The Full 360 on Digital
Booktech: Is it safe to assume digital print is also print on demand?
Bauer: It could be. Print-on-demand is probably an origination of it. That's how a lot of it was sold at the beginning. So digital print is fairly mature. It's been around for over a decade.
Booktech: When you say digital print is mature, does that mean it's lived up to the promises vendors made for it early on?
Bauer: One of the things we've observed is that many of the promises and claims made by digital print manufacturers to publishers were difficult to bring to fruition.
Booktech: What were some of those promises?
Bauer: The profitability of keeping books in print, impacting the returns issue, better inventory management. Those things were promised over the last decade. Whether it's a trade or education publisher or what-have-you, those [promises] have been very difficult to bring to fruition. But over the last three years, the products and digital presses have changed. Those [new] technologies have started to make [digital print] more of a financially viable solution. The impact of those changes are mainly addressing press speeds and roll widths, and delivering a cost platform that now makes sense for publishers to transact at lower volumes. Before, [digital print] wasn't effective printing below 500. When trying to place orders below 500, and you bring in the other transaction costs, [digital print] simply didn't make sense. As the technologies have become faster, and able to deliver 1000 or 1200 units, now it's at a lower price than the equivalent offset. That's starting to make [digital print] viable for publishers.
Booktech: Let's back up for a moment. You're saying now digital print makes more sense when dealing with a higher print run, say 1000 or more?
Bauer: Yes. It depends on the segment. For instance, in the professional markets, where quality was adequate, they were able to capitalize on the original promise [of digital]. The primary reason why is, they can retail that book at higher levels. But for the consumer trade businesses in which the average trade book is $12 - or if it's $19, there's a 40% discount to the store - it was difficult for trade publishers to say, "this is helping "this is helping me improve inventory returns." That was three years ago. Now, though, with the wider web widths available to digital printers and presses, and faster manufacturing speeds, [publishers] can deliver finished books at a lower cost, and a lower price. Now they are saying, "this is starting to add some value." Remember, we're talking about a tier of books that has limited annual demand. Now it makes sense to do this, and [publishers] can actually point to a reduction in working capital as an outcome.
Booktech: Are we talking about full color printing?
Bauer: Even though [digital] started in the one-color arena first, it's now starting to occur in the four-color side.
Booktech: Are publishers getting requests for digital printing from traditional offset customers?
Bauer: There's been a tremendous amount of experimenting with it over the last few years. There have been pockets of success. It really depends on the publisher's inventory management and titles strategies. If a trade publisher believes the bigger their book listing is, the more intellectual property they have, and therefore the more valuable their publishing arm is, then keeping things in print forever makes sense. But when a publisher is focused on delivering a percentage of gross margin as gross profit, sometimes keeping books in print, even with less costly print-on-demand technology, it is not making a great contribution to their margin. As a matter of fact, some can point to where it's actually hurting their margin.
Booktech: So sometimes keeping books in print is not advantageous even though there is market demand?
Bauer: Exactly. You still have to consider all the other costs that conduct the transaction. You have to factor in returns. Granted, they'll be lower, but they're still going to occur, and there's overhead associated with processing them. You have to factor in fulfillment and distribution and handling. When you weigh all the costs for a run of one or 20 books, and you still have to pass a discount to the store, it's hard to make a profitable contribution to the larger business.
Craig Bauer (Craig.Bauer@RRD.com) is director of business development at R.R. Donnelley & Sons Co. in New York.