The Future of Prepress, Printing

and Publishing

Thad McIlroyPresident, Arcadia House

Program Director, Seybold Seminars

Presentation to Prepress 2000

Print is %?*@#*!!

(Expletive deleted!)

“I paint what I see, child.”

The State of Our Union

The good news The bad news Scenarios moving forward What is to be done?

My Pedigree is Print

5 years as a bookseller; 8 years as a publisher

A decade writing books and articles Fifteen years studying the intersection of

technology and print publishing 4 years with Seybold Seminars

You missed…

The great S&L investment opportunities…

You missed…

The magic that was junk bonds…

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Not to worry…

Now Presenting

Internet

Junk Stocks

They’re worth only pennies,but you can make millions!

The Starting Point

We’ve heard a lot about how the Internet is supposed to

challenge print…

T

But with the economy booming, it was beginning to

look like a false alarm…

T

…still, we wondered…

Could print be in more troublethan most people assume?

The Seybold Study

Five editors and researchers Working for the last six months

The Evidence is Conclusive

Printing and publishing aregoing to be just fine,thank you very much!

There’s Lots of Good News

Paper sales are at record levels Envelope sales reach new highs Direct mail volume is soaring Printing sales strong Great profit reports from newspaper

publishers

Direct Mail

The mail formerly know as Junk

Now 44% of all mail handled by the post office (vs. 32 % in 1978)

Average compound growth rate, 1992-1997, 8.4%

Projected to grow to 8.6% through 2002

The Bad NewsThe Bad News

The Prepress Business

Shrinking prices Shrinking margins Printers grabbing a piece of the pie Product confusion

The Printing Business

Double-digit real growth prior to 1988 Mostly below 5% growth in the 90s Slow to negative growth since 1997 Sales grew .5% is Q3 ’99 (NAPL) Print production hours shrank by 2.3%

Annual OutputPrinting & Publishing

(Data: Federal Reserve Board)

0

50

100

150

Out

put (

1992

= 1

00)

1987

Magazine Readership

In 1998:

15 magazines gained 18 million “adult impressions”

144 magazines lost 79 million impressions

Audiences shrank by 5.9% in one year– Leo Burnett’s Starcom Media Buying Unit

 Magazine Readership (II)

Hours Spent Per MonthInternet Magazines

1999 97 812003 192 78

– Veronis, Suhler & Associates

Adults cut a ½ hour from their weekly reading time from 1998 to 1999 (Mediamark Research)

Newspaper Readership (I)

“Did you read a newspaper yesterday?”

80% “YES” in 1961

58% “YES” in 1999

Newspaper Readership (II)

Latest six month figures:

March/99 Sept./99

Daily -.5% -.7%

Sunday -1% -.7% – Audit Bureau of Circulations

Newspaper Readership (III)

57.9% of all adults ready a daily newspaper

But only 44.6 percent of young adults (18-34)

– Audit Bureau of Circulations

Ad Spending

“Over the next five years, the Internet will siphon $27 billion, or 10 percent of all US ad spending, away from traditional forms of media.”

– Forrester Research, 8/99

Internet Ads in Print Media Were a Blip

“Fattening the Lamb for Slaughter”

Dot.com fatigue A survey of 1,734 online buyers found

that 25% could not remember a single Internet advertisement

– Active Research 1999 Holiday Shopping Survey

Book Sales

Consumer Adult Book Purchasing

Consumers purchased fewer books in 1998 than they did the year prior

…the first time that the industry posted a year-to-year decline in the demand for books.

– The Book Industry Study Group

Industry Impact

“By 2002, due to stagnant print revenue and changes in readership patterns, more than 50 percent of the 1998 traditional publishers in the OECD will be acquired or will cease publishing.”

– Gartner Group(OECD - Organization for Economic Co-operation and Development )

OECD Publishing Revenue by Segment: 1998 - 2002

ConsumerPrint

Newspapers BusinessPrint

Internet

Source: Gartner Group(OECD - Organization for Economic Co-operation and Development )

Scenarios

Politics Environment Society Technology Economics

Scenarios

What We Know

Politics…no big change Environment…all quiet for now Society…aging population; slow shifts Technology…advancing rapidly Economics…longest boom ever

Consumers Opt for More Control Over Media (I)

Advertising-supported media (ASM)Broadcast television, radio, daily newspapers,

consumer magazines

Consumer-supported media (CSM)Cable television, recorded music, consumer

books, home video, movies, video games, the Internet

Consumers Opt for More Control Over Media (II)

Hours Lost or Gained 1994- 1999 2002

ASM -10.20% -10.30%

CSM 43.20% 30.70%

– Veronis, Suhler & Associates

The Youth Demographic

Ages 16-24

Watch TV 84% 2.1 hours

Listen to radio 84% 2.4 hours

Read newspaper 54% .5 hours

Read magazine 42% .8 hours

— Defense Manpower Data Center, 1997

The Youth Demographic (II)

Ages 9 -17

63 percent prefer the Internet to TV 55 percent prefer the Internet to the

telephone for communicating — Roper Starch, Nov. 1999

The Youth Demographic (III)

Percent Online

Teens 13-19 41%

20-29 years 31%

30-39 years 33%

40-49 years 30%

— Roper Reports Worldwide

Scenarios

Where We Could Go…

Politics…Internet backlash Environment…increased concern Society…youth revolution, not evolution Technology…all barriers removed Economics…the boom ends

Conclusion

Most 3-5 year scenarios show a continued gradual shift away from print

But as soon as we face a significant U.S. economic disruption…

The pulp is going to hit the fan

T

What Is to Be Done?

The Printing Industry

“The commercial printing industry is mature, fragmented and highly competitive, and is therefore characterized by narrow profit margins. In addition, printers face increasing demands from customers for tighter deadlines, better and more consistent color quality, shorter print runs and greater customization of print jobs.”

— Creo Products Inc.,IPO Prospectus, May 14, 1999

Print Recommendations

The bloom is off consolidation’s rose Specialization pays Digital printing offers growth and profits Web-enabled e-commerce Move towards increased automation

Newspapers

“Of the 100 most-visited Web sites, zero were run by newspapers. Zero.”

— NewsInc.,quoting a PC Data report,

July 5, 1999

Magazines

The Lesson of Ziff-Davis/Softbank

Sell the magazines for half of what you bought them for

Keep the Web site & the trade shows

Designers/Ad Agencies

Design across media Leverage the Web Control assets & digital workflow

The Lesson for All of Us

With apologies to Waylon Jennings and Willie Nelson

Mammas Don’t Let Your Babies

Grow Up To Be Printers

Thank you

thad@printisdead.org