Dr Joe's Printing Industry Blog

Excellent briefing from publishing investors Jordan, Edmiston
http://www.jegi.com/docs/2005July.pdf
Access to prior issues of their briefings
http://www.jegi.com/section.asp?sectionTitle=clientBriefing

Online newspaper experience of The Scotsman and others
http://www.pressgazette.co.uk/article/280705/taking_the_paper

Boston print buyers newsletter (this one is about reluctance to take small orders, and hence a sign of our weakness, and the exact opening that Vistaprint and others exploit)... please note that this is the tip for 8/1/2005, and it will change. The newsletter is worth subscribing to...
http://www.bostonprintbuyers.com/printtips/index.html

The Commerce Department released multi-year revisions to GDP data, and the first thing I looked at was 2001. The rule of thumb is that two negative quarters of GDP is the definition of a recession. I have written many times that there was a chance that the data may show that we had no economic period that fit that definition in 2001. Sure enough, the third quarter of 2001 (page 8), which had been reported as negative, partly from the effects of 9/11, is now positive, a tiny +0.4%.
http://online.wsj.com/documents/bbgdp-20050729.pdf

The PIA Financial Ratios are a valuable industry resource. On June 30, PIA released their 2005 report of 2004's profitability. Most people read these and just look at the data on the surface. PIA reports data comparing profit leaders (the top 25%) and average profits. They do not report profit laggards. Because profit leaders data are part of the average, we don't have data about the companies that are not leaders... that is, unless you calculate it. It's not pretty. It's obvious that only the leaders make money. The others barely break even.



Bob Rosen brought this to my attention a few years ago. I didn't believe it then until I calculated it myself.

When reading the PIA release, it's easy to say that for 2004, profit leaders were almost 4x more profitable than the average printer (9.4% vs. 2.5%; the actual difference is 3.76x). But the real calculation is the difference between profit leaders and "laggards." It's really 47x! (9.4% vs. 0.2%).

All data are from the PIA release except for the column in yellow, which are the result of my calculations using the PIA data.

And you thought e-paper would affect only publishing and commercial printing? How about packaging?
http://www.foodqualitynews.com/news/news-ng.asp?n=61561-e-paper-future


Merrill Lynch says a "media malaise" has descended upon traditional advertising, and says there is a lot of downside risk
http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticleHomePage&art_aid=32529

Print media buyer news
http://www.mediabuyerplanner.com/print/

TV Guide, the latest e-media victim, cuts circulation by two-thirds, changes format
http://news.yahoo.com/s/ap/20050726/ap_on_en_tv/tv_guide_revamp

Text messaging catching on across all age groups
http://www.usatoday.com/money/2005-07-27-text-messaging_x.htm

Record number of teens online
http://apnews.myway.com/article/20050727/D8BK01800.html

Shortage of online journalists?
http://www.journalism.co.uk/features/story1407.shtml

Whitewash? Trade association American Business Media trumpets ad revenue growth, but you can't find news about the decline in ad pages in their release. It always pays to look at the data and decide for yourself. No one is helped by putting a smiley face on stuff when they can see a bump under the rug where the real situation has been swept.
The release: http://www.americanbusinessmedia.com/abm/NewsBot.asp?MODE=VIEW&ID=108&SnID=739704673
The data: http://americanbusinessmedia.com/images/abm/pdfs/resources/BIN/BIN_MAY_2005.pdf

Yahoo! as the next media giant
http://www.fortune.com/fortune/technology/articles/0,15114,1086026,00.html

The recent issue of Presstime as published by the Newspaper Association of America discusses e-paper and other technologies and their ability to replace "newspapers." It's a good article, and can be found at http://www.naa.org/Presstime/PTArtPage.cfm?AID=7124

But it reminded me that people are missing the point. Newspapers will not be replaced. They will be rendered irrelevant over a long period of time. That is, each benefit that one gets from a newspaper will be supplied by a range of other things. eBay did not decide to kill the newspaper classified business directly, but it eats away at the use of classifieds, slowly. Each part of the newspaper is undermined by not one thing, but by many things. Why someone would want to "replace" a newspaper is beyond me. The market needs that are addressed by newspapers today are different than those of 50 years ago. But no one is in danger of picking up Tuesday's newspaper which is on newsprint, and then going to the newsstand on Wednesday and finding an electronic screen in the spot Tuesday's was. No, the newspaper as a consolidator of information is what will be disaggregated into many information alternatives and formats.

