Category Archives: USPS & Direct Mail

Print Media is Running Out of Time

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No More Time!

No More Time!

The transition from our legacy analog world of ink and paper is accelerating.  Major changes in newspapers over the last several years with revenues significantly down to levels not seen in 10 years.  Growth ceased, and status quo is hard to digest to those in the industry that used to grow by showing up.  Population growth meant circulation growth.  Those trends no longer exist, and print media outlets are starting to drop like flies. First it was newspapers, now the trend has extended to magazines and direct marketing publications.

In a recent Daily Beast article by Daniel Gross “Why Time Warner Felt It Had to Spin Off Magazine Unit Time Inc we see why this is happening.  Its all about stock prices.  This trend is now making its way felt through the entire communications field from newspapers, magazines and direct marketing publications.

 Newspapers were the first to feel the pinch of declining revenue.   The grind of producing, printing and delivering daily papers IS not easy, and its expensive to do it every day, especially on those days when the paper is not full of ads.  Recent changes in newspaper ownership around the county brought some promise of hope when heavy hitters like Warren Buffett bought in and gave some hope to other owners that were still viable.  But Warren likes to buy and hold, and he likes to buy things he knows a lot about – and HE still reads his paper daily.  Not everyone agrees with Warren, nor do they all have his deeps pockets.

Even with his very deep pockets Rupert Murdoch owns bunches of papers in the US and in Australia and England, but Rupert also owns lots of digital media in those markets as well.  He also sees the enduring value in the print, but he was one of the first to see that revenues were lagging in print, and those lagging revenues reflected poorly on the ability for the overall stock value of these publicly traded companies to grow.  He has lead the move to split his holdings into discrete segments – digital on one side and print media on the other.  Future dollars for investment and growth are attached to the digital side, and print you’re now on your own now.

Recently Time Warner felt the urge to ‘unmerge’ its holding and to spin off its magazine unit, including Time, Fortune, Money and Sports Illustrated and make them a new stand alone organization and take them public as their own group.   The magazines are still profitable, but they cannot keep with the market and are thus a drag on corporate earnings.

Harte-Hanks, Inc. originally started off as group of small Texas newspapers, but chose a different way to grow outside of newspapers and moved into direct marketing, and over 20 years sold off all other holdings, including all of their newspapers and became a powerhouse in shoppers publications covering millions of households in California and Florida.  A still thriving industry for small communities covering a market just below that of the newspaper they provided cost effective targeted advertising and in the process stole market share from larger local newspapers.  Those golden days are now over.  Having written down all of their goodwill equity in the declining value of The Pennysaver, they were able to unload them quickly.

In December the Florida operations were sold back to their founder Dick Mandt, a former boss of mine, and his team of highly effective industry managers.  Were they losing money -no, but they had to go.  Sources tell me that the same thing is likely in California where the original Pennysaver circulates.  Staff cuts are being made, offices are closing, and they appear to be on the same trajectory as Florida.  Can they still make money – yes.  But they can’t grow in the manner that a public company needs them to.

Like Time, Inc., Harte-Hanks, is a publicly traded company and must show growth.  The huge revenue base of the Pennysaver could not keep up the growth curve for Harte-Hanks and stock prices lagged. Decision time came, and decisions were made.  Heads rolled, and the new management staff has a mandate for growth, and a tight timeline.  This is the new story for print and direct marketing, especially for those mailed publications.  If you are on the big march and you fail to keep up – we’ll leave you a canteen of water, and a couple of biscuits, but your on your own.  Tough love, I think we call it!  Time is not always on our side.

The Care and Feeding for The Orange County Register

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OC Register Masthead from Peak Year 2005

OC Register Masthead from Peak Year 2005

Recently I wrote on the future of newspapers, something many of us with roots in the industry do as a daily pastime. In all of my research, I still think the models of the future that Alan Mutter of Newsosaur postulated for newspapers recently best portray a reasonable future as indicated by the paths many current papers are taking.  Briefly they are:

Farm it – The Buffett Model.  Buy and hold…and hope!

