USPS Proposal Could Spread Pain to Catalogs

Comail is working. But in Postal Land, no good deed goes unpunished.

Like lashing two water-tight boats to a sinking vessel.

The good news — for mailers, printers, and the U.S. Postal Service — is that flat Standard Mail is being sorted far more efficiently than it was just two years ago. 

The bad news is that the trend is prompting postal officials to consider a proposal that would almost certainly lead to higher-than-normal rate increases for efficiently mailed catalogs and other Standard flat mail.

Some postal experts fear the proposal would lead to reduced incentives for co-mailing, which even postal officials admit is the main reason that highly efficient – and profitable – “High Density Flats” volume has grown by 45% in the past two years.

More bad news: Postal officials can’t explain -- and don’t seem to be trying very hard to understand — why the Postal Service’s costs of handling most types of Standard flat mail have skyrocketed in the past year. That trend also threatens to cause higher rate increases even for efficient mailers.

Although the Postal Service is supposed to act like a business, this is a case of it operating like a bureaucracy where CYA trumps ROI.

Hall of mirrors

Let me walk you through the strange hall of mirrors where postal officials are ready to shoot themselves in the foot rather than celebrating, and building on, a successful tactic.

The Postal Regulatory Commission and legal challenges have pressured the Postal Service for years to do something about what is essentially a subsidy for the least-efficient flat Standard mail – the mail that does not meet the 10-piece minimum to create a carrier-route bundle. (Note: The USPS refers to such mail by the misleading moniker “Flats,” but for the sake of clarity Dead Tree Edition calls it “Non-Carrier-Route Flats.”)

The USPS has responded by imposing slightly higher rate increases for such mail than for most other Standard classifications. In Fiscal Year 2018, for example, revenue per piece rose less than 1% for the Standard class as a whole but was up 5.1% for Non-Carrier-Route Flats mail. But the cost per piece rose 13.4%, putting the category further into the red, with revenue covering only 68.65% of costs.

Got no explanation

In a recent report, postal officials speculated that, because of economies of scale, a 17.5% drop in volume for Non-Carrier-Route Flats during FY2018 caused the category’s costs to spike. (See pages 17-18 of this PDF.) But that simplistic theory doesn’t explain why the cost per piece for Standard Carrier-Route Flats rose even more, to 15.2%, when volume for that category dropped only 1.4%.

(Don't blame postal workers: The agency's average cost per labor hour has recently been increasing less than 4% annually.)

These unexplained cost increases have caused the cost coverage for Carrier-Route Flats to decline from 137.53% to 108.49% in just two years. Postal officials have not explained that dramatic trend, which could soon turn what was a highly profitable category for the USPS into a money loser.

“Based on feedback from industry representatives, which is supported by volume trends, flats volume has migrated from the Flats and Carrier Route products into High Density Flats because of comailing,” the USPS report said.

True. Better incentives have encouraged more comailing, a process that sorts a variety of mail pieces -- mostly catalogs and magazines -- into a single mailstream to take advantage of postal discounts. The work is typically done by printers, which are rewarded with a share of their customers' resulting postal savings.

High Density Flats are like Carrier-Route Flats on steroids, with a minimum of 125 pieces per carrier route. Achieving a significant proportion of such mega-bundles typically requires a mailing list – or a comailing run – with at least several million addresses.

It's working. Now let's screw it up.

The rapid growth of High Density Flats is good news for the Postal Service because of the category’s 131.20% cost coverage. That’s the kind of trend rate incentives are supposed to produce.

But postal officials are focusing on the phantom “problem” that the move to High Density Flats is allegedly causing: the reduced efficiency of Non-Carrier-Route Flats. The “solution” they are considering, they revealed recently, is to combine Non-Carrier-Route Flats, Carrier-Route Flats, and High Density Flats into a single category known as Non-Saturation Flats. (See pages 20-22 of this PDF.)

“In a way, the USPS is suggesting that if it lashes two water-tight boats to a sinking vessel it will save the sinking ship,” the Mailers Hub newsletter quipped this week.

No longer would postal officials be pressured to get Non-Carrier-Route Flats “above water,” which would require either massive (and, in some circles, unpopular) rate increases or massive cost reductions. This poorly sorted mail would become part of a larger category with more palatable cost coverage of 88%.

