STEVE INSKEEP, HOST:
The United States Postal Service has cut staff, proposed eliminating Saturday delivery and has just announced higher postage rates, all in an effort to offset record losses. Now, while the rate increases are in most cases really small, they could have a big effect on small business.
NPR's Sami Yenigun reports the increases are already affecting independent record labels and distributors.
SAMI YENIGUN, BYLINE: A postage hike is a familiar bump in the road for small labels. Brian Lowit, who has been working at Dischord Records in Washington, D.C. for 10 years. He says this time it's different.
BRIAN LOWIT: We've gone through a lot of increases in the postal rates before, but I've never seen one this drastic.
YENIGUN: Dischord is home of the hardcore pioneers Fugazi.
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YENIGUN: Dischord Records' Brian Lowit says about a quarter of his mail orders come from overseas, so to ship that Fugazi P to London...
LOWIT: It's about $5.50 more than it was on Saturday.
YENIGUN: Lowit says on Saturday, it cost him 13.17 to send a record via U.S. Postal Service to the U.K. Today, it costs him $18.60. For an independent label that ships several hundred records overseas every week, that's a lot of money.
JEREMY BIBLE: The domestic is real minimal. I am concerned about the international.
YENIGUN: That's Jeremy Bible, who runs Experimedia, a label retailer and distributor of CD's and LP's.
And the domestic increases are minimal. First class letters and postcards rose a penny. First class packages rose around 3 percent. And Express mail rose about 6 percent.
But Bible says think about everything that goes into the final LP before it gets shipped, from the paper sleeve, to what gets glued to the center of the vinyl.
BIBLE: The labels for when they're manufacturing and supplies, probably even up to the manufacturers, such as the pressing plants who have to have stuff shipped to them.
YENIGUN: The biggest, says Bible, will be on small record companies that rely on direct orders from their fans.
BIBLE: In some of these cases, the shipping is starting to become more expensive than what the people are actually buying.
YENIGUN: In other words, that Fugazi record that cost almost $20 to send to London only cost about 11 bucks to buy from Dischord.
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YENIGUN: The Postal Service says it has to raise rates, and 46 cents to send a letter is cheaper than just about anywhere else in the world. Earlier this month, Postmaster General Patrick Donahoe said USPS is losing average of $25 million a day.
In an email, a spokesperson said that the postal service is waiting for Congress to enact what she called, comprehensive long-term legislation that creates a more flexible business model for the agency. For now, the best way for small record labels to ship overseas might just be to avoid the postal service altogether.
Ron Morelli runs the label L.I.E.S. that sends a majority of its music abroad.
RON MORELLI: My distributor pays for all the shipping costs. They get a lot better rates from shipping in bulk with a freight shipping than they would having to ship everything through the USPS.
YENIGUN: Experimedia's Jeremy Bible is already shipping in bulk himself.
BIBLE: Like for the U.K., I have a friend over there, when we put out new releases I send him a large box. So then they'd hold onto the stock and then when we need to fulfill an order for that country or a wholesale order to the store, then they would handle the fulfillment of that.
YENIGUN: But, he says, rising shipping costs don't bode well for the future.
BIBLE: We're probably in the last great era of the physical music media.
YENIGUN: Of course, some would say that era has already passed.
Sami Yenigun, NPR News. Transcript provided by NPR, Copyright NPR.
When postal rates went up this week, labels who ship CDs and LPs saw rates jump. They say the costs will make their way to music fans.
Prices on mail sent through the U.S. Postal Service increased this week — the price of a first-class stamp now costs 46 cents, up a penny. But for small businesses that ship products overseas, like many independent record labels, the costs could be much larger.
Brian Lowit, who has worked at Washington, D.C.'s Dischord Records for 10 years, says that while a postage rate hike is a familiar bump in the road, "I've never seen one this drastic."
Dischord, the label started and run by Ian MacKaye of the local band Fugazi, has long been known for selling moderately priced records. A copy of Fugazi's 1991 album Steady Diet of Nothing still costs just $10 on CD and $11 on LP. When a customer in Europe or Asia buys a record, though, the label has to add in the cost of shipping. And for those customers, that cost is now much higher.
Dischord also distributes releases by many other labels. Lowit says that on Saturday, it cost $13.17 to ship a record to the U.K. Today, it costs him $18.60. For a label that ships several hundred LPs overseas every week, that's a lot of money.
Last year, the USPS posted record losses — nearly $16 billion — and the rate increase is intended to help the agency generate revenue. In a statement earlier this year, Postmaster General Patrick Donahoe said the USPS is currently losing $25 million per day.
By law, the Postal Service is only allowed to raise the average price of its services at a rate equal to or less than the rate of inflation, which is currently 2.570 percent. On Sunday morning, rates rose across the board, but the distribution of those increases was different for different services. The cost of postcard and first-class stamps increased by a penny. Domestic first-class packages are up around 3 percent. Express mail went up about 6 percent.
"The domestic [increase] is real minimal, but I am concerned about the international," says Jeremy Bible, who runs Experimedia, a label, retailer and distributor. Think about everything that goes into the final LP before it gets shipped, he says, from the paper sleeve to the circle glued to the center of the disc: "the labels for when they're manufacturing, and supplies, probably even up to the manufacturers such as the pressing plants, who have to have stuff shipped to them."
Bible says the biggest hit will be taken by small labels who rely on direct orders from consumers to stay in the black.
"In some of these cases, the shipping is becoming more expensive than what the people are actually buying," he says. "I'm really not sure what the Postal Service is thinking, because they're making people look into other options."
The best option for small labels who ship overseas may be to avoid the postal service altogether. Ron Morelli, who runs a record label called L.I.E.S. Records, says he ships a majority of his music internationally via a distributor who has long used a freight shipping company rather than the Postal Service. Morelli says that so far, the price hike hasn't affected him.
Other options for labels could include pressing their vinyl overseas, assuming they can find a plant. Or they could do what Jeremy Bible does and ship large amounts of albums — before they're purchased — to a middle man.
"Like for the U.K., I have a friend over there, and when we have new releases I send him a large box, so then they'd hold onto the stock and then when they need to fulfill an order for that country, they'd fulfill that," Bible says.
Despite these workarounds, he says, rising shipping costs will make selling physical copies of music more difficult.