Postal Service Eyes January Rate Hikes

The U.S. Postal Service is planning to raise virtually all rates a bit in January, apparently including a one-cent hike of the Forever Stamp, to 50 cents. And it’s also hoping it will soon get the power to implement larger rate hikes.

The USPS will raise rates for both market-dominant mail (such as First Class and Marketing Mail) and competitive mail (such as Priority Mail) on Jan. 21, 2018, postal officials told mailing-industry representatives this week.

The average rate increases for market-dominant classes are limited by an inflation-based cap, currently close to 2%. A postal official indicated that rates would rise from 1% to 3% for most market-dominant products, according to attendees at a meeting of the Mailers Technical Advisory Committee.

Postal officials didn’t spell out what any of the new rates would be. But a statement that the increase for letter mail would be about 2% almost certainly means that the price of the popular Forever Stamp for First Class letters will rise from 49 cents to 50 cents (a 2.04% hike).

The new rates for flat Marketing Mail and Periodicals would provide greater incentives to create efficient mailings, which is good news for catalogs and magazines that are co-mailed, as well as for printers that provide co-mail services. But it means higher-than-average rates for small publishers that don’t take advantage of such mail-consolidation programs.

The USPS is most likely to file the new rates with the Postal Regulatory Commission in October. As long as the PRC determines that the USPS proposal meets certain standards, such as not violating the price caps, the new rates will take effect without modification.

Next month, the PRC is slated to announce the results of its 10th anniversary review of the law that created the price cap. If it determines that the law’s system for regulating market-dominant rates is not meeting the law’s objectives, the PRC can modify or replace the system.

Postal officials argue that, because the system fails to meet the objective “to assure adequate revenues . . . to maintain financial stability,” the PRC should loosen or eliminate the price cap. But a significant PRC overhaul of the rate-making rules would probably lead to legal challenges that could delay implementation of any changes.

Related articles:

• Why the Rate Cap Isn't Killing the Postal Service 
• Hell Will Freeze Over on April 10 
• Is the Postal Service Really Broke?

Never Stamps: A $3.5 Billion Postal Subsidy

Nov. 30 update: Linn's Stamp News quoted a postal official as saying that the "breakage" for Forever Stamps is only $2.4 billion, not $3.5 billion. So somehow I must have misinterpreted one of the USPS's obtuse financial reports from previous years. The official's statement means that nearly half of that breakage was recognized in the three years since the previous time the USPS adjusted its calculations -- which suggests that postal officials either underestimated Americans' lack of organization or their passion for stamp collecting!

Way to go, Americans: Your sloppiness, forgetfulness, and hoarding are helping to prop up the struggling U.S. Postal Service.

Based on new data about its customers’ behavior, the USPS recently added $1.1 billion to its estimate of how many Forever Stamps it has sold that will never be used for postage. These “Never Stamps” now total about $3.5 billion, according to a Dead Tree Edition review of previous USPS financial reports.

That’s out of $48 billion in sales from the Forever Stamp’s introduction in April 2007 until the end of Fiscal Year 2016 on September 30, the USPS reported (page 16 of this PDF).

In other words, for every 14 Forever Stamps sold, one will be – or already has been -- eaten by the dog, dropped into a mud puddle, accidentally thrown out, lost in the seat cushions, hopelessly stuck to another stamp, left in that pairs of jeans in the washer, used in an art project, placed into a stamp album, or otherwise diverted from becoming postage.

When you buy a sheet of stamps, the Postal Service treats the money as “deferred revenue”: It gets the cash immediately, but accounting rules say it can’t book the money as actual revenue until the stamps are used to send mail.

The USPS, however, has no way of knowing when those stamps are used or when they become unusable, so it calculates a “breakage factor” that estimates how many stamps have been lost, destroyed, or placed into collections. The USPS didn’t release details of its latest breakage-factor calculation, except that it was based on a revised “estimation technique” using “new information regarding customers’ retention and usage habits of applicable postage.”

But I’d say it means you need to check the nooks and crannies of your desk, scour your purse, and shine a flashlight under the driver’s seat for Never Stamps that could become Forever Stamps. Or maybe you should just take the patriotic route and not bother, knowing that your carelessness is helping to support an iconic American institution.

Related articles:

• Could Forever Stamps Become Worthless? What Bankruptcy Might Mean for USPS 
• Forever Stamp-ede: Consumers May Hoard Stamps This Week But Stop Buying Next Year 
• Forever Stamps: Not a Sexy Investment

 

Are Postal Rates Headed Up, Down, Or All Around?

