Printcafe, Creo and EFI – The Saga Continues

On Wednesday, Creo filed suit against Printcafe. Hey, didn't Dr. Joe say it might end up in court? This could take a while, and it could exhaust the patience and money of both sides. Once all parties realize that opportunity and technology are best realized at a particular place and time, and that the window of opportunity, technology and time might be missed, this thing will settle. As I said before, I don’t think it is worth chasing, but greater and more highly paid minds are at work here.

In the meantime, PCAF is only 75% off of its offering price of $10, that's all. Neither company seeking to acquire PCAF seems to have expressed any compelling strategic idea to change that fact other than offering more of what they're already doing. So should we really be preoccupied with this deal on anything more than a soap opera basis?


WTT’s Print Buyers Series and What Buyers Want

Two movies serve as examples for the relationship of print buyers and printers, and they're both comedies (how fitting): What Women Want, where Mel Gibson plays a know-it-all ad exec who suddenly can hear the thoughts of women, especially those of Helen Hunt; he uses this newfound telepathy to steal her ideas. The other is Groundhog Day, with Bill Murray, where his character's arrogance is worn down by having to relive the same day again and again and again and again…

Both movies end happily, as comedies do, but once the men (I'm reminded of this often -- must be a testosterone thing) start to listen and be aware of their surroundings, their worlds change for the betterment of everyone concerned.

The interviews and articles this week have common themes: (See the whole series)

1) Print buyers are trying to accomplish very specific goals.
2) Print buyers are concerned about meeting those goals within quality measurements they define (and I'm using "quality" in the full sense of the word, not in terms of resolution or other technical factors as the print industry tends to do).
3) Print buyers are less concerned about technologies than they are about the total cost of the project -- not just the printing cost-- and the return they will get for their project investment.
4) Print buyers are on a search for new ideas and approaches that move them closer to their communications goals and allow them to be heroes, both within their own companies and with their clients.

Not all print buyers are as sophisticated as the ones WTT spoke with, of course, but I didn't read anywhere that these buyers select printers based on:

1) The equipment list that was provided by the sales rep;
2) Where they went for lunch;
3) What event tickets they got from the sales rep; or even
4) What low prices they got.

Like the movies I mentioned, where Mel Gibson gains insight into Helen Hunt's life and hopes and dreams, and where Bill Murray finally grasps some meaning in life, printers need to do the same. The biggest crisis in print is not the economy or technology; it's not understanding why people buy print. The successful print businesses do understand, and their interest in value-added services is one way that this is expressed. But if the majority of printers continue to define value-added services as new binding or finishing or mailing equipment, then they really don't know "What Buyers Want" and the industry will continue to be stuck in its own Groundhog Day.

Listening to what the buyers want does not mean just getting a list of job specifications. It's understanding what business objectives the customer is trying to reach.

Here's one horror story I lived through. I was speaking at a major color shop a few years ago to their 10+ sales reps and their top sales management. About 75% of their sales were to catalogers. I asked, "How many of you read Catalog Age magazine?" Not one hand went up. That's the kind of behavior that has to change in our business. We've got to know as much about communications as the buyers do, if not more. Without being able to offer fresh, new ideas, all we have to offer is a low price. In the long run, printers always get the pricing -- and the customers -- they deserve.


Magazine Ad Revenues Up in January

As I reported in my Quick Take earlier this week, the Publishers Information Bureau released an optimistic report indicating that magazine ad revenues for the publications they track for the month of January 2003 were up 9.5% compared to January 2002. I hope this is good news that sticks.

When you look at the data on ad pages for a 20-year period (see Chart), it does show a trend that peaked in 2000 and then dropped significantly to about 1997 levels. (A note of caution: The Bureau does say that you have to be careful when using their data because their base of respondents can change from year to year; but with that in mind, trend is robust enough for general analysis.) Sure, the 2000 peak was in the midst of the dot-com bubble on the way up and the decline since then reflects, to some extent, the residue of the burst for the way down.

