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By Kevin Keane, IAPHC CEO Paper Poohbahs "Paper and oil are the only places we are seeing inflation." From Maria Bartiromo's column Scene and Heard in the December 1999 issue of Individual In vestor magazine. "Not even the fusty old paper business, it seems, is immune to the dot.com revolution. Despite dire predictions that the Internet could depress demand for paper, for the first time it's producing the opposite effect. Sales of newsprint and coated stock are up as newspapers and magazines swell with advertising from e-businesses. Demand for computer paper is climbing because so many Web pages get printed out. And all that merchandise sold by e-tailers such as Amazon.com Inc. or CDNow Inc. is shipped in paper cartons. 'Every time someone buys from a dot.com, that means more paper, more packaging is being used,' says John V. Faraci, chief financial officer of International Paper Co. 'Those predictions 10 to 15 years ago of a paperless office just didn't play out.'" From the November 22, 1999 issue of Business Week magazine. By way of proof for the surging sales of pulp and newsprint and other paper products we offer these global tidbits -- UPM-Kymmene announced from its Kajaani Mill in Finland on November 26th that it would invest heavily in the mill to make its newsprint more suitable for four colour printing. Meanwhile, Asia Pulp and Paper, based in Singapore, may soon achieve the unusual distinction of having its credit worthiness assigned a higher rating than its own home country can obtain! According to the Veronis, Suhler and Associates Communications Industry Forecast released earlier this month, the strong economy will propel Communications as the second fastest growing industry in the United States, with a projected media spending compound annual growth rate of 7.5% for the period 1998-2003. The study predicts that by 2003, Americans will spend more on media than on food ($663 billion). The study also suggests that by 2003 Americans will spend just under 10 hours per day consuming various forms of media. The Internet while accounting for just 5.4% of the total, is projected to stimulate media use and spending in a wide range of categories, from books and recorded music to television and business publishing. A different study also weighed in to support the notion that the Internet is good for adding to the volume of ink on paper. In mid-November, Pitney Bowes Inc released "The Role of Mail in E-Commerce Study" which was conducted in August, 1999. The study claims that half of the 125 surveyed firms involved in e-commerce had increased their volume of mail as a result of e-commerce. And like their "brick and mortar" counterparts, the surveyed firms are using mail for advertising, promotion, billing, fulfillment and for cementing customer relationships. Interestingly, the surveyed companies overwhelming agreed with the notion that direct mail was the best medium for developing long term customer relationships. One wag we know says that smart e-companies will see the value of offering "click and mortar" options to all clients no matter where located. Pitney Bowes provided results of yet another study on November 11. The Pitney Bowes Mail vs. Telemarketing survey was also done in August, 1999. When asked about the likelihood of buying a product or service from a mailpiece versus a telephone solicitation, US consumers who respond to direct marketing, expressed a preference for mail by a four to one margin. (74% for direct mail; 18.5% for telemarketing.) Twin Threats Still Growing Having read all the above evidence that the end user still likes to see lots of ink on paper, some folks in the traditional printing business may be tempted to heave a sigh of relief. Not so fast we would urge. The twin threats of Consolidation and Digitization show no signs of abating and mean that every printer needs to be looking for ways to do new forms of business with existing or future clients. Consolidation Continues On November 22, The JohnsonGroup of Rockford, Illinois announced it had purchased Marathon Communications, Inc., of Green Bay Wisconsin. The JohnsonGroup has suddenly become a near $50 million dollar conglomerate which includes Johnson Press and General Litho in Rockford, Illinois; Cardinal Printing in New Albany, Indiana, and JohnsonGraphics in East Dubuque, Illinois. R.R Donnelley & Sons Co., said on November 16th that it had agreed to buy Penton Press based in Berea, Ohio, outside Cleveland. Penton Press is a division of Penton Media and has 260 employees. After the deal closes, Donnelley will remain the world's third largest commercial printer behind Quebecor Printing and Dai Nippon Printing. Cunningham Graphics International announced an extension of it's global strategy on November 15 when it said it had entered into an Asia/Pacific strategic alliance with Current Knowledge which has production sites in Sydney and Melbourne, Australia ; and with MAKE based in Tokyo. Both firms are providers of document management services and other graphic communication services. Meanwhile on November 11, Consolidated Graphics, Inc., of Houston, Texas said it had signed a letter of intent to acquire Woodridge Press, Inc., based in Anaheim California. The next day Consolidated Graphics said it would begin a share repurchase program which is a classic move by firms who are convinced their stock price is lagging. As has been reported in past issues of TMN, printing firms as diverse as R.R Donnelley & Sons and BCT International have engaged in stock buybacks in the recent past. Joe R. Davis, Chairman and CEO of Consolidated Graphics said: "In light of our recent stock performance, the Company believes that a sizeable repurchase program is an appropriate use of the Company's capital. "As chronicled in TMN this year, Consolidated Graphics stock price has moved from a high of approximately $74 in January to about $23 today. Digitization The bottom line is that traditional ink on paper customers are receiving an abundance of alternative choices every day. The nimble printer must change if she wishes to keep clients happy. As our good friend Bob Hall wrote in his always interesting Monday Morning Fax newsletter of November 22, 1999: "I am beginning to realize that there are a significant number of quick printers out there who haven't seen the digital handwriting on the wall." At the Xplor Show in early November, that venerable printer, Moore North America, underscored its determination to help its clients move from a solely paper-based to a hybrid paper and electronic based information era by showing a whole suite of