8 Media Trends You May Have Missed in 2013

The mainstream press has had its fill of articles recapping 2013, but it missed some important trends and lessons that emerged during the year:

Newspaper reaches for a new high

1) New hope for newspapers: The Denver Post has hit upon a promising market for beaten-down daily newspapers: weed. When publishers from other states see how the Post is trying to cash in on legal pot with its new web site The Cannabist, they may be tempted to start publishing a lot of pro-legalization editorials. I suggest a companion print product -- a special section printed on hemp, with an invitation to “Read it, then smoke it.”

2) Why cell phones have a “vibrate” option: A major magazine company revealed the startling results of an in-depth investigation via a news release: “Meredith's Parents Network, the leading parenthood media portfolio which includes Parents, American Baby, FamilyFun and Ser Padres, today announced exclusive new findings that phones and tablets have improved moms' sex lives and texting has replaced talking in their romantic relationships.”

3) The Postal Service is still solvent: For several years now, a lot of us have been saying that the U.S. Postal Service was months away from running out of cash unless Congress did something. Congress, of course, did nothing during 2013 – unless you count the naming of post offices. Still, with downsizing, increased volumes of parcels and “junk mail,” and its refusal to “prepay” retiree health benefits, the Postal Service keeps delivering six days a week and still has a few pennies in its piggybank -- even though it’s billions of dollars in the red. Now if it could just be allowed to deliver legalized marijuana . . .

4) Magazines are not newspapers: For several years, pundits have predicted that traditional magazine publishers would soon go the way of newspapers, shriveling up from massive losses of advertising, circulation, and profitability. But 2013 proved them wrong. Magazines – or, rather, “magazine media” – are adapting better to the web and are finding growth in such fields as events and services. Some had banner years for their print products, with increased ad pages and even some expanded ratebases. Meanwhile, one of the nation’s most storied newspapers was so diminished in value that Amazon founder Jeff Bezos was able to buy it with some spare change he had lying around.

5) Print is hot: It wasn’t just that web-only brands like Newsweek, AllRecipes, and Politico decided in 2013 to publish printed magazines. Print is now so "in" that a TV ad for Viagra featured the owner or manager of a printing company.

By the way, Viagra in a Printing Plant? What’s Up with That? had a larger audience and stirred up far more discussions than any previous Dead Tree Edition article about printing. Which tells you something about what printers and us print geeks have on our minds.

6) The digital divide is a myth: We’ve been told for several years that, once people got e-readers or tablets, they would mostly abandon printed publications. Several studies released in 2013 told us otherwise: Tablet owners overwhelmingly prefer printed magazines to digital ones; only 22% read tablet-based magazines on a weekly basis.  iPad owners read more printed books than does the average consumer. And most magazine publishers will tell you they have far more tablet owners reading their print editions than their apps.

7) A business model for iPad magazines emerges: Many publishers had viewed the iPad as a great medium for their publications and apps. But Apple has recently thumbed its nose at traditional magazines, allowing its Newsstand app to fall into disrepair and making it nearly impossible to find all but a few e-magazines.

A magazine that is getting promotional love from Apple's Newsstand

Recent quotations helped me understand, however, that there are at least two paths to publishing success on the iPad: The first is ad agencies: “The target market for iPad magazines is 22-year-old media buyers," a publishing colleague told me. "Selling iPad subscriptions to anyone but your print subscribers has become well-nigh impossible. But having an iPad version really helps you with the ad agencies, regardless how meager its circulation is."

And the other path? Porn: “It is apparently easier to get porn magazines from Russia into the App Store today than it is a bug fix update for a major consumer title,” D.B. Hebbard wrote last month for Talking New Media.

8) The wheels are coming loose on the content marketing bandwagon: 2013 was the year we publishers realized that every Fortune 500 company, and a lot of smaller ones as well, seemed to be copying our every move under the moniker of content marketing. Chanting mantras about “owned media” and “brand journalism,” practitioners sound like devotees of some Koolaid-drinking cult as they espouse the virtues of bypassing publishers to go direct to the consumer.

But the honest content marketers are starting to acknowledge the bandwagon is hitting some bumps. Having the junior member of your PR department do the writing is a cheap way to create articles no one wants to read; there’s a reason that kid couldn’t get a job as a real journalist. Even for good articles, finding an audience is challenging regardless of how many tweets, posts, and pins a brand uses to publicize it. Consumers, it turns out, aren't especially interested in connecting with brands.

