KUHN CAPITAL Tuesday, October 17, 2017
Dispatches from the front

Tech Presses Printers

The traditional printing industry -- fundamentally unchanged for hundreds of years and formerly inseparable from publishing -- is peeling away and spiraling down under attack from various technologies.

The trend, beginning about 20 years ago with PC-driven typesetting and layout software, has lately accelerated into a sort of perfect storm with increasingly efficient and cheap direct-to-press and direct imaging devices, the emergence of alternative media like the Internet, and declines in advertising industry sales. The upshot is brutal price competition and rapid industry consolidation.

As one example, according to Printing Industries of America, the number of Illinois printers shrank nearly 9% in the period 1998 – 2001, and some printers report that jobs are now fetching half the prices they did five years ago.

Winners & Losers
While the overall picture is one of declining dollar demand, certain forms of printing are faring better or worse than the average, according to Printing in the Age of the Web & Beyond by the Electronic Document Systems Foundation (EDSF). Reckoned to substantially diminish in absolute page count are printed products for sale -- those produced by book, periodical, catalog, directory, newspaper and other publishers. Among all printed material, such publishers drove demand for nearly 34% of printed pages in 2000, but this share is forecasted to drop to 22% by 2020. Key reasons for the decline are the rise of on-demand publishing technologies, which reduce print over-runs, and the migration of classified advertising to the Web.

The printed page market share lost by publishers will be gained by business and creative services users. Classed as business users are corporate purchasing and marketing departments and the small business (SOHO) market, with EDSF anticipating this group to increase its market share from about 43% to 50% by 2020. However, it is the creative services function that EDSF sees as the big market share winner, growing from about a 16% market share to 23% in this period. Creative services are defined as advertising agencies, graphic design services and related services.

In the printing industry, the big loser is the small, neighborhood shop, unfortunately the industry’s most common player, as their customers find cheaper PC-based solutions to their printing needs and as they fail to keep pace with the re-investment required to compete efficiently. Analysts place the total number of US printers at about 75,000, with nearly 80% of these employing less than 20 people and nearly half employing less than five. Said another way, only three percent employ more than 100.

Technology Knives at the Smaller Printer’s Throat
Some of the technologies that are driving such radical printing industry restructuring are:

• High-speed digital communications networks move print data files instantly through -- and permit automating chunks of -- workflow management. As a result, customers are becoming less tolerant of time-consuming, expensive document Fedexing back and forth.
• Computer-to-plate (CTP) technology eliminates the use of film, with its messy chemical processes and expense. CTP also generates faster and more precise registration of the image on paper, and since it moves the image data directly to the printing machine’s plate, speeds job turn-around.
• Variable data printing, made possible by electronic presses, permits personalized direct mail and books on demand for very short runs: the economics can even support a run of one. Related to this customization is technology that allows the electronic insertion of advertising into publications as they move through CTP.
• Faster, better, cheaper copying machines and printers are increasingly taking printers out of the loop as their former customers design and run short jobs in-house. Illustrating the impact that technology is having on where printing takes place, consider the following: in 1995, RIT Analyses figured that 76% of all pages were printed at the printers. By 2020, RIT estimates that 60% will be printed there, with 40% occurring in the office or home.

Printing on the Wall
The last time we saw an industry under such technological and economic pressure was when we examined encyclopedia publishing 10 years ago. That business, then beset by PC’s, was cratering at the rate of 20% per year, and didn’t stabilize until its managers found new, much smaller but at least receptive markets in third-world countries. Printers’ salvation does not lie in going overseas, however, but rather in embracing and exploiting the very technologies that are fostering their discomfort.

To us at least the writing is clear: to stay in business, most printers must step up to the capital expenditures necessary to differentiate themselves from the printing alternatives increasingly available in-house, or find other specialized services not easily otherwise reproducible by their customers. For those without the financial resources or the energy and creativity, now may not be a bad time to sell.

Ryan Kuhn

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