Periodical rate hike worries small mailers

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Periodical mailers last week voiced their concerns about the Periodical rate hike that took effect July 15.

The rates were delayed until Sunday to allow time for newspapers and magazines to update computer software and adjust to the complexity of the new rate structure. Other new US Postal Service rates went into effect May 14.

Periodical mailers now have new incentives to use efficient containers, bundles and co-palletization, the technique of publishers or printers merging bundles from separate publications or titles on the same shipping pallet. The USPS also is adding new prices for the editorial portion of a mailing to give mailers of high-editorial-content publications access to lower destination entry rates.

The USPS has said that the average increase is 11 percent for the entire Periodical mail class and that, in general, mailers who put mail on pallets and enter those pallets close to where the mail is delivered will experience the lowest increases.

However, other publication mailers said the increase could be more accurately described as 15 percent to 50 percent based on the types of workshare agreements they have. In short, many smaller mailers will see big increases.

"These new rates impose huge hardships on small publications," said Teresa Stack, president of The Nation. "I can say with confidence that some magazines will go out of business because of the increase. Some will be forced to produce a lesser product to pay for these increases. Meanwhile, the largest magazines will enjoy the benefit of much smaller increases or, in some cases, actual rate decreases."

In an April 18 letter to James C. Miller, chairman of the USPS Board of Governors, Stack said that, according to an analysis done by McGraw-Hill, about 5,700 publications, almost all of the small or medium circulation ones, will incur rate increases exceeding 20 percent, with 1,260 publications seeing increases above 25 percent and hundreds more incurring increases above 30 percent.

Curt Barry, a consultant at fulfillment and customer-service consultancy firm F. Curtis Barry & Co., Richmond, VA, agreed that smaller magazines will be hit hardest.

"Our experience is that smaller mailer clients are and will be affected by any postal increases than the larger ones," he said. "Ten- million-dollar businesses may lose up to $4,000 to $6,000 a year, which largely wipes out earnings before interest, taxes, depreciation and amortization profit.

"Businesses must become more effective at prospecting in order to continue growth," he continued. "Changes in analytic tools and using database marketing are strategies that may help overcome this."

Mark Amtower, author, speaker, consult and radio host on government best practices, added that "controlled-circulation publications may decrease circulation because of the economics of the situation. The ad dollars there are harder to come by."

Stack said that the Nation is currently estimating an increase of 18 percent, which will turn into a $500,000 annual increase

To assuage these increase, Stack said that while the company isn't looking to cut back on circulation, it may have to look at changes as to how the magazine is produced, "but it is already produced very inexpensively, on newsprint."

We may have to cut back on investigative reporting," she added.

Joyce McGreevy, vice president of distribution for Crain's Communications Inc., Detroit, said that the magazines Crain publishes aren't see any drastic changes or cut backs in circulation, they are turning to practices such as co-mailing. But she is also seeing some problems with that practice.

Co-mailing involves taking two separate, already-bound catalog titles and combining their mailings to drop at the same time from the same printer so that both mailers realize additional, volume-based postage discounts.

"We are doing co-mailing but are experiencing some problems with it," she said." Since we publish many weeklies, we keep them open until the close of business on Friday and use the weekends to ship the magazines to post offices across the country, she said. "But by the end of the week, many co-mailing pools are no longer open, so ties hard to find a spot or pocket open at that time."

As an alternative, McGarvy said Crain's is experimenting right now with co-manufacturing or co-binding, which is the practice of combining the mailing lists of two or more jobs and selectively stitching or binding the copies on one bindery line. This can save a mailer time and money, but it is also reliant on printing schedules or dispatch schedules, so it could be a potential problem.

While the USPS did give publishers extra time to implement the complicated rates, many mailers still feel that they don't have enough time to implement them correctly.

And, postal software vendors, which send out their software about more than a month in advance of the rates, are preparing for the worst.

"These are the most significant changes in terms of rate and structure for Periodicals mail in over a decade, " said Christopher Lien, director, commercial mail marketing at postal software provider Business Objects. "The USPS recognized this and did give Periodicals mailers additional time to prepare for these changes. While that certainly did help, the fact is that a lot of the changes and issues are going to come about as we go along-as a result of field testing the software."

"July 15 is not the end of the rate case for Periodicals mailers," Lien added. "It's just the beginning."

Additional reporting in this article was done by Giselle Abramovich.

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