Washington Post 2008 Annual Report Download - page 34

ranged (on a short-ton basis) from a low of $540 per ton in January to a high of $699 per ton in November. (Because of
quantity discounts and other factors, the RISI index prices do not necessarily correspond with the prices actually paid by
the Company’s subsidiaries for newsprint.) The Company believes that adequate supplies of newsprint are available to
The Washington Post and the other newspapers published by the Company’s subsidiaries through contracts with various
suppliers. More than 90% of the newsprint consumed by WP Company’s printing plants includes recycled content. The
Company owns 80% of the stock of Capitol Fiber Inc., which handles and sells to recycling industries old newspapers,
paper and other recyclable materials collected in Washington, DC, Maryland and northern Virginia.
Newsweek’s domestic edition is produced by two independent contract printers at four separate plants in the United
States; advertising inserts and photo-offset films for the domestic edition are also produced by independent contractors.
The international editions of Newsweek are printed in England, Singapore, the Netherlands, South Africa and Hong
Kong. Since 1997, Newsweek and a subsidiary of Time Warner have used a jointly owned company based in England
to provide and procure production and distribution services for the Europe, Middle East and Africa edition of Newsweek
and the Europe edition of Time. In 2002, this jointly owned company began providing certain production and distribution
services for the Asian editions of these magazines. Budget Travel is produced by an independent contract printer.
The domestic edition of Newsweek consumed about 20,000 tons of paper in 2008, the bulk of which was purchased
from five major suppliers. The current cost of body paper (the principal paper component of the magazine) is
approximately $1,060 per ton.
In 2008, the operations of The Daily Herald Company and Post–Newsweek Media, Inc. consumed approximately
5,900 and 15,993 tons* of newsprint, respectively, which were obtained in each case from various suppliers.
Approximately 66% of the newsprint used by The Daily Herald Company and 66% of the newsprint used by Post-
Newsweek Media, Inc. includes recycled content.
More than 90% of the aggregate domestic circulation of both Newsweek and Budget Travel is delivered by periodical
(formerly second-class) mail, and most subscriptions for such publications are solicited by either first-class or standard
(formerly third-class) mail. Thus, substantial increases in postal rates for these classes of mail could have a significant
negative impact on the operating income of these business units. Postal rates have increased in each of the past three
years. Future postal rate increases generally will be limited to increases in the Consumer Price Index. Newsweek’s 2008
postage costs increased by approximately $2.7 million. Effective May 2008, the rate increase for all classes of mail was
2.4%, which will increase Newsweek’s 2009 postal costs (January through April) by about $0.5 million. In February
2009, the Postal Service announced rate increases of 4.8% for first-class, 3.9% for standard and 4.0% for periodical
mail effective May 11, 2009. It is anticipated that these increases will increase Newsweek’s 2009 postal costs (May
through December) by approximately an additional $1.3 million.
Competition
Kaplan’s businesses operate in highly fragmented and competitive markets. Kaplan’s Higher Education Division competes
with both facilities-based and other distance-learning providers of similar educational services, including not-for-profit
colleges and universities and for-profit businesses. Kaplan Test Prep competes in each of its test preparation product lines
with a variety of regional and national test preparation businesses, as well as with individual tutors and in-school
preparation for standardized tests. Kaplan’s Score Education subsidiary competes with other regional and national
learning centers, individual tutors and other educational businesses that target parents and students. Kaplan PMBR
competes with online providers of Multistate Bar Exam preparation services, as well as with various bar review providers
(the largest of which is BAR/BRI, a unit of The Thomson Corporation) that prepare students for the multistate portion of the
bar exam in addition to the state-specific portion of the exam. Kaplan’s Professional Division competes with other
companies that provide alternative or similar professional training, test preparation and consulting services. Overseas,
each of Kaplan’s businesses competes with other for-profit companies and, in certain instances, with governmentally
supported schools and institutions that provide similar training and educational programs.
Cable television systems operate in a highly competitive environment. In addition to competing with over-the-air reception,
cable television systems face competition from various other forms of video program delivery systems, including DBS
services, telephone companies and the Internet. Certain of the Company’s cable television systems have also been
partially or substantially overbuilt, using conventional cable system technology by various small to mid-sized independent
telephone companies, which typically offer cable modem and telephone service, as well as basic cable service. Even
without constructing their own cable plant, local telephone companies compete with cable television systems in the
delivery of high-speed Internet access by providing DSL service. In addition, some telephone companies have entered into
strategic partnerships with DBS operators that permit the telephone company to package the video programming services
* All references in this report to newsprint tonnage and prices refer to short tons (2,000 pounds) and not to metric tons (2,204.6 pounds), which are often used
in newsprint quotations.
22 THE WASHINGTON POST COMPANY