Lately, more brands are turning to professional journalism – either by using qualified freelancers or by licensing content from publishing companies – to boost the quality and credibility of their content. And some are also turning to those bypassed publishers for help in promoting their content. It’s a hot new concept known as “advertising.”

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Flexible Workforce Lowers USPS Wages -- and Hurts Productivity

The U.S. Postal Service’s shift to a more flexible workforce has reduced average hourly pay, but adding so many new employees has also hindered productivity gains.

At last report, the “straight-time” pay of postal employees was averaging $25.63 per hour in FY2013, down 1.4% from $25.98 a year earlier. Despite a big jump in overtime hours, even the average total hourly pay had dropped slightly during the year.

Most employees had small wage increases, but the hourly averages were dragged down by temps and other non-career employees who replaced retiring workers. USPS’s career workforce decreased by 37,000 during FY2013, while 26,000 non-career employees were added, the agency said in its recently released annual report to Congress.

More than one in five postal workers is now a non-career employee, versus less than one in six only a year earlier.

“We hired and trained many new non-career employees and this cost many workhours,” the annual report said. “The learning curve for these workers caused us to use more hours as they gained experience (although at a lower wage).”

USPS hoped to boost deliveries per work hour from 41.0 to 42.7 during FY2013, but the annual report said it fell short partly because so many new employees had to be brought up to speed. Having more mail volume than anticipated (a decline of less than 1%, versus 5% the previous year) also hurt productivity, despite improving USPS’s finances, the report noted. The report does not discuss another productivity measure -- mail pieces delivered per work hour -- but that appears to have changed little during the year.

Downsizing of the workforce, consolidation of facilities and carrier routes, and greater automation are helping USPS work more productively. But the growing volume of labor-intensive parcels, though profitable, tends to mean slower deliveries, as does the increasing number of delivery points.

Employees also claim that staff reductions sometimes backfire because they can leave postal facilities with the wrong mix of positions and experience. Letter carriers have been especially vociferous about changes that have inadvertently hurt their productivity, such as having to work longer days and to make more deliveries in the dark. At last report, overtime among the city-carrier force was on track to increase more than 11% over FY 2012.

Related articles:

• USPS Productivity Has Declined This Year
• 8 Reasons USPS Productivity Is Declining: The Employees Speak Out
• Postal Workforce Is Both Shrinking and Growing

 

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WikiLeaks Reveals Praise for Dead Tree Edition from an Unlikely Source

I was surprised to learn today that WikiLeaks had published glowing praise for Dead Tree Edition's coverage of black-liquor tax credits. Especially considering the source.

"I love Dead Tree Edition's coverage of the issue. Complex situation, but the blogger boils it down pretty nicely," wrote Joseph de Feo in a 2010 email to colleagues at Stratfor, Inc. in reference to U.S. Taxpayers' Black Liquor Tab Surpasses $30 Billion.

WikiLeaks refers to Stratfor as "a company that fronts as an intelligence publisher, but provides confidential intelligence services to large corporations," which is why it published more than 5 million of the company's internal emails. The emails reveal that Stratfor did work for the American Forest and Paper Association, which supported the black-liquor tax credits. (Note this correspondence referencing a meeting between an AF&PA official and Sen. Max Baucus, D-Montana, a key player in the black liquor story who may become the next U.S. ambassador to China.)

 "The Small Business Jobs Act that Obama just signed included a CBP [Cellulosic Biofuel Producer] modification that supposedly nets the government nearly $2 billion by removing crude tall oil's eligibility for the tax credit -- and Dead Tree Edition says that it never would have qualified anyway," de Feo continued. "So the $2 billion in savings is made up. Which would be perfectly consistent with all we've already seen on black liquor. Accuse something (falsely) of being costly, shut it down and claim the (false) savings, skewing budget numbers."

"When corporations do this, doesn't someone usually go to jail?" concluded de Feo, who was a Stratfor analyst and briefer and is now the chief operating officer at Keyframe Policy Consulting, a Stratfor spinoff.

De Feo was referring to just one of about 50 articles Dead Tree Edition has published showing how billions of dollars from federal biofuels programs was diverted to black-liquor subsidies for U.S. pulp companies. As he noted, a recurring theme of the twisted tale is how the subsidies were used to skew federal budget numbers so that Congress could shell out more taxpayer money.

The most recent article in the series is IRS Inaction Leads to Another Black-Liquor Windfall for U.S. Paper Companies.