A slow appeals court, delays in the usual inflation-based rate increase, and the end of the exigent surcharge could converge to create a wild ride for postal rates during the next few months.

Rather than the usual, once-a-year increase, rates might go up, down, or do a loop-the-loop and barrel roll before the summer is over. No one planned it this way. In fact, the plans and expectations of everyone involved seem to have gone awry.

The deviation from normalcy began in late 2013, when the Postal Regulatory Commission approved an “exigent” 4.3% surcharge to compensate the U.S. Postal Service for its losses caused by the recent recession.

The PRC ruled that the surcharge would expire when it netted USPS $3.2 billion, which sounded simple enough at the time. But projecting at least 45 days in advance – the minimum amount of time to implement a rate change – exactly when the $3.2 billion target will be reached is no simple or uncontroversial matter.

Attacked by both sides
Both the Postal Service, which wanted a larger and more permanent surcharge, and mailers groups, which argued for no surcharge, appealed the PRC decision. After an appeals court heard their oral arguments in September, many mailing experts expected the court’s decision by the end of 2014.

USPS even held off on its usual January increase, figuring the decision was imminent.

However, nearly seven months after oral arguments, there’s still no word from the court, which could increase the surcharge, extend it, make it permanent, or even reject it.

Postal officials ended up filing for inflation-based increases after all, with implementation scheduled for April 26. But they miscalculated the effect of some efficiency incentives built into the rate proposal, causing the PRC to send the Postal Service back to the drawing board.

Even if the USPS revisions are filed tomorrow, the new prices probably won’t take effect until at least early June. And legal wrangling could delay implementation once again.

Possible postal maneuver
The Association for Postal Commerce figures that the implementation date for the inflation-based increases could end up being just a few weeks before the surcharge expires this summer. And, for all we know, the appeals court decision could land right between those two dates.

There is talk that, not wanting to implement back-to-back price changes, the Postal Service will schedule the inflation-based increases to occur simultaneously with the surcharge expiration. That would result in a net average increase of about 2.3%, with some mailers getting rate decreases and some significant increases.

It might also enable the Postal Service to dodge a thorny problem caused by the temporary surcharge: the prospect of reducing Forever Stamp prices by two cents, which could confuse the public and undermine the whole concept of Forever Stamps.

By rejiggering its proposed inflation-based rate hikes for other First-Class Mail, postal officials might be able to implement a rate hike on Forever Stamps that would cancel out expiration of the two-cent surcharge.

Related articles:

•  Sticker Shock: Size of Postal Increase Stuns Publishers
•  You Won't Believe What This Fortune Teller Predicts for Publishing in 2015!
•  Forever Stamps: Not a Sexy Investment

 

 

You Won't Believe What This Fortune Teller Predicts for Publishing in 2015!

 Smart phones, not-so-smart publishers, and hot new trends: 24 crazy predictions for the new year

Media consultant

When glancing at my article in the current issue of Publishing Executive, I had a revelation: Now that one of the publishing industry's leading magazines had called on me for predictions, I’ve graduated from blogger to media pundit.

And then my heart sank as I realized I had violated a cardinal rule of the International Order of Pompous Media Pundits: In its six-plus years of existence, Dead Tree Edition had never published a year-end list of predictions for the coming year.

With 2015 already under way and prognostication being new to me, I scraped up 50 bucks – Dead Tree Edition’s entire annual research budget – and headed over to Madame Marie, a local fortune teller and door-to-door magazine saleswoman.

Here are her 24 startling (mostly) predictions about magazines, the three Ps (postal, paper, and printing), social media, and publishing in general for 2015. If some turn out to be true, you can be sure I’ll be writing “told ya so” pieces in the next 12 months. And you can blame the wrong ones on Madame Marie:

1) Postal rates will not decrease, even though the exigent surcharge is set to expire this summer. Not sure if that will be from a court order or Congressional action. When I asked Madame Marie to explain, she responded, “What, you think I have crystal ball or something? All I know is, don’t ever bet on government getting rid of a temporary tax or fee.”

2) More web sites will jump into the printed magazine business. But they will not be welcomed into the fraternity of consumer-magazine publishers because they won’t have bloated ratebases or sell annula subscriptions for $5.

A postal bankruptcy would be, like, a bummer, man.

3) Three-dimensional printing will grow almost as fast as the buzz about it. By June, ad agencies will start demanding makegoods if their clients’ magazine ads aren't printed in 3D.

