So far, 2003 has been another difficult year for the publication and commercial printing ink industry. Judging by the results of the National Association of Printing Ink Manufacturers’ (NAPIM) survey of ink companies, the first six months of 2003 brought the same bad news that the ink industry has had for the past three years. Overall, the volume of publication and commercial inks is down 2.9 percent year-to-date, and the dollar value is off by 5.1 percent, signalling further erosion in the price of ink.
The publication side has been particularly troubling. While heatset ink is even on a per pound basis, prices are down by 5.2 percent, which is bad enough news. The worst news came in publication gravure, where volume is down 10.6 percent and sales are down 13 percent.
Meanwhile, printing industry officials are optimistic that things are going to turn around. Should their wishes come true, it would clearly be much-needed good news for ink companies.
“It’s been a comeback year for the printing industry, much better than the past two years, though it’s still not that good,” said Dr. Ron Davis, chief economist for the Printing Industries of America (PIA), which has reported a 2.2 percent gain in printing sales year-to-date for the first six months of the year. “The worst category is magazines and periodicals, although ad pages are starting to trend up.”
At approximately $650 million, the heatset ink market is of major importance to the U.S. ink industry. Because of the state of the magazine industry, it has been a relatively weak market.
|The U.S. publication market continues to face economic challenges. (Photo courtesy of Sun Chemical.)|
“The market has been hit by stagnant conditions, increased unemployment and price erosion,” said Debra Schafrath, marketing manager, publication/ commercial for Flint Ink. “We have yet to see an upswing in page counts that has positively affected our business.”
Printing ink industry executives note that the catalog and direct mail industries have fared well in the first half of the year.
“The direct mail and catalog segments have been relatively stronger than the rest of the market,” said Ms. Schafrath. “Catalog was not hit as hard as magazine. Even so, the catalog market has been just as aggressive in reducing costs in operations, which has affected suppliers.”
While the Internet has yet to impact catalog publishing companies, increasing postal rates are a problem.
“Fear of the Internet in the catalog and magazine industries appears unfounded so far,” Mr. Jacobson said. He added that many web sites invite readers to supply their names and addresses so a printed catalog can be sent to them. On the other hand, he said, a major concern is the constant threat of postal rate increases, which could damage the industry.
To survive, printers are looking to cut costs, and a few major retailers have even moved from process-color to black and white in some of their print ads.
“Printers continue to drive cost out of their systems,” said Ms. Schafrath “As a result, product standardization has been key. Printers are demanding help from their suppliers. Flint Ink continues to focus on our customers’ needs.”
INX International leaders have found that lead times and press runs are becoming more compressed, and short-run and real estate publications have been doing particularly well. They also report that random dot screening appears to be growing rapidly.
Mr. Jacobson said that the state of the printing industry has led printers to take one of two distinctive approaches.
“We see the emergence of two basic strategies among printers, which the PIA has identified as ‘high production focused’ and ‘differentiation’ sectors,” Mr. Jacobson said. “In the high production sector, printers are driven mostly by cost and productivity considerations. They must be highly specialized and super efficient to be competitive. In the differentiation sector, printers provide value-added, customized offerings that their customers demand. In doing so, these printers provide more links in the printers’ supply chain. Both approaches represent a kind of specialization and both require a different approach from the vendors.”
|Magazines and newspapers have had a difficult time in recent years, but officials believe a rebound may be in the works. (Photo courtesy of Sun Chemical.)|
For a long time, gravure has been the choice for long-run magazine and catalog work, but it has slipped in recent years due to the need for shorter print runs. In 2002, publication gravure inks accounted for approximately $300 million in sales, but NAPIM’s survey findings for the first half of 2003, in which publication gravure’s volume is down 10.6 percent and sales are down 13 percent, attest to slower demand and tighter prices, in part because there are only three major publication gravure printers (Quebecor World, R.R. Donnelley and Sons and Quad Graphics) left today.
“In both the heatset and gravure markets, overcapacity is changing the way printers are doing business,” Mr. Jacobson said. “Large- and medium-sized printers increasingly are dabbling in short-run jobs. What was once considered a different segment of the printing market now at least is considered an option for these printers.”