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How USPS Is Like an Airline, and Why That Matters

A postal official made a revealing statement last week about the U.S. Postal Service’s attempt to get higher-than-inflation rate increases.

If USPS’s “financial challenges were alleviated by the timely enactment of laws that close a $20 billion budget gap, the Postal Service would reconsider its pricing strategy,” Deputy Postmaster General Ron Stroman wrote last week in a Post & Parcel letter to the editor. The request for “exigent” rate increases – on which a ruling is due Monday --was “a last resort,” according to USPS’s #2 man.

USPS has spent years trying to pass exigent rate increases to help it dig out of the red. So why would it even think about walking away from a legal victory that could be worth a couple of billion dollars a years?

My theory: Postal officials aren’t sure an extraordinary rate increase will help the agency. They’re worried that breaching the inflation-based cap that has kept most postal rates in check will undermine confidence in the mail system, pushing mailers to switch even more communications to digital delivery.

In the simplistic thinking of some Congress members – whom USPS is apparently trying to appease with its rate request – the answer to insufficient revenue is simple: Increase your rates.

But postal officials know that higher prices don’t mean more revenue if they lead to fewer mailings. They’ve seen this movie before in the pre-rate-cap days, and the ending wasn’t pretty, including a drastic decline in catalog mailings.

It helps to understand that, as I wrote in 2009, the U.S. Postal Service is like a money-losing airline that is flying a lot of half-full planes. Many of the airline’s costs are the same regardless how many passengers are on the planes.

You can’t fly with fewer pilots or reduce the jet’s depreciation just because most of the seats are empty. Nor can the Postal Service deliver to fewer addresses just because its mail bags are not as full as they used to be.

If the airline raises its prices, competitors will lure away passengers with lower fares. At the margin, even a bargain-rate passenger is profitable; the only cost of adding one to a plane is a few gallons of jet fuel, a bag of stale pretzels, and a tiny can of soda.

Jacking up postal rates merely causes marketers to prospect more with email instead of direct mail, publishers to convert more subscribers to digital editions, and corporations to offer more incentives for customers who switch to electronic billing.

What the Postal Service needs is mostly in the hands of Congress, which structured USPS in the pre-internet days to be a cash cow for the federal government. Times have changed, and the cash cow has been milked so dry it can’t replace 25-year-old delivery vehicles that are held together with duct tape and rubber bands.

But the laws and practices that drained the Postal Service of billions of dollars remain unchanged. And, more than ever, USPS needs less not-in-my district Congressional interference that stymies reasonable downsizing of its distribution network.

What the Postal Service doesn’t need are rate-cap-busting price increases that drive away customers.

Related articles:

• What's Weighing Down the Postal Service?  
• Why the Exigent Postal Rate Increase Will Backfire
• UPS Praises Postal Service's Improvements, But Not Its Rate Hikes

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A Glimmer of Growth Amidst the Newsstand's Gloom

Despite continuing declines in North American newsstand sales the past few years, one category has experienced steady, impressive growth: bookazines.

Unit sales of the special issues in the U.S. and Canada grew at nearly an 11% annual rate from 2008 to 2012, with annual revenue up 80%, according to data presented recently by MagNet, an industry consortium.

During the same period, total unit sales of magazines decreased about 10% annually. The trend of rising bookazine sales and decreasing overall sales is continuing this year.

"If print is dead and newsstand is dead, why is it that consumers will plunk down and make an impulsive purchase to spend 10 or 12 bucks to buy a high-quality publication at the newsstand?"asked Gil Brechtel, MagNet's president, at the Magazine Innovation Center's recent Act 4 Experience conference. (Brechtel's presentation begins at about the 30-minute mark of this video.)

Bookazines, also known as book-a-zines, mooks, SIPs, one-shots, or special issues, are non-subscription publications sold via the newsstand system. They are usually published by subscription magazines, but some are published under such non-magazine brands as Philadelphia Cream Cheese, USA Today, and the American Bible Society. Brechtel's definition of "book-a-zine" includes only titles having a cover price of at least $9.99, which is probably the vast majority of special issues.

"During 2012 there were 900 bookazines released," Brechtel said. "Some did very well. Some didn't do so well." They generated $352 million in retail sales, a 20% increase over 2011. Typical subject matter included tributes to dead celebrities, in-depth looks at a single topic, and recipe books -- lots of recipe books. The top seller was a National Geographic title that brought in almost $3 million.

"Why are people buying $10 bookazines full of information they can get free on the web?" he asked. "A lot of these are coffeetable books."