Feed It – Rupert Murdoch Model.  Give the fire some fuel and oxygen and hope that it creates a sustainable blaze.  After having split his media empire into digital and non-digital, this may be a real key for many to follow.  Especially to those public companies that have to report their financials.  Print is no longer a growing methodology, and as such, is dead to public companies as a forward-looking model. Even Harte-Hanks, who pioneered the advertising-only Pennysaver model to millions and millions of circulation, has seen the light and is reported to looking for buyers for their huge franchise.  It can still generate some good cash flow, but looks horrible on quarterly 10K reports.  “Time to set those doggies free” my buddy Bill would say.

Milk It – Newhouse Model.   Why bother to feed the cow, just keep milking it for all you’ve got until it runs dry.  Hope you don’t grab a bull…that could be bad.  This is how those in the industry see most of the changes for newspapers, and what they see in New Orleans is not pleasing to the palate of the N.O. residents and readers.

My Experience there – I during the 90s I was in advertising director at The Orange County register. Those were truly the best of times, when newspapers were at their zenith, and competition kept us strong. It was fun to compete with The Los Angels Times, and to add a number of specialty products to our overall marketing mix. At one time, there were as many as 7 OC Register sales representatives who could be calling on any potential advertiser in Orange County. The favorite expression of senior management was quoted” time to impose our will”.  Sadly, that was what we did with rates, and that was the beginning of a long downward slide for the Orange County Register, and a number of other newspapers that followed the strategy.  Newspapers were still mini-monopolies, and the profits flowed.

Revenues peaked during the early part of the next decade encouraging the family ownership to seek an opportunity to cash out. They did and several of those in the family who took the buyout are still smiling today. Those family members who did not and stayed with freedom communications ultimately lost everything in the recent bankruptcy. In talking with some of the recent employees I hear and almost Universal joy and optimism based on their initial meetings with the new ownership group.

However, most also said it’s too soon to tell how things will actually shake out. They’re also saying that they think there will be a change in the editorial focus of the newspaper, and hoping to see a return to a more centrist albeit still Libertarian viewpoint of the paper.  Over the last several years, under the new ownership and management, the paper had gone strongly to the right and far beyond the historical Libertarian viewpoints of the founding families. This was also not reflected in the larger viewpoint of a changing and dynamic Orange County, which is not the singular conservative bastion from the days of John Wayne.   A strict editorial slant, either left or right is not a positive factor in the newspaper world that is searching for the largest audience possible, even the Hoiles family, had understood that factor and kept their politics in check.

Based on everything I have seen and heard I think it is still too soon to tell exactly which model the OC Register is likely to follow, though I think we can rule out the Newhouse – Milk It model.  New ownership would not have invested to simply let it go without some kind of fight.  New money in, especially from someone outside of the established print community as the new owners as probably signals they want to accomplish something, and also want a return on their investment dollars – something unique in print today.

That leaves Feed It or Farm It!  Based on a strong foothold in Orange County we are still a highly desirable market that will rise again when housing takes off in the future.  For now I’ll go with my heart in hand and say they will “Feed It” and try to do everything they can to build a strong multi-media franchise with the paper as the core product.  This fits the community, and what I think is a great opportunity.  They will not be able to impose their will, or dictate a political bent, but I think they can make small gobs of money, year after year if they play their cards right.  I’m keeping my fingers crossed.

Love Letters from Washington to the USPS

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Congress - In Action or inaction?In the manner in which it can only do, the Senate has passed legislation aimed at solving some of the problems the USPS is facing.  As only they can do…they punted, and now the House will have the ball for the rest of the game.  On May 15, time will be out so they need to act soon.

