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 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.

U.S.mailers' group (including magazines) swell their ranks for the rate fight

The Affordable Mail Alliance, a coalition of U.S. mailers banding together to fight major postal rate hikes now has 1,000 members. According to a post by Audience Development, that includes about 75 individual magazine publishers plus the Magazine Publishers Association and American Business Media.

"It's an unprecedented coalition of the entire mailing industry,"  James Cregan, MPA's executive vice president/government affairs, tells AD. "In the past, a lot of rate change cases have been matters of different types of mailers and classes of mail fighting each other over who's going to pay what, but this is really the first time in history that everybody has joined together and supported one united effort."

Related post:

• U.S. mailers, including magazines, ask that postal rate increase be turned down

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.

"Completely unjustified" magazine mailing costs to increase 3% next January

Canada Post is going to raise Publications Mail rates 3% on January 1, 2010, a hike that Magazines Canada says is "completely unjustified". The magazine association has said in a bulletin to its members:

While CPC expressed its sensitivity to the economic downturn and understands the need to attenuate rate increases while the economy recovers, a weighted rate increase of close to three per cent fails to demonstrate any such understanding. The increase is on par with rate increases over the past few years, as well documented in a recent analysis of CPC rate and services history. A three per cent increase is well beyond inflation and totally out of step with pricing of other products and services to the magazine sector in the current economy.

Magazines Canada president Mark Jamison sent a letter asking CPC to reconsider and cut the increase to zero. It has written in a similar vein to Rob Merrifield, Minister of State responsible for Canada Post Corporation, and to James Moore, Minister of Canadian Heritage and Official Languages.

It was pointed out to Canada Post that it

• has enjoyed a $15 million saving, since it will no longer have to financially support the Publications Assistance Program;
• has received permission to exceed regulated rates on lettermail, something Magazines Canada endorsed; and
• based its projected 3% on anticipated increases in fuel costs, which have since moderated.

Cost of mailing a magazine up 38% in 6 years

The cost of mailing the average magazine in Canada has increased 38% in six years, according to the annual analysis and report for the year 2008, prepared for Rogers Publishing by Michael J. Fox, the senior vice-president, circulation and development. Fox, who is acknowledged to be one of Canada's leading experts on postal matters, prepares his analysis every year after Canada Post Corporation publishes its annual report.

"Publishers paid $0.55 on average in 2008, up 4% versus 2007. As shown on the chart...the average has increased $0.15 or 38% in the six years since 2002. The 20+ different Pubs Mail rates range from $0.40 to $1.69 a coopy, depending on weight and density. The $0.55 average results from dividing Pubs Mail revenue by volume of copies. Based on January 2009 rates, the average now probably is up another 4% or $0.012 a copy."

The report says that CPC data shows it costs the post office $0.35 to deliver an incremental copy of a magazine, an average that has remained relatively flat over the six years. However, notes Fox, while the pace and magnitude of annual price increases has eased for publications, their costs still run well above inflation and increases for other types of mail.

Fox's analysis is particularly apt this year because, although public policy has favoured the public mails as the primary distribution method for magazines, starting in April 2010 the Department of Canadian Heritage is replacing the postal subsidy (the Publications Assistance Program) with the Canada Periodical Fund (CPF), which will no longer require publishers to use Canada Post in order to receive the subsidy.

DCH's new CPF will end CPC's monopoly on subsidized delivery. By combining and replacing PAP and the Canada Magazine Fund, CPF will allow the use of other delivery services without financial penalty. This will faciliate competition by couriers or other delivery services. For instance, bundles can cost twice as much to mail using Pubs Mail.

The complete report can be dowloaded here.

Real costs of distance related pricing for postage may whack editorial

Good story today on Masthead's website about the real costs of Canada Post's distance-related pricing on one national magazine, The Beaver. It will increase its mailing costs 6.2% and, if those costs can't be mitigated, the difference will come out of the editorial budget. And it may cost a Manitoba printer a contract.

“The first thing that’s going to go is we’re not going to pay writers as much and maybe not hire as many people to write,” says publisher Deborah Morrison, “which is counterintuitive to what we’re trying to do with our magazine. Our editorial staff will probably not get that cost of living increase. What hurts is the editorial content first, because all these other costs—getting it out there, distribution—are beyond our control. We have to manage those and respond to those first. We’ve got to get the magazine out the door.”

