US periodicals looking to alternative delivery options

Newsweek – America’s second-largest news weekly magazine – is phasing out its print edition by the end of the year, after deciding it has reached a “tipping point” where distribution is more efficiently achieved in an all-digital format. The move comes as part of a general shift by US periodicals towards Internet and tablet-based forms, with 39% of Americans now receiving their news online, and tablet users in the US predicted to number more than 70m, by the end of 2012.

Newsweek editor Tina Brown said yesterday that the title’s online version, The Daily Beast, has seen a 70% increase in visitors in the past year, including a “rapid” growth of tablet users, while print advertising has proved “challenging”.

The magazine’s physical circulation has halved since its peak to around 1.5m copies.

“We have reached a tipping point at which we can most efficiently and effectively reach our readers in an all-digital format. This was not the case just two years ago. It will increasingly be the case in the years ahead,” Brown said.

The US magazine sector is moving towards tablets at a rapid pace, with 1,728 magazines now offering apps compared to only 192 two years ago according to the Association of Magazine Media.

Alternative delivery

For the US Postal Service, periodicals volumes peaked in 1990 at 10.7 billion pieces and have declined each year since 2000. Since about 2007, every year has seen periodical volumes setting new records for low levels.

This year, the 11 months up to the end of August 2012 has seen a 4.3% drop in periodical volumes, while its $1.6bn periodical revenues have fallen 4.1% compared to the same period last year.

The decision making of publishers regarding their physical distribution options in the US is not being helped at the moment by the uncertainty surrounding the future of USPS.

Publishers have had an eye on possible alternative delivery models in case the unthinkable happens to the Postal Service currently straddling its $15bn government borrowing limit.

For weekly and weekend titles, the move by USPS to end overnight First Class Mail delivery is also making it more difficult for publishers aiming to get titles to their readers and compete against the immediacy of online news alternatives.

The desire by USPS to end Saturday deliveries also raises questions about how weekly – and particularly weekend – titles will reach readers, and how far ahead of delivery a news-based publication would have to be produced in order to be delivered in time.

January’s 2.56% increase in postage rates for periodicals, will also come as bad news for the physical distribution of newspapers and magazines.

A number of magazines are already looking at alternative delivery options, including Bloomberg’s Businessweek magazine, which switched around 250,000 to local delivery companies in cities including Washington DC, Los Angeles, Chicago, New York, Philadelphia and Boston.

TMC publications

US newspapers have moved about $120m worth of their Total Market Coverage (TMC) publications – which generally entail free slimmed-down versions of newspapers and/or advertising inserts – from postal delivery to independent carriers, according to the Newspaper Association of America.

However, this week saw the NNA hailing a move by USPS to propose a new rate category for high density mail that would keep rates for TMC publications the same as they are currently.

The new “high density plus” rate category, subject to approval by regulators, offers an option in between the existing high density rate for more than 150 mailpieces per carrier route and the USPS saturation mail rate, which is for mailings that reach 90% of households on a carrier route.

The high density plus rate would require 300 mailpieces per carrier route.

The Newspaper Association of America, which has spent the summer battling USPS over its wish to offer direct mail giant a big postage discount, said that it had been asking for the new high density plus rate for the last three years.

It said the new rate category would change the current system in which newspapers are mailing more pieces, but can’t qualify for extra discounts.

“We believe many newspapers will benefit from this development,” the Association said.

However, the NAA added: “It may not be enough to keep a newspaper TMC product in the mail, in light of the Valassis negotiated services agreement and other rate advantages given to saturation mail since 2009.”