Maybe it's time to take another look at alternative delivery

The largest printing company in the U.S., R. R. Donnelly, is looking at ways to provide alternative delivery of magazines in most major urban centres in the country. In an article in Publishing Executive, Thomas J. Quinlan, the CEO, says Donnelly is interested in a recent proposal in Congress that would allows periodicals, newspaper and unstamped mail to be placed in mailboxes on days when the US Postal Service (USPS) does not deliver. Right now, the USPS has a  monopoly on the nation's mailboxes. But it doesn't deliver Sundays and, pretty soon, it may not be doing Saturday deliveries either.

Now it makes a certain amount of sense for someone who depends in part on the mailing industry to look at gaining some advantage over other printers. The increases in the price of postage and the reductions in service open an opportunity.

“Look what USPS is doing to the mailing industry. It's just not sustainable. There's significant cost increases that they've put through. They're shifting cost to the players in the mailing industry, Quinlan said. “All these things, these are costs for the mailing industry that, quite frankly, we and other people like us have to go ahead and mitigate to our customers because our customers can't go ahead and aren't going to take the additional cost and look for people like us to, again, go ahead and mitigate those.” 

“You look at Ladies' Home Journal that was announced by Meredith earlier this week [would be shutting down]. I mean, 40 to 47 percent of their cost was related to postage. It was nothing to do with electronic content.”

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U.S. magazine advocates push back against possible 10% mailing increase

Magazine publishers in the U.S. are reeling at the prospect that the United States Postal Service may be preparing to impose a rate increase of as much as 10% across the board for mailing magazines effective January 2014. According to a story in Folio: the unexpected cost is a huge budgetary consideration for subscription-based periodicals that rely on mail on the ground for circulation distribution.

“This is not a bluff on behalf of the postal service,” says James Cregan, executive vice president, government affairs, for the MPA—The Association of Magazine Media, in a phone interview. “Among knowledgeable people working within the mailing industry, it’s commonly known that this exigent rate increase is very much on the table.”

Essentially an exigent increase was allowed for in the  Postal Accountability and Enhancement Act in 2006 and   is meant to allow the USPS  to meet "exceptional or extraordinary" circumstances. -- things usch as terrorist attacks or natural disasters. However, the post office is apparently using it to respond to to the impact of digital publishing on their bottom line. 

“The possibility of magazines on the brink deciding to move to a digital format, being pushed that way in response to a rate increase, is not an extraordinary circumstance,” argues Cregan. “It’s something the postal service should have planned for already.”

The Alliance for Audited Media (AAM) said  

“an exigent rate increase is not a solution to the agency’s financial issues or the profitability of certain classes of mail,” in an open letter from the coalition to the chairman of the USPS Board of Governors Mickey Barnett.

Bloomberg Businessweek signs alternative delivery deal with newspaper company Gannett

Faced with the possible (or likely) end of Saturday delivery by the USPS, usually used by weekly magazines in the U.S., Bloomberg Businessweek has struck a partnership with newspaper chain Gannett for alternate delivery to an additional 100,000 subscribers in 15 markets. 

According to Audience Development, the Gannett deal is an extension of something BBW was already doing, starting in 2010; some 350,000 subscribers in 21 markets now get their magazines delivered to them with the newspaper. By the end of this year the alternative model will be in use in 18 of the magazine's top 20 markets.

The alternative delivery doesn't save the magazine money, neither does it significantly change the production and delivery schedule, nor does it cost more than the post office. President Paul Bascobert said that wasn't the goal.

“We wanted to improve the service, its critical they [readers] get the news as soon as possible, especially in light of the possible USPS Saturday shutdown” he tells AD.

Many publishers, including a consortion of magazines in Canada, have looked closely at alternative or "expedited" delivery, using already existing networks of newspaper delivery contractors. One of the benefits is the ability to polybag the magazine and make money by carrying inserts.

“With expedited morning delivery we significantly shorten the time from the printing press to the doorstep” says Bascobert. When asked if other publishers should get on board with expedited morning delivery he emphatically says, “I don’t know why other publishers haven’t done this already. To me, it seems like a fairly natural thing to think through.”