Let us not forget that newspaper owners are among the biggest investors in technologies that compete with newspapers: other publishers, broadcasters, web sites, and others, with more investments to come. Often the whining about the future of the newspaper is the whining of a division of a conglomerate that has other divisions cheering at the very same moment.

I'm finally cleaning my office and I got down to the part of the pile that had things I wanted to write about but never got around to. It's a direct mail piece from a direct marketing organization, and it's very well done. It minimizes the number of items that are varied, which is a good thing, and it has a nice tie-in to the Internet where I can register on a personalized web page. The printing looks pretty good, too.

One problem: it's addressed to me at the business I sold more than four years ago. Was it worth it? Could it have missed its target using a static piece for less money? Does the extra cost of personalization get paid for by increased response? I don't know if anyone has the definitive answer to these questions. Though I wonder; if it was as good as people claim it is, I would see more of these kinds of mailings, and more of the equipment capable of doing it would be being sold.

I still have not receieved a 1:1 piece that is not a credit card statement or affinity program statement that is accurate, ever.

In what had to be one of the worst-kept industry secrets, Flint Ink was sold and is now part of Xsys. The release was sent to me by the public relations agency Broadford & Maloney this morning. Yet, it was not posted to the web sites of Flint or Xsys as I write this about an hour later. It is on the site of major investor http://www.cvceurope.com/docs/Flint%20Ink.pdf

It's hard to coordinate cross-media, of course, but to not have it on the company web sites? Sheesh!

Anyway, why Flint was denying it was for sale but was "in a number of discussions" was beyond me. Everyone knows what "in a number of discussions" just like we do "pursuing strategic alternatives means." I wrote about it in my blog posting of May 18 as part of a "non-denial denial." Ah, English... it helps you say what you don't mean and still mean it.

Sun Microsystems is letting workers work anywhere
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/07/18/TELECOMMUTE.TMP&type=tech

E-commerce up 24% last year (excluding travel), and is now 5% of retail sales
http://www.washingtonpost.com/wp-dyn/content/article/2005/07/16/AR2005071600158.html

Top executives are now blogging
http://www.usnews.com/usnews/biztech/articles/050725/25eeblogs.htm

They're going to deny it, but it sounds like International Paper is having a fire sale. Of course, the funniest part to me is the sale of timberlands, which some government will buy at the urging of environmental groups, when these lands will be much cheaper in a few years as recycling grows and use of e-media become more commonplace.
http://biz.yahoo.com/prnews/050719/nytu064.html?.v=15

Personal note: Ed Merkel, longtime Heidelberg executive, died at 85 on July 5th. Ed was instrumental in my career. If anyone would like to contact Betty Merkel, please send me an e-mail.

Fujitsu had their big announcement last week (see the second post for 7/13 below), and news of another breakthrough comes from Scotland. The article misspells one of the company names: it's actually DuPont-Teijin. I had thought the e-paper era would be about a decade away. It's probably closer. When we see the first products in this category commercialized, they probably won't be called e-paper, but be called "light-weight screens" or "thin screens" or something like that. We haven't seen samples yet, but imagine we will sometime. Maybe if I keep writing about it, someone will think I'm an expert...

Article: http://news.scotsman.com/scitech.cfm?id=1640772005

DuPoint-Teijin: http://www.dupontteijinfilms.com/ (not a very informative site)

Paisley University Thin Film Centre: http://www.thinfilmcentre.co.uk/

Plastic Logic: http://www.plasticlogic.com/

Printers are "consolidating" all of the time, and in some ways that slip under the radar screen of the press. Sometimes, owners just close and open as new businesses with someone else, without selling or buying another business. Others go bankrupt and start new. Yet others buy the "sales book" of a printer that is closing, and it's never noted as a consolidation. Only a few deals are big enough to make the news.

