Page 3 - Postal Magazine Final

Keep the Cap

Making the case for pricing predictability and stability

he announcement of made in the past about pricing turn, would take an enormous
the Postal Regulatory elasticity and the impact on the number of magazines out of
T Commission (PRC) volume of copies mailed all get the mail stream, thus putting
pricing proposal began with the thrown to the wind in the current additional pricing pressure
statement that a price cap system proposal. There is no model that on the small number of mailer
is the best way to create pricing captures the existential threat customers remaining. Similar
predictability and stability. The posed by an increase of that scale. scenarios would play out for
details of the announcement, other mailers, and so on and
Undoubtedly, a threat to the
however, support an entirely business model of periodicals so on, until no mailers remain.
different reality.
becomes a threat to USPS Indeed keeping a price cap
The PRC proposal blew past in a spiral of unintended system is the best way to
the initial price cap to add consequences. Many magazines create pricing predictability,
incremental rate increases of would be forced to reduce the but keeping a price cap system
another two percent, one percent, number of copies mailed or that is fair and reasonable is the
and then two percent for certain reduce mailing frequency or cease best way to create predictability
classes. While each increment publishing altogether. That, in and stability.
evaluated on its own sounds
small, the compounded increase
reaches levels that have never OUR POINT
been seen before. Since those
additive increases are annual, the
compounded rate over the five-
year term of the proposal could OF VIEW
be a 40-percent increase. With
the CPI currently trending above USPS & MPA: Your Business Is Our Business
recent levels, that 40-percent
increase could soar even higher!
We support, and need, a healthy Postal Service
A price increase of such magnitude The proposed rate increases will have the chilling effect of driving
is unprecedented, especially for a away business, which will leave USPS in a far worse position.
Magazines Deliver monopoly service. In recent years,

the cost for all other periodical
USPS spends nearly half of its annual manufacturing elements has gone The PRC proposal imposes drastic increases for magazines
advertising dollars — $16 million — in down. The economic challenges 40% The cumulative effect of the proposed changes results in a
consumer magazines. forced every other supplier to 40-percent rate increase over five years.
innovate for greater efficiency
Why? Because magazines are proven to be and cost savings. Against
the best place to drive sales, with the highest that backdrop, the increases Efficiency needs to be a key consideration
return on advertising spend across media. proposed by the PRC look even USPS’ efficiency for periodicals has gone down in recent years,

Source: Kantar Media, 2018; Nielsen Catalina Solutions, 2016 more astonishing. In addition, despite the magazine industry’s ongoing commitment to
work-sharing.
the assumptions that have been
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