Thursday, October 30, 2014

NewPage and Verso Find a Catalyst For Their Merger

Update: The Justice Department announced on Dec. 31 that the Catalyst deal will satisfy its antitrust concerns about the Verso-NewPage deal. Both the Catalyst deal and the Verso-NewPage deal were completed on Jan. 7, 2015.

Today's announcement that Catalyst Paper will buy two NewPage coated-paper mills apparently means that the merger of NewPage and Verso Paper will move forward.

Catalyst revealed that it will purchase NewPage's Rumford, Maine and Biron, Wisconsin mills for $74 million -- more than quintupling the Canadian company's capacity for making coated paper. One condition of the sale is that Verso-NewPage deal be consummated.

That merger has been delayed by federal antitrust officials, who were apparently concerned that, by owning half of North America's capacity to make coated paper, a combined Verso-NewPage would have too much market power and be able to drive up prices. NewPage's sale of the two mills, coupled with Verso's decision to close its Bucksport, Maine mill, were presumably a condition of gaining the U.S. Justice Department's approval for the merger.

Catalyst would only pay about $85 per ton of capacity to make paper that typically sells for at least $850 per ton. That looks like a fire-sale price, except that the continent's demand for coated paper is half of what it was barely a decade ago. And except that we've seen this movie before, and the ending wasn't pretty.

Justice allowed the 2007 merger of newsprint giants Abitibi and Bowater to go forward only after Abitibi unloaded one of its gems, a 100%-recycled mill in Snowflake, Arizona, to Catalyst for a bargain price. But a few years later, Snowflake hit a perfect storm -- Chinese buyers driving up the price of West Coast recycled paper, black liquor tax credits subsidizing competitors using virgin pulp, and the collapse of the U.S. newspaper industry -- and was shut down.

Both AbitibiBowater (now called Resolute Forest Products) and Catalyst ended up going through bankruptcy reorganization and emerged as smaller but healthier companies.

Catalyst makes mostly newsprint and uncoated papers in western Canada, but does have a single machine making coated groundwood paper.With the purchase announced today, Catalyst would pick up four machines that make coated freesheet as well as coated groundwood paper, plus some market-pulp capacity.

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Thursday, October 23, 2014

Postmaster General Wins Dubious Publishing Honor

In just two and a half years, Postmaster General Patrick Donahoe has gone from hero to villain in the eyes of a leading publishing-industry magazine.

Disruptor General
Folio: named the U.S. Postal Service’s CEO this week to its Folio: 100 list of the 100 most influential people in the magazine industry, in the “disruptor” category.

“Donahoe raised postal rates by 6 percent in December, making magazine delivery more expensive at a time publishers are carefully managing their print costs,” Folio: noted. Periodicals mail volume declined more than 6% in the first six months after the “exigent” rate increase was implemented.

Folio:’s slap at the PMG was a far cry from April 2012, when the magazine hailed Donahoe because “he has pledged to support the magazine industry.” He was awarded a place on that year's Folio: 40 list of the magazine industry’s “most innovative and distinguished professionals.”

Folio: quoted him back then as saying “You don’t hear me walking around saying we need an exigent price change — that will push you, bill presenters and standard mailers out of the mail.”

To be fair to Donahoe, almost everyone in 2012 thought Congress would have to do something to relieve the Postal Service’s financial burdens, after squeezing billions of dollars from the agency in the form of pension overpayments and prepaid retiree health benefits.

But in fact Congress has been unable to do anything more meaningful than name additional post offices, leaving Donahoe few options in his efforts to keep the agency solvent.

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Sunday, October 19, 2014

Google Loves Print, This We Know, For Its Guidelines Tell Us So

A leaked internal document reveals Google's predilection for the web sites of print-media publishers. Why? Doesn't it know that print is dead?

Google may be on the cutting edge of technology, but its search engine is going increasingly old school by favoring the web sites of print publications.

The expense of printing and distributing publications has led most publishers to start weaning themselves from dead-tree editions. But those same costs may be a key to Google's love affair with print-media brands.