I bring this up because I saw a Denver Post article today about A.B. Hirschfeld Press Inc. of Denver. A few items interested me. "The proposed transaction calls for the merger of A.B. Hirschfeld, National Printing and Packaging Co., digital printer C&M Press LLC and printing software firm OSI6 LLC, all based in Denver," the article states. Ummm... wait a second... a traditional company merging with a digital firm and a printing software firm. This is not the consolidation of printing companies one typically thinks of. None of these companies are similar, and they bring different skills to the party (that doesn't mean they can easily integrate them, but they are on the right track in my mind).

The article degenerates, however, with the usual "There's massive over-capacity in the printing industry," quoting the owner. Yeah, like a single merger will affect industry capacity. So on one hand, this is a creative approach, but we're given the usual uncreative drivel at the end. The comment ignores that print's role has changed because of Internet competition, and yesterday's announcement by Fujitsu means that competition will be coming from other quarters as well. Overcapacity is meaningless. Marketable capacity is the only thing that matters, and has little to do with equipment, and that's hard to understand concept for some executives, even those who were profitable for years when people were complaining about capacity as well. (It's also funny to see the remark that digital printing is more profitable than traditional printing, which would make no sense, as digital printing has added to industry capacity, and should have the effect of depressing market prices even more).

Amidst the complaints about overcapacity, the company is planning to invest in China, according to the Rocky Mountain News version. That is a great move, and more printing companies should do it, but it's a reminder of yet another aspect of the capacity discussion. How do we measure it? Nowadays we have to measure it worldwide, that is, if measuring capacity even matters.

Articles:

• http://denverpost.com/business/ci_2858806
• http://denver.bizjournals.com/denver/stories/2005/07/11/daily31.html
• http://www.rockymountainnews.com/drmn/business/article/0,1299,DRMN_4_3925060,00.html

Yet another consolidation hit the news (or excuse me, Google News Alerts), this time in Midland, Michigan at Etheridge, a Consolidated Graphics (CGX) company. This one, however, was blamed on "faster presses." But finally, it's a story that talks about print demand, and how it's changed. This report should be understood as good news, about a company that's reorganizing and modernizing, and offering new services rather than becoming another Internet or (gasp) "overcapacity" victim.
http://www.mlive.com/business/grpress/index.ssf?/base/business-3/1121352586298000.xml

The Publishers Information Bureau released data about ad pages, and it looked more bullish than it really is. Year-to-date pages are up 1.8%, and revenues are up 9.5%. Pages are pages, so they should be compared to real GDP; they lag significantly, as GDP is up +3.8%. Dollars have not been adjusted for inflation, and they should be compared to current GDP. That looks more favorable, as current GDP, unadjusted for inflation is about 6%, +9.5% looks pretty good. The problem is that dollars are computed on a rate card, or "list price" basis. From the bellyaching of publishing execs and industry analysts, it's doubtful that those +9.5% are actually logged on the books of the reporting PIB companies.

Release: http://www.magazine.org/Advertising_and_PIB/PIB_
Revenue_and_Pages/Revenue___Pages_by_Ad_Category__monthly___YTD_/12702.cfm
Article:
http://adage.com/news.cms?newsId=45536

The most interesting article is the blog post just before this about e-paper, but these got my attention as well.

Good commentary in Advertising Age about disintermediation in the publishing business (another "hey, wake up" article), and about all marketers who should fear becoming "irrelevant"
http://adage.com/news.cms?newsId=45512

College bookstores pushing e-books
http://www.sciencedaily.com/upi/?feed=TopNews&article=UPI-1-20050711-10590500-bc-us-ebooks.xml

USPS starts address correction service (do you think that any e-mail service will offer this? I doubt it).
http://www.dmnews.com/cgi-bin/artprevbot.cgi?article_id=33340

Today, Fujitsu announced a breakthrough in color e-paper. (And we we barely used to b&w e-paper!... ahem... b&w didn't really ever come to market). This is a big story, and I can't stress that enough. It will be very interesting to see if it's covered by the graphic arts media at all.

http://www.fujitsu.com/global/news/pr/archives/month/2005/20050713-01.print.html

The show was small but a lot better at Hynes than at the Boston Convention Center. Hynes is better tied to the flow of the city, its transit, and its interesting places, despite being obsolete in so many ways.

