Sunday, March 11, 2018

Game Over: Postage Rate Hikes Would Shut Down ESPN Magazine

A plan to increase publishers' postage rates drastically over the next five years would cause ESPN The Magazine to cease publication, an ESPN official indicated Friday.

If the Postal Regulatory Commission follows through with its plan "to increase our postage rates 40% over the next 5 years then ESPN will not produce a paper Periodical mailed through the USPS," Dennis Farley, the magazine's distribution director, said in a statement filed with the PRC.

"The content will be delivered via the many other means we now use to deliver our content," Farley added, in emphasizing that ESPN would continue as a popular cable network and web site.

In theory, Farley's statement left open the possibility of using other means to deliver the magazine to its 2 million paying subscribers. But that "other means" doesn't exist for a printed magazine, and digital magazines have mostly failed to catch on with consumers.

The PRC, claiming it has the power to override the inflation-based cap on most postage rates, put forth a plan in December to bail out the U.S. Postal Service with a series of rate increases. The Periodicals class, on which the USPS supposedly loses money, would be hit especially hard.

More than 100 organizations have filed comments with the PRC opposing the plan. Among those was the nation's largest magazine publisher, Meredith Corporation, which recently projected that the rate hikes would force it to stop publishing some titles and reduce the number of magazines it mails by 32%.

Ironically, even under the Postal Service's questionable accounting, ESPN The Magazine is probably a profitable customer for the USPS. The fortnightly is dropshipped entirely on pallets to 175 postal facilities, Farley said, with 83% of the copies in carrier-route bundles.

The Postal Service does well with such efficient mailers while tending to undercharge inefficient Periodicals mailers.

Friday, March 2, 2018

Meredith Warns PRC of Massive Magazine Cutbacks

A plan to jack up postal rates over the next five years would force the nation’s largest magazine publisher to slash its print offerings, according to the company’s CEO.

Meredith Corporation would “pursue magazine closures, circulation cuts, issue frequency reductions, conversions to digital only formats and alternative delivery for some magazine subscription copies,” Tom Harty, the company’s president and Chief Executive Officer, wrote in comments filed Wednesday with the Postal Regulatory Commission.

32% fewer magazines
“We conservatively estimate that the PRC’s proposed rate structure will result in a 32% reduction in the number of periodical pieces mailed by Meredith (a loss of approximately 310 million pieces annually),” Harty wrote. “At this level of volume decline, the Postal Service will receive less revenue, not more, from Meredith than it does under the current CPI [Consumer Price Index] cap system.”

He said the company spent nearly $322 million on postage last year. (He didn’t clarify whether that number included last year’s postage bill for Time Inc., which Meredith purchased a month ago.)

The PRC acknowledges that its package of proposals could raise Periodicals postage rates by more than 40% over the next five years. And that's assuming the inflation rate remains at 2%.

Meredith's corporate headquarters
Meredith is among more than 150 organizations that have submitted comments, mostly unfavorable, about the proposal. A variety of mail-dependent businesses and non-profits are challenging the PRC’s claim that it can enact the rate hikes without Congressional approval.

And the move to bail out the Postal Service with rate hikes is also unnecessary, some have noted. The billions of dollars the agency is supposedly losing every year are a figment of inept government accounting procedures. A recent analysis noted that the USPS closed out Fiscal Year 2017 with “$10.5 billion in cash and cash equivalents, more than it has possessed in the last 15 years.”

Of each dollar Meredith spends on producing and distributing magazines, 40 cents goes to the USPS – up from 24 cents in 2006, Harty said. And that’s “despite ongoing presort and drop ship optimization by Meredith” that should have reduced the costs of delivering those magazines.

Shooting itself in the foot
Harty also pointed out that Postal Service mismanagement has hampered efforts to make Periodicals mail more efficient. The USPS, for example, keeps decreasing the incentive to place copies into carrier-route bundles even though doing so significantly reduces the agency’s mail-handling costs. With better incentives, he said, publishers would do more to reduce the Postal Service’s costs via co-mailing and other measures.

He also noted that the Flats Sequencing System, which was supposed to reduce the Postal Service’s costs of delivering flat mail, has been an abject failure – and is getting worse.

“The total cost processing and delivery cost for an FSS flat exceeded that of a Carrier Route flat by 14.7 cents/piece in FY2015, 16.8 cents/piece in FY2016, and 19.9 cents/piece in FY2017,” Harty said. “The PRC’s proposal . . . will do nothing to incent the Postal Service to fix (or abandon) the FSS debacle.”

Related articles: