Simplified 2016 Canada Post pub mail rates may be anything but simple for publishers

Changes to the 2016 Publication Mail pricing by Canada Post is making some publishers unhappy, particularly if the result is a 6 - 15% increase in costs. The changes include changing Letter Carrier Presort (LCP) to a simplified "Special Handling" blended price. Vesna Moore, the director of circulation at Annex Business Media includes in a LinkedIn post a quick calculation publishers can do to see what 2016 could look like compared with 2015.

I like the comment by Michael Fox, publisher of Garden Making magazine (and an acknowledged postal expert) in response:

It's important that publishers try to educate Canada Post on our need for sensible, long-term pricing and product design. While many of the 2016 changes intended to simplify Pubs Mail make sense, the severity of some of the changes are likely to do more harm than good for some magazines and ultimately for Canada Post.

Canada Post reports 2014 profit, but decline in Publications Mail volume and revenue

Canada Post reported today that its Publications Mail volume was down 9.5% or 36 million pieces in 2014, with consequent revenue down $19 million or 8.2% to $212 million. The corporation attributed the losses to a decline in mailed subscriptions. 

The revenue decline for mailing magazines and newspapers represented  slightly more than half of the total revenue losses of $37 million the corporation reported in its direct marketing business. Direct mail over all lost 2.2% of its volume and 3% of its revenue compared with 2013. 

Canada Post reported a profit before taxes of $269 million or about 3.3%, compared to a loss of $58 million (0.8%) in 2013.

Another segment important to magazine publishers is business reply mail, where volume was down 5.3% or about 2 million pieces and revenues down 1.9%.

Lettermail volume was down 5.2% or 214 million pieces; lettermail revenues were up 8% or $238 million, largely as the result of the greatly increased, tiered pricing that Canada Post introduced last year. The net positive revenue result was something of a self-fulfilling prophecy as customers mailed fewer more expensive pieces. (Total transaction mail revenues were $3.2 billion, of which domestic lettermail represented $2.9 billion or about 90.6%. The rest represented mail sent out of the country or received from outside.)

Parcels continued to perform well, with volume up 4.6% and parcel revenues up $120 million or 8.6%.

Total Canada Post revenue was up 5.6%  or $331 million between 2013 and 2014, although volume was down over all by 3.4% or 319 billion billion pieces. 

Canada Post said it was determined to continue its Five-Point Action Plan, which involves new, increased pricing, reducing employee benefit costs and concentrating on the parcels business. (click on table to enlarge)

Canada Post reports $39 million in profit for 3 quarters of 2014; mail volumes continue to fall

Three quarters into 2014, Canada Post has reported a profit, before tax, of $39 million, a swing of more than $200 million from the loss for the same three quarters last year. For the third quarter, the profit was $13 million, compared with $129 million in the 3rd quarter the year before. 

Results are attributed to continued growth in the parcel business, lower employee-benefit costs and new pricing related to transaction mail, the core business which continues to decline. The increase in the cost of postage to end users for letters, bills and statements, resulted in a 13.7 per cent increase in revenue to $750 million in the 3rd quarter. Cumulatively, for the first three quarter, revenue was up 6.5 per cent to approximately $2.4 billion.

Volume erosion picked up speed in the third quarter after being lower than expected in the second quarter. Compared to the same periods in 2013, volumes decreased by 58 million pieces or 6.1 per cent in the third quarter and by 175 million pieces or 5.1 per cent in the first three quarters of 2014, [said a release].

 Parcel revenue grew by 8.9 per cent to more than $1 billion for the first three quarters with increase of 4 million pieces (4.2 per cent) compared with the same period in 2013. Direct mail volumes decreased by 99 million pieces, down 2.2 per cent from the previous year. 

The conversion of home delivery to community mail boxes proceeds apace. As of November 25, approximately 100,000 addresses have been converted and a further 200,000 will be converted in 2015. 

Canada Post making money again, but delivery to the door? Still doomed

They have barely started making us walk to community mailboxes at the end of our streets instead of getting our magazines home delivered, and already Canada Post is making money again. In a release it said that it made a profit before tax in the 2nd quarter of $53 million, compared with a loss of $104 million in the same quarter of 2013.

