Magazine publishers worried about the prospects for their industry might be grateful not to be staring at the numbers being batted around for the United States Postal Service (USPS) over the next few months.
“They could be in the hole by $12 billion by the end of the year,” says Eddie Mayhew, a former postal service executive and president of consultancy firm Eddie Mayhew’s Classification Station Inc. “Their borrowing power only allows them to borrow $3 billion, and right now the consumer price index [CPI] … has gone from 3.5 [percent] to 2.8 percent. If the trend is set, it might be close to zero by the end of this year.”
The CPI is important because, as stipulated by the 2006 Postal Accountability and Enhancement Act, the USPS cannot raise annual rates for mailers beyond this benchmark, which is determined by the index as it stands each December. (So, the CPI that determines this year’s rate increases is based on December 2008 levels.) The recession could make the 2009 CPI dip to very low levels by the end of this year. On top of this, the downturn has led to a huge decrease in mail volume (the USPS expects to ship 32 billion fewer pieces in fiscal year 2009 than it did in 2007, according to an agency fact sheet), leaving the Postal Service with limited options for raising revenue. If the situation is bad enough, it could turn to an exigency rate clause in the Postal Accountability and Enhancement Act, allowing for a return to the old, unpredictable rate-hike system.
It sounds bleak, but the strength of the 2006 Postal Accountability and Enhancement Act comes from enabling the Postal Service to be flexible and creative in increasing revenues and cutting costs, something that Mayhew says the USPS has pursued aggressively over the last few years. As new strategies for reducing labor costs, implementing new technologies and updating revenue models are put in place, it all adds up to a period of uncertainty and adjustment—and perhaps, when the dust settles, a new era of stability and efficient shipping—for periodicals mailers.
New Rates in Effect
Publishers must work with the changes included in the May 2009 round of rate increases, beginning with the fact that the overall rate hike for the periodicals class is 0.2 percent higher than the CPI rate—legal because the USPS did not raise periodicals rates in 2008 as much as it could have, so it was allowed to “bank” 0.2 percent, which it is tacking on to the CPI (3.5 percent). So the overall increase for the periodicals class as a whole ends up being just less than 4 percent.
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