Related posts:

• Bloomberg Business Week plunges ahead with alternative delivery 
• Bad news for U.S. periodicals: USPS business model said to be "not viable"
• Rogers mags to test alternative delivery

Bloomberg Business Week plunges ahead with alternative delivery

In the wake of our recent post about the need for Canadian magazines to get cracking on alternative delivery comes word that Bloomberg Business Week magazine since December has been working on a strategy to get its magazine delivered by daily newspaper contractors in metropolitan markets. 

Right now, 9% (about 75,000) of the magazine's 860,000 circ is delivered this way, according to a story in Folio: and the company has plans to see 1 out of 3 issues (250,000) delivered this way by year's end. It's not just because of the cost of mailing, apparently, but because of the delivery problems with the USPS.

Right now, the weekly magazine achieves about a 60 percent cumulative delivery rate between Friday and Saturday with the Postal Service. The remainder of subscriber copies arrive sometime between Monday and Wednesday-the latest arriving almost a week after the issue ships.

By partnering with a major newspaper and/or a private carrier, the magazine has a guaranteed Friday delivery by 6 am.

Bloomberg Business Week's director of manufacturing and distribution identified regions where there was a combination of problems with delivery, sufficient entry points and congenial delivery partners. Though he declined to specify costs, he said that overall they were comparable with traditional delivery.

"I don't have a budget to increase my costs, I can tell you that." 

Customers are given the option to stay with postal delivery or take alternative Friday morning delivery and so far only .01% have asked to go back to mail delivery. The magazine is delivered in its own polybag, soft folded and handled separately from the newspaper. 

In Canada, smaller-scale example is set by the Guardian Weekly, which delivers some copies on Thursday mornings, bundled in a plastic bag with the Globe and Mail. (Previous to this , the mailed copy could sometimes arrive as much as five days late (it wasn't unheard of to receive two copies at once).

Strong opposition builds to bill to make sweeping changes to US Postal Service

Proposed legislation in the U.S. Congress would make sweeping changes to the United States Postal Service (USPS), which would inevitably have an impact on Canadian magazines with mail circulation south of the border. 

Lobbyists for the U.S. magazine industry have been critical of the bill by Congressman Darrell Issa of California, which would reduce delivery to 5 days a week (ending Saturday delivery), require all "market dominant" products to cover costs  while maintaining a CPI price cap and and require those products which are below 90% of cost recovery to pay 5% above the cap annually.

According to a story in Audience Development, MPA -- The Association of Magazine Media  (formerly the Magazine Publishers of America) said it continued to question the USPS calculation of attributable costs for periodicals. And American Business Media said while the bill has some provisions it likes, others would be potentially damaging to its members -- and estimated that the anticipated CPI increases would result in more than 20% increase in costs over the next three years. 

The American Postal Workers Union called the bill "a reckless assault on postal workers and the Postal Service" and said that it would result in drastic service cuts, resulting in $2 billion worth of facility closures in the next two years.

Bad news for U.S. periodicals: USPS business model said to be "not viable"

Periodicals in the U.S. account for more than a third of the enormous loss that the United States Postal Service (USPS) has suffered; delivering magazines and newspapers has steadily been losing money for the past 13 fiscal years and reached $642 million in 2009, according to a story in Audience Development. It reports that  a General Accounting Office  (GAO) report says the post office's business model is "not viable".

Like Canada Post, the USPS is attempting to get its rates up and its costs down and to move away from favourable rates for periodicals, which do not cover costs (one calculation sets the necessary increase to reach breakeven on handling costs at about 31%). The scale of the problem in the U.S.may necessitate annual rate increases well above the rate of inflation which would have the effect of driving publishers to seek more digital alternatives or alternative delivery systems.

US Postal Service announces no increase in magazine mailing rates

This seems a day for postal news. U.S. Postmaster General John E. Potter has sent a letter to customers officially announcing there will be no rate hike for "market dominant products." Magazine publishers had been expecting a 2 to 3 percent increase in May and some had even speculated about 10 percent.

"We want to end all speculation," said Potter who, on Wednesday, told a conference in New York that the USPS had an "extreme prejudice" against a 2010 rate hike.

According to a story in Audience Development, first-class mail, standard mail, periodicals and single-piece parcel post will not have a price increase—"there will be no exigent price increase for these products," said Potter in the letter.

Would that Canada Post -- which is imposing a 3% increase as of January, citing "increased costs to serve" -- took the same view as the USPS. The cost of mailing the average magazine in Canada has gone up 38% in six years.