But two profitable categories – High Density Flats and Carrier-Route Flats – would also join that slightly unprofitable new category. Based on the Postal Service’s history, we know what will come next: Postal officials will spread the pain around, jacking up prices across the category, even on the types of mail that would be considered highly profitable if not for this bureaucratic finagling.

(That already happens in the Periodicals class, where efficient and inefficient mail are in a single category in which efficiently mailed publications subsidize the inefficient ones.)

Increasing the price spread between efficient and inefficient mail has prodded more mailers to participate in comail and more investment by printers in enhancing the process. By the same token, freezing or shrinking the price spread by having efficient mail subsidize inefficient will curb the favorable trend.

Iceberg off the starboard bow

What really galls the postal experts I’ve spoken with recently is that the Non-Saturation Flats proposal looks like an attempt to paper over some very real problems – what one postal expert called “re-arranging the chairs on the Titanic deck” -- instead of understanding and addressing them.

Postal officials don’t understand the cost trends with flat Standard mail, don’t know whether their various efforts to improve the handling of flat mail are working, and can’t even say when they will know.

Their explanation of the cost increases for Non-Carrier-Route Flats are simplistic and probably off base. (Note to the USPS: Here’s a hint in your own data: The proportion of Non-Carrier-Route Flats dropshipped to the SCF level has declined from 64.1% to 51.7% in just two years. If you actually dig into the category’s data, I’ll bet you’ll find much less relatively inexpensive mail, such as dropshipped 5-digit bundles, and a higher proportion of poorly sorted, non-dropship mail.)

Postal officials’ explanation of the even larger cost spike for Carrier-Route Flats is non-existent. Here’s why: A big culprit is probably the money-eating Flats Sequencing System, but postal officials won’t admit that or even discuss trying to unwind the FSS fiasco. Doing so would force them to shoulder the blame for rushing into the multi-billion-dollar investment before it was proven to be workable. The unofficial motto at L’Enfant Plaza is “Never recalibrate, just obfuscate.”

(Another note to postal officials: I dare you to publish a clear analysis showing the cost-per-piece of handling and delivering FSS mail – including the stuff the machines aren’t able to sort – with the costs of carrier-route and 5-digit-bundle mail. No, I take that back. I double-dare you.)

Related articles:

• New Postal Rates Will Benefit Some Publishers and Printers

• Why the Flats Sequencing System Should Be Scrapped

• USPS Cost Cutting Ain't Cuttin' It, Mailers Group Says

 

 

 

Why the Flats Sequencing System Should Be Scrapped

A 2011 presentation explained how FSS would
streamline the handling of flat mail. Oops!

What many have long suspected has now been confirmed: The U.S. Postal Service’s Flats Sequencing System is a disastrous failure that cannot be fixed.

The FSS is adding so much to the costs of handling magazines, catalogs, and other flat mail that no amount of machinery tweaks, Lean Six Sigma projects, or "Tiger Teams" can ever make it right.

“When all processing and delivery costs are included, an average Periodicals flat addressed to an FSS zone costs over 10.5 cents more than if addressed to a non-FSS zone,” postal expert Halstein Stralberg wrote recently. Assuming the same 40% cost differential applies as well to flat-shaped Standard Mail, such as catalogs and retailer flyers, Stralberg’s analysis indicates that FSS is adding several hundred million dollars annually to the Postal Service’s costs.

And that doesn’t even count the $1.3 billion spent on purchasing the huge machines or the additional investments in building modifications, training, and other start-up costs.

“Because of the large investment in the FSS and the great hopes that were attached to them, USPS managers appear still unwilling to admit that the program is a failure,” wrote Stralberg, a longtime consultant on postal costing and prices to Time Inc.
 

Another utopian vision from 2011

Based partly on Stralberg’s analysis, three mailer organizations recently called for the USPS to “(1) retire the FSS machines, (2) allow mailers of flat-shaped mail to prepare their mail for (and qualify for) Carrier Route and other discounts in all zones; and (3) make Carrier Route and other worksharing discounts for flats deep enough to cover 100 percent of the costs avoided by the worksharing.”

“These reforms alone should encourage enough co-mailing to enable Periodicals Mail and flat-shaped Marketing [aka Standard] Mail to cover all, or nearly all, of their attributable costs,” they told the Postal Regulatory Commission.