The formula for bookazine success, according to Brechtel, is strong brands, high-quality cover and paper stock, and appealing content. Bookazines have the advantage of avoiding a major cause of declining retail sales -- low-ball subscription offers.

"Publishers are trying to chase ratebase so much they're basically giving magazines for free or for a very low price," Brechtel said. "If you buy Cosmopolitan 12 issues for $5 a year why in heck would you spend $3.95 for one issue?"

Bookazines accounted for more than 10% of total newsstand sales last year, and that share seems to be growing rapidly. At a couple of stores I visited recently, it was hard to find actual weekly or monthly magazines amidst all the special issues.

At Target recently: An issue of TIME surrounded by bookazines.

One advantage of the special issues is that they don't go "stale" quickly and can remain on sale for up to three months, versus a month or less for regular issues.

But that's not relevant to all locations: As some stores shrink the amount of space for magazines (though it's the most profitable category for supermarkets), there's increased pressure to turn inventory over quickly, even for successful, high-priced titles.

Related articles:

• Invasion of the Bookazines, Featuring the Return of the Living Dead 
• Mooks and Canucks: The Bookazine Invasion Crosses the Border
• Rupert, Weiner and Cardboard Animals: 5 Who Should Be Ahead of Me on RISI’s Top 50 Power List
• 8 Questions About Newsweek's Future

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UPS Praises Postal Service's Improvements, But Not Its Rate Hikes

United Parcel Service recently praised “impressive efforts by the Postal Service to reduce costs and improve productivity” but criticized USPS's request for emergency rate hikes.

The Postal Service’s request for “exigent” rate increases on “Market-Dominant” mail is “an unsustainable business model which can only lead to continued postal deficits and more requests to exceed the rate cap,” UPS wrote in a filing last week with the Postal Regulatory Commission. Instead, USPS’s “Competitive” products should bear a larger share of the agency’s institutional costs, according to UPS, which is a major competitor, customer, and vendor of the Postal Service.

Market-Dominant mail includes such classes as First-Class, Standard, and Periodicals, where USPS’s mailbox monopoly is a huge barrier to competition. Rate increases for such mail can generally be no greater than the rate of inflation, except USPS is seeking higher rates starting in January to compensate for revenue it lost as a result of the recent recession.

By contrast, “Competitive” services include expedited and parcel delivery, where USPS tends to compete head on with UPS, FedEx, and other private businesses. For such mail, USPS can charge what the market will bear. But much of the category’s profit gets tied up in a Competitive Products Fund that the Postal Service cannot easily access.

In the past six years, “Competitive Product revenues have grown by more than 40%, while Postal Service mail and services revenues as a whole have fallen by about 13%.”

Nevertheless, Competitive Products have continued to pay only 5.5% of USPS’s institutional costs, while the unprofitable Market-Dominant category covers the rest.

“Competitive Products’ share of total Postal Service revenue has risen from approximately 11% in FY2008 to over 18% in FY2012,” UPS wrote. “This trend is likely to continue, with Competitive Products expected to account for more than 20% of total postal revenue in FY2013 and over 23% in FY2014.”

Yet the Postal Service’s pricing strategy runs counter to the customary tactic of hiking prices based on rising demand.

“The Postal Service proposes a Market-Dominant average rate increase of more than 5.9%, while it proposes a Competitive Products average rate increase of only 2.4%, with no rate increase for Priority Mail overall,” UPS notes.

Breaching the inflation-based price cap on Market-Dominant mail will “accelerate” the ongoing decline in such mail, UPS claims.

“In short, it is unsustainable for the Postal Service to continue to rely on shrinking Market-Dominant volumes to pay the vast majority of institutional costs. The Commission should require growing Competitive Product revenues to contribute a more equitable share.”

The UPS filing doesn’t spell out the company’s motives. Its proposal would tend to cause larger price increases for the Postal Service’s Competitive Products, which go head to head with UPS’s own offerings and are gaining market share. But because it often outsources the “last mile” of delivery to the Postal Service’s vast carrier network, UPS also has a genuine interest in the health of Market-Dominant mail.

UPS’s filing doesn’t seem to be the work of a company that, as some conspiracy theorists claim, secretly wants to take over the Postal Service. Instead, its actions are consistent with its 2009 statement that, "We believe that the government plays a role in terms of ensuring that every mailbox is reached every day. That is not a responsibility that UPS would want.”

