BREAKING NEWS & VIEWS
At 1st MPA Postal Summit, Industry Tackles Distribution Issues
Friday, February 3, 2012
MPA: The Association of Magazine Media came together at the Hearst Tower Thursday to discuss an issue that is plaguing the minds of publishers, lawmakers and individuals across the country: the state (and future) of the U.S. Postal Service (USPS) and its impact on magazine media, its ads, revenue and distribution.
“It’s one of the most important topics facing almost every magazine media company this year,” Nina Link, the MPA’s president and CEO, told the audience of about 50 at the opening of the group’s first ever Postal Summit. “About 90 percent of total magazine circulation comes from subscriptions which wind up in reader mailboxes, via of course through the Postal Service. It’s a reliable and wonderful system that has bound the country together since the earliest of days in this nation and it’s endanger of collapse.”
Postmaster General and USPS CEO Patrick Donahoe (pictured top right) gave the keynote speech—he reassured the industry leaders in the room of the Postal Service’s continued commitment to magazine media, but remained steadfast on the realities surrounding the challenges the USPS is combating.
“Your trust and your business means a lot to us,” he said. “We’re in a pretty tough situation right now and what we’re facing is continued drop off in first-class mail and that is the underlying issue and it has been the problem now for the better part of 10 years. We’ve got to take on that issue from a Postal Service perspective and an industry perspective. We know that this is not just a postal problem but an industry problem.”
Donahoe said that while the first-class mail volume has been a persistent issue, it is not the only problem the USPS faces—infrastructure issues that have built up over time and remain unsupported by revenue, in addition to increasing labor costs, have left the postal system in a state of disarray.
“On the table we’ve got a $20 billion plan to reduce costs throughout this organization,” he told the audience. “It will be work. It will be hard. It will require sacrifice—from everybody. Some people say they can’t live without 6-day delivery or overnight delivery of first-class mail. Employee union groups say they can’t give up wages in a time like this. The problem is, people understand they have to make changes but it’s hard to get everyone to pony up, come to grips and make changes.”
The postmaster said the $20 billion plan includes resolving worker healthcare costs and reallocating some of those resources for operating costs; eliminate pre-funding retiree benefits; eliminating Saturday delivery of service; consolidating the USPS network and reducing the number of career USPS employees.
“These things will allow us to maintain price, that’s why you don’t hear me walking around saying we need an exigent price change—that will push you, bill presenters and standard mailers out of the mail,” he said. While Donahoe did pledge support for keeping prices low, he did later say, “Until legislation is passed, what I won't do is take anything off the table.”
Congressional Action and the Future of Distribution
After hearing from Donahoe, Ann Fisher, the director of the Office of Public Affairs and Government Relations for the Postal RegulatoryCommission and Peter Warren, the majority legislative policy director for the House Committee on Oversight and Government Reform, offered little clarity to the audience on the likelihood of Congressional action on postal reform during an election year.
Fisher came closest to providing some sort of insight into whether the legislation would be seriously taken up—she said that when compared to years passed, it’s no longer a republican vs. democrat battle, but also one of rural vs. urban geographies. However, neither speaker could offer a definitive answer on whether or not the measure would be taken up in Congress this year—saying the body would likely act only if extreme circumstances are presented as they have similarly done throughout the past year.
John Loughlin, executive vice president and general manager of Hearst Magazines, next moderated a panel on navigating a future Postal Service system that would be smaller, slower and potentially more expensive. Loughlin asked panelist Larry Hackett, managing editor of People magazine, what would happen if delivery service went from 6 to 5 days.
“We’re closing by Tuesday afternoon and we’re generally on sale in major transit hubs by Wednesday morning and we aim to have 70 percent of our subscribers have a copy by Friday evening,” he said. “The customers expect to get their magazines at a certain period of time and that’s happening at a time when they’re finding time for other things like Facebook. [With delivery changes] if you now don’t fit into the expected spot, you’re creating a bigger challenge for them when they finally get it. At Time Inc., the greatest use of tablets is among subscribers—if you start disappointing them if they’re not getting their magazine, they may stop subscribing.”
Nina La France, vice president of Consumer Marketing for Forbes Media, was asked by Loughlin if a publication could pass rate increases on to customers.
“Passing on price increases to audiences is just really hard to do,” she said. “Our calculations show, as we test through some of these things, on a normal basis without a double digit postal increase, it wouldn’t be unusual for us to see a fall off of 10 percent if we raise prices or a fall off of 20 percent when you hit certain pricing tiers. The challenge is getting people to pay more for content, in this day and age, is exponentially harder than I think it’s ever been. Add to that the opportunity to get free information online, you’ve got this sort of consilience of things that can get harder and harder for us to pass along those higher prices [from distribution changes].”
Panelist David Orlin, senior vice president of Operations and Strategic Sourcing for Condé Nast, offered a different set of concerns associated with USPS service cuts—having to close the magazine earlier to meet the needs of distribution could mean missed opportunities for ad sales and decreased revenue.
“Can the postal service downsize successfully?” Loughlin asked the panelists.
None of them could say.
This article by associate editor T.J Raphael appeared first in min's sister publication Audience Development
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