What did they accomplish? According to most who care about the issue – not much.  Lots of posturing, and little action.  Retirement incentives for nearly 100,000 postal employees, a ‘study’ of dropping Saturday delivery, a return of $5.5B in ‘overpayments into the retiree health plan along with not having to continue the onerous advance payments they had been conscripted to do in 2006.  They would also allow the USPS to find some new revenue sources like the delivery of wine and beer which they are forbidden by law to do currently.

Wow – study Saturday delivery.  Oh, and they also sent a strongly worded letter to the Postmaster General not to do any post office or distribution center closings, please, until they got back to them.  Our top 100 legislators in the U.S., and this is all they can come up with.  Now it’s on to the House.

The House is going through its ‘due diligence with no due haste of any many.  With their view they also want to punt the issue down the road.  After having asked for bold solutions and suggested that the Postmaster General and his staff run this like a business, they are now saying ‘ wait a minute.’  It is obvious from their public comments that they in the House intend to do just that…for many minutes.

Notes have been passed back an forth Senate to House to USPS in a never ending cycle and now some news is coming out as of today that the USPS has agreed not to close any post offices for now.  The threat of closing many rural post offices was too much for all of the Senators and Congressman.  We’ll effectively deal with that after the fall election.  Surprised, not so much on my part.

The USPS has many problems, but the courage to create a ‘business plan’ that could stem their losses was not one of them.  They came up with one, but it meant pain, and we don’t do pain well in an election year on any house or on either side of the aisle.  Change will have to come in 2013.  But what kind of change do we really want.

It is absolutely true that we communicate differently now than in the past.  Old legacy media and forms of communications are being changed to newer digital forms.  Mail, newspapers, land line telephones are not the key means to reach out and ‘touch someone’ that they used to be.  Get over it, and move on!  We still need all of these to have total access to information and a free dialog that is so important to our way of life.  We need the USPS, but we do need to trim its costs just as newspapers have had to trim theirs to stay alive.  Let’s hope our national legislators have the real courage to tackle this issue and to help place the USPS on a solid footing for the sake of our future.  I’ll be putting out a Mothers Day card tomorrow, and I hope I’ll get a couple of Fathers Day cards next month – we need the cheer that only they can bring when you pull them out of the envelope.

The USPS is NOT a business, it is a real part of the American way of life, and I for one want it to stay, even if I don’t like all the grumpy clerks down at my local P.O. here in Irvine.  Heck, even I get grumpy once and a while.  I welcome your comments, email or even drop me a card in the mail.  Our friends at the post office will appreciate it too!

Postal Reform Now…Will Congress Act to Save or Kill USPS?

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Is the Postal Service going downhill??

“Industries Fear the Ripple Effects of Proposed Postal Service Cuts” – Was the title of the article in by Ron Nixon in the New York Times yesterday.  It is a good statement of some of the key issues that are being taken up starting this week in Washington.  All sides are lined up to help shape the final outcome.  Today ,CCN Money  has picked up the story as well.  It seems that all eyes are on Congress as they take up the issue of “postal reform.”  All this while all the ears are on the Supreme Court as they take up the issue of ‘Obamacare.’  We certainly do live in interesting times.  As the pace of change and disruption our world picks up we must expect many more battles in the future to go along with these two. 

Congress has begun work on their vision for Postal Reform, if reform is what they really have in mind.  All of the various constituencies are lined up on both sides of the issue.  Some want more, and others want the USPS to do less.  On the plus side are the wine and beer lobbies that want to be able to use the USPS to ship their products, something the USPS is prohibited from doing by law.  On the negative side the insurance and banking industries are lined up to ensure that the USPS not move into their fields, as some in Congress has suggested they do to create more revenues.

Like the newspaper business which is also undergoing its own transformation, the USPS is a huge enterprise that employees nearly 600,000.  Beyond that the entire direct marketing field, including mailing companies, printers and direct marketers employees over 10 times that amount.  This is a big deal, and we need to get it right.  As was noted in the article the field supports over $1 trillion in annual economic activity.  It helped to put both of my sons through college, so it is still dear to me.