The newspaper industry, which has been severely impacted by the economic downturn in the U.S., has also been one of the areas that has been impacted by new technologies. The economy has continued to fuel the general decline in the number of U.S. newspapers (Figure 1) and the overall circulation (Figure 2). Since the mid-1980s, cable TV and the Internet have changed the way Americans get their news. For example, back in 1950, there were 322 morning and 1,450 evening papers, with a total daily circulation of 53.8 million. By 1990, 62.3 million Americans were reading their daily newspapers, with more than 67 percent being evening papers.
Much has changed since then: the advent of cable news has essentially made evening papers obsolete. Today, there remain 692 evening papers that are in operation, as opposed to 777 morning papers. That’s 315 fewer newspapers than in 1950, and more than 150 fewer than in 1990. Circulation is 55 million, an 11.7 percent decrease from 1990, and the Newspaper Association of America (NAA) is reporting further erosion.
Yet there have been some bright spots, quite literally, with the increased use of color in newspapers due to the influence of USA Today, and the nearly doubling of Sunday newspapers in the past 50 years to 913 today, which have 58 million circulation. Yet even the number of Sunday readers is falling, as consumers simply say they don’t have time to read the papers on the weekend. And that’s bad news for publishers, as the Sunday paper is nearly 40 percent of a typical newspaper’s advertising revenue.
Of equal concern is the average age of the typical reader. For example, 55-year-olds and older have the highest readership, and 18- to 24-year-olds the lowest by far. Studies show that younger people are more likely to use the Internet for news, which doesn’t bode well for the newspaper industry’s future.
The loss of ad pages and inserts due to the economy has hurt the newspaper industry, and there are few signs that things are getting better.
“There are some sporadic signs of a rebound in advertising. However, it is too early to be certain of any long-term trends,” said Norm Harbin, Flint Ink’s vice president, market and technical development, news ink.
“In the amount of printed materials, newspapers have had a flat year so far, although they are reporting some minor gains in year-over-year revenues,” said Todd Wheeler, marketing manager, US Inks. “The fourth quarter, which is traditionally the busiest time of year for newspaper advertising, will tell the tale. To this point, the consumption of newsprint, which is a good indicator of print volumes, is down in double digits from the highs of 2000. While some of the national newspapers like the New York Times and USA Today have enjoyed some growth, there’s a lot of variability among local newspapers.”
Mr. Wheeler said newspapers continue to increase their use of color printing, although it has slowed slightly. He also noted that newspapers are seeking higher strength inks, which allows newspapers to achieve proper densities with thinner ink films.
For ink companies, quality and service remain essentials.
“There is a strong emphasis on quality and better satisfying the expectations of readers and advertisers,” Mr. Harbin said. “We are taking more objective and scientific approaches to addressing these expectations.”
|Figure 1: Number of newspapers in the U.S. from 1950-2000. (Source: Newspaper Association of America.)|
|Figure 2: Total circulation of daily and Sunday newspapers in the U.S. from 1950-2000. (Source: Newspaper Association of America.)|
The Future of Publications
Dr. Davis is optimistic that the printing industry will see better days in 2004.
“Assuming the economy tracks as expected, print markets should continue to gain momentum in 2004,” Dr. Davis said. “Our forecast calls for overall shipment growth of 3 percent to 4 percent above 2003 levels. Aside from the pull of the growing economy there are the additional factors of the Olympics and the presidential elections which could add a half a point or so to print market growth next year. Additionally, there is evidence of direct mail picking up as advertising returns to this tried and true media.”
Should this be the case, ink manufacturers may have something to look forward to in 2004.
While a few dozen U.S. newspapers use flexo for printing and rave about its color and the ease of use, flexo has yet to make much of an impact in the newspaper market.
“There continues to be interest in flexo news inks with existing flexo news ink customers,” Mr. Harbin said. “However, offset inks remain the most widely used. Little change in this trend is anticipated.”
Mr. Wheeler said that there are more than 30 flexo newspapers out of approximately 1,500 daily newspapers in the U.S. "Offset is the dominant printing process for U.S. newspapers," he said. "Therefore, while flexo continues to have dedicated proponents, it appears there is greater interest in offset based on recent press sales."