Junk mail boon: Postal Service giveaway hammers newspapers

Preprint advertising - the colorful inserts that fatten up your Sunday newspaper - represent a quarter of the newspaper industry's revenue, according to Alan D. Mutter, a former Chicago and San Francisco columnist and editor who blogs as the "Newsosaur."

As big box stores have lost sales and profit to Amazon and other online merchants that sidestep a lot of brick-and-mortar overhead, those firms have cut back their wide-reach advertising. Nonetheless, "Representing some $5.2 billion a year in sales in 2011, advertising inserts from companies like Best Buy, Target, Kohl's, Home Depot and Kmart represent the second largest revenue stream left to an industry that has lost half of its sales since revenues peaked at $49.4 billion in 2005," Mr. Mutter recently blogged. "The only bigger revenue source for publishers are the local retail ads carried in the pages of their print editions."

This and every other traditional American newspaper has a stake here. We're not disinterested parties. And because those revenues help pay for the stories and photographs you enjoy in the newspaper - as well as the staff that print and deliver it - you're not a disinterested party, either.

Which is why newspapers around the country are informing their readers about a rate cut granted last week by the U.S. Postal Service to Valassis Communications, which will enable the direct-marketing company to mail certain types of national retail preprints for 42 percent less than newspapers are required to pay for the same service.

The Newspaper Association of America says the Valassis deal could divert no less than $1 billion in advertising revenues from newspapers to the direct-mail company, which generated more than $2 billion in sales in the past 12 months by mailing out its Red Plum ad circulars. The discount will let Valassis mail a 9-ounce bundle of inserts for 17.2 cents apiece. A newspaper would pay 25.4 cents per unit for an identical package sent to a non-subscribing household in its delivery area. Prior to the adoption of the new discount, Valassis and other saturation-mail services already were being charged 3 cents per piece less than newspapers.

Competition is fine. But should the Postal Service be stacking the deck this badly? When the deal will earn $15 million - a thousandth of its projected $14 billion loss this year?

The NAA calculated that the Valassis discount will put $2.5 billion in existing newspaper ad revenues at risk. While most newspaper publishers now also make their news available online, the old-fashioned "print" newspaper still represents the bulk of their investment and their income. Around the country, lots of people still like to read them.

The Postal Service has other plans. They can't be allowed to stand. Postal Service regulators must reject them.