Related articles:

• USPS's Own Words May Doom Its Rate Increases 
• Why the Exigent Postal Rate Increase Will Backfire
• The Oxymoron at the Root of USPS's Woes

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A Funny Thing Happened on the Way to the Funeral of Print Media

Web publishers launching print magazines, e-book sales plateauing, slow adoption of tablet magazines, and now a profitable U.S. Postal Service: Whatever happened to the death of print?

I recall a magazine editor parading around the office in 2009 and announcing, “Print is dead.” Sure, I recognized it as the exaggeration of a middle-aged journalist trying desperately to prove he was hip to the digital age.

Still, it looked as if he had the basic trend nailed. Although I’m a print guy, I had to admit that within a few years – say, 2013 – print would probably be well along the road to Buggy Whip Lane.

A CueCat, from the author's personal collection of Magazine Failures

But 2013 is turning out to be the year that print media didn’t die. Let’s take a look at some recent events:

Postal profits
The U.S. Postal Service revealed Friday that it was profitable in the year that ended on Sept. 30. OK, the official news release says USPS lost $5 billion, but that included a $5.6 billion payment for pre-funded retiree health benefits that it skipped.

Such payments are in reality low-interest loans to the federal government that mask some of the federal deficit. They're a vestige of the era when USPS was the government’s cash cow.

The $5.6 billion is not truly an expense, and the retiree-benefits shenanigans are so politically controversial that the missed payment will probably be written off. USPS's cash position is still precarious, but better than it was.

The return of junk mail
It wasn’t just downsizing that led to a successful year for the Postal Service. The volume of Standard mail – such as direct mail, catalogs, and promotional flyers – increased 1.8%. Wasn’t everything supposed to have shifted to email promotions and online ordering by now?

Web to print
This month has already seen the launch of two significant print magazines, Allrecipes and Politico, from brands that were previously web-only. That’s the perfect rebuttal to Michael Wolff’s recent analysis for The Guardian, in which he asked, “What is the business basis for print? In fact, is there any reason print should exist?”

If Michael put a bit more effort into looking at actual data and less effort puking up vitriol all over Time Inc., he would know the answer: For most magazine publishers, print is still where the money is.

E-gads
When I headlined an article early last year Are E-Book Sales Reaching a Plateau?, many laughed off the article as wishful thinking from a print dinosaur even though it was based on an objective study.

But three weeks ago, Digital Book World wrote, “Once thought destined to reach 50% or 80% of all book buying and reading in the U.S., ebooks have stalled out on their way up to higher altitude.”

And more recently Mike Shatzkin, one of the leading commentators on the digital transformation of the book industry, actually used the P-word: “Recent evidence suggests that ebooks have hit either a point of serious resistance or a temporary plateau.”

App-oplexy
I got similar blowback for this year’s article A Troubling Sign for Tablet Magazines?, which pointed out a study showing that three-fourths of U.S. tablet owners prefer print magazines to digital editions.

Many articles have subsequently come out about the surprisingly slow adoption of tablet magazines and the struggles publishers are having with selling digital subscriptions.

“Apple is a fickle partner,” Jasper Jackson recently wrote, citing various challenges for magazine publishers. "Until these issues are dealt with, or a genuinely credible competing platform emerges, digital magazine marketers will be working with one hand tied behind their back.”

Print still struggles
Don’t get me wrong: Not all is well in the world of print media. The Web is driving most daily newspapers to the point of extinction. (I’m not naïve enough to think Jeff Bezos’ purchase of The Washington Post is a vote for print. Methinks his long-term vision for that hallowed journal doesn’t have much to do with putting ink on paper.)

With the continuing decline of profitable First Class mail and a Congress that can’t pass any meaningful reform, the U.S. Postal Service is still on the ropes.

Newsstand sales are still declining at about 10% annually. Retail chains keep reducing the space devoted to magazines even though it’s their most profitable category. Dysfunctional sales channels, you see, are not Apple’s invention.

So don’t expect people to ditch their laptops and smartphones, dig their typewriters out of the attic, or revert to sending handwritten letters instead of texts and emails.

Digital substitution of print will continue, but it won’t always be at the steady or exponential rates the pundits predict. An unsustainable trend cannot be sustained, and inevitable changes often turn out to be quite evitable.

A few digital innovations are immediate game changers. Some need years of refinement to catch on. (Perhaps digital magazines are in this category.) And others burst onto the scene with much buzz but soon go the way of Friendster, PDAs, and the CueCat.

As for that editor who proclaimed four years ago that print is dead? He was recently heard proposing the creation of a new print product.

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