Expected Rise in Paper Costs Leaves Publishers Shuddering (Dinosaur Media DeathWatch™)

Advertising Age ^ | November 26 2007 | Nat Ives

[Milhous]

Mags Could Be Paying 25% More Next Year Due to Mergers in Pulp Biz

Magazine publishers are already facing way too many rising costs: technology investments, postage, editors both diva and deserving. But the seemingly mundane budget line for glossy paper is suddenly the one everyone is worried about.

Welcome to our hell, publishers said last week.

"I frankly became more of a quasi-expert than I would want to be, only out of necessity," said John P. Loughlin, exec VP-general manager at Hearst Magazines.

The weakness of the American dollar is increasingly restricting publishers' overseas options.

Seller's market
More worrisome, paper seems to be emerging from a competitive era of cyclically rising and falling prices. This year already has seen increases implemented and announced. Now structural changes, including mergers and a growing role for aggressive private equity, look likely to drive prices up next year by another 20% to 25%, Mr. Loughlin said.

The industry hasn't seen a spike like that since 1995, when announced increases led to a brief run on the paper market that echoed Dutch Tulip Mania. This isn't spare change, either: Paper comprises some 15%-20% of publishers' costs, Mr. Loughlin estimated. One big publisher said it's still unclear how big a hit is bearing down. "We're still examining what we believe specifics amount to, and whether there are benefits to our scale," an executive there said, speaking on the condition of anonymity.

Planning the right strategic response is complicated by that fact that visibility, beyond such rough projections, remains limited. Paper manufacturers aren't too helpful on this score. A spokesman for AbitibiBowater, the result of an October merger and now the third-largest publicly traded paper company in North America, declined to discuss publishers' fears. "We cannot speculate on pricing on a going-forward basis," he said.

A spokeswoman for NewPage, which hopes to close on the acquisition of Stora Enso's North American operations by the first quarter, did not respond to a voicemail and an e-mail seeking comment Nov. 21.

Hearst ready
Mr. Loughlin said Hearst would get by. The company increased cover and subscription pricing on many of its magazines this year and is considering a couple more hikes next year. "We have tried to be thoughtful about our structure in the good years and in the tough years relative to paper prices," he said. "Nobody wants to be here, but frankly we're in a good position in that we've managed our costs and don't have to change the physical specs on the magazines."

The other obvious recourse, trying to pass costs along to advertisers, just won't work well enough for everyone, said Malcolm Campbell, publisher of Spin. "It's going to put some people out of business," he said.

And he didn't just mean the indies. "Don't kid yourself," he said. "There are a lot of large-publishing-company old titles that are very marginal anyway. You're going to see a lot of icons going down if paper prices go up that much."

Spin, he said, will continue just fine in print, even without exploring options like switching to cheaper paper stock or reducing the magazine's size. "There may be some adjustments," he said. "I don't think we're going to go that route. We'll find other ways."

[Milhous]

Paper And Ink Companies Screwed Again -- By Paper

Peter Kafka | November 26, 2007 7:40 AM

Magazine publishers can't blame the Internet for their latest problem: The price of paper, which accounts for 15% to 20% of their costs, is expected to spike by 20% to 25% next year, says AdAge.

Paper costs tend to be cyclical, but AdAge says the coming increase is different. It theorizes that this one is due to "structural changes, including mergers and a growing role for aggressive private equity." Some publishers may try to raise subscription and cover prices, and if that doesn't work...

The other obvious recourse, trying to pass costs along to advertisers, just won't work well enough for everyone, said Malcolm Campbell, publisher of Spin. "It's going to put some people out of business," he said.

And he didn't just mean the indies. "Don't kid yourself," he said. "There are a lot of large-publishing-company old titles that are very marginal anyway. You're going to see a lot of icons going down if paper prices go up that much." AdAge

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I am becoming increasingly convinced that the wealthy, powerful, and somewhat archaic media conglomerates that have controlled the messaging to America for so long are beginning to crumble. As they begin to deteriorate under the weight of a more democratic media system, opportunities to infiltrate the pervasive and corrupt lies and spread truth in love are becoming abundant. As America continues to grow fatigued and sluggish from decades of the mainstream media's preaching of godlessness, bright lights are beginning to shine in the most unlikely media places. And like any small light in a pitch black room, the effect will be unmistakable. - Brian Fisher, Coral Ridge Ministries

[Milhous]

ping

[george76]

Thanks

[Dr. Bogus Pachysandra]

I have a friend who does two catalogs a year for the company he works for.
Medical supplies, nuclear medicine, etc. They were shocked at the rise in cost for the paper required. With their budget, the paper they got was vastly inferior to last year’s stock.

[DManA]

If you’ve been following advances in electronic media you would not be investing in paper companies.

[Grampa Dave]

Interesting in that last week there was a post about the price of newspaper pulp going down in price due to less demand.