new digital products and initiatives. "Emerging technology and the Internet have created a wealth of new opportunities to manage information more effectively and efficiently across the enterprise. As the recognized leader in traditional print management services, Moore is committed to helping our customers harness the power of digital document technology to reduce the cost of document ownership, enhance their organizational efficiencies and increase value," said Sieg Buck, president for Sales and Marketing for Moore North America. So how does a traditional business forms printer like Moore change to keep clients happy? Well, for example, consider the Digital Presets product introduced at Xplor. Digital Presets allow users to enhance their corporate image by creating attractive and dynamic documents, from invoices to statements and other standard forms, right from their desktop using electronic templates, blank paper stock and their laser printers. Moore knows that traditional business forms printing is declining, but rather than abandon ship it offers clients new ways to produce similar documents. We would urge all our readers to consider carefully the ramifications of the terminology: "dynamic documents." Dynamic documents are often printed in a quantity of one, each version then is personalized and contains much variable information. Long run lengths of an identical document (the bread and butter of traditional commercial printing) are un-necessary in the world of dynamic documents, and thus Moore can offer to "reduce the cost of document ownership." It is very clear that more and more traditional printing clients have an ever increasing array of alternative in-house solutions being advanced to them each day. Yesterday, Xerox announced that Home Depot would be buying more than 1,500 DocuPrint N40cn Network laser printers for its home improvement super stores in Canada and the US. Each Home Depot will have at least two of the printers installed to print documents such as inventory, sales and shipping reports. The TrendWatch Fast Fact #56 released today notes than creative professionals now buy more color copiers than do commercial printers which is a dramatic turnaround from the market direction of only 3 years ago. The obvious conclusion is that control of content is moving upstream to the content creator. Therefore the wise printer needs to become a partner in content creation and the re-purposing of content. Bowne and Company, North America's oldest printer has shown up often in TMN as we find their digital diversification strategy to be so compelling. On November 23, Bowne Internet Solutions announced that a site it had designed for companies with surveying needs had won a web design award. The site is called SurveyPlanet.com and importantly, Bowne understands that providing the expertise to get the site up and running in October, can lead to many other content contacts and traditional printing opportunities. Bowne Internet can manage, repurpose and distribute a client's information, through any medium, in any language, anywhere in the world. The changes being driven by the digital era are not easy to engineer. We have reported before in TMN on the difficulties Applied Graphics Technologies has had in becoming fully energized in all its digital asset management services. Yet earlier this month, the firm reported a 44% increase in revenues and a nearly 50% increase in gross profits for the third quarter. A healthy chunk of this success came as the result of the acquisition of the Wace Group in Britain. The digital economy may not be easy to master, but it must happen. In the 115th issue of TMN, we talked about e-Books and the deal between Adobe and Buffalo, New York based Reciprocal (an e-Publishing copyright Clearing Service). Reciprocal also announced on November 10 that Xerox had made an equity investment in the privately help firm. As a final comment about the reality and even the inevitability of the drive towards digitization we offer this item plucked from the Heidelberg website dated 25 November: "Books in the server instead of on the shelf? The principle behind 'Print on Demand' lies in storing the data for a book in the computer and printing it out only once it has been ordered. Is this a real alternative? The large book store Libri Georg Lichtenbrink, GmbH ↦ Co., in Hamburg, has been offering this service since 1998. In September alone, Libri digitized 15,000 books and this figure is growing week by week." Industry Blurbs Creo, the Burnaby, British Columbia based computer-to-plate juggernaut had a heck of a year. Total revenue was up more than 56% for the year. About one third of sales are now derived from the Prinergy CTP joint venture with Heidelberg. Adobe's InDesign product, released August 31, 1999, should be expected to gain 50 percent of the market for formatting magazine and newspaper pages according to Executive Vice President Bruce Chizen who spoke to a San Francisco investment Convention on November 18. Adobe aims to take 50% of the estimated $500 million market now dominated by Quark's QuarkXPress software. Toshiba introduced the FC22 full color digital copier/printer as Comdex earlier this month. In tandem with the EFI Fiery Z4, the machine can run network printing at 25 pages per minute and color copies at 22 pages per minute. Apple Computer's iBook was the number one selling portable computer in the US during October according to a report released on November 23 by PC Data. On November 29, Printware, Inc announced a new RIP based control panel applet for its PlateStream PlateSetter line that will allow Printware's factory service technicians to 'see' customer's Platesetter systems on their service consoles for fast problem diagnostics over the Internet or through dedicated lines. IKON Office Solutions Inc announced on November 24 that it had reached a settlement of a class action lawsuit filed by shareholders last year. It will result in a one time charge of $111 million for fiscal 1999. PrintPlanet.com is a family of nine graphic arts forums -- or e-communities. PrintPlanet.com is hosted by Digital Art Exchange, Inc. (DAX). KBA Planeta is the world's oldest press manufacturer and is also the third largest. Its sales and profits have been on the upswing of late, suggesting that not everyone is waiting for Drupa 2000 to buy a press. Heidelberg said that it had a short term slowdown in sales and had to absorb some profit impacting costs associated with the acquisition of the Eastman Kodak digital printing business, but had a very successful selling experience at Graph Expo.
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