An interesting product shown was at ThinkFree. The company was one of those overfunded Internet companies from long ago that has survived in smaller form. They have a decent office suite for those who don't need exotic bells & whistles. It has superb compatibility with MS Office. They have a product that allows putting Powerpoint presentations on iPods or other MP3 players and you can then hook the iPod to a projector. The release is at http://www.thinkfree.com/whatsnew_con.jsp?seq=120

They also have an on-line version of their suite that allows you to work on files online and save them in a free secure 30mb space on their servers. You don't even need to have office suite software on your computer. (they tried this before, but without broadband it really stinks; broadband changes everything, and here's another case of it). It has a feature to post live documents as part of your blog as well, and I'll use it here sometime soon (I experimented, didn't like the results, but it was the settings I chose). The suite is just $49 but you get a 30-day free trial by downloading. You can use the online service for free-- just sign up for a free account at http://online.thinkfree.com/index.jsp. There are some Internet software discounters selling ThinkFree for $10-15; beware... it's version 2.3 and not the latest version.

The on-line version of the company was the original intent with the "ASP" craze how no one would have software but use browsers for everything. The investors would get rich from banner ads that would be up as people were using the elements of the suites. That thinking is so '90s. :)) It's not their thinking now; they'll use the online version to sell suites and sell upgrades to greater server space, and other products and services, etc. Their press kit was a bit disappointing, showing examples of how well it handles MS Office files, but then dumping on OpenOffice with examples of bad conversions by that product. I've been using the beta of OpenOffice 2.0 and it's been great: the presentation program is greatly improved. I'm considering switching totally to it when it is released as StarOffice 8.0. I thought ThinkFree's positioning against OpenOffice was interesting. Since the company is Asian in ownership, they see far more Linux and open source software, of which OpenOffice has emerged as the most important full-featured suite, having far greater penetration than in the U.S, or Europe. This doesn't mean I won't buy ThinkFree, which I will, because as a software geek I buy everything and find all kinds of little things that some products do better than others (like this blog feature in TF3.0). But the shots at OpenOffice are done without recognizing OO features that TF doesn't have.

Download the latest OpenOffice beta at http://download.openoffice.org/680/index.html

The keynoter on Tuesday was columnist Andy Ihnatko. I had never heard of him, so obviously I never heard him speak. He was superb. His Chicago Sun-Times columns can be accessed at http://www.suntimes.com/index/worktech.html and his blog is at http://www.cwob.com/yellowtext/

All in all, despite being a PC user, I survived, and no one suspected that I was not one of the Mac-ians. Last year's show was a disaster, but this was far better run in a more appropriate location. Maybe, one day, Apple will come back and exhibit.

Last year I went undercover by wearing a t-shirt that said "Macintosh for Productivity, Palm for Mobility, Linux for Development, and Windows for Solitaire." Always a hit with the crowd. I got stopped a few times in Busch Gardens in Williamsburg a few years ago with people who wanted to take pictures of it. Got it at MacWorld NY 2001, and I forgot what vendor it was. I didn't see it at the show. Strangely, it was funny how much stuff at Macworld works on Windows, and how often I saw the word "Linux" there.

Though the e-mail prices look high (almost $300/M) it must be remembered that they're no postage cost, and no printing costs. For first class, postage alone is $370/M, so e-mailing starts with a big advantage right there. E-mail has no paper costs; costs are only incurred by the receiver if they choose to print it.

http://www.sitepriceindex.com/2005/default.htm

Take the data with a grain of salt: these are list prices. Just like magazine space rates, on which the Publishers Information Bureau data are based, everything is negotiable for the right situations.

Effectiveness of e-mail has stabilized, and deliverability is getting better. From the data I've seen, they can even lower their prices should competition with other media get more intense.