The three organizations are MPA-The Association of Magazine Media, the Association for Postal Commerce (aka PostCom), and the Alliance of Nonprofit Mailers.They submitted their comments and Stralberg’s analysis to the PRC to counter the USPS’s proposal to abolish the inflation-based cap on Periodicals postage rates, as explained in my recent Publishing Executive article, Postal Rate Fight Continues as Publishers Battle USPS "Stupidity Tax".

A 2003 Stralberg presentation correctly predicted
FSS mail would cost more than carrier-route flats.

Stralberg’s predictions in 2003 about why FSS would not reduce flats-processing costs have turned out to have nearly prophetic accuracy, except the program turned out even worse than he expected.

For example, he contradicted postal officials who claimed that their costs for FSS-sorted pieces would be lower than for pieces in carrier-route bundles. (Postal officials now acknowledge that carrier-route mail is cheaper to deliver than FSS mail.)

But Stralberg never predicted that the FSS cost per Periodicals piece would be nearly double that of carrier-route pieces, as his recent analysis shows.

Here’s the MPA/PostCom/ANM summary of why the Postal Service’s assumptions about FSS turned out to be so fatally flawed:

1) “The Postal Service’s planners greatly underestimated the extent to which mailers would sort flats to the carrier route level.” About half of flat-mail copies were in efficient carrier-route bundles when FSS was first conceived more than a decade ago. Because of co-mailing and similar mail-consolidation efforts by printers, the proportion is now higher than 70% in non-FSS zones. (When a system nearly doubles the cost of handling 70% of the mail, it cannot possibly save enough on the other 30% to reach breakeven.)

The view from 2010, before reality intruded.

2) “The Postal Service overstated the costs of manual sequencing of carrier route flats by carriers, and thereby overestimated the costs saved by diverting the sequencing work to the FSS.” Stralberg called out this flawed assumption in a 2003 presentation to mailers and postal officials.

3) “The Postal Service, erroneously assuming that practically all flats within an FSS zone would be placed in delivery sequence by the FSS, removed the vertical flats cases carriers had used for manual sequencing.” This triumph of optimism over reality adds to the amount of time carriers need to prepare flat mail for delivery. Barely half of the flats in FSS ZIP codes are presented to carriers in delivery sequence.

4) “The Postal Service’s planners incorrectly assumed that nearly all flats would be machinable on the FSS.” Stralberg warned in 2003 that flat mail unsuited for the Postal Service’s existing machines probably couldn’t be handled on the FSS, meaning that “non-machinable flats will cost more” under FSS.

5) “The Postal Service’s predictions that practical concerns about the FSS machines themselves, including their footprint, cost, and complexity, would be solved during the design and implementation of the system proved incorrect.” That’s nearly a direct quote from Michael Plunkett, a USPS pricing manager when FSS was being developed and now PostCom’s President and CEO. He also told the PRC, “From the outset of the FSS project there was significant skepticism that the proposed technology would achieve the intended results and concern that substantial capital was being invested in a system that would unnecessarily complicate a network that already needed to be rationalized.”

6) “Finally, because flats mail volume was lower than the Postal Service had expected, it added many outlying zones to the territory covered by each FSS machine, causing substantial service degradation.” Mailers warned postal officials more than a decade ago that digital disruption was reducing the volume of printed catalogs and magazines, but the Postal Service persisted with an FSS plan that assumed gradually increasing volumes. Flat mail peaked in 2005 and has dropped about 40% since then.

Related articles:

• The FSS: A Hopeless Case 
• Will Publishers Pay for the USPS’s FSS Fiasco? 
• USPS Needs a Plan B for Flat Mail, Coalition Says 
• Is The FSS A Boondoggle? Tough Question #2 For The USPS

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:

•  Dueling Bindery Breakthroughs: Three years ago, it was Quad that fired back with its own announcement after Donnelley unveiled a breakthrough in co-binding, another method of reducing postage costs.
• How about some free printing?: The postage savings available from co-mailing a magazine can exceed the cost to print it.
• Hell Freezes Over: Quad/Graphics Wants To Buy Worldcolor and Go Public: Donnelley tried first to buy Worldcolor, but Quad ended up taking over the rival printer.

R.R. Donnelley Stalks Quebecor World

For many large American publishers there are only three printing companies. Soon, there may be only two.

R.R. Donnelley stunned the printing and publishing industries today by announcing its offer to be the "stalking-horse" bidder for rival Quebecor World, which is about to emerge from bankruptcy reorganization. It offered Quebecor's creditors, who essentially own the company, everything they would receive from the reorganization (which for many unsecured creditors is at most 50 cents on the dollar) plus 15% ownership of Donnelley. Donnelley stock closed down 9% today, making the stock being offered to the Quebecor creditors worth about $360 million. (See also "Q&A on the Donnelley-Quebecor Deal".)

