October 12, 2000
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Define 'Printing' for me, Counselor

"After the panel discussion, I hit the product booths, Zing.com, the nation's leading online photo-sharing site, had a most impressive exhibit. Earlier in the week, the company announced that Sony Electronics had selected it to build phase two of its consumer online digital-imaging Web site, Image-Station. Zing also runs an intriguing e-commerce operation through which it can make greeting cards, mouse pads, note cubes, even shortbread cookies with faces, say, in the icing, all from digital images customers supply. And what about producing actual photos? 'We're not in the printing business,' replied the Zing guy." Andrew Feinberg in the October issue of Individual Investor magazine.

The online oracle upon which you have currently fixed your gaze, genteel reader, is certainly not ink or toner on paper; yet, how many times in the past several years have you found yourself printing a copy of TMN to use a blurb in an upcoming speech, fax a copy in its entirety to a buddy in Budapest, or maybe just save it in your packrat file?

This digital stuff is changing our internal dictionary. What the heck is printing anymore?

From Berlin, Germany on 5 October: "It is reasonable to expect that because of the evolution of instant access to exponentially more information, our appetite for printing will increase," said John Zbrozek, Vice President of R & D at Lexmark, "Printing from PC's will continue to grow substantially.....Print on paper is convenient, comfortable, portable, foldable and easily marked on, shared, stored, archived and retrieved. Any electronic storage technology will have to achieve similar attributes before it can hope to replace paper." Remarks made at the Lexmark 20/20: Vision on Print technology conference.

And none of us would disagree with Mr. Zbrozek. Printing on paper is still a viable growth market we assure ourselves with bobble headed enthusiasm. Printing will keep growing, it is a market of manifest destiny we proclaim.

Still, in this era of ever smaller run lengths, we know in our hearts, that Zbrozek is justifying printing in quantities of only one from the PC printer he hopes you will buy two more of tomorrow. As the commercial printer in Wisconsin told us last month, "My regular print volume is suffering, I know these alternative digital technologies are luring some of it away, and my other profit centers have to take up the slack, if we are to keep growing."

From The Economist on 4 October: "This bombshell {the 25% drop in Eastman Kodak's share price on 27 September} could not have hit at a worse time. Kodak is in the middle of the most important transition in its history. Like Japan's Fuji Photo Film (which, with Kodak, controls 70 per cent of the world's color-film market) and Germany's Agfa, Kodak is struggling to cut its dependence on old style film and embrace a brave new digital world."

And unless you are a first time reader of TMN (we welcome each and every one of you!) you know that we have been constantly harping on the theme that commercial printing, in all its market segments and manifestations, is also in the throes of the most important transition any of us will labour through.

Consider the following review of Eastman Kodak's digital prospects from Christopher Byron writing for Bloomberg on 4 October:

"Kodak has been in business in one form or another, for more than 120 years, doing one aspect or another of the same basic thing: making and marketing the stuff out of which you make a photograph. More than 80,000 people are now involved in that effort at the company - the heart of which is producing and selling (and thereafter developing) still pictures for consumers.

This activity, and all the sidelines associated with it -- what Kodak calls 'consumer imaging' -- account for almost 60 percent of the company's revenue and 66 percent of its profit -- which means there are an awful lot of people at Kodak who have a direct, deep and personal stake in seeing to it that nothing changes at the company from the way things have always been done there.

... Beyond the status quo problem of corporate vested interests, there's the huge costs of developing a digital presence, and in the end the company will remain what it is now: basically a film business -- a business that, in time, will become almost a buggy-whip operation when all photographic images will begin as a digital data in the first place."

Mr. Byron is no doubt paid to be a touch provocative. So let's discount any apparent vitriol, but not forget that in the same two or three week window, other firms with a noble lineage in the global graphic arts -- firms from A to X (Apple to Xerox) were whipsawed in market mayhem. Imation announced on 5 October that it may put the entire enterprise up for sale. Paul Allaire, the once and again CEO of Xerox went so far as to suggest that the business model under which Xerox has operated is "unsustainable."

This is big stuff and big bets are being placed everyday with outcomes less than certain.

A mere five days before the market punished Kodak not for losing money, but for missing its earnings targets by perhaps 15%; (Fifteen lousy percent and the stock price swoons by twenty bucks? Rational markets phooey!) Daniel Carp, the current Kodak CEO, and a thirty year Kodak lifer spoke at the Photokina exhibition in Cologne, Germany. "We have all heard the pundits predict that the Internet will be the engine that will drive the new economy. But I would assert that the Internet is an engine that is fueled by pictures....Because no matter where you are on earth, pictures remain the only true universal language."

The one solid message that rings through all these prognostications is that to avoid wrestling with the digital dilemma is to assure a slow death.

Our good friend Charles Miller stopped in to visit the other day. Charlie is a sculptural die maker in Kansas City. In a word, he is an artist. He also reads TMN and he said "You know, letterpress isn't dead. You write so often about the digital stuff, but we see a lot a letterpress goodness too." And of course Charlie is correct. We have seen amazingly intricate letterpress projects being submitted to the International Gallery in recent years, and we suggested to Charlie that from our vantage point, it appears that there is a renaissance in letterpress work.

Upon reflection, we think this letterpress renaissance confirms the truth of the observation from the Wisconsin commercial printer we quoted earlier. As the digital world shifts some business away from traditional commercial printing it is important to add value to existing work from existing clientele by adding the expert finishing craftsmanship of letterpress or looking for ways to produce alternative media from the same digital content.