Google's idea of a highest-quality web page
Google’s preference for print pops up frequently in its guidelines for quality raters, a 160-page document that advises the Google employees who evaluate web sites in order to improve the company's search algorithms.

Publishing Executive magazine has just published my article "9 Lessons Publishers Should Take from Google's Leaked 'Search Quality Rating Guidelines'," which draws lessons and warnings from the leaked document.

But why does Google prefer print – or, more precisely, why do its search results tend to favor web sites associated with printed publications?

The rating guidelines document doesn’t explain the preference explicitly and in fact never mentions the word “print.”

Clues aplenty
But the clues are plenty: Raters are told to give high ratings to pages that “clearly come from a highly authoritative source which is known for original content creation (newspaper, magazine, medical foundation, etc.)”

The Atlantic’s "Secret Fears of the Super-Rich" exemplifies an article deserving the highest rating because it provides “a satisfying or comprehensive amount of very high quality” content “on an award winning magazine website” with “a very positive reputation.”

The guidelines contain eight references to the word “magazine,” 15 to “newspaper,” and six to the Pulitzer Prize – plus additional examples of specific publications. Almost all refer to the publications’ web sites as authoritative, high-quality sources.

Google's clear message 
The message is clear: Search results should give preference to reliable web sites with content that is free of commercial influence -- and that often means the web sites of reputable publications.

Music magazine interview has highest-quality main content
A Google search of “diet pills” will return a myriad of results. If the first page is full of pill merchants and what they say about their own products (“Melt pounds away in minutes!!!”), all but the most gullible will be inclined to look for a new search engine.

But prominent links to trusted brands like Prevention, WebMD, and The New York Times will keep people coming back to Google.

Any idiot can create a web site (even me!) and fill it with useless, biased, or just plain wrong information. And plenty have. But a printed publication can’t rely for long on clickbait and other tricks.

To cover the costs of paper, printing, postage, etc., it has to generate much higher revenue per reader than does a web site. Survival usually depends upon having both subscribers and premium advertisers, which you can't attract and retain without earning a reputation for providing worthwhile content.
The permanence of print gives magazine publishers an incentive to get it right the first time – that is, to edit, rewrite, fact check, etc. And the additional cost of each page naturally leads to weeding out the weakest content. (Many print publishers have content on their web sites that does not meet the standards for their printed publications.)

Nowhere do the Google guidelines recommend checking whether the information on a publication’s web site has actually appeared in a printed publication. The assumption is that a print-media publisher’s standards and the necessity of protecting its hard-earned reputation will spill over to its web site.

How did Google reach that conclusion? Not from the publishing industry’s time-honored BOGSAT (Bunch of Guys Sitting Around Talking) method. And not from making value judgments about which web sites people "should" visit.

Google's motive: profit (Duh!)
Google is just trying to give customers what they want. It uses data from millions of daily searches to determine what kind of results give people the information they want so that they will continue using Google.

Google’s data obviously tell it that internet users believe information on a web site that is associated with a print publication tends to be more trustworthy than information on other web sites.

In the publishing industry's endless discussions of “print versus digital,” we often miss this lesson: Print means credibility, and credibility means more web traffic.

Having a printed publication is a source of sustainable competitive advantage for a web site. Just ask web-native publishers like, WebMD, and Politico, which have burnished their reputations by starting ink-on-paper magazines.

The Daily Bust 
Too often, the “Print is dead” types – mostly aging Baby Boomers desperate to prove their with-it-ness – have viewed print as a ball and chain on their digital dreams. Following that logic in 2010, Newsweek’s entire web presence was subordinated to sister company The Daily Beast. (WTF is a Daily Beast?)

Contrast that with Newsweek’s new digital-native owners who, recognizing the strength of the Newsweek legacy and brand, relaunched and invested heavily in its editorial content. And then, rather than fleeing print, they did the unthinkable, resurrecting Newsweek as a printed newsweekly.

Sure, neo-Newsweek is a niche publication with a tiny fraction of the multi-million circulation numbers of the glory years. But how many people look up circulation numbers when deciding whether a web site is credible? (And maybe a magazine with a few thousand high-paying customers has the same credibility as one with millions of bargain-basement subscribers.)

