Meanwhile, eReaders are making significant strides in the market place, rising from one million units sold in 2008 to an estimated 25 million units sold in 2011. As a result, printed book sales are on the decline, with IHS/iSupply, a consultant group, estimating that eBook sales will grow at 40% in next five years while book sales will decline 5%. This is partly driven by the average selling price of eBooks, which is 40% lower than printed books.
It is understandable that publication printers and their ink suppliers are facing challenging times. There is little likelihood that these numbers will ever improve, nor will publication printing disappear. Still, the market will be ever shrinking, although it will likely plateau years from now.
“The weak economy, fueled by financial uncertainty across the globe and the growing popularity of digital devices, continues to challenge the publication heatset printing market in 2011,” said Todd Wheeler, marketing manager, US Ink. “As a result, the publication market in 2011 is down percentage-wise by low single digits compared to 2010 volumes.”
Mike Kellen, business director heatset inks and director of strategic marketing for Flint Group, said that Flint Group has seen ups and downs in the publication sector.
“Ad page declines eased, coupon use was up and catalogs and magazines continued to drive consumer purchases – motivating data point for consumer goods companies,” Mr. Kellen observed. “But the numbers are still well below historic levels. Sales in many publication categories are down, and economic conditions mixed with raw material trends and ‘e-progress’ limited recovery in the publication printing market.”
“The demand for printed advertising slightly recovered compared to 2010,” said André Berk, BU head publication gravure for Siegwerk. “However, we are still far away from previous years. The consolidation process in the printing industry has continued. In publication gravure, we have seen some capacity shutdowns. The remaining printers are better utilized. In spite of some price increases realized in Q2 and Q3, the margins in the printing business are still unsatisfactory.
“After recovery of the publication gravure market in Q3 and Q4 2010, we saw a slight fall back in Q1 and Q2 2011, but still on higher level than Q1 and Q2 2010,” Mr. Berk added.
“There were capacity shutdowns also in heatset,” Michael Müller-Samson, BU head web offset at Siegwerk, added. “However, there are still significant overcapacities left in the market. The heatset markets are slightly increasing, but due to structural changes, the coldset market faces a slight decrease.”
Raw Materials and Publication Inks
The publication ink market has been beset by raw material price increases and supply concerns, which has further impacted ink manufacturers.
“Our industry has experienced record levels of volatility and inflation, including feedstock shortages, commodity inflation, supply constraints and continued growth in demand from both traditional markets as well as from alternative industries like adhesives, coatings and tires,” Mr. Wheeler said. “The increasing costs of distillates, solvents, resins and pigment raw materials in particular are key factors that contributed to Sun Chemical needing to raise heatset ink prices and consumables earlier this year. We are continuously working to control our costs closely with our supply chain partners and to improve the efficiency of our internal operations. ”
“The supply situation is still heavily influenced by sharply increased raw material cost, which severely challenges profitability,” Mr. Berk said. “The main drivers are rosin for publication gravure and mineral oil for web offset.”
“Certain pigment shortages tighten the market, carbon black in particular,” Mr. Müller-Samson noted. “Siegwerk has been taking many internal countermeasures and price increases, but the cost increases could not be compensated yet.”
The Magazine Market
The annual combined paid and verified average circulation per issue of all Audit Bureau of Circulations (ABC) magazines has been on the decline since its high-water mark of 378.9 million in 2000 (see Graph 1). In 2010, circulation was 325.2 million, a drop of 14.2% from 2000.
Annual combined paid and verified average circulation per issue of all Audit Bureau of Circulations (ABC) magazines, 1990-2010. (Source: Magazine Publishers of America)
“The magazine and catalog market have been subjected to the forces of the global recession and digital transformation,” Mr. Wheeler said. “In 2011, however, magazine advertising is holding steady through the third quarter of 2011. This has been driven by year-to-date increases in the cosmetics, apparel and finance categories. Total magazine print advertising revenue for the first nine months of 2011 was $14.4 billion
U.S. daily newspaper circulation, 1990-2010. (Source: Editor & Publisher Yearbook/PEW Research Center)
“A key factor to watch in the next few years will be the growing adoption rates of the smart phones and e-reading devices,” Mr. Wheeler added. “An upside in the magazine market is the growing circulation of niche consumer publications.”
The Newspaper Market
The U.S. newspaper market has perhaps been the hardest hit by the Internet. As Graph 2 shows, U.S. daily newspaper circulation has declined from 62.3 million in 1990 to 46.2 million in 2010, a decrease of 25.8%. During that same period, the number of daily newspapers has decreased from 1,611 in 1990 to 1,387 in 2010, a decline of nearly 14%.
“As a whole, the U.S. newspaper industry continues to operate in a cost-cutting mode in an effort to realign its costs with decreasing advertising revenues,” Mr. Wheeler said. “After 15 years of digital transition, 85 percent of ad revenues for newspapers come from print. In 2010, printed newspapers generated approximately $23 billion in ad revenue while online versions generated $3 billion. Therefore, for the near future, most online revenue generating business initiatives for newspapers will require significant funding from the print side of the business.”
Norm Harbin, business director, news ink at Flint Group, believes that these are opportunities for the newspaper industry.
“It can seem hard to find the silver lining when reviewing newspaper market data, but there are some real opportunities in this sector,” said Mr. Harbin. “Consider that the Sunday paper is still the preferred source for coupons. Keep in mind, too, that print news readers remember ‘significantly more’ than those who read news stories online. In fact, much of today’s electronic activity needs print; for example, newspapers are among the top 4 sources of scanned QR codes. Lastly, new advertising doors open for newspaper printers who use UV inks.
“There’s no doubt that newspaper printing will never be what it was,” Mr. Harbin added. “Still, it remains a very important part of brand owners’ media mix and should show some growth when our economy eventually improves.”