The results were primarily due to the impact of lower employee benefit costs, continued growth in the parcels business and new pricing measures for transaction mail [what the post office calls letters, bills and statements] contained in the Corporation’s Five-point Action Plan. 

The number of pieces of mail continued to fall, by 38 million or 2.3 per cent in the 2nd quarter (a total of 117 million pieces or 4.7 per cent in the first half of the year.)

Domestic parcels, the largest part of the parcel category, increased by 10.9 per cent and volumes grew by 2 million pieces or 9.7%. Over all, parcels grew by 11.3 per cent to $353 million compared with the same period last year. 

About a quarter of a million addresses will be moved to community mailboxes in early 2015 and a total of 1.17 million by the end of next year, leaving about one-third of Canadian addresses with door-to-door delivery to be converted in the remainder of the five-year period. 

Related posts:

• Government approves regulations for postal rate increase effective March 31
• Publishers told that Publications Mail rate staying as announced for Jan 2014
• Canada Post announces service changes and price increases for next January

Publishers told that Publications Mail rate staying as announced for Jan 2014

Member magazines have been informed by Magazines Canada, the industry association, that the forthcoming changes announced last week by Canada Post (CPC) do not -- at present -- affect the Publications Mail rate, which was announced in July for January 2014. However, publishers will be faced with a major increase in lettermail (like any regular mail user) come March 31, affecting the mailing of publishers invoices. 

"Renewals and acquisitions sent via Addressed Admail rates remain the same as announced in late July 2013."

CPC is working with Magazines Canada and publishers to ensure that correct customer's mailing addresses are captured (rather than the physical address). And it is promoting tools such as Address Complete, which ensures that mailing addresses are complete (the #1 reason for returned mail is missing apartment or suite numbers, and the #2 reason is using the physical address instead of the mailing address.) A free trial of the Address Complete software is available.
Related post:

• Canada Post releases new Action Plan (Magazines Canada summary)

Postal workers' union research says economic impact of strike & lockout was overblown

The Canadian Union of Postal Workers (CUPW) has published a research paper that says the June 2011 strike and lock-out did not have the catastrophic negative effect on the economy that was claimed by critics and the government at the time. It says that the cost to Canada Post was only about $58 million. The paper was presented this spring to an international conference; the Rutgers University Conference on Postal and Delivery Economics in Brighton, United Kingdom. A release on the CUPW website says:

'Last June, the Harper government argued it had to legislate CUPW members back-to-work to protect the economy,' said CUPW National President Denis Lemelin.  'But our paper reveals that the impact of the postal disruption on the economy was negligible, as measured by bankruptcy and employment data.'

"Not only that, the labour disruption only cost Canada Post about $58 million, not 'hundreds of millions' as claimed by Canada Post President Deepak Chopra,' said Lemelin.

The paper also shows that while some businesses were negatively affected, there is no evidence the rotating strikes threatened their viability. It shows charities, non-profit organizations, seniors groups, and rural and remote organizations experienced some temporary negative impacts.

'The paper demonstrates that postal back-to-work legislation, which was passed one year ago today, was not enacted for economic reasons, ' said Lemelin. 'It was enacted because our government has it out for workers.'

The whole research paper can be downloaded here as a pdf.

A large number of businesses and organizations across the country, including not-for-profits, seniors groups and charities, were surveyed as part of the research. Among the business organizations polled were the Canadian Marketing Association, the Canadian Federation of Independent Business, the National Association of Major Mail Users and Magazines Canada. The study paraphrased president Mark Jamison's June 15 2011 letter to Labour Minister Lisa Raitt emphasizing the importance of postal delivery to Canadian-content magazines. The CUPW researchers requested an estimate of the number of workforce reductions that may have occurred as a result of the disruption, but says it did not receive a response.

Canada Post announces revised specs for business reply cards

After extensive consultation with the magazine industry and other mail users, and tests of various samples, Canada Post has released new recommendations for the weight and dimension of business reply cards (BRCs; bind-in, blow-in). Its original announcement in July 2011 caused some consternation when it required heavier weight stock but has now been amended to say that

After substantial testing and analysis, we would like to advise that Business Reply Mail customers may continue using paper with a weight lower than 160 gms but not less than 111 gms. In such cases, customers must realize that a small portion of their returned cards may be subject to longer processing times. To improve performance, we recommend using: optimal card size of 108 mm x 165 mm (4.3 in x 6.5 in); and grain direction long.