Laugh at Newsweek’s new strategy if you like; many pundits already have. But for the first time in years, Newsweek recently became profitable.

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Saturday, October 11, 2014

Third Bush on the Right, Please: USPS Grocery Deliveries Would Need Lots of TLC from Carriers

Mail carrier was recently named the most endangered job in the U.S., but the U.S. Postal Service seems to have other ideas. Its plan to deliver groceries to households in major metropolitan areas is the latest among several strategic moves that would mean more work for employees who handle the "last mile" of delivery.

Please, Mr. Postman, look and see,
Are there some groceries in a tote for me?

The Postal Service’s proposed market test of same-day grocery deliveries, apparently in partnership with Amazon, would require even more TLC on the part of USPS’s carrier force than normal deliveries, the agency revealed this week in filings with the Postal Regulatory Commission.

“All Customized Delivery items will be transported directly to a customer’s door and will be delivered [between 3 a.m. and 7 a.m.] without disturbing the recipient,” USPS revealed to the PRC. “Customized Delivery also will allow recipients to provide specific delivery instructions.”

Back door man
“Carriers would need to go to each delivery door and manage customer specific delivery instructions.” To avoid theft of the early-morning deliveries, such “special delivery instructions” could conceivably include placing the special grocery-filled totes at back doors, in hallways, into parked cars, or even behind bushes. Undeliverable totes would be returned to the shipper.

“Participants will pay a fee for the Customized Delivery Service,” USPS wrote. UPS is reportedly close to rolling out a service that, for a $5 fee or a $40 annual membership, would deliver someone’s packages to a nearby store instead of to the home.

The Postal Service has recently been encouraged to enter a wide variety of new ventures, most notably providing banking services to the poor and to rural residents. But postal executives’ new-revenue plans are all focused on leveraging the agency’s massive, every-address delivery network: not only by serving the grocery business but also with Sunday deliveries for Amazon, aggressive price cuts on lightweight packages sent by large mailers, and seeking legislative approval to deliver wine and beer.

All of those growth efforts are far more labor intensive – and higher priced – than USPS’s traditional job of delivering letters. The Postal Service is also adding thousands of new delivery points every day, requiring more travel time for carriers even if mail volumes don't grow. So it's premature to assume that letter carriers will soon go the way of buggy-whip makers.

Market disruption? 
To gain the PRC’s approval for its proposed two-year “Customized Delivery” market test of grocery delivery, USPS must show that the venture would not disrupt existing markets or rely on “unfair” competitive advantages over private businesses.

Starting later this month, USPS wants “to test and develop a long-term, scalable solution to enable expansion of customized delivery to additional major metropolitan markets across the nation.” It might also test other delivery times during the day.

“The Postal Service will negotiate price with each customer [presumably the grocer, not the consumer], in part, based on the pickup schedules specific to each customer.” USPS also hopes the test will determine “the optimal pricing structure for this type of service.”

San Francisco test  
The agency recently conducted a smaller-scale test of grocery delivery in the San Francisco area. City carrier assistants – non-career postal employees – delivered about 160 totes per day to 38 ZIP codes, according to postal officials.

“In the current process,” USPS told the PRC, “the retailer brings groceries already packed into retailer-branded totes, some of which are chilled or include freezer packs, directly into Postal Service destination delivery units (DDUs) between 1:30 a.m. and 2:30 a.m."

“The totes are all the same size and color, and have a QR code on the outside. The Postal Service receives a manifest file from the retailer containing the address and QR code number for each tote. This file is used by the Postal Service to dynamically route totes and create a line of travel for each route.”

“These deliveries are unattended — the CCA will not ring the doorbell or knock on the door. The carrier places the totes in a location designated by the consumer for delivery.

“Totes are scanned [sometimes with an iPhone] at key steps in the process to provide tracking and visibility through to delivery. CCAs wear postal uniforms and lighted caps as a safety measure and for easy recognition by the public.”

[Editor’s note: Perhaps such lighted caps should also be provided to carriers who have to make normal deliveries after sunset during the winter months.]

