Book Printing Outlook — Opportunities Abound

ONE THING is a safe bet when it comes to handicapping the fortunes of the book manufacturing sector: Those who stay in school will definitely go far.

The book platform is rife with challenges. Overseas printers can offer attractive production cost savings and adequate turnarounds in segments that aren’t as time- sensitive, such as coffee table books. One-color has become a bubbling commodity cauldron for print- on-demand digital applications; a boon for publishers that don’t want to carry excess inventory but, from this side of a playing field, it resembles a feeding frenzy for printers with comparable equipment.

Want to continue dabbling in trade? Three words carry a sickening finality to them: No more Potter. The seventh and final edition of the über-popular “Harry Potter” series bowed this past summer. With Joanne Rowling pondering her next move, who is going to capture the consumer’s imagination...and wallet share?

But Uncle Julius was right when he chided you about education being the best road to take. An education is forever, and the current adoption cycle seems to have lasted that long. We’re smack in the heart of a fertile 2005-2009 adoption cycle for the elementary/high school (el-hi) segment.

Ed Lane, president of book and directory for Chicago-based RR Donnelley, points out that a number of states have helped keep the educational presses rolling due to strong rollout programs. Among them: Texas and Georgia for math materials; California and South Carolina in science; and Indiana, Oregon and Texas for reading.

“RR Donnelley is delighted with the response of our employees as they rose to the challenge of successfully integrating Von Hoffmann and Banta into the platform,” Lane says. “We are also pleased with the ability to leverage this expanded platform to meet all of our customers’ education needs.”

Trade Sector: Solid Year

It was a solid year for the trade sector, as well. Citing Association of American Publishers (AAP) statistics, Lane notes that adult hardcover year-to-date sales enjoyed double-digit growth. That growth has been driven by blockbuster performances from the best-seller lists.

“We have been able to respond quickly to a title’s exceptional growth at any given time,” he adds. “That’s one of the value propositions we offer to customers: flexibility and responsiveness to our publishers’ immediate reprint needs. RR Donnelley also continues its investments in one-color, 8˝ and 9˝ equipment, and as a result we are prepared to continue to meet the growing customer needs.”

Donnelley also saw an uptick in the religious segment, backed by domestic and offshore bible production. The professional sector, dogged by digital media cannibalization concerns, provided excellent results in ’07, and Lane sees a bright future that includes digital and hard copy options for consumers.

Lastly, the juvenile space was wonderfully filled by Harry of Hogwarts, and Donnelley—a producer of the epic saga—was sad to see it reach its conclusion. Clearly, it is the hope of not just Donnelley and every book printer, but publishers, teachers and parents nationwide, that the love for reading continues for children.

Of the three spaces Courier Corp. of North Chelmsford, MA, competes in (education, trade and religious), the el-hi segment continues to validate the investments it made in recent years. Peter Tobin, vice president, also points to AAP figures, including 9 percent el-hi growth as of September for the adoption states. He says Courier managed to best the industry figure by winning more share with publisher clients, buoyed by its service record.

“We’ve also benefitted from the fact that the market itself has grown at a nice margin,” Tobin relates. “If you look at the consolidated AAP numbers, it will show el-hi at 3 percent growth year- to-date, but you have to look at both the adoption states and the open territory/non-adoption states. The adoption states, which is where we’ve focused ourselves for a lot of growth, has been a good story this year.”

Tobin says Courier has also had a hand in the sound growth reaped in the higher education space, bolstered by increased share and a bump in volume levels. Religion posted another steady, if unspectacular, campaign.

Summer growth for the trade space resulted from a somewhat unexpected demand increase. Again, Courier was able to take away a greater share of publisher pie in a year filled with new titles and fast-track books that required quicker turns which, he contends, speaks to the printer’s competencies.

“We saw a lot of fast reprints for titles that took off because publishers might have been a little cautious on their first printing (volume),” Tobin says.

In past years, “Harry Potter” pro- duction caused a capacity crunch for other publishers that provided residual volume to Courier and other printers with available press time, but Tobin says that wasn’t the case with the final “Potter” installment.

Pricing pressures that have been felt domestically and internationally by Montréal-based Quebecor World has been a function of excess capacity, according to Kevin Clarke, president of book and directory services. The rules of engagement continue to change.

