BOOKS - Textbooks Lead the Way

BY SCOTT POLK

The book printing industry had one of its finest years in 2000, and not just because of the wild success of the Harry Potter series. Of course, the bespectacled British lad had a little to do with the success, but it was the elementary through high school (el-hi) textbook market that led the way.

Peter Tobin, vice president of North Chelmsford, MA-based Courier Corp., notes that el-hi textbooks had a 17 percent increase in sales compared to last year.

"The outlook is very, very strong. [Next year] should be as strong as 2000 and 2002 should be even stronger," he predicts.

The boom can be attributed to several reasons, Tobin explains. Federal and state funding are at high levels and more states are requiring students to pass competency tests, or "high stakes testing." Add some strong demographics to the mix and the ingredients for a good year are in place.

The Menasha, WI-based Banta Book Group had an all-time sales high for the second year in a row, according to Dave Mead, vice president of sales and marketing. Banta's outstanding year was also attributed to a bullish textbook market.

"State funding is strong for el-hi and the use of the book in schools seems secure for years to come," Mead opines. "Publishers are investing in new programs and states continue to see books as the primary instructional material. This market has continued to be a strong growth area for Banta. We continue our commitment to educational products with ongoing acquisitions and investment in new equipment."

As far as collegiate texts go, Courier has been helped by large college enrollments as more and more companies are participating in programs to send their employees back to school.

Banta, too, had a strong year with college textbooks, but Mead cautions that market has different dynamics than the el-hi market.

"Colleges are more receptive to custom published products and technology-based materials for instruction," he states. "College-level students are sensitive to cost and are more willing to accept alternatives to the traditional book. Enrollments are up, and the use of four-color and more paperback products benefits us in this market. Our college-level sales have increased significantly in the past few years."

A similar story is unfolding at Chicago-based R.R. Donnelley & Sons, which is the segment's largest printer with $800 million in sales.

Booming Book Biz
"The book business, from our perspective, is simply booming," says Ed Lane, president of book publishing services. "This should be a record year for us in terms of volume produced. One of the things that's been great this year is that we've seen strengths in virtually all of the major segments we serve."

Lane touts all of R.R. Donnelley's products—el-hi, college, religious and trade—as being successful in 2000. Perhaps one of the reasons for this was an ambitious program designed to improve the huge printing company's efficiency.

"One of the initiatives we took this year was to work on installing a uniform PDF file format workflow across all of our plants," Lane explains. "We've seen a migration from more and more of our customers, and across the industry, to a PDF file format. By having this uniform workflow, it allows us to improve efficiency and speed. We can share work across divisions and leverage our size, if you will, to create increased capacity and flexibility for our customers."

Improvements were being made at Courier, as well. Tobin reports that his company spent $15 million in new equipment and technology this year, and plans to invest the same amount in 2000 to expand capacity and enhance responsiveness.

"Book manufacturers need to sink capital into new technologies such as computer-to-plate," he states. "The investment is significant, but customers appreciate the resulting quality and service."

Mead sees internal growth as an important part of the business. That's why Banta will continue to put forth capital in such improvements.

"We have significant capital expenditures planned for 2001 in areas of infrastructure growth and distribution services," Mead comments. "Although we were not immune from the industry-wide capacity crunch in the third quarter of this year, we have aggressive hiring and equipment installation plans for next year that will provide the growth cushion for our future."

Book printers that are stubborn when it comes to upgrading facilities and equipment run the risk of being left behind as the industry adjusts to the recent technological advances in printing. One of the most significant is digitization. According to the Printing Industries of America's recent Vision 21 Executive Summary, digitization will free book content material for repackaging and reuse. It will also enhance the availability of books, especially those less suitable for an extended print run. A significant market may develop for printing such titles.

Digitization is what moves on-demand printing, but Mead cautions that the larger companies may not be able to benefit from on-demand in the way that a smaller company might.

"On-demand is growing steadily, but tends to impact the short-run areas of the business," Mead notes. "It has great promise for the future in many markets, and the technology is steadily improving. We have invested significantly in this capability, but it has some limitations at the present in Banta's typical book markets."

"On-demand allows a publisher to keep a title in print forever," Tobin adds. "If a publisher can digitize a title and keep it in an archive, even if they only need to sell 50 copies a year, if it's an important title to them, they can keep that alive indefinitely."

Though the outlook for book printing is rosy, there are still challenges for printers. Among them are maintaining a hold in a shrinking market and finding enough skilled workers to maintain around-the-clock production in an economy with some of the lowest unemployment levels in years.

"With all the consolidation that is going on in publishing, that can create a challenge because there are fewer doors to knock on," Tobin says. "But it can create a real opportunity to build relationships that can result in winning a substantial amount of share from these publishers. There's been a tremendous growth in specialized niche publishers over the last 10 years. Those are people with whom you can build very loyal relationships, people who will be looking to their book manufacturers for total, one-stop shopping."

Reading Labor Issues
Mead echoes Tobin's concerns. "Finding and retaining enough labor in a tight labor market has been a challenge. The wages are being driven up to hire new people, and companies have had to become very creative in attracting new people," he says. "Retention has become more of an issue since competing retailers and manufacturing concerns in other sectors are competing for entry-level labor. One can purchase new equipment, but without labor to support the added output, it would be of little help."

Some of the future trends the executives point to include:

• A continued reduction in cycle time to market through faster turnaround, more frequent printings, better inventory control by publishers and more utilization of plant-connected distribution services.
• A steady growth in digital printing in the short-run end of the market.
• More use of color in higher education and trade books.
• Increasing use of e-commerce to streamline workflows and an evolution to some standards in this area.

Mead doubts if the market can continue its meteoric rise in 2001, for no reason other than that 2000 was so successful. "I've been in this business for nearly 30 years. This was an unusual year due to simultaneous momentum in a number of areas of the book market," Mead remarks.

"I would not expect that the industry could sustain the level of growth experienced in 2000. Although I expect some continued momentum in 2001 in education and trade publishing for printers due to consolidation of suppliers, a continued solid economy and continued, significant government interest in literacy and educational system upgrades."