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Wednesday, October 8, 2014

Ten Ways to Celebrate International Print Day

Today is the first International Print Day, when lovers of ink on paper are taking to social media to share cool printed projects, success stories, and helpful information.

It's very early morning (U.S. Pacific time), and I'm already seeing more than one "#IPD14" tweet per minute, most of them with relevant links.

But we here at Dead Tree Edition headquarters have our own way of honoring special days (like wearing all-natural condoms to celebrate Earth Day). So here are our 10 suggestions for making this day really special:
Nice Frisbee you've got there.
  1. Moon the next bank that sends you a "Go Green, Go Paperless" message.

  2. Hand someone’s tablet to her three-year-old child. (“No, Mr. iPad does not like to be dropped. Can you say “ouch”? Can you say “cracked screen”?)

  3. Calculate the percentage of emails received today that you don't read; be sure to check your spam folder. Now compare that to the percentage of mail pieces you receive today that you don't look at. 

  4. Tell the IT department you want to include a scratch-and-sniff promotion in your next email blast. “C’mon, I saw something like this in a dead-tree magazine. If those geezers can do it, you can too, right?”

  5. Mail a handwritten note to someone you are trying to impress. And have the rescue squad on standby in case the recipient can’t take the shock of receiving personal mail.

  6. Visit your "Print is dead" friend, go into his pantry, and tear the labels off all the cans and packages. Just think, you'll be helping him realize his dream of going paperless. (While you're at it, maybe you should remove all the paper from his bathroom as well.)

  7. To the tune of “YMCA,” sing “C-M-Y-K,” and make up new, print-friendly lyrics. Don’t forget the arm motions. Take a selfie when you’re doing the “K” and post it to your Facebook page.

  8. Use your Kindle as a Frisbee.

  9. Watch the Viagra-in-a-printing-plant TV ad and think of the suggestive, print-related sweet nothings he’ll whisper to his wife when he gets home. (“Hey, baby, let me get rid of your PMS by converting it to process colors.”)  

  10. Buy a book. Not an e-book, which can only be rented (regardless of what the sellers say). A real ink-on-paper book. And read it.

Thursday, October 2, 2014

The Postal Service Giveth, and the Paper Market Taketh Away

October began with both good news and bad news on the cost front for publishers of magazines and catalogs.

Because of announcements made on Wednesday, publishers can scratch the usual January postage rate increase from their 2015 budgets but should probably count on price increases for coated paper.

The U.S. Postal Service Board of Governors announced it would not raises prices on "market-dominant" mail classes early next year, contrary to its usual practice of implementing inflation-based price hikes in January. They have the authority to raise rates 1.58%, which could have led to a 1-cent increase for Forever Stamps as well as higher postage for direct mail, catalogs, newspapers, and retail flyers.

"The governors decided not to seek a change for mailing and shipping products and services in January in part because of the uncertainty regarding the exigent price increase.The Postal Service will continue to evaluate pricing strategies and will communicate about any potential price change filings in early 2015, including advance notice to customers of any price changes."

As noted in Postal Rates in 2015 Could Rise or Fall -- or Do Both, USPS is currently slated to reduce market-dominant rates by 4.3% in the second half of next year when the exigent surcharge expires. But postal officials have gone to court in hopes of increasing or extending the surcharge. And they hope to avoid a price cut when the surcharge expires by implementing an inflation-based price hike at the same time.

The bad news came from Verso Paper, which is closing its Bucksport, Maine coated paper mill. That, coupled with the recent closure of the FutureMark mill in Illinois, could mean an end to rock-bottom prices for magazine-quality paper in 2015.

Verso revealed that Bucksport has been unprofitable for years. Paper industry insiders say the same is true of FutureMark. As the old saying goes, the best way to make a small fortune in the paper business is to start with a large fortune.

Verso, teetering on the edge of bankruptcy, says the Bucksport closure will not affect its proposed merger with NewPage, which is under extended antitrust review by the U.S. Department of Justice. By the time Justice gets done, there may not be anything left of Verso to merge.

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