• Is Ratebase the Magazine Industry's Crack Cocaine? explains what ratebase is -- and why so many in the publishing industry detest it. I feel their pain but haven't heard of a viable alternative. 
• Bezos Needs To Learn the First Rule of Newspaper Ownership scored a dubious hat trick: Three cyber-friends -- BoSacks, Denis Wilson of Publishing Executive, and Jim Sturdivant of Media Shepherd -- castigated me for focusing too much on pleasing advertisers rather than readers. But at least noted publishing consultant Alex Brown left a comment defending me, stating "the sweet, rosy, unicorn-filled future of publishing as something that readers/viewers will sustain has more cracks in it than we have mortar to patch."  
• A Troubling Sign for Tablet Magazines? Maybe their time will come, but so far tablet versions of magazines have been a disappointment for most publishers. Even tablet owners prefer to read magazines in print.

It's Time To Put the Content-Marketing Snake Oil Back Into the Bottle

A magazine-publishing colleague sent me this rant that I thought was worth sharing:

I know you’re impressed by the content being put out by some non-publishers, but it’s time to put a halt to the snake oil and Kool-Aid being handed out in the name of “content marketing.” Some marketers are losing all sense and perspective.

I got word that a big ad agency wanted to talk to my publishing company about content marketing for its financial services client, so I set up a call with a team at the agency. Their specific task is to promote the client’s “529” college savings plans.

“We love your content about how parents can save and invest money,” the team leader said. No surprise there, since some of our advertisers like to promote their 529 plans adjacent to articles geared to parents.

”OK, are you interested in using the articles on a web site or in other media?” I asked.

“Oh, we don’t want to publish the articles, we just want to link to them from the client’s Facebook page, and the legal department wants us to get your permission.”

A quick look at the Facebook page showed there was already a link to one of our articles that fell squarely into the “fair use” category. Only a paranoid corporate lawyer, or outside counsel trying to keep the meter running, would ask for written permission to publish such links.

Seeing that there was no money to be made from licensing our articles to the agency’s client, I took a different tack: “Since we have so many articles that are relevant to your client’s target audience, have you considered running ads adjacent to such articles?”

“Oh, the client has no budget for media buys,” came the response.

OK, I get it. The client is spending probably north of $100,000 for a high-priced agency to create a Facebook page that has fewer than 2,000 “likes,” even though the only real people who “like” a bank’s FB page are bank employees and retards. [Editor’s note: I apologize for my friend’s slur against the mentally handicapped. I know several mentally retarded people, and none of them are stupid enough to waste time on Facebook.]

And the purpose of the page is not to drive traffic to the client’s web site but instead to web pages that advertise competing 529 plans. Meanwhile, the client is spending not a penny to promote its own products. Brilliant!

A simple explanation: Stupidity
There’s a simple explanation for what my colleague experienced: The client has been reading the work of too many content-marketing experts (who a year ago were social-media experts and two years ago were SEO experts). It asked the agency for three things: 1) Social media: Check. 2) Content marketing: Check. 3) No paid media (AKA advertising): Check. Never mind that the agent isn't supplying any content or doing anything that passes as marketing.

Yes, I'm impressed by some of the web sites and publications that non-publishers have created (See The Content Marketing Craze: 7 Ways Publishers Can Fight Back), but most of what passes for content marketing these days is crap.

Fortunately, some brands are jumping off the bandwagon and realizing that good content isn’t free. You either have to pay professionals (and I don’t mean that intern in the PR department) to create it, or you have to pay someone else for content that was created by their professionals (such as magazine writers and editors).

These brands are also realizing that just because they build it -- and post it, and tweet it, and like it --  doesn't mean people will come. Their wonderful content will not “go viral” unless they spend money inviting relevant consumers to see that content. In other words, unless they advertise.

Related articles about content marketing from Dead Tree Edition and other sources, with pithy quotes from each:

• Publishing Without Profits: What's Behind the Content Marketing Craze?: "There's no bigger sucker than a gullible marketer convinced he's missing a trend." 
• How Google Is Becoming the Magazine Industry's New Best Friend: "Content marketing could become a real threat to traditional publishers, except right now most of it sucks."
• Brands Should Stop Trying To Be Publishers:"Don't buy the hype that every brand must be a publisher. Remember that your brand is a brand. . . . You don't measure success based on engagement the way publishers do; you measure success based on sales.” 
• The Content Con:“The vast majority of content ‘providers’ will produce nothing but drivel that no one will pay a moment's attention to.” 
• Brands Are Shelling out to Amplify Positive Press: “Marketers see third-party content as more valuable [than their “owned” content]. Publishers have an authoritative voice. It’s about validation.”

Publishing Wisdom From Across the Pond

British blogger David Hepworth published a pithy comment yesterday that rings true here in the Colonies: "There are lies, damned lies and circulation figures but if you want to know how healthy a magazine is, look at how cheaply you can buy a sub."

He added the comment to his article, The gob-smacking "sales" figures of Rolling Stone, which includes this insightful statement:

"All circulation figures involve a certain amount of smoke and mirrors but American figures are more opaque than ours. The overwhelming majority of copies are on subscription and most of those are sold at a risibly low price in order to secure the number of readers the publishers need to deliver to the advertisers."

Some translations are in order for my fellow Americans: "Gob-smacking" means astonishing -- so surprising that the person is speechless. "Risibly" means "laughably." And "circulation" is actually a way to make money on your content instead of just delivering eyeballs for your advertisers.

Bezos Needs To Learn the First Rule of Newspaper Ownership

Amazon founder Jeffrey P. Bezos demonstrated yesterday that he desperately needs a primer on the publishing business before he buys The Washington Post next month.

In his first interview since the purchase was announced, Bezos showed his naivete about the industry with this comment:

“We’ve had three big ideas at Amazon that we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the customer first. Invent. And be patient. If you replace ‘customer’ with ‘reader,’ that approach, that point of view, can be successful at The Post, too.”

The last time I looked, the vast majority of American newspapers’ revenue came not from readers but from another type of customer – advertisers. Sure, perhaps Bezos knows better and decided to emphasize the noble journalistic side of the business rather than the grubby capitalist side.

But he didn't go out of his way to curry favor with advertisers: "I’m skeptical of any mission that has advertisers at its centerpiece."

Many of the Post’s advertisers, who view Amazon as a ruthless and even unfair competitor, are already wary of a Bezos-owned Post. Knowing that his vision for the Post apparently does not include pleasing them will do nothing to allay those fears.

Bezos needs to learn the first rule of owning a newspaper: Don’t piss off your advertisers; that’s what reporters are for.

Other Dead Tree Edition articles on the newspaper industry include:

• The Perfect Newspaper Story?
• Washington Post's New Magazine Will Bypass USPS  
• Rupert, Weiner and Cardboard Animals: 5 Who Should Be Ahead of Me on RISI’s Top 50 Power List. Note the Headline Writers Prayer.