Publishers take issue with rising postal costs

Postal issues continue to be a headache for publishers the world over and price based reform is currently under review by operators in the UK, US and Australia. Allison Leo & Arif Durrani report on recent developments…

In October representatives from the Periodical Publishers Association’s (PPA) postal committee urged the UK’s national postal operator, Royal Mail, to find an acceptable way forward on the size-based pricing issue which continues to threaten the country’s magazine industry.

PPA has warned weekly tabloid-sized magazines could become obsolete as a genre if Royal Mail carried through its proposals to increase rates for larger publications.

Weekly business-to-business titles would be hardest hit by the new pricing system, where postal costs would increase by 50%. PPA estimates crisis hit Royal Mail, who earlier this year announced hundreds of job losses in a drive to cut £1bn costs, stands to lose up to £50m in revenue if this weekly magazine sector is killed off.

While it has been calculated that publishers with mixed-sized portfolios will tend to have a neutral outcome, this ignores the fact that publishers treat titles as individual profit centres and cannot be regarded, for example, like banks which would look only at their overall postal costs. The risk for Royal Mail is the same as for publishers: titles made unprofitable by the move would be closed.

Royal Mail proposed the move in the belief size-based pricing would more accurately reflect its costs. However, while larger packets are generally not machinable, magazines are pre-sorted and fed into the postal cycle at the latter stages. PPA argues this should enable tabloid publishing to be ring-fenced and treated on a sectoral basis.

Continued talks between Royal Mail and PPA has led the postal operator to reconsider its pricing options, with an announcement of intent expected from the postal operator in January 2003. The UK magazine industry will be following developments carefully.

Australian Publishers are also facing distribution price increases as the national operator, Australia Post (AP), gears up to introduce major changes to operator Print Post.

The proposed changes, which include addressing requirements and line-haul reform, as well as increased workloads and potential price hikes, were highlighted in a mid-year discussion paper circulated to the Major Mail Users Association.

AP released the paper in order to gain preliminary feedback before it moved to the next stage of consultation with other stakeholders, which would then include the Australian Business & Specialist Publishers (ABSP).

However, heading AP off at the proverbial pass, ABSP made sure it received the preliminary paper and provided its input into the feedback process earlier than anticipated.
Of major consideration to ABSP is the short response period allotted by Australia Post for industry groups to respond to the paper and the limited amount of industry consultation. ABSP also considers many of the issues raised in the document to particularly threaten small publishers. As this story was compiled, ABSP had not received any feedback from AP, although a response is expected sometime in November.

Meanwhile, in the US magazine publishers have faced cumulative rate increases of 24% in just 18 months as the United States Postal Service (USPS) continues to search for ways to stem losses after its third straight year of revenue decline. While USPS does seem to be making progress on its pledge to reduce costs by $5 Billion over five years, further postal hikes looked likely for early 2004 until a possible reprieve earlier this month [November] that could safe guard publishers’ from further postal hikes until 2006.

A study of the postal service’s obligations for its current and future retirees shows it has made more progress in funding future pension obligations than had previously been thought.

USPS and mailers now seek to have legislation enacted to allow USPS to lower its payments for its retirement system by almost $3 billion in 2003 and more than another $2 billion in 2004. If the law is changed by early 2003, USPS will then be able to cap post rates until 2006. This would be bring great relief to publishers after the recent back-to-back increases.
The USPS is also trying to reduce costs and rates for small magazine publishers. The Postal Rate Commission was asked to authorise a two-year experimental discount rate for publishers who combine their periodical mailings, then use private transportation to deliver the mailings to postal facilities closer to the ultimate destinations. The proposal, which gives small publishers incentives to do more work sharing as a way to help lower the overall cost of processing periodicals, has been strongly supported by Magazine Publishers of America (MPA).

Despite these recent developments, American publishers still believe the US postal system needs fundamental change. MPA strongly believes USPS needs a comprehensive overhaul to remain viable and has urged the Bush Administration to appoint a special commission to study the many pressing long-term issues facing the nation's post.

MPA intends to maintain its three-prong postal strategy. Nina Link, president and ceo of MPA said: "For the past few years, our strategy has been to fight excessive rate increase proposals; look for interim solutions with USPS and private logistics providers to reduce our members' mailing costs; and search for meaningful long-term postal reform. We intend to continue our execution of this ambitious plan while a presidential commission looks for solutions to the long-term challenges to the Postal Service’s future.”

In this digital age it has never been more important for publishers and postal operators to work together to ensure distribution services remain viable. It is thanks to the dedicated work of associations such as ABSP, MPA and PPA, that the interests of magazine publishers around the world continue to make the agenda.

Allison Leo is editor of ABSP’s Bulletin

Related URLs:
www.abp.com.au

Author's E-Mail Address:
Allison Leo

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