Mark Davis of the Indianapolis Club sent us a post he found on the Motley Fool message board discussing Xerox on 5 October: "In a recent conference call, Rupert Murdoch, who knows a thing or two about the publishing business, discussed the future of digital publishing. I never thought that digital would take the place of books so I downplayed in my own mind its real value. What Murdoch talked about was magazine publishing. Publishers of magazines will simply allow a download of their product, cutting out the paper supplier, the post office, the distributor etc. (and the printer???) The market worldwide is huge. Guarding the downloads from hackers and ensuring accurate billing is a must. The company that establishes the dominant technology in this area will make huge profits."

Long time readers of TMN will recall past references to a hot technology Xerox has developed called ContentGuard. And that several e-book purveyors seemed interested in the ContentGuard technology, including a small one outside Seattle called Microsoft. And what is in the downloads mentioned by Mr. Murdoch -- content!

Therefore, while this writer has read with interest all the gnashing of teeth as Xerox searches for a more 'sustainable' business model, there was another notable announcement at the recent Graph Expo in Chicago by Xerox president and COO Anne Mulcahy that her firm intends to overtake Heidelberg in the next three years in the graphic arts market. While that brave announcement came only days before Xerox took its turn in the market cap buzzsaw, Xerox did back up its claim with several new press products including the DocuColor 400 DI-5 (made by Adast) and the DocuColor 233-4 (made by Ryobi). The former press can compete with the Speedmaster 74DI, but it is the latter unit that could see a Xerox printing press arrive in a corner print shop near you. The 233 will be sold as the world's most affordable digital offset press according to Xerox and will be available in the second quarter of 2001. Interestingly, the first news releases on 25 September suggested that Xerox had agreed to sell Presstek presses, and while the machine are based on the Direct Imaging technology developed by Presstek, the machines themselves are not manufactured by Presstek.

We often quote from the headline research pioneered by the good folks at TrendWatch. The earlier item apparently quoting Robert Murdoch on the Motley Fool Message Board with regard a possible shift in magazine publishing is underscored by the two most recent items from TrendWatch. First consider this bullet item in a 6 October release about TrendWatch Forecast 2001: "Half the top 10 opportunities for book, catalog and magazine publishers are not print based. While printers may not see demand shifts yet, it's clear that publishers have roving eyes when it comes to new media." And from TrendWatch Fast Fact #93 dated 3 October: "Unless you're just watching this bandwagon go by, this has big strategic implications. With Web-related design and publishing now the top opportunities for both creative professionals and publishers, does this mean even more bad news for printers? After all, these two groups are printers biggest clients. (Strategic implication - more to the Web, less to the press.) When we see an Internet-related opportunity near the top of printers best sales opportunities, we'll know they've finally gotten the message."

Geography students learn about the continental divide, an imaginary line along which rivers flow either east or west. The digital divide will carry us one direction or another as well. The plain truth is, you can't straddle the fence on this watershed of change. Jump in, the river's fine.

Industry Tidbits

o BCT International said its paper converting distribution division, Pelican Paper Products was awarded a contract with Cartiere di Cordenons, past of the Cordenons Group of European Paper Manufacturers. Pelican's plant in Wisconsin will handle Cordenon's warehousing, order fulfillment and most of their paper converting.

o We applaud the news from Printware which announced at GraphExpo the introduction of the PlateStream-SC, which it hailed at the world's most affordable platesetter, imaging the lowest cost digital plate material. Printware has long made really good equipment, but it has been a bit too expensive for some folks. Dan Baker, CEO at Printware and one of our most erudite International Gallery of Superb Printing judges said: "Small commercial printing and quick printers are the largest segment of printing, with as many as 25,000 sites in the US alone. The PlateStream-SC is half the size and considerably lower priced than our other models."

o Electronics for Imaging said on 3 October that it was creating a $20 million dollar venture capital fund with which EFI will invest in early stage companies with promising imaging technologies. Not a bad way to supplement EFI's internal R&D.

o Four51 launched a new website at the end of September aimed at 'print materials distributors.' http://www.four51.com

o Lifetouch, Inc., a first time entrant and a double winner in the year 2000 International Gallery of Superb Printing agreed to be the North American beta test site for the Indigo Publisher 8000 - one of the new ultra high speed presses Indigo N.V. launched at GraphExpo. Lifetouch, based in Eden Prairie has four other Indigo presses and does a lot of business in the areas of school photography and yearbook publishing. IAPHC Chairman Ray Rafalowski does some business with Lifetouch; we wonder if Lifetouch might do some business with Charlie Miller someday too.

o In a recent TMN we mentioned the Odyssey Initiative, an alliance between PagePath Technologies (Steve Ciesmier, VP Of Sales and Marketing at PagePath is an IAPHC member) and printLeader (where we will soon be welcoming president John Fleming as an IAPHC member --John, that's called the assumptive close!) On 5 October, Steve sent word that Discount Labels, a highly regarded vendor in the small commercial print market, and now a part of the Mail-Well organization would also join the Odyssey Initiative, which is aimed at furthering the integration of print-related workflows on the Internet. If you haven't looked at Pagepath's free MyOrderDesk e-commerce service, it's worth doing so. www.Pagepath.com

o At the end of September, Gould Paper Corporation and WWF Paper Corporation said they would create a joint venture of equals to create the largest independent distributor of fine papers in North America. Each firm brings about $800 million in sales to the marriage. Gould is based in New York City and WWF is based near Philadelphia.

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