Special Report: Printers' Outlook: Not Your Father's (or Mother's) Book Manufacturers
To survive and thrive as the book industry's digital revolution pushes forward, and as better inventory management drives the shift toward smaller print runs, the smarter printers are doing everything they can to ensure they'll be a part of that ongoing transformation. This includes incorporating newer technologies with an ever sharper focus on customer support and service. Book Business spoke with executives from Quad/Graphics, BookMasters, Sheridan Books, Walsworth and Thomson-Shore, and asked about their outlooks for their businesses. The general consensus: They're ready for what the next year (and the years to come) have in store for them.
With an adapt-or-perish perspective on how new technologies have fundamentally changed their time-honored business models over the past decade or so, these five innovators are among those that see more clearly now than ever where their services fit into their publishing customers' future success. Knowing the right balance between digital offerings and traditional services is key, as is knowing what their clients want. The unquestionably more difficult part is helping those customers gain a better understanding of exactly what they need.
Kevin Spall
President and CEO Thomson-Shore Inc., Dexter, Mich.
Peter Beisser: What is your company's biggest challenge today?
Kevin Spall: I think it's somewhat similar to what traditional publishers are going through with managing the ongoing production of physical books. It's our core product and makes up a lion's share of our product. We're in a very competitive environment, but we're investing and developing new services for a dynamic publishing industry. Knowing when to make strategic investments, balancing those investments, while at the same time managing the traditional side of the business—that is our ongoing challenge both here at Thomson-Shore and as an industry.
Beisser: What is your biggest opportunity?
Spall: I think the opportunities that exist for us come through having a very flexible and diverse product and service offering. Rather than … crouching down in a fetal position and –saying we do one-color, 6-by-9 paperback books, we have, for years, been blowing out our offering to the marketplace so that, in theory and practice, a publisher could come to us for any product, and we could produce it for them with our single platform.
Many of those products and services are new to us over the last few years; It's a really high-cost area. Retail-driven print-on-demand (POD) is a large area of opportunity and growth. Short-run digital fulfillment. E‑books and the whole workflow around XML, and the management of e‑books and print. The challenge is developing and launching those things. That's where the industry is moving, and that's where we see the opportunity.
I think as much as things change, some things are very much the same. What I hear day-in and day-out, as much as the industry is focused on e‑books and XML, publishers still want really high-quality books. They want them fast. Make the experience feel good. If we don't do those things, we get pinged.
Beisser: Have you made significant changes to increase your value to publishers or to address trends you are seeing?
Spall: Once we get beyond some of the trends, I point to the one-stop shop. Having one customer service representative and one invoice process is one trend. The ability to do offset-first print, and do that short-run, and drop that into a POD. That combination of offset and digital to produce a book from initial printing to subsequent reprints. E‑books, to a certain extent, are starting to grow. I think those classic expectations will always be in demand, so we're not taking our eye off the ball. Make a great-looking book and make it fast. I think that that demand has gotten more aggressive in the last few years.
We're working [with] some publishers and partners to develop an XML-first workflow, so we can bring XML capabilities to our publishers so they can … push that out to print in the form of a PDF for any number of e‑book formats.
Beisser: What are some of the trends you are seeing among your publishing customers?
Spall: The extension of our Web-based printing system. Over the last couple of months, we've begun to build custom websites. We preload the catalog of books, so that [customers] click the book and say that they want 20 copies or 20,000—and away we go. I wouldn't say that's tremendously revolutionary, [but] that's evolutionary of our Web services—that kind of custom user website for publishers to produce a title from one to thousands. We selected some open source programming that lets us build out-of-the-box solutions for publishers.
Beisser: How much of your business is digital printing, and how do you see that changing?
Spall: Offset is still 95 percent of the business. Five percent is digital and, of that, a lion's share is short run. A percentage of that is what is commonly referred to as retail-driven POD. Digital is growing at a 30-percent rate year-over-year, which is in line with what we expect. I think that'll hold up very nicely.
Beisser: Do you offer e‑book conversion, or have you partnered with a conversion service or do you plan to in the future?
Spall: We do some conversions in-house. … If we think a partner has some experience, we'll partner. But as we take this XML workflow further, that percentage of our business will grow exponentially.
Beisser: Have you invested recently in new equipment?
