Hi.  This is Frank Romano for WhatTheyThink.com

Well, a little lecture today.  I'm constantly asked about why the printing industry changed, what was the big bang that caused the loss of printing companies and the changes in volume.  Well it's very easy: the Internet.  No one predicted the Internet and no one understood the changes that it would create.

Now with this professionally done chart that I've created here, let us look at this circle here and let us assume that this is all the printing produced in the United States in a given year.  This area here, about 20 percent of all printing volume in the United States went away.  It went electronic; it went into PDF files, it went into Word files, it went into PowerPoint files, it went into websites, it went into electronic form.  And probably did not go back to print at all, unless somebody printed it out from their home printer or business printer.

And that's easy to track, to some extent.  We've been able to do that and it's taken about 10 years for that to happen.  So we lost 20 percent of the volume of print in the United States.

Another volume, which is harder to track.  Could be 10, could be 20 percent more.  And that was lost because of overseas manufacturing.  Now that's harder to explain.  If we buy printing overseas, and by the way seven percent of American printing is bought overseas, Canada, well they're not really overseas, they're across the border, but to the UK, to India, to Asia, wherever.  When that printing is bought there and it comes back to the United States, Customs can keep track of it as printing but if you take your manufacturing base where you made widgets in the United States, you also printed the packaging for those widgets.  When you move the manufacturer of those widgets somewhere else, the packaging follows it and that changes everything because now you've lost volume that you can't keep track of anymore.

So when the widget comes back to the United States to be sold at Wal-Mart or Target or wherever, customs keeps track of the widgets but they don't keep track of the package printing that went away. So somewhere around 40, 50 percent of all printing in the United States has gone away.

And not to come back and you can promote print to your hearts content, you're not going to get people to convert from putting stuff on the Internet vis-à-vis putting it on paper.  What you can do is get them to think in terms of multi-channel approaches where they can go paper and electronic and that's probably a more desirable approach at this stage of the game.

Nineteen-ninety-five was the watershed year; there were more printing companies in the United States in 1995 than in any other time in history: 62,000 printing companies.  And those printing companies were large robust, profitable organizations, but when the volume starts to disappear now you can't sustain that many printing companies so they start to consolidate, they go out of business.  And my feeling is we've got another year or two of that; probably two at the maximum, because at that point we will stabilize and right size to the point where the volume of printing and the number of printing companies comes into some kind of accord.

The growth in printing will come in the implant market place. It will come from implant corporate reproduction facilities as well as design houses that goes with digital printing or mailing houses that go with digital printing.  So they will be **** because digital printing will engender new companies starting up, just like offset created the quick printing market place.  Digital printing will create a whole new market place of small printers that will evolve but probably not as commercial sites but more as implant sites.

I think the growth in printing will come from ancillary services; in fact, that's what hid the changes in the industry because printers were doing relatively well as the print volumes were going down because they implemented ancillary services.  As they did that, their revenue increased but their print volume actually either stayed the same or decreased.  And so it sort of hid what was happening out there. I think new forms of printing will be part of the growth.  Inkjet on plastic, on glass, on wood, on metal will create new kinds of specialty and industrial printing.  RFID printed with digital approaches will create new opportunities.  So really it's a case of looking for the new opportunities and sort of gearing up for them.  That's where the growth will probably come from over the next few years.

So another few years of catharsis, the volume goes down, the number of printing goes down, we right size to the point where probably about half the number of printers we had in 1995.  We don't need as many trade associations, we don't need as many magazines, we don't need as many consultants, we don't need as many suppliers.  The world cannot sustain six or seven suppliers of offset presses; that's just not going to happen.

And so when this happens, everything changes and that's why we are where we are.  And that's my opinion.  Take care.

Next time...

Now, there's a pot back here that has molten metal it at 550 degrees.