[goodnesswins]

Yeah.....Weyerhaeuser got out of the fine paper business because it just wasn’t worth it to them. I don’t get this either....unless....someone misjudged the market, or the making of paper just became so unprofitable and so many got out of its production that now there is a shortage of makers.

[Grampa Dave]

Either this writer is lying or spinning or the reports below re the decreases in newsprint prices are wrong:

http://www.mediainfo.com/eandp/columns/forestwebs_archive.jsp

[advertising guy]

science has been sitting on technology that uses plastic
thinner than paper,just as recycleable and a 1/3 cheaper cost per run....... know why it isn’t used ?

The tree industry and lobbyist.....liberals need a straw
dog in the environment

[advertising guy]

of course he is lying......it ain’t costs killing the rags...it’s content

[Grampa Dave]

“Yeah.....Weyerhaeuser got out of the fine paper business because it just wasn’t worth it to them. I don’t get this either....unless....someone misjudged the market, or the making of paper just became so unprofitable and so many got out of its production that now there is a shortage of makers.”

Thanks for your comments.

There is something wrong here:

http://www.mediainfo.com/eandp/columns/forestwebs_archive.jsp

[Califelephant]

But the seemingly mundane budget line for glossy paper...

It's possible that gloss (magazine) paper costs are going up while newsprint (newspaper) costs are going down.

[Grampa Dave]

Newsprint in Flux
Overcapacity threatens the health of the industry

By Chris Cook
First Published: PRESSTIME August 2007

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North America’s newsprint industry is in crisis, with many mills struggling in the face of dwindling demand and collapsing prices. At hand are dramatic structural changes that promise to reshape the manufacturing landscape and influence purchasing decisions for publishers across the continent.

excerpt - go to the link below for complete story:

http://www.naa.org/Resources/Publications/PRESSTIME-07-Aug-Newsprint-in-Flux/PRESSTIME-07-Aug-Newsprint-in-Flux.aspx

[okie01]

The price of paper, which accounts for 15% to 20% of their costs, is expected to spike by 20% to 25% next year.

It ain't gonna get them to support drilling ANWAR.

But we may have heard the last on "the plight of the spotted owl" and "the sanctity of old growth forests".

[abb]

Both stories can be correct. Magazines and catalogs and such use “coated” paper. Coated paper literally has a thin layer of clay smeared on its surface to make it nice and white so print and pictures show up clearly.

Newsprint is a rather low grade paper. Much of the pulp is recycled and has low strength because the pulp fibers are short and weak.

In recent years, many paper consumers import paper from foreign producers and mills. The weak dollar would tend to make imports more expensive.

[okie01]

The article isn't concerned with the cost of newsprint.

Instead, it concerns so-called "coated stock" or "glossy paper" -- substantially higher on the quality scale.

[KarlInOhio]

If you’ve been following advances in electronic media you would not be investing in paper companies.

There are two things which would need to happen to wipe out the paper catalogs/news.

1. Cheaper, lighter hardware for viewing. Get something the weight of a paperback book and an 8.5 x 11 inch viewing area. With the ability to cram more than 4 GB on a SD card, memory and the space required for it really isn't a problem.

2. A better reading program than the current Acrobat. Allow easy user annotation (like notes in the margins on paper) and multiple, user selectable viewing locations in the document (equivanlent to dog-earing pages or keeping fingers at the interesting pages) and I would have no reason to get paper catalogs or newspapers any more.

[Grampa Dave]

Thanks for the feedback.

The only glossy slick color paper out here is in the ads stuffed in the newpapers and particuliar on the weekends and like this pre Black Friday. Everything else is on what appears to be regular news print including color photos and a lot of color ads.

If the costs go up with the slick paper, the advertisers have to make the decision to stick with the more costly paper or to use regular news print. We are seeing more of the later choice. I doubt if the fishwraps get involved in anything besides stuffing their papers with these expensive glossy ads. The high dollar advertisers are probably the ones dealing with the increase purchase prices of the slick paper.

[Eric in the Ozarks]

Linerboard paper is still doing pretty well. Calendared paper (like magazines use) is going up because the coatings are going up. Newsprint sucks because newspaper circulation is down. Don’t see many afternoon dailies anymore...

[CIB-173RDABN]

I am willing to bet that if asked, most everyone that post on this forum could provide suggestions that would save the print media. I will go first.

1. Don’t piss off half your potential market by taking sides. Report the news fairly, honestly. You will be surprised how many would be interested in subscribing.

2. Hard copies of your product are going away. There may be a need for some, then make them pay extra. Put your content on line.

3. Want to charge for on line content, provide those extras that a user would not get anywhere else. Such as the ability to search your entire archive of contents going back to the first issue.

4. Allow forums such as FreeRepublic to pull articles out for discussions. This will generate traffic as people go to your site to read the article and then perhaps stay for something else.

5. Report the news, not opinions (I know I have listed this one already but it should be repeated since this more then anything else that is killing the print news media.)