If you examine the data in detail, it reflects that there's still quite a ways to go compared to 2000 levels for many categories. But the four that have had a turnaround are:

Automotive
Drugs & Remedies
Home Furnishings & Supplies
Apparel & Accessories

Apparel has had the biggest rebound, more than 30%, with the others up between 3 to 7% compared to the 2000 data. When it comes to prospecting for commercial print sales, this might be an indicator of the segments that are coming around best.

Still suffering in terms of magazine ad spending (down more than 30%) as compared to 2000 are:

Technology
Financial, Insurance & Real Estate
Retail

Of these, we know that the real estate part of the financial group has been doing well, but the other parts aren't. The fact that retail magazine ad spending is still down affirms last week's comments about the growth of Wal-Mart (not a big print user) and the decline of K-Mart (a big print user), as well as a variety of other media mix issues.

If advertising is really starting to turn around, though, that would be great news. Let's hope.

Click here to see the full release.


More News from the Economic Front

The National Association for Business Economics tempered its 2003 outlook last week, expecting a 2.7% growth in GDP for the year, revised down from 2.8%. The forecast assumes some tax relief and a quick end to any military action in Iraq. Even if both of those happen, 2.8% is nothing to write home about economically, and because print is a discretionary expense to most businesses, it will lag any economic turnaround. (On the Net: NABE: www.nabe.com).

Experts were shocked when Wednesday's housing market data showed yet more strength, now growing at an annual rate not seen since May of 1986. We all know this will ultimately slow down, but it shows the resiliency of consumers and how money flows toward the perception of best return. With stocks down and interest on savings paying less than inflation, is there any wonder housing is such a desirable investment?

The Producer Price Index was much higher than expected, and commentators were going crazy over it. It was up 1.6% in January, but that growth is not sustainable. There is no overheating economy, and the prices have the emotional oil price premium built in, which will disappear once there is certainty about Iraq and Venezuela's problems are accepted as regular background noise. Most of these prices can't be passed on at the consumer level anyway, and if it was real, there would be concerns that the Fed would have to tighten immediately. Not likely to happen.

First-time claims for unemployment went up this week, but the unemployment rate was down more than expected last month, so this is not a big deal either; it shows that the economy is still sluggish and not in danger of overheating. (I wish it was.) The indicator that everyone looks at is a four-week-moving average, which is still below 400,000. Funny, but that alarm point was set when the economy was less than half of what it is now. Old rules of thumb have a habit of hanging on, even if they are not really useful.

The trade deficit rose again, and even that is overblown and outdated as an indicator of the health of the economy. There are so many things not measured, especially business services that are misvalued or not subject to customs documentation (including services like consulting!). This is one business indicator worth ignoring. The only thing not to ignore is that other people watch it and make too big a deal about it, and that's the danger. If these trade deficits really mattered, we would have collapsed as an economy 50 years ago.

The Conference Board released its leading economic indicators on Thursday, and they were down slightly, pointing to more sideways movement in the economy. The positive indicators were unemployment (remember that January's unemployment reports were good, but they weren't in Thursday's weekly first-time claims data) and money supply growth (the Fed has been flooding the economy with cash), among others. The negative indicators were consumer expectations (the news of potential war is starting to wear that down, and everyone in the Northeast has seasonal affective disorder from being housebound), building permits, weekly manufacturing hours, and orders for non-defense capital goods. The measure of demand for business goods was flat.

What does this all mean? February's report should be about flat, as recent negative unemployment news will balance the very good housing news that will show up in the LEI. But there is no indicator from other sources of a rise in business capital investment, a metric which is currently paralyzed and in dire need of long-term stimulus. This report tells us, unfortunately, to keep expecting a little bit more of the same.

For the full report, click here.

Need more validation on the lackluster performance of capital spending? Remember when I expressed concern that Quebecor World's capital investment for the year was only 3% of sales? Bowne has now joined the club, at an expected 2.7%, too. Yikes! Not good news for suppliers.

See the full Bowne story.