According to a memorandum from Magazines Canada, the problem Canada Post was (is) trying to avoid is that, in order to reduce mailing weights, some publishers were printing BRCs on so light a stock they were fragile and were either damaged or destroyed in the mail sorting process or they are jamming equipment.

As magazines find other means, decline in subs mailing hurts Canada Post volumes

An analysis by MastheadOnline of ABC circulation figures shows that the volume of mailed subscriptions has declined 18% over five years (June 2006 - June 2011). The impact for Canada Post is obvious, but it is also a bellwether for the magazine industry , as alternative means of distribution -- more single copy sales, more bulk distribution and more piggybacking with newspapers -- have increased 3.1% over the same period, during which total circ per issue of ABC-monitored titles declined 10.7%. The data was reported to a Toronto chapter meeting of the National Association of Major Mail Users.

"If the ABC numbers are indicative of the entire industry, they suggest a couple of things," says MastheadOnline publisher Doug Bennet. "One, the higher-than-inflation price increases at Canada Post over that time may be a disincentive. Secondly, the changes in funding formulas introduced by the new Canada Periodical Fund may be having an affect."

The new rules of the Canada Periodical Fund allow single copy sales to count towards the funding formula, whereas its predecessor postal subsidy had left them out of consideration. As a result, publishers have an incentive to pump up single copy and other accepted circulation means, at the expense of mailing with Canada Post. 

	June 06 ABC	June 11 ABC	% Change
Total circ per issue	10,936,189	9,770,947	-10.7%
Total subscriptions	7,148,184	5,863,705	-18.0%
Total through other	3,788,005	3,907,242	3.1%

Canada Post backs down on restrictions on half-wrap magazine covers.

Canada Post, faced with bewildered and annoyed responses from magazine publishers, has backed off its intention to start restricting partial covers starting in January. The restriction would have allowed a half-wrap on the front only if the back wrap was a full page. Many magazines use half wraps front and back, the front to promote the issue, the back to, for instance, notify readers that their subscription is about to run out. The half-wrap at the back leaves the OBC ad showing.

It was said it was a "health and safety issue", though no one was able to say exactly how or why. Part of the bewilderment in the industry came from the post office calling the wraps "gatefolds".

Anick Losier, Canada Post spokesperson, said in an email to Masthead Tuesday, "Given the recent feedback and impact on our customers, we've decided not to introduce the proposed changes to 'gatefolds' in January 2012. In fact, we're reassessing and putting the project on hold indefinitely."

Publishers surprised about Canada Post restrictions on half-wrap covers

Canada Post -- citing "health and safety" concerns -- will be limiting half-wrap covers on magazines. They will only be allowed on the front (see a typical newsstand copy of The Walrus) if the back cover is a full page size. Until now, magazines have been able to have half-wraps or half-overcovers front and back. It's not clear what the safety issue might be (paper cuts?).

Although it was announced last summer amidst a flurry of other changes, the decision by Canada Post to restrict the use of cover wraps on magazines has caught some publishers by surprise. Perhaps part of the surprise springs from the misnomer "gatefold" that Canada Post used to describe the cover wraps. In industry parlance, a gatefold more usually a double width cover that folds inside the front of the magazine.

A story on PrintCAN, the website of Graphic Monthly Canada says the restrictions come into effect in January. Another proposed change that was announced in the summer involved changed specifications to business reply cards but, after a flurry of protest and complaints from direct mailers and publishers, Canada Post deferred the implementation (originally to start in January) until next July, to allow for consultations.

Canada Post Group reports major drop in earnings

Magazine publishers won't be surprised, but will continue to be concerned, that Canada Post saw pre-tax earnings in 2010 decline by 27% to $233 million, according to its annual report, tabled Wednesday in the House of Commons. 

It saw its main lettermail business decrease by 4.5%, the fourth consecutive year-over-year drop. Total volume for the Canada Post division (including mail, parcels and direct marketing) fell by 1.8%. Canada Post accounts for 80% of  Canada Post Group volume (comprising Canada Post, Purolator, SCI Group and Innovapost).

