Keeping costs down

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After a year of rising paper prices and with the U.S. Postal Service poised to raise rates in January, production executives at business media companies have found yet another financial obstacle placed in front of them due to the devastation of Hurricanes Katrina and Rita: quickly rising oil prices.

This convergence of events has forced publishers to go back again and try to find cost savings in the production cycle. And production executives fear the effects.

"You can save yourself out of business," said Mike Cohen, director of manufacturing and distribution purchasing for Reed Business Information.

"We're doing all of the postal programs, everything behind the scenes, but at some point the product can get affected."

But still, production executives look for ways to cut costs.

"You scratch around," said Keith Hammerbeck, director of manufacturing services at Advanstar. "There's always something else to save somewhere."

Advanstar, for instance, will realize cost savings when it changes the trim sizes of all of its 103/4-inch titles to 101/2 inches to take advantage of the short cutoff presses.

"There are more presses available than there were two years ago at that size," Hammerbeck said. The smaller size means a 4.5% savings on paper.

Advanstar also plans to co-mail 90% of its standard-size titles next year, and Hammerbeck is trying to find a printer that will do the job for him quickly.

"I'd rather get going on Jan. 1 with it than halfway through the year," he said. "It's all a matter of what a printer can do for us." Hammerbeck predicts about 15% in distribution cost savings for each co-mailed title.

One benefit to the upcoming postal increase is that it got printers and publishers serious about creating programs such as co-mailing and co-palletization.

"Everyone thought the increase would be bigger, so people were scrambling to find other ways to save," said John W. Miller, senior VP-sales and marketing for Banta Publications Group.

Production executives are elated that paper price increases may have abated for the time being.

"In years past, they would have come up with double-digit increases in quarter after quarter after quarter," Miller said. This time the increases were a "little more spread out and a little more reasonable," he said.

There is word, however, that paper mills may put surcharges on their bills soon because of the rising oil costs.

Miller predicts that many publishers will go back to their vendors and ask for price reductions.

"Once you get to 36 pound lightweight No. 5 paper, and you've cleaned up your mailing list, and you cut your trim size and you shore up the balance sheet, there's not a lot more you can do than ask for a reduction," Miller said.

Miller also sees a number of his customers turning to digital editions for international sales to save money on printing and shipping.

Cohen said the combination of higher paper, oil and postal costs shouldn't lead publishers to force digital editions onto customers. "It not the Holy Grail," he said.

"What it always comes back to for me-whether it's digital, hard copy, on the Web, wherever-is the content. If the magazine serves a group of readers well, it will find a way to survive." 

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