Spall: Most of the new equipment we've purchased in the last two years and in the last few months is almost entirely software and intelligence to make this stuff work in the background. The hard assets we've purchased are very old assets. We have a custom, limited-edition book-binding business. That's a POD for very high-end books. That's a business we bought that would provide leather-bound editions. We've spent millions of dollars in software systems, both in traditional MIS to automate the shop floor and in accounting.
Beisser: What is your five- to 10-year outlook given the growth in e‑book sales and publishers' focus on inventory management and short-run printing?
Spall: I think we'll continue to make aggressive changes relative to continued investment in software capabilities for customers and automation in-house that will enable physical book printing [and] digital POD. We expect a larger percentage of our business to be derived from publishing services and e‑book conversions. We've already begun to offer tools for [authors and publishers] to market their books [and] design and editorial services. We expect the self-publishing model to grow, and we expect that percentage of our business to be much larger than it is today. Clearly, I see our physical book business … remain[ing] the majority of revenue for five years to come.
Beisser: How can publishers maximize relationships with book manufacturing partners?
Spall: I think it's really important that we don't commoditize the physical book. If you walk into a bookstore today, more times than not, when you look at the books by the door, they're not beautiful books. They're produced with very low-quality tissue paper. As a reader, if I'm going to read a physical book, I want it to look good, and have good production value and good paper. If I was going to be encouraging publishers, I'd say, "Get with the printing community and ask what can we do to embellish books a little bit more than we did in the late 1990s and the early 2000s." … Consumers and readers that just want content will go to the e‑book. But there's still a slice of readers that want a physical book. We need to make that physical book a nice quality.
Beisser: Is there anything I didn't ask about that you feel is important to address?
Spall: What's a little bit tiring to me, is that, as an industry, we've been talking so much about e‑books. … I fear that we've spent all that time at the expense of the product that's been viable for hundreds of years and has gotten us to where we're at. How do you make a physical book relevant in a society that wants instant gratification? Elevating the book as a place for a reader to go calm themselves and think deeply about a topic—that's really valuable as a society and as a culture. I think we should protect that. I'm worried as an industry; we're talking 80 percent of the time about product that drives 20 percent of revenue.
Sean Twomey
Vice President, Market Development • Quad/Graphics Inc., Sussex, Wis.
Peter Beisser: What is your company's biggest challenge today?
Sean Twomey: We, and the rest of the book industry, are challenged by major changes in the trade sales channels, as well as the continued pressures on state education budgets. Book printing units appear to be declining. Borders' demise eliminated a channel responsible for 15 percent of trade volumes in prior years. This loss and the 7-percent annual decline in independent bookstores over the past decade impacts sales volumes. While online sales continue to grow, both in print and e‑book forms, the online [sales] channel tends to favor the electronic format.
Beisser: What is the biggest opportunity?
Twomey: Quad/Graphics sees two major growth opportunities for the book business. We have increased our digital POD capacity by over 500 percent by installing one- and four-color digital capacity across our network. This enhances our ability to offer life-of-title support to publishers. Publishers have responded with new contractual volume commitments.
Second, we have offered e‑book conversion along with our print editions, so publishers have one point of contact for all the formats that their consumers –request.
Beisser: What are some of the trends you're seeing among your publishing customers?
Twomey: Trade sales are most affected by digital readers. While the overall digital share of trade sales is now around 20 percent, some best-sellers will have 50 percent of sales in electronic formats. Education is much less affected, as there is institutional resistance to change, and as e‑books are generally a value-added offering and not a replacement [for print]. Reference and b-to-b sales were affected by electronic substitution several years ago, and changes in these segments are modest. E‑books do reduce total print sales, but they also make demand-planning more difficult. As a result, reprint lead times are dropping. The fall trade cycle has seen a higher peak relative to the summer than in prior years.
Beisser: You mentioned you offer e‑book conversion services.
Twomey: We do … and will continue to invest in helping publishers of all kinds easily deliver content through multiple channels. We believe that is an essential service model … and are investing in digital, mobile app and related technologies to ensure our book customers have the greatest range of services and maximum flexibility and efficiency in deploying their book content.
Beisser: What is your five- to 10-year outlook given the growth in e‑book sales and publishers' focus on inventory management and short-run printing?