Postal back-to-work relieves publishers, but they need to be resolute about alternative delivery

With the resumption of mail service tomorrow as the result of an imposed back-to-work order by Parliament, many publishers will be happy that their subscription copies can now be delivered again. But the industry simply can't settle back with a sigh of relief.

Even as it welcomes the imposed settlement through 2015, it needs to look at alternatives for delivery. (It saddens me to say so because, personally, I feel that a functioning postal system is one of those things that is a classic example of the "common good".)

The lockout and rotating strikes were largely the result of the management failure of Canada Post Corporation which bobbled months of negotiations and failed to make its case for modernization and automation. Of course the Canadian Union of Postal Workers (CUPW) shares the responsibility, but it was defending the established and negotiated rights of its workers (as it should) and showed more appetite for negotiation and compromise than the suits right up to the passage of the legislation.

The lockout is a continuum of the way CPC has done business for some time now -- treating its small customers brusquely and communicating poorly with even major mailers. It was exemplified by the fact it locked out its workers, sat on its hands and essentially relied on the government to force its workers back.

We shouldn't fool ourselves that the post office thinks of magazine subs and the volumes of direct mail and renewals as being critical to their business. The famous quote from former CEO Moya Green (now running the Royal Mail in Britain) was that the magazine business was a "rounding error" for CPC.
Things are not likely to get better with the imposed settlement. The postal business has been permanently impaired by the stoppage (one estimate was that 1% of their lettermail and package business disappeared, never to return, with every day of the lockout).Which will require even more service cuts.

It seems likely that our current 5-day-a-week mail system won't continue much longer. There could be pressure to retain to-the-door delivery, but reduce it to three days a week, for instance.

Even those who have for years said they'd like to work with Canada Post to make it work better for magazines are now coming to the conclusion that the industry needs to do the research and the hard work that would go into developing a parallel or alternative delivery system. 

In 2006, a feasibility study was done for a group of larger industry companies by PricewaterhouseCoopers (PWC) and it recommended a test, but cost, complexity and timing precluded it. Rogers Publishing did a test on its own in 2007 for delivery of Maclean's in one market (Toronto) using private contractors who normally deliver daily newspapers. The results were good and showed that it was feasible, but to achieve the necessary savings, Rogers would have needed to shift significant volumes of its magazines to the newspapers' systems and it went no further.
The industry pinned its hopes on reforming its relationship with Canada Post. That hope seems to be fading and the urgency for an alternative increasing.

Any such alternative would be very complicated and won't happen overnight -- in fact it could take five or 10 years. It would involve a lot of collaborative hard work and research to devise something that served not only concentrated urban audiences and big circulations with heavier magazines but the far flung small town and rural readers upon which so much Canadian magazine publishing is based. Such an initiative will almost certainly need to involve the industry association, Magazines Canada.
It wouldn't be to the advantage of the larger publishers to go their own way, abandoning smaller magazines to their fate; it would have to be a "plan for all" that benefited magazines and readers. And, who knows, Canada Post may smarten up in the face of it. But I wouldn't bet your database on it.

It's not clear how much of any alternative would involve digital delivery, though a private or industry-run service might be created that made a weekly or monthly delivery of all printed, subscribed magazines to individual addresses. There are examples in the expedite industry of combining deliveries for many different shippers.

First, the hard work has to be done and the end of this postal disruption is a good time to start to make sure the Canadian magazine industry isn't caught flat-footed by the next one. 

Magazines Canada doesn't speak for us on postal back-to-work bill: indy publishers

A group of independent magazine publishers are unhappy with Magazines Canada speaking for them on the matter of back-to-work legislation for postal workers. As an extension of a week of lobbying with the federal government, this week Magazines Canada president Mark Jamison wrote a letter to labour minister Lisa Raitt commending the government for its intent of legislating an end to the dispute at Canada Post (lockout by management following rotating strikes by the Canadian Union of Postal Workers.). 