4) USPS will announce a new strategic plan called Seven Six Three – delivering Amazon packages seven days a week, other parcels Monday through Saturday, and everything else three days a week.

5) If you think native advertising is bad, wait until you see foreign-born advertising.

6) Mark Zuckerberg’s new book club will spread like wildfire, until people start seeing spammy “sponsored” posts and photos of distant acquaintances’ new puppies in their books.

7) Despite a decent economy, the market for huge yachts will plummet as billionaires join in the new craze for tasteful displays of wealth – buying a daily newspaper. When I asked Madame Marie whether the newspapers would still struggle, she said, “If you have to ask how much money they will lose, you can’t afford to buy a newspaper.”

8) Congressional Republicans will try to push the U.S. Postal Service into bankruptcy to break the postal unions – until voters realize a USPS bankruptcy would turn Forever Stamps into Never Stamps.

BoSacks flyin' high: Our consultant's
source of inspiration and insight

9) Congress’ next attempt at postal reform will be putting USPS up for sale. FedEx and UPS will quickly say, “No thanks.” However, the idea of buying out the middleman will intrigue Amazon, until it runs the numbers and realizes that, with proper accounting for pensions and retiree benefits, the Postal Service would be profitable. And you know how Amazon hates profits. To console himself, Jeff Bezos will buy another newspaper.

10) Amazon will go back to working on delivery drones.

11) Wal-Mart will announce the development of anti-drone missiles that can be mounted on store rooftops.

12) A major publisher will redesign its web site, then realize the snazzy new look and upgraded user experience can’t be seen on smartphones, which represent 80% of the site’s visitors.

13) “Big data” will be so hot that tech companies will try to differentiate themselves with new projects involving “Really Big Data,” “Huge Data,” and “Massive Data.”

A source of insomnia -- and much cursing

14) Tablets will be linked to insomnia. We’re not talking about the recent study proving that using e-readers before bedtime disrupts people’s circadian rhythms and makes it hard to fall asleep. (That’s so 2014!) We’re talking about MediaVest, the ad agency that is refusing to pay for the portion of a magazine’s circulation distributed via tablet editions. As Madame Marie put it, while meditating on a 1978 copy of High Times with the BoSacks centerfold, “Magazine advertising executives will stay up all night wondering whether to grow a pair and tell MediaVest it needs a rectal-cranial extraction.”

15) With tight supply, rising prices (for now), and strong dollar, the U.S. will be the market of choice for manufacturers of coated paper around the world. Because of low energy costs and the recent shuttering of inefficient mills, North American producers will be able and willing to protect market share by cutting prices.

16) As usual, “that damned newsstand” will be a frequent utterance of magazine publishers. But in 2015 the phrase will refer to the long-neglected Apple Newsstand for marketing iPad editions of magazines. The regular newsstand system – the one that sells printed magazines – will actually register gains in 2015 after years of declining sales.

Google What?

17) The content-marketing bubble will burst when non-publishing companies realize how few people are viewing their content and that it's not generating actual sales. Some will find it more efficient to use -- perish the thought -- paid advertising.

18) Trying to ride the next big wave, a former content-marketing/social-media/SEO consultant will publish a book called How Publishers Can Profit From Chris Christie-sized Data.

19) Web advertisers will have a radical idea: Only pay for ad impressions that are seen by actual human beings.

20) Google will pull the plug on Google Plus. No one will notice the difference.

The next big thing in social media

21) The big news in social media will be a simple new app that lets people share their pain and disappointment by sending out messages saying, simply, “Oy!”

22) Magazine publishers will pour lots of resources into cool new ancillary enterprises that they will brag about at industry conferences. A few of these ventures will actually turn a profit.

23) Some magazine ads will still include QR codes. And consumers still won’t bother scanning them.

24) “Oh, one last thing,” added Madame Marie, still clutching her sacred copy of High Times. ‘Linkbait’ headlines designed to exploit people’s curiosity will take over the Internet. Even your blog will join the trend.” She’s already been proven right on that one.

Forever Stamps: Not a Sexy Investment

Sales of Forever Stamps spiked shortly before the 3-cent price increase in January, dropped slightly for a few months, and have now returned almost to normal.

Some people stocked up to beat the price increase but not many bought more than a few extra months' worth of stamps, numbers released Friday by the U.S. Postal Service suggest.

Thanks to the temporary "exigent" surcharge, January's increase to 49 cents was the largest since Forever Stamps went on sale in 2007. That led to speculation about people hoarding or even investing in Forever Stamps.
 
