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Book Printing--Mixed Results, Mixed Future

December 1999

Imagine laying on the beach with a blanket, some sunblock, an umbrella—and the laptop computer cued to the latest book by your favorite author.

Too futuristic sounding to be taken seriously? That future may not be as far away as you think.

Most people still would not want to get sand in their keyboard, or curl up in bed or next to a fireplace with a good PC, which indicates that the health of the printed book is not in immediate danger.

"As long as we have the three "Bs"—the bedroom, bathroom and the beach—the traditional book will remain," laughs Jerry Allee, president of Quebecor World Book Services, based in Greenwich, CT. "People are more apt to use a regular book in that context rather than an electronic reader."

Top 10 Book Printers
Total Sales
1R.R. Donnelley & Sons
2Quebecor World*
3Jostens Inc. Minneapolis$655.00$771.00
4Von Hoffmann Corp.
Owensville, MO
5Banta Corp.
Menasha, WI
6Bertelsmann Arvato
Berryville, VA
7Courier Corp.
North Chelmsford, MA
8GTC Transcontinental
9Phoenix Color
Hagerstown, MD
10Taylor Publishing
*Combined proforma data as of 12/31/98

Allee and a number of book printers are intrigued about the possibilities offered by electronic books, or e-books, as the 20th century draws to a close. Electronic readers, presently $400 to $600, are prohibitive for the mainstream market, but he feels the adoption of the technology will increase dramatically once the threshold reaches the $100 mark.

Allee feels the higher education and reference market segments will be most influenced from the onset of electronic books. He believes the reference sector will lead the way as the demand for instant information increases.

"We're already seeing people looking at connecting software content into formats that can be downloaded into e-books," he says. "We're going to be a part of that through some acquisitions our parent company has made on the content management side. This is not something we view as a threat, but rather as an opportunity to build new revenue streams tied to content management."

Quebecor World is one of several mainstream printers branching out into technological peripherals. The Montreal-based printing giant boasts a company called Intellia, which concentrates on content creation, Website development and e-commerce programming. It also owns a Web portal called Canoe, the Canadian answer to America

Online. E-books appear to be a natural extension of these initiatives.

Allee characterized 1999 as a relatively flat year, with growth approximated at 11⁄2 percent and taken into context of units produced, which he feels is a more accurate measure than sales. Quebecor World had that area covered as well, generating an estimated $739 million, up from the $420 million the previous year, buoyed by the integration of World Color Press, which was acquired during the summer.

Adult trade, particularly paperbacks, and the educational segments enjoyed a stellar 1999 campaign, but the Bible market took a hit, as 1998 inventories were still being depleted by publishers. Mass market paperbacks also didn't fare as well—a result of market erosion occurring within the publishing companies. The mail-order book market slumped somewhat, as well.

Despite increased volatility, R.R. Donnelley & Sons, headquartered in Chicago, enjoyed a surprisingly strong year coming off a disappointing 1998, according to Mike Allen, president of R.R. Donnelley Book Publishing Services.

"Publishing partners are trying to relate to shorter cycle times brought about because of the Internet and other electronic publishing modes," Allen says. "They're trying to draw down their inventories, and they're making later and later decisions about how they want to construct their content, because they're trying to decide which content is best suited for electronic distribution and what content is for print."

Donnelley witnessed an increase of roughly 5 percent to 7 percent in the consumer segment, far and above the 1 percent to 4 percent that had been forecasted, particularly closer to the low end of the range. Allen doesn't foresee the trend continuing, however, but does see good news ahead for the education segment, which also surprised the company in 1999 and should take off for the next two years, due to state funding and major adoption cycles. And while the religious segment was up a whopping 20 percent, the professional, university and reference markets—small niches for Donnelley—were all flat.

Allen is most concerned with the one-color trade business. Some of the top trade publishing houses reported net sales increases in the 12 percent to 19 percent range, while the U.S. Census revealed total bookstore sales were only up 31⁄2 percent through August. This leads Allen to believe the deficit between the two is a result of what he terms "channel fill"—in this case, publishing rates may have risen to fortify the inventories of e-commerce retailers such as

The Banta Book Group, based in Menasha, WI, reaped an all-time sales high in 1999, according to Dave Mead, vice president of sales and marketing. Banta also benefitted from the education boom, and sales to the general market were boosted in reaction to the company's 10-year manufacturing and distribution contract with IDG Books Worldwide. IDG is perhaps best known for its series of "...For Dummies" titles, of which there are more than 60 million in print on 450 different topics.

Mead also notes that some educational publishers are moving quickly toward CTP workflows, a challenge since peaks and valleys in educational publishing occur due to the adoption process and typically high-page-count books with modest print runs. Cycles in the market create large peaks of manufacturing demand, which outstrip current industry capacity during those peaks. And, while Banta has been using digital workflows for a number of years—and has solid and growing capacity—many printers are just now making the transition, which adds to industry bottlenecks.

According to Mead, packaging and fulfillment services have been critical in helping Banta reduce cycle times, and inventory and distribution costs for its customers. The company has more than 1.5 million square feet of space in five locations, and an additional 250,000-squre-foot distribution center has been annexed to the Harrisonburg, VA, printing facility.

The introduction and success of new retail outlets for books, from the growing number of franchised superstores to on-line bookstores, is helping to satiate the public's appetite and, in the process, bring more business to manufacturers, notes Terry French, marketing manager for Courier Corp., based in North Chelmsford, MA. On-line bookstores, which have flourished over the last five years by offering millions of titles for sale, has helped the "readily available" product line grow roughly a thousand-fold.

"Small- and mid-sized publishers are thriving by serving increasingly small niches—niches that can now turn a profit due to the market access that the Internet allows," he states. "Despite the continued consolidation among the largest publishers, the overall number of publishers and number of books in print have doubled in the past decade."

Courier Corp., which primarily services the religious, educational and specialized publishing markets, announced it had increased its net income by 27 percent during fiscal year 1999.

Stephen Snyder, executive vice president of the Book Manufacturers Institute, believes publishing confidence during 1999 was aided by the availability of paper in substantial quantities and at price levels that stimulated activity. As for 2000, he feels there will be ample opportunities.

"On the school side, there's plenty of federal money coming in," Snyder says. "The trade publications will be staying busy, as well."

Allee is confident the Bible market will rebound strongly and anticipates a very strong year for book printing on the whole. Like Snyder, he sees a windfall in the "el-hi" market, as major adoption processes are taking place in school systems around the country, as reported by several major publishing houses.

"I see 2000 as a very good year," he says. "I'm really looking forward to the return of the Bible business; there are signs of advance-loading into the first and second quarter, considerably stronger than this year."

Banta is also bullish on the future. "We are well along the curve on digital technology—and we intend to invest heavily in new technology that better serves our customers' needs," Mead says. "We believe e-commerce and the Internet will be a strong supplement to traditional channels of distribution for book and catalog products, and will boost sales, rather than poach sales, in our niches. That has not, and will not be, the case in many reference areas of the book market where we are not a major player."


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