Postage Due: The USPS is running out of money. Where does that leave magazines?
Early on a February morning, in a glass-walled conference room high up in the Hearst Tower in Manhattan, Postmaster General Patrick Donahoe spoke in a careful, reassuring tone. “We can do this; I know that we can do this,” he told the audience, which included representatives from magazine-industry heavyweights like Condé Nast, Hearst, and Time Inc. “Hang in there with us.”
Donahoe’s talk was a keynote at a “Postal Summit” organized by The Association of Magazine Media (MPA, formerly the Magazine Publishers of America) to address the inarguably dire situation currently facing the United States Postal Service, and the complications that situation is causing for the businesses that depend on its survival.
Despite Donahoe’s assurances, his audience couldn’t be blamed for being skeptical. In the past decade, the postal service has been hit by a perfect storm of technological and cultural shifts, economic recession, and political gridlock. Since 2000, the USPS has seen a precipitous decline in the volume of mail. From 2006 to 2011, as people have increasingly sent e-mails instead of letters and paid bills online, first-class mail volume has dropped 25 percent. As the housing and financial sectors sank, so did the amount of direct mail they sent to prospective customers. The country’s second-largest civilian employer (after Walmart), the USPS has been squeezed by rising health-care costs for its half-million employees, plus the requirement to pre-fund their pensions.
While the service has often run a deficit during its 237-year history, it now faces the possibility of insolvency. Following a loss of $5.1 billion in fiscal year 2011, the service reported a $3.3 billion loss in the first quarter of fiscal 2012 alone—a period that’s typically the most profitable of the year because of mail sent in the winter holiday season. The USPS’s total deficit as of last December was already $12.9 billion, and in February, the agency projected that it may run out of cash completely by October.
All of this is alarming news for the magazine industry, which, despite its recent forays into digital publishing, still depends on the postal service to deliver almost 90 percent of its circulation. Some publishers at the summit wondered aloud just how worried they should be. What would happen if the USPS actually shut down?