Donnelley's proposal letter expressed confidence that the deal would be approved by the U.S. and Canadian governments, but the word "antitrust" was on the minds and lips of many major buyers of printing today.

Donnelley may point out to government agencies that the United States has thousands of printing companies. But only three -- Donnelley, Quebecor, and the privately held Quad/Graphics -- have rotogravure publication presses. And only those three have co-mail pools that typically contain at least several million magazines and/or catalogs. As good as they may be, "second-tier" printers with only offset presses and smaller co-mail pools simply cannot compete with the Big Three for much of the long-run catalog and magazine work in the U.S.

For parts of the market, such as for rotogravure magazines inserted into newspapers (like Parade and American Profile) and for telephone directories, it's really the Big Two, with Quad mostly or completely out of the picture. Quad has been trying to break into the newspaper-insert magazine market for years and reportedly built its Martinsburg, WV plant because it (mistakenly) thought it had a deal to print USA Weekend.

But a foray into coupon printing years ago that nearly bankrupted the company has engraved a commandment into Quad's corporate DNA: Don't get into price wars on printing. The Wisconsin-based company tends to compete instead with features like high-speed binderies and efficient co-mail pools -- which are irrelevant in the if-we-get-this-business-at-this-price-will-we-have-any-profit-margin? world of printing Sunday newspapers.

With its stalking-horse bid, Donnelley would set the bar for anyone wanting to buy all or part of Quebecor World, though the creditors would still be able to seek better deals. Even if the proposal does not pass anti-trust muster, it could be a winner for Donnelley by preventing competitors from buying Quebecor plants at fire-sale prices and then using their nearly debt-free status to undercut Donnelley.

I would love to hear your concerns, questions, or insights about the Donnelley proposal. Please email them to Dead.Tree.Edition@gmail.com. I promise not to attribute any comments to you or your company without your authorization.

9 Cost-Cutting Guides for Publishers

The folks doing the "A Crash Course in Cost Cutting" at tomorrow's Publishing Executive Conference have put together a great list of helpful articles.

They asked me to post the list to make it easy on the attendees and to avoid unnecessary handouts. I'm happy to do so because the list has some great resources for my readers (and also happens to include three articles by yours truly):

1. “7 Tips for Analyzing Print Prices”: Alex Brown demonstrates that there's more to analyzing printing proposals that simply comparing Price A to Price B. Publishing Executive magazine.



2. “Paper Options: Looking Good Without Breaking the Bank” : Folio: magazine discusses how it saved money on paper and how other publishers can as well.



3. “16 Ways to Save Money on Your Print Jobs”: Margie Dana of Boston Print Buyers provides a list that is especially well suited to sheetfed printing.



4. “US Paper Price Index”: Charts the market prices for LWC and SCA paper.



5. "Dos and Don'ts of Buying Paper": Multichannel Merchant's advice for cataloguers is just as relevant for magazine publishers.



6. “Heavier Paper Can Save Money”: Dead Tree Edition shows that lighter paper isn't always cheaper -- and offers a free model for calculating the total cost (paper and distribution) of papers with different basis weights.



7. "Co-Mail Confusion: Do you know how much you’re really saving?”: Steven W. Frye unravels the complexities of calculating co-mail costs and savings for Publishing Executive magazine.



8. "How About Some Free Printing": Dead Tree Edition shows how much money some publishers are leaving on the table by not co-mailing.



9. “The Conde Nast Protection Acts”: Dead Tree Edition explains the new Periodicals rates that will take effect in May, including a handy summary of the changes to each rate. The article also shows that the heaviest publications will get the smallest postage increases -- thus the Conde Nast reference.

The Conde Nast Protection Acts?

If your publications don’t have well over 100 pages per issue, don’t assume that your postage rates will increase by only 4% in May.

Even if they mail efficiently, publications weighing less than half a pound will typically experience increases of 6% to 7%, Dead Tree Edition's exclusive analysis has found, even though the Postal Service says Periodicals increases will average just under 4%. Characteristics other than weight – such as dropshipping, co-mailing, ad-edit ratio, and non-profit status – have little impact on the percentage increase for Periodicals mailers who do not change their mailing practices.