Nearly every business relies on the post office to deliver packages, advertise services and send out bills. This postal supply chain supports millions of American jobs in fields as diverse as banking, agriculture, media and manufacturing.  This is an urgent issue since the USPS is losing nearly $36 million a day.  As volumes of mail have decreased with former users now going to digital methods of delivery.  Even the USPS has said that it does not expect to get those missing volumes back in the future.

The USPS is also saddled with a Congressional mandate to pre-fund future retirements, the only government agency to have to do so, to the tune of $5.5 billion.  Relief from this mandate would cut the shortfall in half.  A sign that this is a big deal is the nearly $300 million spent over the last three year by those lobbying on all sides of this issue – both the USPS employee unions and industries who work in the direct marketing field.

Postmaster General Patrick Donahoe has proposed closing half of the post offices, approximately 3700 and shutting half of the mail processing centers, 250 there.  Both changes, along with stopping Saturday delivery, would also help to bring down the shortfall.  In a world that has gotten to email and instant messaging for time vital business and personal communications, there would seem to be some wiggle room for printed mail – derisively called ‘snail mail.’  A big question is how fast do we need to be, especially if we want to price reduction, or at least fewer price increases.  And yes, the USPS is also asking for a 50 cent first class stamp.

Postmaster General Donahoe said in prepared testimony.  “If Postal Service were a private company, we would be engaged in Chapter 11 bankruptcy proceedings.”  The Senate is beginning the process now, and the House will begin deliberations, probably next month.  A key deadline for consideration is May 15, when a moratorium on closing postal facilities will expire.

Currently under consideration is a bill that passed a Senate committee in November that would tap the overpayment of the future retirement benefits, currently at $10.9 billion to pay down postal service debt (to the U.S. Treasury) and use up to $2 billion for incentives to get a number of long term employees to retire.  The USPS has also planned to open its own health care for employees in hopes of cutting their costs, but there is pretty widespread opposition to that from Congress and the employees.

The USPS is a legacy system with a long history.  Like so many of our other ‘legacy’ systems, including newspapers, they are in deep trouble with the change in the economy in our broadening digital age.  Change is great for some, though it sucks for others.  I live in both worlds, and yes, I still want things the way they used to be.  The question is how much am I willing to pay to have that.  We make those choices each day, and we are making those choices now regarding our postal system.

In the face of the current situation I have to applaud Postmaster General Donahoe and his staff, though that is a strange position for me.  I prospered under the USPS, and endured a lot of petty regulations as well.  They clearly understand where they are today, where the world is going, and have surfaced a plan that will help them to move forward under their current legal and financial burdens.  Congress has the keys to open doors for them to endure and preserve the current levels of service many still desire.  They also have the keys to the vault and say no more.  I compliment the PG for a real and thoughtful plan, and I hope our elected officials will make the right choices.  In the face of the coming elections later this year – this should prove to be good theater, and maybe even good politics.

The Pony Express Collides with 21st Century

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Postmaster General Patrick DonahoeTomorrow, Patrick R. Donahoe, USPS Postmaster General will be addressing a gathering of key postal businesses from throughout Southern California at a Postal Customer Council event at Knott’s Beery Farm Resort Hotel.   The location is fitting since Knott’s was built on framing images of life in the old west, stagecoaches and railroads – just like our vision of our Postal Service.  I think that is a key to our discussion about how to handle the transformation of the USPS in the 21st century. The USPS like newspapers, printers and mailers are in the midst of a major reshaping as increasing numbers of businesses and all people are moving to digital forms of communications.  The world will never be the same as it was when I started my career selling for Xerox in the 70’s.

Facing great change and pressure the USPS has done a good job in creating plans to bring the service in line with the needs of the 21st century, and stagecoaches are not in the mix. The Postal Service drafted its business plan with analysis from Boston Consulting Group and Accenture.  Based on my reading of the plan, they have gotten good advice, though it has not been well received in Congress, though nothing really is anymore…but that is another problem that modernization needs to impact.

