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Publication Printing--On Top of The Rainbow

December 1998
Though caution is key in what will most likely be a light ad market for certain portions of the publications segment, the powerful micro-publishing push and a moderate softening of paper prices should make 1999 one very vibrant year.


BY MARIE RANOIA ALONSO


Get out the sunglasses—the publications segment is glowing. Sure, the consolidation of titles and, in many cases, the shutdown of titles have impacted players in the publications printing market. But overall the continued strength of special-interest and trade titles, coupled with moderate paper pricing, is allowing the publications segment to virtually beam.



Top 10 Publication Printers
 CompanySegment
Sales
(millions)
Total Sales
(millions)
1R.R. Donnelley & Sons
Chicago
$1,261.00$4,850.00
2Quebecor Printing
Montrea
$1,009.20$3,480.00
3World Color Press
Greenwich, CT
$540.00$2,000.00
4Quad/Graphics
Pewaukee, WI
$488.00$1,220.00
5Brown Printing
Waseca, MN
$273.35$355.00
6Cadmus Communications
Richmond, VA
$228.40$393.80
7Publishers Printing/
Publishers Press
Shepherdsville, KY
$155.40$155.40
8Perry Judd's Inc.
Waterloo, WI
$151.42$285.70
9Banta Corp.
Menasha, WI
$132.00$1,200.00
10Mack Printing Group
Easton, PA
$105.60$120.00


C. Stephenson Gillispie Jr., chairman, president and CEO at Cadmus, is calling for continued growth in the publications market for 1999—especially in the areas of journal production and micro-publishing, despite the current downturn in the global economy.

"Given the propensity of government to fund research projects and the heightened demand for publishing in academia, journal production has a natural, built-in growth rate," Gillispie explains. "There will also be continued movement toward niche-based, targeted publications, with macro-focus, general-interest publications evolving into micro-focused, topic-specific publications that appeal to particular demographic groups."

Recently, the Banta Corp. completed a major expansion of its Kansas City facility, following Banta's acquisition of Greenfield Printing in late 1997. Greenfield Printing was brought aboard by Banta's special-interest and trade publications printing division. In addition, Banta has invested heavily in sophisticated technologies to enhance its products and services.

"While there will be segments of the market that will be more challenged than others, we feel the overall market will remain fairly stable and hold onto the gains of the past two years," predicts Larry Panozzo, group president of Banta Publications. "While the growth rate next year may not mirror that of the past few years, the market will remain strong in 1999."

As for Quebecor Printing (USA)? Quebecor remains very bullish on the publications market, reports David Moore, vice president of sales and marketing, Quebecor Targeted Publications Group. "Our clients are indicating that 1999 will be another growth year, with many saying it will be equal to or better than 1998," Moore states.

As a corporation, the Montreal-based Quebecor Printing has made it a priority to align itself with successful business partners. At present, two initiatives are under way to help Quebecor continue its industry-leading efforts: globalization of printing services and continued service integration.

"Most of our publishing customers have global distribution or, at least, global aspirations," Moore reports. "Our acquisitions in Europe, South America and elsewhere give Quebecor an unprecedented ability to help its customers repurpose information for printing abroad."

As for service integration, Quebecor's direct mail facilities, for instance, are heralding some exciting insert production capabilities for Quebecor's publisher clients.

"Our marketing initiatives will be focused on helping our publishers convert some distinctive concepts into earnings," Moore continues. "The publications market holds great potential."

As consolidations continue on the publishing side of the business, Brown Printing has found itself dealing with the ramifications of a willingness by publishers to shut down acquired titles more quickly than they have in the past. Case in point: Brown lost more than $3 million in contract business due to title shutdowns in the last six months.

"We are seeing more publishers with 20, 30 or more titles. This obviously increases their leverage in negotiating printing contracts, which drives pricing down and puts pressure on printers to hold down costs and improve productivity to maintain margins," reports William K. Traub, vice president of marketing at Brown.

Brown's plan for 1999?

"We are basically bullish for 1999, but with the understanding that the current economic picture is in a state of flux—all projections mean nothing if corporate profits slide. While we don't believe the bottom will fall out," he continues, "we are reviewing our cost structures and operations to become a leaner organization if industry growth slows to 2 percent to 3 percent."

The publications market, Brown's Traub explains, is sending mixed signals. Regardless, Brown is confident its presence in the publications market in 1999 will be strong and healthy, especially in its core markets, which are business and trade magazines and special-interest consumer titles.

"In 1997, we refined our business strategy to concentrate on the business and trade magazine and special-interest consumer title segments. And we also sold our gravure facility and retail insert divisions," Traub states. "We purchased two publications printers and continue to look for additional purchase opportunities."

Why this move at Brown? The obvious—special-interest titles are the course of action for most major publications players in 1999.

"Since 1991, general-interest titles are down while special-interest titles are up 2.7 percent in circulation," Traub reveals. "Advertising continues to demand more precision or audience specificity. This factor is an inherent strength of special-interest titles, making them the desired advertising vehicle."

What's the bottom line? Publications printers maximizing special-interest and trade publication printing titles will enjoy a strong 1999, with friendly paper prices and a flexible ad market creating a climate for growth and opportunity.

The forecast for 1999? Sunny skies ahead, but, with the possibility of clouds in certain areas, an umbrella is recommended—just to be safe. Caution is in the wind for the publications segment in 1999, with printers anticipating a hot year for special-interest items, but mild climates for general-interest pubs.


Price Forecast

DONNELLEY: Paper prices are anticipated to be relatively flat in 1999, driven by the heavy influence of imports and the softening of demand. Postal prices for medium- and short-run titles will be up slightly and some benefits will be realized by the longer title runs. Overall, Donnelley forecasts publishers will benefit on the cost side with paper, postal and print costs in 1999.

QUEBECOR: Expect a moderate softening of paper prices for the first six months of 1999, with distribution costs expected to be consistent with 1998.

CADMUS: Plan for the paper market to continue to be soft as the influx of European and Asian products creates a supply surplus that is exceeding demand.

BROWN: The expected postal increase should be offset by lower paper costs throughout 1999. Look for moderate price increases in 1999—if any—for paper.

BANTA: The general health of the publications market is certainly contingent on the overall financial health of the supply chain. Current paper costs levels should help promote market stability and help offset the announced increase in postal rates. As such, Banta believes total page counts will be buoyed by stable paper prices and low inflationary pressures.


The Donnelley Perspective

Robert S. Pyzdrowski, president of magazine publishing services at R.R. Donnelley & Sons, shares his perspective on the publications segment as 1999 moves into focus.

Q. Does Donnelley view the publication market as bullish going into 1999?

"The publications market in the main is not bullish going into 1999. Caution is in the wind. U.S. companies continue to brace for slow growth in the wake of economic turmoil in Asia and Latin America.

"Corporate profits are down and many companies are cutting costs by closing plants and laying off employees. Customer confidence is waning as a result of the uncertainty.

"Certain segments of the publications market are weaker than others. Technology and high fashion are challenged, while the shelter and business-to-business publishers continue to be strong.

"Overall, Donnelley anticipates the market, as measured in units produced, to have flat to nominal growth. A soft landing is anticipated, coming off the largest positive run in recent history."
 

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