The stock market ended 2005 with a bit of a bust. The bellwether Dow Jones average showed zero gain for the year.
Certainly, the news has not been good for the suppliers of digital prepress equipment. Another major player has bitten the dust as Creo, which had previously purchased Scitex, became a part of Kodak. During the year, The EAGLE suggested that there was no longer room in the market for the four significant players left in the graphic arts supplies arena (Agfa, Fuji, Kodak and Konica Minolta.) Michael Evans, NPES consulting economist, indicates that capital equipment spending should be cloudy for 2006 as equipment is only running at 75% of capacity.
Despite the mixed realities, we really have seen some good things begin to happen. Last September at Print 05, the doom and gloom that we've seen for the last few years at Graph Expo seems to have been lifted.
Ronnie Davis, chief economist of PIA, has presented a rosy outlook for 2006, indicating that good times are continuing. Traditional printers, we believe, have seen some good news. There are pockets of growth, resulting in a 3.8% overall increase in domestic print, but we do not hear very many printers talking about the great year that they just finished for offset print alone-it seems to be more that they've finally figured out how to grow again, as we will note below. And even the printers chosen by NPES to discuss their success at Print Outlook seemed to tout additional activities, such as digital printing, fulfillment, mailing, data management, and marketing services, rather than just good old-fashioned offset.
Despite the mixed realities, we really have seen some good things begin to happen. For example, recent analysis by IT Strategies forecasts continued extraordinary growth in the large-format segment of the print market, pegged at 48% per year for the next three years.
No More Room for Gloom and Doom
Finally, last September at Print 05, the doom and gloom that we've seen for the last few years at Graph Expo seems to have been lifted, and traditional printers have finally begun to see how to use their strengths in color management, workflow, customer file handling, and other print-related tasks that they'd become masters of. They are now leveraging these strengths to sell additional, different products to their customer base. Many offset printers are finally moving into the allied wide-format and short-run print fields, selling more to their customer base and expanding the base too.
We are also seeing many more hybrid plants, where both offset, digital narrow- format offset, and wide format are all being used to produce goods for customers.
For many years, The EAGLE has been urging manufacturers to figure out how to sell more to their existing customers, as it is so much less expensive to grow by selling more to the same than to find and add more customers. During the last year, it seems that they've finally begun to utilize this advantage, as can be seen in the purchase of Sericol by Fuji, Inca by Dainippon Screen, VUTEk by EFI, CREO by Kodak, NDI by DAY, and more.
We also saw great progress at the SGIA (Specialty Graphics Imaging Association) Digital Expo, with The Pitman Company, the nation's second largest dealer, entering the wide-format market with a concerted effort at selling printers for paid jobs rather than just for proofing. We talked to the owner of a traditional offset site with an Inca wide-format printer who has even ventured into the custom packaging business for his existing customer base.
"Why Not," Indeed?
"Why not?" he said. "We were already trying to get all of their printing, so why not also try to get the custom printed packaging business that they needed?" Not just providing binding and mailroom finishing, this printer was now automatically generating designs for and custom cutting and creasing corrugated boxes and product packaging, a high margin opportunity that saved his customers big bucks compared to purchasing shorter runs from their traditional package printers.
During the past year we also saw many Internet web portals continue to make a shift from "all on line" to supplementing that with narrowly focused printed products. WebMD, for example, has introduced a magazine that invites customers to write down (using sheets printed in the magazine) questions to ask their doctors during their appointments. The free magazine is delivered to hundreds of thousands of waiting rooms to be read during the short time the patient is waiting to be seen. Such new uses seem to require local knowledge and short turnaround, and augment rather than replace existing promotional campaigns and dissemination resources.
Change will bring a new and revitalized industry, perhaps at a lower level of traditional production, and with fewer companies involved.
The EAGLE has also suggested that the industry needs to beware of the real impact of competition from China and elsewhere. The realities of China will continue to gnaw away at the old offset market print potential, requiring an acceleration of change. But we do not believe that this is going to impact shorter- run and time-critical jobs; specialty magazines that are not yet in mass production; jobs that don't require much handwork; jobs that are an integral part of a varied communication mix (online, direct mail, radio/TV/print advertising, and printed brochures); or jobs that require significant local interfacing to accomplish properly. This still leaves open significant business to those who learn how to get it.
It Had To Happen, and It Has
After more than five years of concern about the state of the domestic print market, we finally feel that the manufacturers, the dealers, and the printers are getting the message and gearing up to survive. It won't be easy, but they won't be killed off by all-digital, non-print communications or offshore print. Change will bring a new and revitalized industry, perhaps at a lower level of traditional production, and with fewer companies involved
After many years of conflict, the "channel" may finally have been redefined as manufacturers and dealers functioning as partners.
Despite the advances that we're beginning to see, one area remains for the printing industry to truly restructure to meet its economic and technological challenges. This is the rethinking of traditional relationships. After many years of conflict, the "channel" may finally have been redefined as manufacturers and dealers functioning as partners.
Fuji's acquisition of its channel officially ended the older era of manufacturers selling to a channel as if it were an independent- and expendable-entity. The final challenge now is to extend the definition of "channel" to include the printers also. When that occurs, enormous efficiencies will be found; the fruitless "switching" of vendors may be tempered; and a renewed focus by a supporting team of manufacturers, dealers and printers, on the real customers-the print buyers and their needs-may begin.
The printing channel will truly equip itself to meet its formidable challenges only when the old idea of earning a profit by squeezing a supplier, rather than adding value to a customer, finally dies off.