Periodical “death spiral”?

In a post on his Courier Express and Postal Observer blog today, Alan Robinson asks whether Business Week’s decision to shift some of its subscriptions to private delivery could signal the beginning of a “service driven” death spiral for the US Postal Service. As the USPS tries to cut costs by relaxing service standards, will it lose customers, making its financial problems worse?

Robinson makes some good points, especially about the need to charge higher prices for higher service levels (e.g. day certain standard mail). But it’s difficult to see a loss of periodicals revenue as a crisis for the USPS. Periodicals accounted for just 3.2% of postal revenue in the last quarter- and as more and more Americans get their reading matter delivered electronically, periodical volumes are steadily dropping. That decline is likely to accelerate regardless of USPS pricing and service decisions.

More importantly, though, periodicals aren’t exactly a money maker for the USPS. The average revenue from periodicals is 25 cents per piece- and yet publishers often expect next day, or even same day delivery for those pieces! So it’s not surprising that the USPS says it loses money on periodicals as a class.

Those losses aren’t insignificant- for the five year period from 2005 to 2009, the USPS says it lost $2.2 billion on periodicals. It would seem that keeping the periodical business might be more conducive to a death spiral than losing it.

Courier, Express, and Postal Observer: The Death Spiral: Could it Be Driven By Service Quality as well as Costs?.

  • Tok

    Magazines are history.
    They go directly to my
    iPad.

  • hrdcorefan

    At my station, all mail goes to the street regardless of class. We haven’t curtailed mail for years.

  • Alan Robinson

    Magazines in general may be money losers but when the magazine in question mostly goes to the highest income addresses as well as business addresses, the marginal loss in revenue is likely to be larger than the marginal reduction in costs. The result is the loss associcated with the remaining periodicals gets largers forcing even larger rate increases on those periodicals, and for that matter other flats and leters that remain.

  • brian

    I understand your point, but I’m not so sure it makes that big a difference. Periodicals tend to be bulky and hard to handle, compared to letters. Combine that with their low revenue per piece and I would think that even on high volume routes their loss would have a negligible negative impact, and might even be positive. In any case, hard copy periodicals are a dying species- combine that with their small share of total mail volume and their negative overall impact on the USPS bottom line, and I don’t see why the USPS would feel the need to worry about them.