Publications struggle with rising costs of postage and printing.

Los Angeles-area publications are moving into the new year with rising postage and printing costs cutting into the higher revenues they are earning as the economy warms up and ad pages grow.

The rising costs of postage and the paper on which publications are printed will be substantial, said those in the publishing industry.

Susan Gates, publisher of Buzz magazine in Los Angeles, said the good news is that Buzz's advertising revenues rose 30 percent in 1994 over the previous year. However, the cost of second-class postage -- used by magazines such as Buzz to mail issues to subscribers -- jumped 14 percent as of Jan. 1.

And, Gates said, the price that Buzz pays for paper will soar 25 percent in January, with an additional 8-percent increase expected for April.

"These increases are the bad news that comes with the good news," Gates said.

Paper tigers 

The rising price of newsprint and glossy-stock paper has been particularly troubling for local publications. For years, the prices for paper had remained stable or declined, as the recession-driven decline in publications' advertising revenues lead to a decline in the demand for paper.

This led to a surplus on the paper market, resulting in lower prices, according to a Los Angeles-area newspaper official who asked not to be identified. However, the official said, the lower paper prices caused a number of smaller mills to shut down and prompted larger operations to slow down production.

This, in turn, eventually created a paper shortage, as well as concentrating the newsprint market into only a handful of companies, he said. As a result, prices have been going up since 1994, and will likely continue to do so through 1995, industry sources said.

Several newspaper industry sources reported that the price of newsprint climbed about 20 percent in the last six months of 1994, and will rise another 20 percent in 1995.

"Prices have been unusually low over the past few years," one official said. "Now there's not enough supply to keep up with demand."

And with newsprint costs accounting for anywhere from 15 to 30 percent of the typical newspaper's operating budget, rising paper prices have to be offset somewhere else if existing profit margins are to be maintained.

Cutting costs

Kevin Cody, publisher of the Easy Reader weekly newspaper in Hermosa Beach, said higher paper costs are forcing him to forgo buying new equipment. Printing expenses for the Easy Reader are up $1,000 a week due to paper costs, Cody said.

"I could have bought a new computer every week for $1,000," he said, "and I need them."

At the Los Angeles Times, higher newsprint costs are expected to add some $40 million to the newspaper's expenses in 1995, said Times spokeswoman Michele Biagioni. The newspaper is looking to operate more efficiently to make up for those costs, Biagioni said.

Postage hikes

The higher costs of 1995 are compounded for publications distributed largely through the mail, such as magazines. Second-class postage rates climb 14 percent as of Jan 1.

In general, said Buzz publisher Gates, the costs of paper, printing and postage take up about 35 percent of a magazine's expenses.

"Both of these increases hurt," Gates said.

"(The postage increase) could affect our bottom line by a couple million dollars," said Frederick R. Waingrow, president of Petersen Publishing Co. in Los Angeles, which owns 19 monthly magazines, including Motor Trend, Golfing and Sassy, and six bi-monthly magazines.

In the meantime, Waingrow said, Petersen's paper costs will go up about 8 percent in 1995.

To offset those increased costs, Waingrow said, Petersen is reorganizing and improving its management techniques and investing in new computers to operate more efficiently.

"It's very difficult to pass any of these costs on to either readers or advertisers," Waingrow said. "The market is too competitive."