Twomey: Quad/Graphics conducted an in-depth survey of 5,000 consumers to determine what happens as consumers purchase tablets or e-readers. The good news: We found that most consumers continue to buy print editions, even after acquiring a reader. We also found that preference for e‑book titles is highly dependent on e‑book pricing. As e‑book price points move from $10 to $15, consumers switch their preferences and prefer a print product by a margin of 1.8 to 1. We anticipate that e‑book demand will continue to grow as device prices drop. Astute publishers have been bundling print and e‑book editions to drive sales by satisfying consumers who want both formats. This trend will grow, and Quad/Graphics will be redefining and innovating its business solutions for customers to help them adapt to these trends.
Beisser: What can you say to publishers about maximizing their relationships with their book manufacturing partners?
Twomey: Opportunities abound for domestic printers who can offer full service and rapid turn times in digital, conventional and e‑book formats. … Publishers should expect their printer to be a part of meeting these many challenges. Printers should be partnering with book publishers to better bundle print and digital formats. POD capacity will allow publishers to economically print smaller and more frequent reprint orders. They also allow publishers to launch targeted, niche books that were not economic conventionally. The loss of Borders stores is likely to be offset by some new entrants and by book offerings in non-conventional locations.
Beisser: Is there anything I didn't ask about that you feel is important to address?
Twomey: Book imports appear to have flattened as Chinese prices rise, as turn times shorten and as concerns about sound environmental and safety policies make domestic production more attractive.
Mike Seagram
President/COO • The Sheridan Group, Ann Arbor, Mich.
Peter Beisser: What is your company's biggest challenge today?
Mike Seagram: [Publishers are] feeling more pressure to balance margins. They're facing the growing influence of e‑books. It's really throwing their business model into chaos. … If I talk to 40 customers, I get 40 variations of the new business model from publishers. This is a business that historically has been about old, unchanging technology. The last decade has been warp speed in comparison. Our challenge is to put the right structure around it and meet the changing needs of our publisher and, in some cases, lead them to the right answers.
Beisser: What is your biggest opportunity going forward?
Seagram: The fact of the matter is that not all printers will survive the revolution. Those that do [will] do so because of evolution—if they do it in the right way. Staying relevant as a publishing partner—it's what's really driving our investments. Ink jet and content technology. Increased four-color printing. Alliances with offshore partners to provide seamless print and digital options. Those are all the kinds of things that when we looked at our business we asked, "What would make us viable?" That's what we needed to provide. All of these changes provide a lot of opportunity. We have more and more publishers that say we can't work with you in the future unless you provide it all.
Beisser: Do you offer e‑book conversion, have you partnered with a conversion service, or do you plan to in the near future?
Seagram: We can't pretend it's not happening. We're not going to run in the other direction. We're going to embrace it. We've invested millions of dollars that includes a tech lab in our corporate office. We have people doing research and development on new e-content, from mobile apps to e-store environments for our customers.
We've been just growing every single month with new customers and existing customers. It's surprising to some of them that a printer has invested as heavily as we have, but when we get in discussions with them, it makes sense to them. We're already handling their print flow. It's a natural extension for us to provide e-content for them, as well. It's been huge for us. It puts us in a different conversation with our customers.
Beisser: What is your five- to 10-year outlook given the growth in e‑book sales and publishers' focus on inventory management and short-run printing?
Seagram: We're investing in our first digital platform with a digital ink jet press, which is very responsive to our publishers' needs to not only have a POD option, but extend that to more mid-range print runs to have the benefits of reducing inventory and managing costs. An ink jet will be able to print longer runs.
Sheridan Press [a division of the Sheridan Group focused on journal production] has a robust digital toner. They're a source for short-run and digital printing. They'll be installing digital case binding this summer, as well. They'll be able to do our POD, but for us, because we didn't have a digital capability, it's been small. Some of our publishers have gone completely digital. In the past that's been a problem. We have shifted a lot of our investment focus from heavy equipment to other things that are software that automates our front-end process. That's where we have the greatest opportunities to reduce cycle time. … We're a little late in the game to the digital front. We're not unhappy about that at all. I'm much more excited with investing in digital ink jet instead of toner tech. I'm glad we waited in that regard. One reason we delayed was because we invested in four-color technology.
Beisser: What can you say to publishers about maximizing their relationships with their book manufacturing partners?
Seagram: When I'm out with customers, I take the opportunity to talk about their business models. Print books are not going to go away. Publishers are saying that more and more now. They have a better sense of the reality. The drum beat of the media and e‑books is starting to die down.