In the last quarter of 2011 the USPS lost $3.3 billion.  The forecast for a full year-end is a $14.1 billion loss for the year ending Sept. 30.  The losses will continue, and continue to grow if nothing is done

First-class stamped mail has declined more than 50% in the past 10 years, from 52 billion deliveries in 2002 to 26 billion in 2011. According to an email from USPS representative Sue Brennan, the drop in mail has resulted in significant excess capacity.

Among the recommendations from the USPS, and their consultants in the new plan to cut losses are:

Rate increases – The U.S. Postal Service wants Congress to help it raise the price of a first-class stamp to 50 cents, an 11 percent increase, as part of its strategy to avoid annual losses as high as $18.2 billion by 2015.  The fact still remains for the USPS is that we are the least expensive postal service in the world- we could even say that we are under priced for the service that we deliver. A price increase would seem to be in line all things considered, including real value.

Staff and facilities reductions – Closure of a number of local post offices and half of the larger mail processing centers would save significant dollars, and would also reduce staff by over 35,000.  This would be a tough call in the middle of a financial downturn, and a national election.  Nine states will see eight or more processing facilities closed.  Almost half of the 223 plants scheduled to be shuttered are located in nine states, including mine.  For the most part, these states, which include California, New York and Texas, have the largest populations in the country.

Curtail Saturday delivery – The Postal Service says it would save $2.7 billion annually by cutting mail delivery to five days a week.  Those of us in urban areas are likely to see this as positive, but rural areas have tended to see this a problem.

Manage Their Own Health Care Benefits – The USPS states that they could save $7.1 billion a year by managing their own health-care benefits.  This, along with not prefunding pension benefits, would be significant, but are a large political football for both sides. The USPSwould have lost only $200 million if not for payments it had to make toward the $5.5 billion it is required by law to set aside for future retiree health benefits annually, something no other government agency needs to do.

Our transistion to a post industrial society is hell for those who still provide the bulk of our labor.  The USPS has dramatically changed over the last couple of decades and automation has made it a model for most of the world, but not even that is not enough well production volumes decrease.  Savings from automation aren’t there any more, and now we have to remove some chairs from the table.  Like newspapers, the transition is painful, but it is still inevitable.  The USPS plan is a good business plan, and Congress should adopt it for the most part.

I wish I could hear the Postmaster General tomorrow.  Unfortunately, I have a previous engagement with a client dealing with digital marketing issues and their competition.  Doesn’t it just figure – new media trumping old media once again.  I hope the USPS gets their way in the end.  The plan is real and reflects the medicine we all need to take now.  In an election year this will drag out and become another political football.  Shame on us for allowing that to happen.

Happy Endings to All…and to All a Good New Year!

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I love endings!  That usually means a completion of a task or a goal, and the opportunity to move on to new things.  Year endings are the best.  Close out the old and start with a clean slate.  I think this year will not end so well.  Instead of starting fresh we will be dragging an incredible amount of baggage along with us into 2012.  As we have moved into our new digital age in the first decade of the 21st century, our legacy tools and traditions, and so much of what makes up our business way of life are struggling to advance with incredible pressure being on them to adapt, or die.

One of our oldest tools in the U.S. has been the Postal Service initiated in large part by Benjamin Franklin.  It was instrumental to our overall success for over 200 hundred years.  Today, it is seen by many as a ‘relic’ of the past as new digital tools have eaten into its core ability to facilitate communication.  Hand written letters are becoming things of the past.  Our current generation would not understand the context of the old saw – “keep those cards and letters coming!”  Now we have to warn people about communicating (i.e. – texting) while driving.

I could go on for days about this transition, but I won’t.  I have written extensively about the battle for the future of our USPS and what it means to commerce and personal communication.  The leaders of the USPS have offered solutions – i.e cutbacks, and I have applauded their honesty and candor about their situation and things that must be done to keep the USPS on a sound financial footing given our change in mailing patterns.