Apparently the sentiments expressed stuck in the craw of four independent publishers who are members of Magazines Canada:  The Dominion (an editorial collective), Briarpatch magazine, Canadian Dimension and Our Times. All could reasonably be described as being progressive or left-of-centre publications. Their statement said, in part

As editors and publishers in an industry that critically depends on reliable and efficient postal service to fulfill our obligations to readers, we share Magazines Canada’s concern for the impacts of the lockout on the magazine industry as a whole. However, we categorically oppose the introduction of back-to-work legislation, which denies 48,000 postal workers their fundamental right to collectively negotiate the terms and conditions of their employment. This action is an unnecessary and unjust intervention by the Harper government in support of Canada Post management, and a direct attack on postal workers’ rights to organize and bargain collectively.

As members of Magazines Canada, we would like to affirm our appreciation for the indispensable service that postal workers provide to magazine readers, writers and creators alike, and express our support for the struggle of postal workers to defend their right to safe, healthy and fair working conditions. 

Magazines facing a severe impact with postal dispute, says Magazines Canada

Magazines Canada has written a letter (oh, irony) to Lisa Raitt, the federal labour minister responsible for Canada Post, in which it asks for intervention in the lockout and strike as early as possible. President Mark Jamison said the labour and management actions over the past 12 days have had "no discernible impact on negotiations".

The shutdown announced today will stop the delivery of millions of magazines destined for Canadians’ homes and businesses. In each of Canada’s 308 ridings over 25,000 subscriptions are purchased. Our readers do not deserve this situation.

This interruption in postal delivery, if allowed to continue, will have a severe impact on the Canadian magazine sector’s capacity to fulfill its obligation to Canadian readers. The vast majority of Canadian-content magazines read by Canadians are purchased by subscription and delivered to consumers through the Canada Post network. There are no alternative distribution channels for these magazines that can be adopted in the short term. Faced with this prolonged stoppage in postal delivery, magazines, printing companies and distribution support companies will need to reduce activity and work force, extending the negative impact of the job action to include many more families and businesses across Canada.

Postal union gives 72-hour notice of possible walkout; mail might not be delivered starting Friday

 Video statement by CUPW president Dennis Lemelin
The required 72 hours notice has been given by the Canadian Union of Postal Workers (CUPW) for strike action against Canada Post Corporation, which could mean that mail will not be delivered starting on Friday morning. The triggering of strike notice required by federal labour law does not necessarily mean that there will be a postal walkout, only that the union reserves the right to do so. Negotiations are likely to continue right up to the deadline.

The union, representing about 48,000 letter carriers and inside postal workers has been a legal strike position since May 25 and is backed by a mandate from its members of almost 95 per cent, according to a story in the Toronto Star. Negotiations have been going on for 7 month and most of the contention concerns rollbacks of benefits that had been in the last and previous contracts. 

At issue are wages, especially for new hires, as well as sick leave, pensions and technological changes. The union has also questioned management’s assertion that its demands would cost $1.4 billion over the contract term.

Citing rising inflation, the union is proposing wages of 3.3 per cent, 2.75 per cent, 2.75 per cent and 2.75 per cent in each year of a four-year deal.

Canada Post has offered a four-year deal with wage increases of 1.9 per cent, 1.9 per cent, 1.9 per cent and 2.0 per cent in each year.

Postal disruption may come at first of the week -- or not

Negotiations are likely to go on through the weekend between Canada Post Corporation and the Canadian Union of Postal Workers, but if they fail, mail service for magazines (and everything else) could be disrupted Monday or Tuesday by a strike or a lockout. It seemed likely that by end of day Friday, CUPW would give the required 72 hours notice for a strike, which could see a strike begin Monday night.
CPC said in a release today that it was "disappointed" with the CUPW's response to its latest offer. It continued to maintain that the union's demands would cost it $1.4 billion over the lifetime of a contract, though it refuses to explain how it calculated that figure. Among other things, CPC wants to reduce labour costs by reducing the salary of new employees from $24 an hour to $17.50, according to the union.
CUPW said Canada Post slightly increased its wage proposal in its latest counter offer but reneged on two aspects of their previous offer and dropped some other demands for rollbacks, but without addressing some of the union’s priority demands. For instance, says the union, it is demanding a 50% reduction in sick leave.
In an earlier bulletin, the union said CPC need to drop its "extreme" bargaining tactics.

For sixteen consecutive years CPC has been profitable. Yet, throughout the current negotiations, the Employer has taken extreme positions concerning the financial aspects of the negotiations. Instead of identifying problems and discussing solutions, they came with ultimatums.