When e-retailing really emerged and took a foothold in the '90s, the mantra then was that there wouldn't be any more catalogs. There's more now than ever. I think publishers are starting to understand a similarity here. We get it: Printed books are not going away. … But there's a relationship developing between e-content and physical content. It impacts the way customers interact with our product and ultimately how they purchase that.
I have optimism moving forward. Although it is uncomfortable for us to go through that, it's kind of fun to see how it's going to evolve. It's interesting to hear more and more publishers ask, "How can I put more value in the printed book? How do I give it more value?" You are seeing a desire by publishers to do more color or to design their covers differently. They're really looking at the printed book in a different way.
Beisser: Is there anything I didn't ask about that you feel is important to address?
Seagram: I urge publishers—big and small—to do what you need to do to protect the value of your content. Do not condition the market to think a different delivery system should be cheaper or that we'll be giving it away. Content is the asset that a publisher has. Undermining the value of that content, even with the convenience of electronic delivery, is not really serving anyone well. The market and the customer needs to understand this.
Jim Mead
Chief Operating Officer Walsworth Publishing Co., Inc., Marceline, Mo.
Peter Beisser: What is your company's biggest challenge today?
Jim Mead: Anticipating the future impact of technology on our markets. This will affect the final product, how it will be distributed and how it will be made. We have a diversified offering that includes products other than books. The heritage of Walsworth is yearbooks, and we have expanded into other product lines during our 75-year history. Working with our customers to understand their needs, we are constantly changing our service offerings and products to help them be successful.
Beisser: What is your company's biggest opportunity?
Mead: Leveraging our company's strength is our biggest opportunity. While the past few years have been challenging in the print industry and the overall economy, Walsworth Publishing has enjoyed continued growth and expansion.
Challenges within commercial print have been met with a broadening of product capabilities to serve additional catalog and publications markets and expanded offerings to our core customers.
Beisser: What are some of the trends you are seeing among your publishing customers?
Mead: Many of our customers want smaller production runs, faster turnaround and greater capabilities facilitated through technology and process improvement. We see the need to get products to the end user [more quickly], while minimizing investment in inventory through the supply chain. Many of our niche markets remain strong in a shrinking print world and are not presently at risk of digital replacement. Moreover, Walsworth has the ability to provide a comprehensive digital product.
Beisser: Have you made significant changes to increase your value to publishers or to address the trends you are seeing?
Mead: Walsworth has invested in capabilities for our customers to create content, identify and market to end users along with full-publication support. An acquisition [of IPC Print Services] in 2010 also enhanced our fulfillment, distribution and logistics services. We constantly evaluate capabilities to complement our print services and are forming strategic partnerships to complement our product offering.
Beisser: How much of your business is digital printing, and do you see that changing?
Mead: A substantial part of our business is supported with our digital printing and binding platform. This is a high-focus area as press manufacturers' capabilities improve and the demands of our customers are best served by digital products.
Beisser: Do you offer e‑book conversion, have you partnered with a conversion service, or do you plan to in the near future?
Mead: We have the capability today for e‑book conversion and currently offer this solution to many of our customers.
Beisser: Have you invested in new equipment? If so, when, what kind and why?
Mead: The acquisition of IPC Print Services in December 2010 was a major investment. However, we constantly invest in technology, customer support and core manufacturing.
Beisser: What is your five- to 10-year outlook given the growth in e‑book sales and publishers' focus on inventory management and short-run printing? Are you planning changes to reflect current market shifts like these?
Mead: Yes, our focus is to deliver the best customer experience, regardless of the market we serve. Our innovation and product management functions are constantly looking ahead to design and deliver products that are desired by the market. In fact, our Innovation Group is dedicated to researching and developing ground-breaking products. … We have a consistently high customer-retention rate that reflects our ability to adapt to market forces and deliver on customer expectations. This business base allows Walsworth to explore additional capabilities within comparable vertical markets and to broaden our products within our customer base.
Beisser: What can you say to publishers about maximizing their relationships with their book manufacturing partners?
Mead: Look at who you're partnering with. Look at the big picture. Who can you partner with to stay successful into the future? It seems a lot of publishers are looking at the very, very short term, and will hop from printer to printer. It's always happened. You'll find loyalty if you build a partnership. We have a lot of customers that have been with us for a long time.