“Demand is changing radically,” he says. “You’ve got the embracing of time sensitivity, extreme publishing, just-in-time...the whole supply chain emphasis in this business has become extraordinary. The publishers are dealing with significant return issues and, from that perspective, we understand their challenges.

“We’re seeing an emerging digital market that’s starting to gain traction in a variety of different products. Electronic distribution of information is surely gaining strength. It will be interesting to see what momentum and significant traction it gains. We radically changed our digital position on that basis.”

Consumer Sector Boost

As for 2007, the consumer sector proved bountiful for Quebecor World, which also had a large hand in “Potter” manufacturing. Education has seen major consolidation on the publishing end, Clarke notes, and offshore options have been embraced far more today than in past years.

It has been a year since Quebecor World reorganized its U.S. book and magazine platform. The move—part of the company’s five-point transformation plan to improve performance—entailed the closing of its Kingsport, TN, facility and the redeployment of existing and new assets. In the last 18 months alone, Quebecor World has plunked down nearly $100 million to augment that space.

“The new (web press) equipment we’ve put in every one of our facilities is a hybrid-type solution—wide formats, more pages, quicker and, at same time, they have very efficient makeready capabilities,” Clarke says. “The middle ground of some of these markets has just disappeared. You’ve got big books where publishers need a million or two million of them. The good news: When Oprah talks about one on TV, you need an extra 400,000 of them. That equipment...some of our presses now are doing a million impressions a day, doubles the amount of pages. We’ve had presses, the same press, do more than 100 makereadies in a single day.”

Quebecor World has instituted “hub and spoke” technology with data centers which process content that can be migrated to any of its worldwide facilities, along with an enterprise scheduling system and other links that bring the company network—and its customers—close together. Other solutions have tightened Quebecor World’s supply chain and its Latin American operations, which has tripled book sales volume.

In order for Quebecor World to thrive in 2008, the company needs to be “the easiest guy to do business with,” according to Clarke. That entails, among other things, being responsive to client needs for driving more turn time out of the final product’s equation.

“It will be interesting to see if there’s a radical change in paper prices, and how that might impact the ‘B’ list books,” Clarke says. “If there is a radical uptick in prices, I think we’ll see a more aggressive application of speed-to-market, extreme publishing concepts. Publishers will be challenged to manage inventory and, at the same time, it becomes a challenging environment for us to assist them in getting product to market.”

Tobin anticipates solid growth from both el-hi and college markets in 2008, at a level consistent with 2007. Within the past 12 months, Courier has gone live with a new MAN Roland Lithoman web press, which was installed at its Kendallville, IN, facility. That plant also reaped a new high-capacity binding line and a warehouse is being constructed. McCain and Smyth sewing capabilities have been increased. At presstime, Courier was mulling over options for its 2008 spending initiatives.

Soft proofing for one-, two- and four-color printing has become mainstream, according to Tobin, and Courier has also invested in technology toward that end. It’s another example of publisher clients seeking to save time and compress their schedules.

Smooth Integrations

Lane feels the Banta and Von Hoffmann integrations have gone smoothly in the past year. The Windy City printer has increased manufacturing capabilities to provide its customers more flexibility in the “One RR Donnelley” platform, which will allow the company to enter new book segments.

“From RR Donnelley’s perspective, the most important measure of success is how our customers perceive the integration, and we are pleased to say the feedback has been positive,” Lane says. “In addition, we continue to provide our customers a global platform that combines offshore capabilities with the service levels that they expect. RR Donnelley recognizes the importance of offering an international platform because our publishers’ strategies are increasingly more globally focused.

“We believe our expansive manufacturing platform, superior customer service and overall capabilities enable us to be nimble, responding quickly and effectively to each book segment’s growth and changing customer needs,” he contends.

Quebecor World’s Clarke believes his company is well-positioned to handle the time-reducing needs of its clients and should flourish over the next two campaigns.

“We’ll see significant growth in the education business; our investments complement what we’re trying to accomplish,” he says. “It’ll be interesting to see the impact of the general economy, an election year and the paper pricing situation. Publishers are also embracing the carbon footprint and green initiatives. We embraced that many years ago because, for one, in many cases, there are legal requirements, and two, it makes sound business sense.” PI