Postal Hike Looms; Publishers Fume
US Postal Service proposes postal rate increase on periodicals in 2002 that
could cost magazine industry up to $500 mil
From FOLIO, April 1st, 2001
ORIGINAL TITLE: Postal Hike Looms; Publishers Fume. FULLTEXT: Moseley, Bob A likely proposal from the USPS to offset a potential deficit by hiking rates
15 to 25 percent has magazine industry leaders seeing red, but fighting back. * With a 9.9 percent postal rate increase on periodicals enacted just months
ago, and another that could cost the magazine industry up to $500 million
proposed for 2002, publishers are furious. And they are taking action–a
high-profile campaign aimed at blocking an anticipated 15 to 25 percent rate
hike. Magazine Publishers of America is calling on the U.S. Postal Service to pursue
alternatives to a price increase. Suggestions include boosting productivity,
imposing a hiring freeze and consolidating processing plants. The Postal Service's board of governors, facing a potential deficit of $2
billion to $3 billion this year, contends that it has improved productivity
and cut costs, but price increases remain necessary. Wage and fuel costs are
rising faster than the growth in mail volume and revenue, according to the
USPS. It is essential that the government overhaul U.S. postal laws to avert a
financial crisis, the board says. "What we need is reform of the law under which we operate. The pricing
structure is out of touch with the marketplace today," says USPS spokesman
Greg Frey. "Magazines need to put an increased emphasis on Congress and
government to change the laws, and not blame USPS." Frey's assertion that the magazine industry is demonstrating "misguided anger"
over mailing-cost increases has angered some publishers: "It's absolutely
pathetic that someone at the Postal Service would fail to accept
responsibility for their inefficiencies," says Jason Klein, president of Times
Mirror Magazines. "The problem is not with government; the problem is that
they've been unable to control their own costs. It's not the fault of anyone
else but the Postal Service." Added stress to the industry The Postal Service could file a rate hike request for periodicals as June,
with any price jump taking effect in the first half of 2002. A rate increase
would add to the long list of problems that have beset publishers: a softening
advertising climate, rising paper costs, lower newsstand sales and increasing
circulation costs. "The Postal Service will cause the demise of hundreds of magazines by not
controlling their own operations," Klein fumes. DeSilva & Phillips, a media investment banker, said in a recent report that a
substantial postal rate hike would hurt the magazine industry. "B-to-b
magazines, unable to take advantage of efficiency options available to
big-circulation books, could be especially hard hit. The specter of future
increases will discourage magazine start-ups." "The big publications will be able to make it, but what about the small ones?"
wonders Joseph Levy, CEO/president/group publisher of CIO. "Is this country
losing a voice?" Lobbying for the b-to-b sector, David Straus, ABM postal business counsel,
says that in 30 years he has not seen the publishing industry so angry about
postal rates. "We all agree the Postal Service must be changed," he says.
"It's time for the Postal Service to tighten its belt and recognize that you
can't continually hit rate payers with increases." But Frey says plant closings and a hiring freeze are not the answer. "We have
1.7 million addresses added every year," he says. "If you don't have
sufficient personnel to handle that, you have to pay overtime–which is very
costly." He adds that while processing plants do not handle equal volume, it
is logistically necessary to maintain plants in remote areas. The return of private delivery Klein says private delivery is an option for publishers facing another large
postage hike. "You'll see it across the board," he says. "They're just
inviting competition." Levy says his company is doing more drop-shipping–bypassing steps in the mail
stream to cut costs–following January's increase. CIO is actually spending
less with USPS than before, he says. And he notes that the increase in
first-class postage has led him to mail fewer business letters and do more
e-mailing. Andy Sippel, publisher of ESPN The Magazine, says his publication had budgeted
for a 15 percent increase last time, and when the postal increase came in at
9.9 percent, the company was well prepared. As for the next increase, he says,
"I don't think anyone had it on their radar screen. The industry will survive,
but we'll have to get more money from advertisers and consumers. We'll have to
pass the costs on as much as possible." A Histroy Of Hikes
Industry averages for Periodical Mail
RATE CHANGE PERCENTAGE
CASE YEAR IMPLEMENTED INCREASE
1990 February 1991 22%
1994 January 1995 14%
1997 January 1999 5%
2000 January 2001 9.9%
2001
(June request expected) Early 2002 (anticipated) 15% to 25%
ISSN 0046-4333; Issue 5; Volume 30; Page 15 Copyright 2001 INTERTEC Publishing Corporation (c) 2001 Resp. DB Svcs. All rts. reserv.
$$FOLIO, 01st April 2001
