It is just days before a significant change in the rates and methods for determining periodical postage take effect.  The changes affect not only the rates of mailing, but also alter costs depending on the process of mail preparation - moving to more of a shape based pricing model.  Average rate increases for US domestic mailing are estimated at between 11.7% and 30%, but increases for foreign mailings are much more substantial.  An April article in Folio covered the pending increase.  There have been lobby efforts by smaller publishers who are hardest hit by the increase.  In a L.A. Times May 30 article posted by Bosacks, the impending impact of these changes are examined.

As one publisher put it “The postal increase will definitely drive publishers to more proactively explore digital editions. That Gen Y is already digital just provides us with the impetus to get there sooner.”

I attach below the content of a letter included in the May 28, 2007 digital issue of Red Herring.  Mr. Vieux's points highlight what we are seeing as publishers begin to struggle with rising distribution costs, the need to find readership globally, and the emergence of video as an important tool in a publisher's offering.

P U B L I S H E R ’ S L E T T E R (May 28, 2007 issue)

Digital Herring Delivers

Alex Vieux, Publisher

Almost seamlessly, the world has migrated to digital media. Millions of readers have already switched while a new generation has grown up with movies, music, and news delivered on iPods and PCs. Red Herring has witnessed and reported on these changes and, like other media properties, we are transforming our business in keeping with the times. Indeed, we are pushing deeper into this new world in three directions.

First, Red Herring has committed to dramatically expand its reach and work toward serving a wider group of paid subscribers. As it is, Red Herring’s loyal community of entrepreneurs has grown exponentially since the bubble days.

Amid accelerating globalization, the boundaries of innovation now encompass new fields such as cleantech, mobile, and search. As shown by our recent Red Herring Europe 100 (and as will be in our Red Herring Asia 100 in August), tens of thousands of entrepreneurs and companies are determined to make a difference in ever more distant places.

The world is definitely shrinking, and the paradox of entrepreneurial globalization has not been lost on Kleiner Perkins’ Randy Komisar, who sees the attraction of Silicon Valley only increasing, not lessening, as entrepreneurs pursue opportunities farther and farther afield. Simply put, the appetite for learning how to build large, innovative startups keeps pulling them toward Northern California—which explains why Red Herring placed its roots just off famous Highway 101.

Second, Red Herring will dedicate more resources to reporting and analyzing news, and delivering the magazine to a broader circulation base across the globe. Serving

a bigger readership efficiently requires increasing our digital paid subscriptions. We believe that if we could achieve almost half a million print subscribers by 2008, a banner year by all metrics, Red Herring should be capable of approaching the same number—if not a higher one—by January 1, 2009, with the help of digital distribution. In a world which has morphed so quickly, many more of our readers will be paid digital subscribers.

Red Herring’s expansion into digital paid subscription will occur in several steps. Current print subscribers, who spent $1.02 per week to receive our magazine at their doorstep, will see no immediate change. We will continue to serve them, but when we renew their subscriptions, it will be at $1.70 an issue, a price that recognizes the higher cost of print production and distribution compared to digital.

Starting next week, subscribers who paid the lowest consolidated rates will receive Red Herring in digital form. They can switch back to paper on request, at the new subscription renewal rate.

Eventually, readers will be offered their choice of print or digital at different rates. The digital version will be priced at $19.95. There will be exceptions; our student rate will not exceed $9.95 for Red Herring’s digital edition. To order a digital subscription, or switch from print to digital, contact info@redherring.com.

Another group that can take comfort in our new model will be advertisers who will reach a wider audience, as a coming audit will show, with no proportional increase in ad rates.

Third, we understand that the content industries will continue to be challenged. User-generated content must find its place alongside traditional journalism.

Blogging’s influence cannot be overstated. Online properties are offering more and more video streaming, and we are focusing on offering a richer visual experience to Red Herring readers. Mixing in many of these new elements, while adhering to the best standards of journalism, can make for an interesting balancing act. But we are committed to making real progress in these different domains in 2007.

Digital media technology delivery has improved so much that it will also help Red Herring optimize both its presence and coverage. Digital players such as Zinio and others have developed products to provide a rich magazine experience, and as more players move into digital delivery, prices keep dropping—just as print distribution spikes as a result of energy and other cost increases. With trends unlikely to dissipate, Red Herring, no less than anyone else in print media, has had to rethink its distribution model.

Ironically, troubleshooting our way through the challenges of print has yielded options with a lot of upside. For one thing, a two-tiered print-digital approach—largely biased toward digital—frees up more resources to widen and deepen reporting, increasing newsstand presence (domestically and internationally) and addressing other quality issues.

Thank you for your continued support, and for the time you set aside each week for Red Herring.