The latest salvo against their plan has come from their masters, the Postal Commission – “Postal Service’s Closure Review Process Was Flawed, Panel Says”  They believe that the original plan was ‘flawed’ and did not take into consideration a number of sensitive issues other than just cost.  That is an honest statement, but the overall consideration by the Commission is politics.  The only answer for the USPS is a full and open consideration of what we expect from the service in light of today’s evolving digital world, and what are we will to pay for as citizens to preserve the service as a whole, and how will the prime users contribute to save their unique positions.  This includes the full commercial mailers, and rural users who are the prime drivers of cost.

I await 2012 to see how this evolves.  I expect no real answers until after the election of 2012 which will go a long way to determining how we as a large community will choose to deploy and pay for the resources that we use.

Kicking the can down the road for Postal Service changes until May 2012

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Dear SantaPostponing the inevitable…good news, and bad advertising, will still be delivered to your mail boxes, on time  and without delay.  A temporary agreement driven by a coalition of Democrat Senators has gotten the USPS to postpone the planned closing of a number of postal service centers, post offices, and the reduction in service standards the USPS proposed.  Whew, just another great challenge for our elected leaders in Washington to boot down the road until ‘later.’

While that was going on this week I spent my time interviewing local businesses and those I know who are professionals in the mail business on how they were taking the situation that will have big impact on them, and their customers.  The delay is good news, since we need more time to process and plan.  Almost to a person everyone that I have spoken with understands the situation – volumes have dropped, costs have continued to rise, and the direct mail support industry has continued to shrink.  Like my old compatriots in the newspaper business they understand the direction things are headed.  No heads buried in the sand here!

What they don’t understand is why it has taken so long to recognized what they see everyday.  The world has changed, and legacy forms of communication, mail, just as printed daily newspapers, aren’t the dominant forms of communications they used to be.  We all must plan for the next phase of evolution in how we send and received all of our information, including payments for bills, as well as Christmas cards.  This hurts because it forces us to once again, realize how much our entires lives have been transformed, and will continue to change.

I hope that in this ‘truce period’ we can lower the volume and come up with some plans on what we want our postal services to be.  I didn’t use USPS, because we might find other ways to communicate or ship messages with something other than a total government monopoly.  But we have to define what we want, what we are willing to pay for, and then gain agreement before moving forward.  If not, the plan will fail.  Here’s to coming up with some great plans…and to a Happy Holiday for all.

Notes from the Battlefield…

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A funny thing happened on my way to researching the options for the USPS.  I got way laid! I must admit that this happens to me a lot, especially when I have ‘chores’ to do.  This time, no chores, but I found that when I started doing research with all of my friends in the direct marketing field – they wouldn’t stop talking.  I quick discussion turned into a 2-hour meeting.  That was repeated multiple times, but it was well worth my time, and therapeutic for them.  I left them all with the feeling that they had gotten something off of their collective chests.

What did I learn…a lot!  First thing, all are passionate about what they do!  They feel that they are contributing to the big marketing effort to sell goods and services, and that direct marketing is still relevant and vibrant.  The second thing that I learned is that, they are nearly all wondering, what the hell happened, and this can’t be happening to me.

Where do they go from here, and where the heck do I go from here?  More field work I guess, looking for real options that reflect the public mood, and the mood of the users of direct mail and direct marketing.  Meanwhile, the battle continues to be waged in the halls of Congress, where hearings will go on,and talk will flow.  If we could harness the energy from all of the Congressman’s lips, even on this little subject, the energy crisis would be over…tomorrow.

Seriously, this issue on the future of the USPS is real, and everyone is concerned.  The answers aren’t simple, and few agree, today, on what we should do, and what kinds of USPS we should have in the 21st Century.  I will continue my journey throughout December to try to bring some sense to the issues, and to try to shed some light on possible solutions, and probable outcomes.  Now back to the battlefield to interview more wounded warriors.  Roger and Out!