The magazine's printing contract, now held by LGM Transcontinental in Winnipeg, expires at the end of the year.

“We’ve made it very clear to anyone bidding on the contract that Canada Post is a factor for us,” Morrison says.

Like many other national magazines with 50% of their circulation in Ontario, there may be irresistible pressure to get regional and local mailing rates by printing in Ontario.

Related posts:

• Magazines Canada provides "calculator" to help titles figure out postal increase
• Secret postal code for Gateway is L4W 1S2
  
• MagsCan urges members to blitz MPs and Canada Post about distance-based pricing
• Canada Post intent on implementing distance-based pricing
• Feds announce panel to review mandate, responsibility of Canada Post
• Strategic review imminent for Canada Post?

Secret postal code for Gateway is L4W 1S2

Today's announcement by Canada Post of its proposed rate increases for 2009 -- released, naturally, just before a long summer weekend -- says that for Publications Mail, local mailed copies will see no increase in 2009; for regional, rates go up 1 cent; for national, rates go up 3 cents. The problem is knowing what proportion of your mailed copies are in each category. As a friend writes:

In Canada Post's pursuit of more creative ways to raise rates, in 2007 it first proposed implementing distance-based pricing for magazines that use LCP sortation. After it was pointed out that publishers had no way of knowing how many copies are local, regional and national, CPC said that it would implement the new system in January 2008 but keep the rates the same for local, regional and national. Well, it's now half way through 2008, and some of the biggest publishers are still not sure how many copies are local, regional or national.

It turns out that there's a problem with the postal codes of the CPC facilities. If you use the published postal codes for the CPC facilities, then all copies are reported as national -- even the ones that should be local or regional. To fix this software bug, you need to use a different postal code, except that CPC hasn't finalized the list yet.

For Gateway in Mississauga, Ont., where many Ontario-based magazines mail, the secret is to use L4W 1S2. That's the postal code that needs to be plugged into both the LCP software for the reports, and the Statement of Mailing. From that, you get your quantities. CPC claims the overall weighted average increase of the Publications Mail hikes will be 3.1%, but then who really knows? CPC itself hasn't figured out yet how to make this work.

The import of the rate hikes may be lost in a flurry of media comment about costs for regular stamps going up from 52 to 54 cents, starting in January. (The spin being applied by the post office is that Canada will continue to enjoy the 3rd lowest rate of postage in the developed world. What it doesn't say is that, compared with those who are lower (Australia and the United States), the cost to mail a letter in Canada is already 15% higher.)

"We have done our best to shield our customers as much as possible from the full impact of rising fuel, energy and labour costs." said Canada Post president Moya Greene. "The overall pricing strategy has been designed to ensure no one segment of our customer base carries an unfair share of burden of these rising costs."

Magazines Canada president Mark Jamison issued a statement soon after the Canada Post announcement saying:

Distance-related pricing could be a potential disaster for the industry. Many titles, not based in large urban centres but who have mostly national reach could be at serious risk whether they have PAP (Publications Assistance Program) eligibility or not.

Make no mistake, large or small , many titles could be badly hurt or worse. On top of this impact, we are looking at a total rejection of the Government of Canada's own cultural policy concerning access to content. Does the Government of Canada have any say in the behaviours of its agencies in the context of the delivery of its own policies ?

MC and its members will continue press MPs across Canada to take action

[More detailed analysis of the postal increases to follow as it becomes available.]

Related posts:

• MagsCan urges members to blitz MPs and Canada Post about distance-based pricing
• Canada Post intent on implementing distance-based pricing
• Feds announce panel to review mandate, responsibility of Canada Post
• Strategic review imminent for Canada Post?

MagsCan urges members to blitz MPs and Canada Post about distance-based pricing

In a bulletin to its members, Magazines Canada is urging publishers to blitz their MPs and Canada Post, objecting to expected proposals to implement "distance related pricing" and increase rates by as much a 8% in 2009. The actual rate increases won't be known until released by Canada Post in July, but MagsCan is not waiting.