David Wurster
CEO • BookMasters, Inc., Ashland, Ohio
Peter Beisser: What is your company's biggest challenge today?
David Wurster: We find ourselves balancing two types of clients. First, we are tying to offer our publisher clients a breadth of à la carte services: everything from design and editorial, to printing and binding, to fulfillment and trade distribution services. Constantly looking for better solutions in the form of customized service offerings is our full-time job.
Second, we have our book-buying clients. This ranges from Amazon.com and Ingram Book Co., to direct-to-consumer book deliveries, both in traditional print and e‑books. Trying to determine the best-selling marketing practices to the ultimate end-user is our other full-time job.
Beisser: What is your company's biggest opportunity?
Wurster: We have been in the printing business for 40 years, the digital-printing technology for 11 years, and distribution-related business for 25 years. Our publishing clients had the need for expanding production into foreign markets, and our foreign book buyers wanted our content delivered in a more effective manner. As a result, we now have a global POD program that covers multiple continents and serves multiple languages. The opportunity is bridging this gap whenever possible.
Beisser: What are some of the trends you are seeing among your publishing customers?
Wurster: Our publishing clients are in a high-speed mode to leverage their content in multimedia channels. The cost to properly create the content remains quite high, so with all of the other inherent market pressures, the concept is to creatively take that one file and use it in as many fashions as possible.
This includes the print-to-e‑book opportunity; however, it also includes the ability to better expose the content to the consumers in the form of applications, widgets and other Web-based tools.
Beisser: Have you made significant changes to increase your value to publishers or address the trends you are seeing?
Wurster: One of the things publishers are trying to do is mitigate inventory risk. This means that BookMasters has to provide a viable high-quality, ultra-short-run to one-off printing solution. Our answer to this was the installation of a $2.5 million Océ ink jet printing system coupled with a Muller Martini inline bindery. That’s something we installed in mid-2011, and it’s an area we continue to invest in.
On the selling side, our book buyers were telling us they would like to see more and better Spanish content in the U.S. marketplace. As a result, we started a Spanish distributorship in 2011.
Beisser: How much of your business is digital printing, and do you see that changing?
Wurster: The digital printing of our production-related services, excluding sales and fulfillment, is 20 percent. We absolutely see that growing. Generally speaking, both our e‑book and our POD departments are two areas of significant growth.
Beisser: Do you offer e‑book conversion, have you partnered with a conversion service, or do you plan to in the near future?
Wurster: We do provide conversion services and, in fact, have partnered with a couple of overseas providers over the years. However, what we see changing is the conversion service offering on the less-complex content. We’re seeing more automated conversion solutions that are becoming a more viable option than what is still required on the more-complex content.
Converting content to e‑books has been commoditized, and there is not a lot of value-add in this area moving forward as manipulating front-list files during the composition stage is quite simple. As publishers work through their backlists, the value in conversion certainly decreases. I see BookMasters’ value in the “what next” approach. Our ability to sell this content and distribute it to the global marketplace is how we differentiate ourselves.
Beisser: Have you invested recently in new equipment?
Wurster: We invested $2.5 million in the Océ JS1000 printers and the inline Muller Martini SigmaBinder. That included a major software investment that runs and drives our global POD network. BookMasters is very fortunate because we’re a debt-free and privately held company, so we’re able to move very quickly on growth initiatives. We’re always looking at the long play; we’re not in this space for the short play.
Beisser: What is your five- to 10-year outlook given the growth in e‑book sales and publishers' focus on inventory management and short-run printing? Are you planning changes to reflect current market shifts like these?
Wurster: We react monthly, not annually, to the changing tide in the industry. That’s key to our continued success. I see the business in 5 to 10 years, and it includes BookMasters. We’ll be a long-term player. At the end of the day, BookMasters will be around because of the way we invest in infrastructure, people, and whatever the changing needs of our clients may be over that time period.
Beisser: Is there anything I didn't ask about that you feel is important to address?
Wurster: At the end of the day, the most important thing we’re trying to do is appease the end-user—the book buyer. If we can provide product in the form and the style that the end-user wants, we are going to help make our publishing clients successful.
BB
Peter Beisser is a regular contributor to Book Business. He previously was managing editor of several North American Publishing Co. titles and has written extensively about the publishing industry. Despite his ongoing fascination with new technology, he will fall asleep tonight reading a paperback.
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