I’ve been catching up on my reading... here are the most interesting stories I’ve found from the last two weeks:

FCC reports broadband connections in 2004 went up by 34%
Full report, including press release and statistics: http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/hspd0705.pdf

The Direct Marketing Association issued its report about media integration (cross media, multichannel marketing, whatever else you want to call it)
Press release: http://www.the-dma.org/cgi/dispannouncements?article=328

Advertisers looking for new ways to reach their target markets
Article: http://www.usatoday.com/money/advertising/adtrack/2005-06-19-cannes-box_x.htm

Newspaper readers shifting to the Internet
Article: http://www.adage.com/news.cms?newsId=45413

Why can’t marketing and sales departments get along?
Article: http://www.cmomagazine.com/read/070105/culture_crash.html

Bigfoot Interactive e-mail delivery report
Press release: http://www.bigfootinteractive.com/site/pressroom/press_releases/pr2005/pr-06-27-05.htm

My first graduate degree was in Management Information Systems, and from my earliest experiences in corporate life I started to wonder if MIS was a bunch of smoke and mirrors. Sometimes it is.

As I researched the printing business, I thought it was quite funny how the most profitable printers were the ones often considered to be the most neanderthal when it came to computing. I was always taught that bad information systems once computerized became worse or deadly. Good management made a real difference.

When studying the lack of MIS investment in the printing business, it became clear to me that printers could not "see" the benefits of MIS because they always had a sense that they could make certain tweaks in their business that would yield better results. This would range from getting a more modern press to finding a hot sales rep or cutting waste and spoilage. Indeed, printers would see tangible and quick results from implementing total quality management programs (TQM), even if these approaches were not fully implemented. How one could think that an industry that can't make money because of "overcapacity" (whatever that is) could suddenly justify having "overcapacity and MIS systems" just seemed beyond thought. We know, or at least people who agree with me know, overcapacity doesn't matter. Good management does. Good management with good tools matters even more.

Finally, some proof from international consulting organization McKinsey. (If it doesn't come from a big consulting outfit, it's not true, supposedly).

"...a study of 100 manufacturing companies in France, Germany, the United Kingdom, and the United States found that IT investments have little impact unless they are accompanied by first-rate management practices, which, by contrast, can boost productivity on their own. We rated companies on how well they used three important management practices: lean manufacturing, which cuts waste in the production process; performance management, which sets clear goals and rewards employees who reach them; and talent management, which attracts and develops high-caliber people. The companies that had the highest marks in these areas became more productive, with or without higher spending on IT. Those that combined good management practices with IT investments did best of all."

What a surprise :)

http://www.mckinseyquarterly.com/newsletters/chartfocus/2005_06.htm

Margie Dana of the Boston Print Buyers has an interesting short article about the job titles of print buyers:
http://www.bostonprintbuyers.com/printtips/print/05-07-05.html

It made me remember a discussion I've had countless times that printers don't call high enough in organizations. This is one reason why it's really important that presidents and high level executives are active with other high-level executives of print-consuming organizations, totally outside of selling situations. This is what marketing is all about. Getting out of the stereotypical "here's our equipment list, can we bid on your next job" mode starts at the top. It's better to have strategic discussions with marketing directors about their long term plans than it is to call on lower-tier positions alone. Good sales people know people multiple levels up and below their key contacts, and work those levels regularly. As long as print sales people are paid on high commission programs, shop owners should never expect deep, proactive relationships with clients and prospects.

Unemployment is now at 5.0%, down from 5.1%. Payrolls were up +146,000. What will get little reporting is that the payroll data for April and May were up a combined +44,000 over and above what was initially reported. May was considered lackluster +78,000; it wasn't, because it was +104,000.

Payroll growth was strongest in non-manufacturing (gee, what a surprise).

What won't be reported: the household survey +163,000.

Net new business up slightly, still at highest levels since I've been watching it.

More in my July 15 WTT column...

http://www.bls.gov/news.release/empsit.nr0.htm

Confusing the experts again, the Institute for Supply Management's Non-Manufacturing Index is up to a robust 62.2, and the employment component jumped to 57.4, up 4 points.