Its position is that this is a revenue grab, that far from being revenue neutral, rates for "local" delivery won't go down while rates for "regional" and "national" will go up significantly. Also, that distance-related pricing runs counter to Canada's cultural policy and denies many Canadians equal access to Canadian publications.

In recent weeks, our public affairs team, composed of industry leaders and senior staff, has met with many officials: MPs from many regions; Canadian Heritage officials; senior policy advisors to a number of key Cabinet Ministers and senior executives at Canada Post. In addition, Magazines Canada is working with our regional association partners to ensure that the message goes to Ottawa from sea to sea to sea. The association is preparing a submission to the Canada Post review panel.

Related posts:

• Canada Post intent on implementing distance-based pricing
• Feds announce panel to review mandate, responsibility of Canada Post
• Strategic review imminent for Canada Post?
  

Size matters -- too much -- in U.S. postal rates, say smaller magazines

The impending restructuring of postal rates in the U.S. is predicted to have major, damaging effects on mid-size and smaller titles. A deal cooked up between Time Warner and some of the other big players with the United States Postal Service (USPS) , giving large-circulation titles a break for volume and doing most of the post office's sorting for them.

Titles that, while big by Canadian standards, are small in the U.S. context cannot qualify for the proposed price breaks and find the costs of the big magazines' breaks transferred to them.

Members of a coalition of smaller and independent publishers, led by the left-liberal The Nation and the conservative-right National Review appeared last week before the Federal Workforce, Postal Service and District of Columbia subcommittee of the US House Committee on Oversight and Government Reform (ed. note: phew).

What was said there is intrinsically interesting but also applicable to discussions in Canada about the beleaguered Publications Assistance Program (PAP).

In reporting on the submissions, The Nation said the federal postal policy changes "favour size over content, bigness over quality".

• Scott McConnell of The American Conservative magazine explained said "the postage increases we are facing under the new provisions are little less than catastrophic."
  
• Christopher L. Walton, editor of UU World, published by the Unitarian Universalist Association of Congregations explained, "It is disturbing to learn that the new rates abandon the long-standing American tradition of supporting a diverse marketplace of ideas with a fair and uniform postage rate for periodicals. Historically, the periodicals rate allowed small journals of opinion to reach a national audience. But the new rates reward high-circulation periodicals with discounts that smaller-circulation periodicals simply cannot qualify for."
• In These Times editor Joel Bleifuss said: "These reckless postal rate increases are aimed at the heart of our nation's independent press. I urge you to ask the spokespeople of the media conglomerates whether they would support these increases if their mailing costs had risen 23 percent. This is a democracy issue."

But of most interest was a presentation by Nation Publisher Emeritus Victor Navasky, who now directs the Delacorte Center for Magazines and Delacorte Professor of Magazine Journalism at Columbia University's Graduate School of Journalism and is director of the Columbia Journalism Review. Here is what he said:

"I have never understood why of all the services government provides--defense, education, environmental protection, health, housing, highways and the rest--only the mails are required to break even or make a profit. The founders, who saw the mails as the circulatory system of our democracy, made no such presumption. George Washington himself was in favor of the free delivery of newspapers (which, by the way, in those days were often weekly and usually partisan, and as such the equivalent of today's journals of political opinion). These journals, whose core franchise is public discourse about public affairs, are, like water, national defense, public highways and public education, a public good and as such it would seem to me ought to be paid for out of public funds (i.e. general tax revenues)."

Navasky made several suggestions for addressing the problems of the wrong-headed rate proposal.

• Allow the first 250,000 copies of all publications to be mailed at reduced rates
  
• Put a moratorium on postal increases for magazines with a low percentage of advertising content, low circulation or non-profit status
• Ask the USPS to extend non-profit rates to small-circulation political magazines.

"It is no accident that the president of The Nation and the publisher of National Review, two periodicals on the opposite sides of the political spectrum, recently teamed up to write an Op Ed essay sounding the alarm," concluded Navasky. "Such small political journals –- which, by the way, carry the most discourse –- bear the heaviest rate increases. The unpopular ideas and opinions that these journals propagate and circulate today often turn out to be tomorrow's wisdom. They act as intellectual and political gadflies, they prod their larger and staider colleagues, they question conformity and complacency. By helping them recover from the grievous wound inflicted upon by the recent rate increase, this Committee will have deepened and strengthened our democracy."