BOOK PRINTING OUTLOOK — BEST-SELLERS FLOAT ALL BOATS

IN GENERAL, when a best-seller hits the market, it directly or indirectly benefits the entire book manufacturing industry. The long runs clog up capacity for those fortunate enough to garner the job, and creates overflow that needs to be spread through the ranks.

Take Courier Corp., of North Chelmsford, MA, for example. The 2006 trade campaign started off slowly, notes Peter Tobin, executive vice president, but developed a head of steam in late summer and early fall, leading up to the holiday push. A degree of the pickup can be attributed to publishers hanging back on reprint orders. But what really lit the fire was a bevy of new titles by big name authors, including Stephen King and John Grisham. Those works generate the one- and two-million print runs.

“We don’t typically print those books, but the fact that these books are being manufactured has caused people to come to us for help in getting other titles manufactured,” Tobin says. “In the world of trade, there’s been more demand on capacity than people might have expected earlier in the year. Those who did print best-sellers were so busy that people came to us for overflow, so we benefitted.”

Courier saw a steady performance from the education market. While 2006 hasn’t been as robust for the industry as its predecessor, this appears to be a golden age of state elementary/high school (el-hi) adoptions, a span from 2005 through 2009 that will see a good deal of new and updated textbooks. Modest, single digit growth marked the higher education front, while the religious sector proved to be consistent, lacking in peaks and valleys.

Courier positioned itself to reap the benefits of a flush publishing landscape with the addition of a four-color MAN Roland Lithoman web press that was installed at its Kendallville, IN, facility in December of 2005. An identical match to the heavy iron installed in April of 2004, the Lithoman was largely tabbed to cover the demand for four-color el-hi books. The impact was so immediate that Courier placed an order for another Lithoman that is slated to be installed and running this month.

Sewing Up New Business

Between December 2005 and 2006, the company has invested more than $35 million in four-color capacity. Added to the mix were McCain and Smyth sewing capabilities, also as a result of the education market boom. The Kendallville plant grew by 65,000 square feet to house expansion in the bindery.

Aside from the heavy machinery, Courier also sank a good deal of money into its technology, research and development initiatives, including the XBITS program to create industry standard electronic transactions between publishers and other suppliers in the marketplace.

Tobin believes 2007 will prove even more fruitful on the el-hi side, noting that the American Association of Publishers projects new title publishing ballooning 20 percent to $800 million in 2007. With the power trio of Lithomans in Kendallville, Tobin feels his company is poised to pounce on the resulting opportunities.

As for the trade end, a new Dan Brown book, with the working title, “The Solomon Key,” is tentatively slated for release in 2007. And with the seventh and final installment of the Harry Potter saga targeted for the summer of ’07, the blockbuster titles will no doubt cause a buzz and resulting rippling effect for the publishing and printing communities.

“If they both come out in 2007, those are blockbuster authors and subjects,” Tobin notes. “They would certainly be highly anticipated and highly publicized books. That’s good for the book business because it gets people talking about books and it builds excitement.”

It was an outstanding year for consumer sales for Chicago-based RR Donnelley, which saw the platform grow significantly, according to Ed Lane, president, book and directory. On the consumer trade end, while there was a lack of publishing “front list hits,” RR Donnelley reaped the reward of strength via its broad client base. One aspect that augments RR Donnelley’s standing, he contends, is its relationships with publishers from the smallest to the largest.

“Publishers continue to be cautious from an inventory standpoint, and our ability to leverage our three-plant trade book platform was critical in providing schedule flexibility and quick-turn reprint service,” Lane says. “In addition, disturbances in industry capacity created opportunities for RR Donnelley in 2006, and allowed us to build relationships with new customers.”

Lane adds that education sales remained solid across the board, buoyed by publishers producing books earlier than expected. As for specialty (including juvenile and religious), sales were down compared to the 2005 mega titles that Donnelley produced, while un-favorable market conditions from the book club market also played a role. The printer did manage to garner some upside in the religious segment, with some printers exiting the domestic manufacturing of bibles. Demand for lightweight bible capabilities strengthened throughout the year, Lane notes.

The 2006 campaign also proved a successful one for RR Donnelley’s China manufacturing platform, where the printer serves consumer, education, religious and other specialty markets.

Educated Installations

New press and bindery equipment added to the U.S. platform in late 2005 and early 2006 is preparing RR Donnelley for the anticipated strengthening of the el-hi adoption cycle in 2008 and 2009. Its Chinese facilities in Shenzen and Dongguan are continually being fortified with new gear, as well.

Among the keys for 2007, according to Lane, is RR Donnelley enhancing its Inventory Management Solution’s digital print offering. In the education segment, the printer is launching a short-run education module that will produce more targeted and customized textbooks that reflect the trends in educational publishing.

The recent announcement of RR Donnelley’s intent to acquire Banta Corp., which registered $370 million in book manufacturing sales, and its integration during the coming year will help determine the fortunes for RR Donnelley’s book segment in 2007. “(The acquisition) is done with an eye towards increasing the range of products, services and solutions we can provide to help our book publishers succeed and grow,” Lane says.

Speaking of the mega-printers, it was a year of mixed fortunes for Quebecor World of Montreal, which reorganized its U.S. book and magazine platform in 2006, resulting in the closure of its long-time Kingsport, TN, book facility and dismissal of more than 400 employees. But the company welcomed a new president and CEO in Wes Lucas, who promptly announced a five-point transformation plan to improve performance.

However, the overall plan for the Quebecor World book segment is leveraging its entire asset base to help provide more effective pricing for publisher clients, notes Kevin Clarke, president of book and directory services. The redeployment of existing assets, along with a $100 million capex program for the sector alone, should also help Quebecor World rebound nicely in 2007.

Balancing Act

It’s safe to say that 2006 had its challenges. “Overall, we saw a balanced market with interesting dynamics—some weakness in the front end of the business, then a real desire on the part of many publishers to make up for the weakness in the third and fourth quarter,” Clarke says. “On balance, most of the markets were flat to marginally growing.”

Like its aforementioned contemporaries, Quebecor World is active in most segments—mass market, education, adult trade, religious, juvenile and specialty printing. According to Sean Twomey, Quebecor World’s senior vice president of market development, publishers are making for a reasonably strong fall trade season. “And that’s reflected in the sort of activity we’ve been seeing in our own business,” he says. “We printed 151 separate titles that ended up on the USA Today best-seller list in the third quarter.”

Quebecor World is also seeing more reprint business, with an emphasis on driving smaller jobs through the supply chain more quickly. By investing heavily in MAN Roland web presses, Clarke believes the company can reap quicker makereadies and double the page throughput.

“These presses, and the automation in the bindery, allow us to blend the larger books, the best-sellers, with the publisher’s desire to capitalize on unique topics that might be hot at the time,” he says. “Then, the publishers order reprints to keep books in print without a lot of inventory and the risk of returns.”

Supply chain management, last spring’s retooling of the sector, and continuing investments across the platform in both North and South America, are among the factors that will dictate how Quebecor World may fare in 2007. Twomey is expecting a stronger first half than 2006, fostered by strong growth in the trade and educational segments. Satisfying clients’ need for more reprints and faster turn times will be critical elements for the printer.

“It’s going to be a challenging year for us—we spent a lot of money, and we’re in the final phase of retooling the platform, which is never easy,” Clarke says. “The good news: we’re going to come out strong with new technology and focused factories, and be prepared to deal with a rapidly changing publishing environment.” PI