While the latest proposed postal rate increase (May 3: "Mother of All Rate Cases" is Here) will be examined by the Postal Rate Commission for the next 10 months, publishers are already crunching the numbers to determine what it could cost them and figure out what steps they need to take to offset any new costs.
An 11.7 percent increase coming on the heels of last year’s 5.4 percent increase is going to have an enormous negative impact on the publishing industry," says Jim O’Brien, vice president of distribution and postal affairs at Time Inc. "Given all of the worksharing efforts that have been implemented by Periodicals Class mailers over the past few years, an increase of this magnitude seems entirely out of proportion."
O’Brien adds that this will certainly effect Time Inc.’s distribution model and the company will need time to evaluate any possible changes. "Obviously, as a result of this filing we will make changes to the preparation and distribution of Time Inc.’s magazines in an effort to minimize the impact of this increase. We’ll have more specific action plans once we’ve had an opportunity to analyze the new rates and apply them to our magazines.
Tom Martin, vice president of manufacturing at Cygnus Business Media was a little more philosophical on the proposed rate hike. "It was inevitable," he says. "They finally got around to a whole five-year scenario realizing what their actual costs are and what the increase needs to be to stay ahead of the inflation game."
The proposed changes have Cygnus looking at a possible $700,000 to $750,000 increase in annual postal costs. "This will increase operational costs," says Martin. "Postal is about 34 percent of total operational costs and the rate increase will move it to about 36.5 percent."
Still, Martin is confident Cygnus will be able to defer some of the cost. "We’ve been co-palleting with Publishers Press and we’re now totally on co-mailing with them too. We’re co-mailing only about 200,000 to 250,000 copies per month but we need to move that up to about 700,000 to 800,000 by early next year. That will be about 60 percent of our overall monthly pieces and by doing that we can offset the $700,000 to $750,000 increase by about 40 percent."