Publishers were the big winners and direct marketers the losers when the Postal Rate Commission last week made its recommendations for postage rate hikes for 2001.
While the commission's rate increase was less aggressive than expected for consumer magazines, publishers still face a nearly 10% hike to a substantial fixed cost at a time when advertising looks likely to slow.
"Our goal was single digits," said Nina Link, president-CEO of Magazine Publishers of America, "and here we are at 9.9%, so I think it's good news." For consumer magazines, the Postal Commission approved rate increases of 9.9%, and the nonprofit title rate increase was 7.2%. The Postal Service sought rate rises of 14.2% for consumer titles and 15.2% for nonprofits.
Rates for an average weekly news magazine (5.8 ounces) would increase from the current 16.2¢ to 17.8¢, while a heavier household magazine (13.8 ounces) would rise from 27¢ to 29.3¢, according to Rate Commission figures.
LITTLE GUYS WON
"I'm pleased," said Greg Coleman, Reader's Digest Association senior VP and president-U.S. magazines, who quickly added his reaction may lead "some to say, 'hey, you should have your head examined.'" Mr. Coleman is also treasurer of the MPA, and was active in its lobbying campaign to get the proposed rate increases reduced. Reader's Digest sells 94% of its 12.5 million U.S circulation via subscriptions.
Nonprofits fared better, said Neal Denton, executive director for the Alliance of Nonprofit Mailers, thanks largely to a law President Clinton signed on Oct. 27. That law charges nonprofit mailers a set percentage of standard commercial rates. According to Lynn Carlson, general manager of Harper's, which is run by a nonprofit foundation, "The little guy won."
Direct marketers and catalog companies, however, didn't see the same pullback in rate increases that magazines won. Direct marketers saw the Postal Service's initial 9.4% proposed increase for the "standard mail" category shrink by a much smaller margin, to just 8.8%. For some lighter catalogs, the Postal Service sought a 3.2% increase; the commission upped that to 4.6%. Heavier catalogs face a much steeper increase.
"They really didn't provide a reduction for regular-rate mailers like they should have," said Jerry Cerasales, executive VP of the Direct Marketing Association.
The Postal Service's Board of Governors meets next month to announce when new rates will be implemented, which are expected to go into effect in January.
RATES REFLECT POSTAL FEARS
The prospect of a massive postal rate hike played a significant role in the advertising rate increases sought by magazine publishers for 2001, which clustered in the high single digits. But Valerie Muller, senior VP-director of print services at Grey Global Group's MediaCom, demurred when asked if publishers had hammered advertisers with rate increases because of the potential 15% postal hike.
"On a whole, publishers were as realistic as they knew how to be," Ms. Muller said, pointing out that by the time budgets were being drawn up for 2001, execs were expecting hikes closer to 10%. "I don't think anybody believed it was going to be 15%," she added, joking that perhaps such a belief was arrived at "wishfully."
"We're obviously disappointed, and hoped that the final number would be less, but we're certainly happy it's lower than what was originally discussed" said Newsweek President-COO Harold Shain in a statement. Newsweek has yet to finalize its ad rates for 2001.
Trade publications were hit harder than consumer and nonprofit magazines, with the Postal Service requesting a 15.1% increase and receiving an 11.4% increase.
Magazine and direct-marketing execs alike continue to jockey for battles with the Postal Service by invoking the specter of reform, or opting out of the Postal Service at some point.
The rate increases are "not a good sign, as our members start to look elsewhere" for delivery options, said Mr. Cerasales.
Copyright November 2000, Crain Communications Inc.