No doubt some publishers will complain, as they did a couple of years ago, that these results reflect the undue influence of Time Inc.’s lobbying at the expense of small publishers. But the gradual move to cost-based rates, which means charging more for pieces and less for pounds, has been at best a mixed blessing for Time so far because of its many relatively light weekly publications. (Have you seen how thin Time magazine looks lately?)

The real winners, both two years ago and this year, are publishers of heavy magazines that dropship extensively. You could call these postal-rate changes the Conde Nast Protection Acts, though in all fairness I should add that Conde bore more than its share of Periodicals-Class costs under the old rate structure.

The chart below shows that the rate changes for outside-county Periodicals range from a decrease of more than 20% for weight going to a delivery unit to a 1,650% increase for a 5-digit bundle on a 5-digit pallet. So we’re getting more incentive to ship to delivery units as long as we’re entering mostly carrier-route and firm bundles there.

With the new rates, co-mailing still makes sense, though at first glance some have mistakenly concluded that the incentive to co-mail is being decreased because the gap between “5-digit automated” and Basic Carrier-Route piece rates will narrow slightly. For most publishers, co-mailing will generate enough savings in other areas (such as bundles, containers, and better dropshipping) to make co-mailing even more attractive than it is now.

Publications experiencing a 4% increase will probably weigh at least 0.6 pounds and more likely 0.7 pounds per copy, Dead Tree Edition’s analysis shows. For an 8” x 10.5” magazine using a 100# cover and having four pages of reply-card inserts, that would mean 148 to 180 body pages on 40# paper. For a tabloid newspaper, that would be about 120 to 140 pages on 45-gsm newsprint.

Here are some examples of how the rates would have affected recent issues of various outside-county publications:

• National consumer magazine with numerous demographic versions run as separate mailstreams; 692,000 mailed copies averaging 0.96 pounds; 55% advertising; three-fourths of copies dropshipped: 2.7% increase. The magazine subsequently streamlined its versioning and joined a large co-mail pool. That approach would have reduced its postage by 24% (more than 11 cents per copy!) for this particular issue under both current and new rates, according to data provided by the consultant who engineered the magazine’s distribution transformation.

• National consumer magazine in large (multiple millions of copies) co-mail pool; 0.60 pounds; 59% advertising: 3.9% increase.
  

• National consumer magazine in a similar co-mail pool; 34% advertising; 0.27 pounds: 7.3% increase.

• Non-profit journal mailing 53,000 pieces weighing 0.62 pounds each; 33% advertising; no co-mail or dropship: 6.0% increase. Most publishers will see their weight costs (advertising and editorial pounds) decrease, but this journal’s will actually increase because most copies are going to Zones 5 through 8, which got hefty rate hikes for advertising pounds.

• Non-profit state association newspaper with 21,000 copies, about half qualifying for dropship discounts; 11% advertising: 5.9% increase. A publication with the same characteristics except for 50% advertising would see a 5.6% increase.

How about some free printing?

Here's a way for American printers to make money producuing magazines: Don't charge for the printing of subscriber copies.

There's a catch (acually two catches), of course: In exchange, offer to co-mail the copies as long as you get to keep all of the postal savings.

Let's focus on a certain major publisher of monthly magazines that does no co-mailing. Suppose that its prominent 700,000-ratebase title has a 128-page (plus 4-page cover) issue and mails 650,000 copies. It would probably pay about $45 per thousand, not counting makereadies or consumables, to print the magazine using two 64-page offset presses plus a cover press.

Mailing on its own, the magazine probably gets carrier-route sortation for 35% to 40% of its copies. That would increase by about 50 percentage points if the copies instead went into a co-mail pool at one of the major publication printers, where mailstreams of 4 million or more are commonplace. With carrier route costing 10.2 cents per piece less than the next-best sortation level, the savings on piece rate alone would average roughly 5.5 cents per copy -- or $55 per thousand.

Co-mailing would also create more efficient bundles and pallets, reduce the number of sacks, and enable the printer to dropship the magazine more extensively. (Printers generally will not dropship sacks.) Such savings would probably equal at least a penny per copy ($10 per thousand).

So the printer would be giving away printing worth $45 per thousand but would receive $65 per thousand in postal savings. That net of $20 per M is more than printers receive in shared postal savings from some co-mail clients.