As manufacturers downsize, they outsource to service businesses for a wide range of tasks that they used to do internally. These also play havoc with the way the government tracks manufacturing. Got a cafeteria? Bring in an outside firm to run it. Those cafeteria workers used to be manufacturing employees. Now that they work for a company like Aramark, they're now service employees, even though they go to work every day to the same building and do the same exact things. Got a payroll department? Close it and use ADP of PayChex. Those payroll workers were manufacturing employees. When ADP or PayChex hires the same workers they're counted as service employees. Have mechanics on staff for your equipment? Let them go. They used to be manufacturing workers, and now that they work for a equipment maintenance company, they're service employees. The examples are endless, but I think it's clear. Some of it comes from regulations, such as pension laws that are incredibly complex resulted in companies hiring pension management firms, or benefit management firms, for example. Most of it comes from information specialization. Companies like PayChex have the intricacies of payroll laws and payroll information programmed in their systems, and offer lower cost and better service than a payroll department can.

That's just one reason why the ISM non-manufacturing data is so strong. Construction has been a hot sector for a while, and people forget that's not a manufacturing business, and neither are mining (the oil business is not part of manufacturing either!), and the usual suspects of finance and banking are all examples of high-paying service industries. This is an indicator that Friday's employment figures should be good, except for the usual warning that payroll data have missed the strength of the service businesses, which are often too small to have impact on payroll data, and are best reflected in the household survey.

http://www.ism.ws/ISMReport/NMROB072005.cfm

Folio has a great piece that describes changes in the publishing process.
http://www.foliomag.com/index.php?id=396&backPID=392&tt_news=929

HP turns its back on its users group! Only control freaks and micromanagers can get any pleasure out of this. If your company thinks it has "rogue customers" who need to be monitored, then this is a smart move. There will certainly be fewer problems when there are no customers at all. No matter how this is sugar-coated, it's not a smart idea, even if you think the user group is bad.
http://members.whattheythink.com/home/050706sherburne.cfm

Interview with Philip Kotler, world-renowned marketing expert, whose textbooks have been used in college and university classrooms for parts of four decades (at least three). A little disappointing, but worth a look anyway.
http://www.dmnews.com/cgi-bin/artprevbot.cgi?article_id=33258

Yet another publisher laments that "print is dead." I used to get his magazine... his comments here are better than his magazine is... also an early Zinio user...
http://www.foliomag.com/index.php?id=396&backPID=392&tt_news=942

May printing shipments were up slightly compared to May of 2004, and industry shipments to date are up 0.7% compared to last year on a current dollar basis. Adjusting for inflation, the industry is down about -2% for the first five months of the year.

These data will be discussed in detail in my next WTT column on July 15.

Data are from the manufacturer shipments report released on Tuesday, July 5. http://www.census.gov/indicator/www/m3/

Last week, PIA released data about printer profits for their 2005 Financial Ratios. Let's be clear: they're not 2005 data, they're data from 2004, so 2005 designates that they are published this year. (Who'd want to buy a 2004 report in 2005, anyway?)

The Financial Ratios are a marvelous undertaking, and I use them for a variety of tasks in my modeling (Harrie Lewis was the person most responsible for my using them, almost 25 years ago).

The data are not directly projectable to the marketplace, as the sampling and weighting that one would expect from a market research study are not applicable, though they could be weighted to reflect the full marketplace. Whatever-- this is quibbly stuff. The key thing for me is that it's a consistently applied methodology and there are few industry data series that go back that far that can say that.

The release made me look at my data series that I use from the Commerce Department, which is more aggregate, and based on tax returns and other data. PIA's release stated that the profit rate was up by 50%. The Commerce Department Data on profits before income taxes, combined with the data series on shipments (cited above) that I use gave me these year-to-year changes:

...........Profits as %
Year ....of Sales .......Change
1995 ......8.3%
1996 ......9.2% ......+11.2%
1997 ......8.9% ......-3.7%
1998 ......10.5% ......+18.1%
1999 ......10.8% ......+3.0%
2000 ......8.6% ......-20.2%
2001 ......2.6% ......-70.0%
2002 ......4.5% ......+72.7%
2003 ......3.8% ......-14.2%
2004 ......4.8% ......+25.1%

I'll discuss more in the 7/15 column.