Strategically Speaking: Is Digital Printing 'Ready for Prime Time'?
Short-run digital printing is unquestionably a technology whose time has arrived. Its quality and capabilities are improving steadily, and inline/near-line binding solutions promise to make an already capable technology even more so. Many digital printers' equipment and skills have improved to where we have moved away from the Henry Ford Model A approach to substrates ("any paper you want as long as it is (50) uncoated offset") to manufacturing of case-bound, four-color textbooks printed on (60) gloss coated stock.
In short, digital printing is clearly ready for prime time, but it remains a second-tier technology to many publishers for well-known reasons. On a unit-cost basis, offset printing still has the edge on longer runs and will continue to have the advantage until digital manufacturing migrates to the next level of technology—inkjet printing.
If the economic advantage remains with offset, why should publishers consider giving digital manufacturing a broader role in their production and inventory strategies? No doubt offset printing has a role to play and will continue to do so for some time, but I suggest that near-term changes in the marketplace for books may warrant more conservative inventory strategies—for reasons that have as much to do with fundamental changes in product and distribution channels as recession-related pressures.
Here are five factors that may argue for accelerating the shift from offset to digital manufacturing:
1. Introduction of the iPad. At the time this column was written, the iPad had been on the market for about two months and appears to be a remarkable success, with sales of 2 million units per month and the international release underway.
While the jury is still out on its impact on the e-book market, the iPad is certain to stimulate competitive responses from e-reader manufacturers in the form of e-readers with a broader range of capabilities and, more importantly, lower prices. Lower-priced e-readers mean accelerated uptake of the e-book—and more e-books inevitably translates to fewer print books sold.
2. E-book proliferation. In addition to the trade market, there is a brisk and potentially larger opportunity for e-books in the college and professional publishing markets. The college space is particularly ripe for expansion as digital textbooks offer the answer to many prayers—a viable way for publishers to combat the clear and present danger of used books, the burgeoning textbook rental market and as a counter to the criticisms of the cost of college texts.
3. Shrinking library budgets. With states facing FY 2011 budget deficits of about $190 billion, publicly funded library spending is certain to be hard hit. Library budgets at institutions of higher education are equally likely to feel the pain as operating budgets are cut and endowments deliver returns well below historical levels. This can only mean fewer dollars for acquisitions.
4. Patron-driven acquisition. In an era of uncertain funding levels, many libraries are turning to a new business model: patron-driven acquisition (PDA).
PDA is a response to circulation statistics that suggest that many of the books acquired by libraries never leave the stacks. It postpones the decision to purchase a book until a demand has been identified by one of the library's clients. Automatic purchases under approval plans are rapidly becoming a fond memory. Sales that could be counted on in years gone by now become a matter of speculation, which does not make for reliable inventory forecasts.
5. Distance learning. Distance learning has become part of the fabric of the American education system. The business model for these programs frequently includes tuition and textbooks bundled into a single fee to the student. Many of these institutions have replaced some or all of their printed texts with digital versions.
6. Textbook rental. While textbook rental is a relatively recent development, it is clearly spurring interest in the college sector, and can only mean fewer copies coming off the presses.
7. Regional manufacturing. In a global economy moving at Internet speed, there's a lot to be said for replacing the long-standing tradition of manufacturing in the country of original publication (there goes that obsession with unit manufacturing cost again) with exporting to international markets with a policy of local manufacturing—as close to the customer as manufacturing capabilities permit. If we take a total cost perspective—defined here as printing, shipping and handling, customs clearance, inventory carrying costs (including obsolescence and the risk of lost sales created by not having the inventory immediately available to meet customer demand)—the case for local manufacturing is hard to dismiss. While all this is good news for the publisher's bottom line, it's unlikely to bode well for country-of-origin print orders.
8. Higher Education Opportunity Act (HEOA). Effective in July, any institution of higher education receiving funding from the federal government must, "to the maximum extent practicable," provide students with early notice of the texts required for the courses in which they are enrolled to give them ample time to examine alternatives for sourcing their course material.
To quote from a summary of the HEOA created by the National Association of College Stores, the legislation "encourages institutions of higher education to disseminate information to students on campus-based initiatives to reduce costs such as used books, guaranteed buyback, rental programs, e-books, print-on-demand, etc." I am not suggesting that this legislation is in any way inappropriate or unnecessary; however, it is difficult to understand how it will make forecasting inventory requirements any easier for college publishers.
What does all of this mean in practical terms? I am not predicting the demise of the printed book. It will be around for a long time to come and, in one fashion or another, will always be indispensable.
What I am suggesting is that the balance is clearly shifting. E-books are here to stay. The scales are tipping from a world built around print supplemented by digital to digital supplemented by print. The change is no longer speculation—it is a reality that publishers must accept and integrate into their workflows.
This means that well-tested policies, procedures and demand history as predictors of the future should be closely re-examined—something that every well-run business should do as a matter of course.
That being said, if the recession has taught us any lesson, we should all be examining the marketplace assumptions and production economics that we have relied on for so many years to see if they still hold up to scrutiny, and actively begin to look at new ways of doing business. Not all of the traditions and technologies that have served us so well for so long will need to be abandoned, but we need to be open to change and regularly examine the opportunity that technology (in this case print-on-demand and short-run digital printing) offers. This is not just a matter of economic necessity, but in some cases may well be the difference between survival and extinction.
David Hetherington is director of major account sales for Baker & Taylor's Digital Service Group and an adjunct professor at the Pace University Graduate School of Book and Magazine Publishing. He was previously managing director for strategic business development for Integrated Book Technology, and has held senior positions in finance, operations and manufacturing with some of the industry's largest firms, including Simon & Schuster, Reader's Digest Association, BearingPoint Consulting, Wolters Kluwer Health and Columbia University Press.