Let’s look at the same publisher’s magazine that has a ratebase of 200,000, with most of the copies going to affluent subscribers. It probably prints on 32-page presses, so the printing of a 128-page issue would probably cost a bit more than for its larger sibling – say, $54 per thousand.

Because of the magazine’s audience, it probably gets better sortation, perhaps 25% carrier route, than do most magazines mailing nearly 200,000 copies. But it’s still in the sweet spot for co-mailing. Going into a major co-mail pool would generate piece savings of at least $65 per thousand. And on a per-copy basis, the savings from such other items as bundles, palletization and dropshipping would be greater than for the larger title, probably another $20 per thousand.

So with Dead Tree Edition’s plan, the printer would net about $31 per M -- $85 in postal savings minus $54 in foregone printing charges. The publisher would have been far better off paying for the printing and doing the usual co-mail deal; under one printer’s formula, that would be about $59 per M. (For an explanation of how to analyze the publisher's savings from co-mail, see Steve Frye's excellent piece in the October issue of Publishing Executive.)

Oh yeah, the other catch: If magazine publishers nickel-and-dime their printers to cut print prices by 50 cents per M but leave savings of $40 or $60 per M on the table, what makes you think they’ll be smart enough to take the free-printing deal? Even some publishers that are co-mailing are doing some questionable things with their mailings, but that’s a subject for a future article.

After Standard flats postal rates were restructured in 2007, the catalog industry jumped into co-mailing with both feet. The magazine industry, which has had more than a decade to get on board and has even greater incentives to co-mail , has been a much slower sell for co-mail programs. Too many have a production “silo” that doesn’t bother to consider distribution.

You’d better blow up those silos fast. The next round of postal rates, due to be announced next month for implementation in May, are likely to be especially rough on inefficient mail in both the Periodicals and Standard classes. (See “Postal costs to go up less than 4% -- maybe” for details.)

If you have a legitimate reason for not co-mailing a standard-sized monthly magazine having between 25,000 and 1 million mailed copies per issue, please write to me at dead.tree.edition@gmail.com. The only possible reason I can think of is demographic versioning, which might make selective binding (arguably a form of co-mailing) more efficient. Even then, co-binding is a possibility. And careful analyses would reveal that many demographic-advertising offerings are unprofitable, especially when the lost postal savings are figured in.

If you’ve run into some bad reasons not to co-mail, please pass those along as well. I already have a few candidates for the 10 Lamest Reasons Not to Co-Mail, but I’d love to hear yours.

Is Quebecor back from the dead?

Is Quebecor World ready for a "return to greatness," as Printing Impressions suggests in the glowing cover story of its latest issue?

At first blush, it's hard to see an exciting future for a company that has already lost $1 billion this year after going Chapter 11. After all, the giant printing company acknowledged in a financial filing recently that it faced "challenging market conditions, resulting in price erosion and decreased volume in most of the Company's markets."

But dig a little deeper and you will find some signs of strength. Most of the $1 billion loss was a writedown of the albatross that almost brought QW to ruin, the European division that it sold in June. QW World has not used much of its debtor-in-possession financing since filing for Chapter 11 in January and experienced positive cash flow, though barely, in the third quarter.

An apparent blessing of the Chapter 11 filing, at least so far, is that counterparties canceled all currency-hedging contracts with QW, which has Canadian plants that produce items for the U.S. market. The U.S. dollar has gained more than 20% on the Canadian dollar since then.

Another blessing came from the U.S. Postal Service last year when it overhauled rates for Periodicals and Standard flats mail in ways that enhanced the incentives for co-mailing. Only R.R. Donnelley and Quad/Graphics are in the same league as Quebecor when it comes to large co-mail and dropship pools for mailed flats, and in this case size does matter.

Of the three, Quebecor's efforts have been more focused on the small mailers (with circulation of, say, less than 100,000) that have flocked to co-mailing in the past year or so and that gain such huge postal savings when participating in QW's large co-mail pools.

I was at an industry function recently where several executives talked of there being only three printers -- QW, RRD, and Quad. Certainly there are others, some of them sizeable companies with stronger credit histories than QW. But without rotogravure presses (rumored to be more profitable than offset), huge co-mail pools, and extensive dropship networks, it's hard to see how they can compete with the Big Three for most medium- and large-circulation publications.