Mail disruption possibility pushed back as negotiations come to the crunch

[This post has been updated] The earliest there can be a mail strike or lockout, given required 72-hour notice, would be this weekend (more likely Monday) but the likelihood increased only a bit with the rejection Tuesday by Canada Post Corporation of the latest contract proposal from the Canadian Union of Postal Workers (CUPW). 

Neither side has chosen to give the required notice, which is a hopeful sign, though magazine publishers will be wondering if imminent direct mail should be sent into the mail stream and if current issues of magazines will be delivered to subscribers.

CPC says the CUPW proposals would raise its labour costs by $1.4 milion and require the cost of mailing a letter or package to go up by 15 per cent. However, it said it put forward a counter-offer, details of which weren't released. (CPC has consistently said that the union demands are unaffordable in the face of a double-digit drop in mail volume in the past decade and a pension deficit of $3 billion.)

"There was no explanation of these [CPC] figures." said a statement from the union. "Exaggerating the cost of union demands is a tactic that has been used by CPC in all previous rounds of bargaining to distract attention from the real issues and justify taking a hard line during negotiations."

The union proposal asked for a 3.5 per cent wage increase in each year of a 3.5 year agreement.

[Update: The United States Postal Service has reached an agreement with the 205,000-member American Postal Workers Union on a contract that includes a wage freeze for the first two years and increases ranging from 0-1.5 % thereafter, totalling 3.5% by May, 2015. The new contract includes employment practices such as use of temporary and non-career employees and irregular shifts that the USPS says will save the service $3.8 billion over the next four and a half years.]

Hanging in with hope for settlement in the postal labour-management negotations

Magazine publishers large and small have every reason to feel nervous about the 11th hour negotiations between Canada Post Corporation and the Canadian Union of Postal Workers (CUPW). Next Wednesday (May 25) is the day on which either CPC will lock out its employees or CUPW will go on strike; either way, distribution of subscription copies and vital direct mail campaign materials will be disrupted for the first time since 1997. 

Magazines Canada president Mark Jamison says 

"Magazines Canada is communicating directly with federal officials expressing concern about the prospects of a postal interruption and encouraging the Government of Canada to assist the parties find solutions in the context of the fragile economic environment Canadians are grappling with."

Ultimately, it will do no good to issue jeremiads and, unfortunately, there are few options open to publishers, particularly small ones. Alternative delivery methods are not only complicated, but generally too expensive and the newsstand cannot replace home delivery. The proportion of magazines delivering to a significant proportion of their audience digitally is still small, though a disruption may encourage more publishers to press forward with digital offers to their readers.

There is still time for a reasonable settlement (as there have been more than once in recent years) and the careful public demeanour of both sides gives some hope for such a deal, albeit likely right at the deadline. That's of little comfort to a publisher about to put his/her latest issue into the mail stream or poised to send out a vital direct mail subscription offer

Postal talks coming down to the wire; earliest labour action could be May 25

While talks are continuing between Canada Post and the Canadian Union of Postal Workers (CUPW), the union has announced a press conference tomorrow morning to talk about strike action. The earliest date that CUPW could go on strike -- in which case letters, parcels and magazines won't be delivered -- is May 25th.Canada Post has created a dedicated website to update the public by posts, e-mail or text. The union's site provides its perspective on such outstanding issues as short term disability, overtime and staffing as well as an eDigest for updates on negotiations.

Postal workers union files for conciliation in negotiations with Canada Post

The Canadian Union of Postal Workers (CUPW) has filed for conciliation in its negotiations with the government of Canada. According to a statement from Canada Post,

A conciliator, once appointed under the provisions of the Canada Labour Code, meets with both side and attempts to reconcile issues at the bargaining table. The conciliation process can take a maximum of 60 days, after which either party is in a legal position for strike or lockout, probably no later than the end of April.

Canada Post said

"This is an expected part of the negotiations process and does not mean that CUPW is in a legal strike position. Conciliation must be completed before Canada Post or CUPW acquire the right to lockout employees or strike."

CUPW said that filing was an effort to get CPC moving off its demands for rollbacks for current employees and inferior wages, benefits and pensions for new employees.