First Class Forever Stamp revenues were up 10% in December 2013 and 35% in January 2014 over the previous year, temporarily netting USPS more than $300 million in additional cash. Then came the drought: The number of stamps sold was down 18% in February, 17% in March, and 12% in April.

By comparison, the 1-cent increase in January 2013 caused hardly a blip -- a 5% increase that month and then a 9% decrease the next.

In the past three months, revenue from Forever Stamp sales has been essentially flat versus the previous year. With the price increase, that means fewer stamps were sold.

But the decrease wasn't much more than would be expected  from the long-term trend of declining First Class letter mail.

If the surcharge expires next summer, as currently scheduled, the price of Forever Stamps will probably decrease for the first time, most likely by a penny or two. But those who own 49-cent stamps will not receive rebates.

Despite email and online billing, people are still mailing plenty of letters: In the 12-month period from September 2013 to August 2014, the Postal Service sold more than 13 billion Forever Stamps, worth more than $6 billion.

Related articles:

• Forever Stamp-ede: Consumers May Hoard Stamps This Week But Stop Buying Next Year 
• Postal Rates in 2015 Could Rise or Fall -- or Do Both
• Could Forever Stamps Become Worthless? What Bankruptcy Might Mean for USPS

Forever Stamp-ede: Consumers May Hoard Stamps This Week But Stop Buying Next Year

For the next week, Forever Stamps will be the hottest deal going, but a year or two from now the popular stamps could actually decrease in value.

The price of a First Class stamp will rise from 46 cents to 49 cents next Sunday, January 26. Someone who buys a Forever Stamp this week, for 46 cents, and uses it a month later in place of a normal First Class stamp will save 3 cents and have an annualized return on investment of 113%.

No wonder some are expecting a stamp-ede of buyers stocking up on Forever Stamps this week. (Do you suppose post offices will have additional people working the counters?)

But holding onto the stamps for more than a year or so may not pay off so well. Because of a new twist in the upcoming price increase, the price of a First Class stamp may actually decrease in 2015 or early 2016.

Next Sunday’s price increase for First Class letters has two parts. One cent of the increase is the usual, annual inflation-based postage hike. The other two cents are from a temporary “exigent” price increase that is slated to expire within two years. (An influential Senator has proposed making the exigent increase permanent, as the U.S. Postal Service had requested.)

If inflation continues increasing at about 2% annually, the cost of a First Class letter would probably rise to 50 cents in January 2015. But when the exigent increase expires, most likely in late 2015, the price would drop to 48 cents. If inflation remains at about 2%, the price probably wouldn’t hit 50 cents again until January 2017. If inflation is even lower, it might take even longer for a 49-cent Forever Stamp to reach parity.

This week’s stamp-ede should provide a nice cash infusion for the unprofitable USPS, which has come perilously close to running short of cash at times. By the same token, consumers are likely to hold off on buying Forever Stamps in 2015 as the exigent increase nears expiration.

The Postal Service will have difficulty figuring out how such fluctuations in the demand for Forever Stamps will affect its long-term finances. It can only guess at how many Forever Stamps have been purchased but not used. In fact, USPS realized last year that its guess was too high, resulting in a $1.3 billion favorable accounting adjustment.

Related articles:

• Why the Exigent Postal Rate Increase Will Backfire  
• Could Forever Stamps Become Worthless? What Bankruptcy Might Mean for USPS
• How USPS Is Like an Airline, and Why That Matters 

USPS' Mess and NewPage's Saga: Dead Tree Edition's Best (and Worst) of 2011

Articles about the U.S. Postal Service’s struggles were the most-read features of Dead Tree Edition in 2011, while NewPage's downward spiral into bankruptcy protection was also a popular topic.

Once again, the 10 most popular articles were all about the Postal Service, led by USPS Retirement Mess: A Major Barrier to Downsizing and Obama Hints At Changes To Postal Service Workforce, each with nearly 20,000 page views. The irony is that many people mistakenly thought the first article was criticizing postal unions (I was actually praising them for addressing a problem that management seems to be ignoring.) and that nothing much has come of Obama’s hinting.

Readers actually spent the most time – nearly 1,000 hours – reading Postal Service, White House Engaged in 'Intense Discussions'. Nothing much seems to have come from those discussions, either.

The article receiving the most comments – a whopping 49 – was Postal Service Has Too Many Employees and Pays Them Too Much, Mailer Groups Say. A lot of postal employees wondered why USPS has so many supervisors, why they’re working overtime when there are supposedly too many workers, and why U.S. mailers are complaining about the best bulk postage rates in the world.

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.