Postal Rates: Up, Up, Up

On March 2 the cost of mailing a first-class letter will go up from 8-c- to a dime, an increase of 25%. Most Americans will feel that bite of inflation at once, but another may go unnoticed at first. On the same day, a new jump in second-class postal rates, which affect magazines and newspapers, will take effect. This increment is the first installment of a 40% rise to be spread over the next 28 months. It comes on top of a fiveyear, 145% rate hike begun in 1971. The new increase, being imposed on a compound basis, means that periodicals collectively will have to pay at least 242% more to use the mails in 1976 than they did in 1971.* Some predictions are even grimmer. Richard J. Barber Associates, Inc., an economic counseling firm in Washington, D.C., says that accelerating Postal Service costs will actually force a crushing 406% rise in second-class postage by 1976.

According to figures compiled by the Magazine Publishers Association, the new rate immediately boosts the average cost of mailing each copy of a magazine by six-tenths of a cent. That amount may seem modest, but it is not, when weighed against the harsh fact that the average profit now earned on each copy of a U.S. magazine is only eight-tenths of a cent. And the bulk of the increase is yet to take its toll.

Soaring rates have already claimed some significant victims. Executives of both Look and LIFE blamed projected postal increases as a major factor in the decision to fold those magazines.

To fend off a similar fate, many magazine publishers now face a bleak future of radical cost cutting.

Part of the March 2 increase involves a rising charge for each piece of second-class mail. But the increase is also based on a complicated formula involving a magazine's ratio of ads to editorial content, its weight and size, and the distance it must travel. Thus no two magazines will be affected in precisely the same way, but all that use the mails are hurting. Says National Review Publisher William Rusher: "Journals of opinion traditionally lose money. The National Review is a journal of opinion, so the postal rates won't eat into our profits--they will simply swell our deficits. It's a very serious problem for us."

Harper's Publisher Russell Barnard says that his projected postal expenditures during the next two years "could more than wipe out our total profits." Hearst Magazines President Richard Deems says, "We're spending every waking hour thinking about how we'll keep our publications as viable businesses."

Postal Service officials do not view the publishers' dilemma as their problem. The Postal Reorganization Act of 1970, which created the present Postal Service as a quasi-independent body, stressed that most classes of mail should pay their own way and contribute a "reasonable" share to the service's general overhead by 1976. The service clearly regards that mandate as all important, and never mind the consequences. "I don't see why any enterprise should expect any sort of subsidy," says Postmaster General Elmer T. Klassen, 65, who was with American Can Co. for 43 years.

"The only way to look at this is that we're running the Postal Service like a business organization." Critics point out that the service retains nonbusinesslike features; for instance, it charges the same flat rate to mail a letter across the street or across the country, despite the widely differing costs of each operation.

Ralph Nicholson, a senior assistant postmaster general, argues that the old U.S. Post Office performed many different roles essential to the developing nation. It was a builder of roads, an employer of last resort. It charged low rates to second-class users to stimulate an infant free press and the flow of ideas throughout the country. Those days are over, Nicholson says, and adds: "Maybe we look like the heavies in this second-class matter, and I guess we are."

Loaded Rivalry. The Postal Service says that publishers should be tough enough and inventive enough to offset their new mailing costs with new revenue. That sounds easy, but the experience of the magazine industry--and the record of its casualties--shows that it is not. Businesses ordinarily pass along added operating costs to their customers.

But magazines face a damned-if-they-do, damned-if-they-don't choice. They cannot afford to absorb the new rates, and the entire history of subscription promotion shows that many readers will refuse to pay the freight as well.

The fewer number of people able to afford the higher prices will mean a lower rate base for advertising. Advertisers seeking large audiences will have further incentive to pump still more dollars into television, already a rival for magazines' advertising. In many ways, this rivalry is loaded against magazines.

Television has a government-licensed monopoly over the public airwaves. The cost of "distributing" a program is virtually nil, and it is no higher for 40 million viewers than for 4 million. There is no correlation between cost and audience size. But every added magazine mailed through the Postal Service--another monopoly--means added cost.

Many publishing experts worry that skyrocketing postal rates will enhance TV's present advantages.

Stymied by the Postal Service and harsh economics, publishers continue to seek help in Congress. But despite criticism of the second-class increases by such remarkable allies as Edward Kennedy and Barry Gold water, Congress has been reluctant to intercede in matters it delegated to the new Postal Service in 1970. Many Congressmen remain unmoved by the magazines' plight. A House bill drafted by Representative James Hanley that did not reduce but merely stretched out the phased increases from five to ten years died last summer. The Senate Post Office Committee will soon vote on a similar bill, authored by Committee Chairman Gale McGee.

Members are reported to favor the measure by a narrow 5-to-4 margin, and McGee may decide not to seek full Senate approval if the vote remains that close. Basically, any congressional remedy would involve an appropriation to offset revenue that the Postal Service seeks from second-class users. Klassen opposes that approach.

Congress is free to amend the postal law. Klassen's position, however, has some appeal on Capitol Hill because it is associated with traditional marketplace economics. But Congress helps particular industries when it considers that the public interest is at stake, and the Klassen policy is a wrenching reversal of another U.S. tradition. Says Historian Arthur Schlesinger Jr.: "The reason that the founding fathers believed that newspapers and magazines should be transmitted at preferential rates was because they perceived a powerful public interest in the dissemination of information and opinion."

This interest still exists. The Postal Service's own policy demands that it "bind the nation together through the personal, educational, literary and business correspondence of the people." The balancing of this intangible requirement with the ambition of the Postal Service to break even may be a difficult task, but is surely an essential one. Says Schlesinger: "To condemn magazines to a lingering death would be, as the founding fathers well understood, to weaken the foundations of the Republic."

*Magazines paid $84.5 million in U.S. postage in 1971. The projected yearly payment as of July 1976 is $289 million, even if, as seems unlikely, there are no additional increases beyond those now scheduled.

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