Printing Impressions quotes company executives as saying the new QW is more streamlined and has fewer silos, doing innovative things like using available magazine press capacity (which no doubt there is a lot of these days) "to meet peak four-color educational textbook demand." And QW has definitely been more aggressive in recent months about reaching out to customers and potential customers -- for example, sponsoring and participating in webinars held by Folio: and Multichannel Merchant.

The big question is whether QW is now strong enough to ride out the turbulence of a severe recession and lean enough to thrive as many customers permanently reduce or even eliminate their demand for printing.

What has changed?

What a week, not just in the political world but also in magazine land. With every day seeming to bring another announcement of layoffs at a magazine publisher, it’s easy to conclude that everything has changed. Nope. It looks to me as if we’re still doing the same stupid things.

I still see us putting out three newsstand copies for every one that’s sold. For weeklies, who pay extra to get allegedly quick on-sale, it’s more like four copies distributed per sale.

I still hear about plenty of magazines mailing their titles inefficiently. I still receive the same old lame direct-mail pieces asking me to subscribe to magazines that I’ve never seen. (Stupid question: Why would I subscribe to a magazine based only on marketing copy without knowing what’s in the actual magazine?)

And, other than a few exceptions, I see little evidence that publishers are considering their impact on global climate change despite growing concern among their readers and advertisers. After all, we did elect a President this week who has promised to focus on the issue.

Here’s my advice for magazine CEOs looking to cut waste in response to falling ad revenue:

• If you have mailings of between 10,000 and 800,000 magazines (or up to 1.2 million catalogs) that are not being co-mailed, find out why. In fact, if no one has mentioned to you the possibility of some form of co-mail for those titles in the past year, you probably need to fire someone. There are plenty of production and distribution managers on the job market now who understand how to minimize postal costs. Note that even Crain’s, which a couple of years ago presented testimony that weekly titles could not be co-mailed, is now co-binding some of its weeklies.
• Read your magazines’ direct-mail pieces. Betcha 2 to 1 they suck.
• Call your circulation director and newsstand distributor into your office, hold a gun to their heads, and tell them to stop wasting so many newsstand copies. “Reduce the draw, reduce the sale,” they will parrot back at you. Comag Marketing Group has proven that you can reduce draw with little impact on sales. After all, the goal should be to maximize profits, not sales.
• Get ready for more of your advertisers to ask uncomfortable questions about the carbon footprint of your products. On the print side, you can start with the big item – paper manufacturing – by asking your paper suppliers about the carbon footprint of their products and what they are doing to reduce it. On the electronic side, make your people and your vendors stop suggesting that Web ads and digital editions are necessarily “greener” than print.

Is this harsh advice a betrayal of my readers? No, you are likely to read this before the magazine CEOs, so take it as a warning. Get a ballpark estimate of what you could save with co-mail and put it in front of your CFO. If you don’t, a consultant will. Take a scalpel to your newsstand draw before the bean counters take an axe to it. And get ready for the growing movement among advertisers to track, and perhaps offset, the carbon footprint of their ads.

Dueling Bindery Breakthroughs

A patent battle may be brewing between printing giants R.R. Donnelley and Quad/Graphics, but it's their competitors who should be looking for cover.

Four days after Donnelley announced that "Variable Trim Binding (VTB) allows for multiple sized products from multiple customers to be bound in-line in a single, efficient operation," Quad revealed that it was already using its patent-pending "IntelliTrim" technology on more than one saddle stitcher. A Quad insider confirmed that Donnelley's announcement prompted Quad to go public with IntelliTrim. And perhaps Quad's patent application prompted Donnelley's announcement.

One apparent difference between the technologies is that Donnelley's allows variation of up to one inch in either direction among publications being bound together, while Quad's allows such variation only in the side-to-side dimension. Also, the Donnelley announcement does not mention the type of bindery lines using Variable Trim Binding, while Quad specifies saddle stitchers for IntelliTrim.

In any case, the two printers seem to have gained a significant technological advantage over other competitors in the production of mailed magazines and catalogs. Co-binding is a faster, more efficient method than co-mailing of bundling multiple publications together to achieve postal savings. But the need to match up publications with exactly the same trim size has hindered widespread adoption of co-binding. Co-mailing, meanwhile, has exploded for both Periodicals (magazine) and Standard flats (catalog) since postal rates for both classes were overhauled in 2007.

Future posts will provide examples of how to estimate the potential savings from commingling mailings. But suffice it to say that finding the right co-bind situation could save some magazines more in postage than they pay to print the magazines.