The Printcafe Soap Opera Continues

Will Yogi Berra's wisdom -- 'It's not over till it's over" -- hold true AGAIN? In last Friday's column, I suggested that the Creo/Printcafe story be watched as a soap opera. Certainly the plot has thickened. Creo went to court, lost in court without time for a commercial break. Then they upped their bid (twice!), and then they took their bid away, complaining that the bidding process wasn't fair. Yet they said joint projects between Printcafe and Creo were proceeding normally (but we wonder if they proceed with the same enthusiasm). Creo has to make nice so they'll get their 44% stake in cash once EFI pulls the trigger. Or will they?

For the good of everyone, this saga seems to be over relatively quickly (see what happens when you don't go through the UN?). Creo gets money, unless they take EFI stock -- while their plans are not known, I would suspect cash is the preferred option. And any PCAF IPO buyers who have been holding on despite losing 75% of their money have the same cash or stock choice; maybe EFI will make announce compelling plans to turn Printcafe around and give the stockholders a real reason to hang on.

There certainly could be more plot complications (Creo’s lawsuit is still active; just the restraining order was refused by the court), and Creo and EFI may even end up needing each other to reach their desired markets. But will there be a compelling business idea that comes out of it or just more of the same? Will there be a shakeup of the executive staff? Will IPO buyers ever get a return on their investment? This will take time … the real matters of urgency will be decided in months, not days, so the soap opera will continue to play itself out. We'll see. Remember what Yogi said.


Consumer Confidence Index Falls Nearly 15 Points – No Big Deal

The latest survey by the Conference Board is worth ignoring, for now at least. The key data cited are that unemployment is still below 6%, and the consumer sector is still strong. Beware of any study that measures "feelings" like this does, especially in the short term. Always look for the hard data that reflects actual behavior. Should Iraq concerns persist, hanging over the marketplace long enough, home buying and other strong parts of the market will be affected. Read on for more economic news.


Durable Goods and Unemployment First-Time Claims

Whenever economies are moving sideways, you always get conflicting economic data, and data series tend to move up and down with no consistent direction. It gets really annoying. Great news about durable goods orders, up 3.3%, was balanced by unemployment first-time claims, now at a moving average of over 399,000. This is close to the long-out-of-date but for some reason still-used rule-of-thumb of a 400,000 panic point.

We know unemployment is still at a good overall rate (<6%), far better than recent recessionary periods, and much, much better than Europe’s is, even in good times. Because the economy is still squeezing out productivity gains, the pressure to hire new workers just isn't there. There is no reason to panic here, but there will be politicos who will try to make hay out of it. Supposedly, Congressional approval of a tax plan won't get passed until the summer. That’s four months away, and some swifter action would certainly be helpful and show that someone is taking things seriously. Gee, that would be different.

Durable goods shipments went up by 3.5%, and inventories needed to produce those goods went down. Those inventories will need to be restocked. Non-defense goods orders were up 2.1%.

Overall, this is positive news about the economy, and the increase in shipments might be why some of the advertising purse strings are starting to be loosened, as indicated by our next story.


Advertising Spending Starting to Show Some Life?

Finally some good news about advertising budgets is beginning to appear. This may indicate a trend that major corporations are realizing that they've done all the cost-cutting they can, and now have to stimulate sales to maintain their bottom lines. A story on Advertising Age's web site says that in the last few months, executives "have seen a significant upswing in the number of advertising creative accounts coming up for review; the volume of request for proposals, or RFPs, being issued; and the initiation of hiring efforts in agencies that have come through a long period of personnel retrenchment." This is good news. These initiatives don't bring dollars to the printing industry immediately, and many of these dollars end up in broadcast and other media, but it is a sign that the desire to spend is returning, and that we’ll start getting some good news soon, too.

See the entire article.


Is Newspaper Readership At Risk?

Newsday, one of the nation's most influential newspapers and part of the Times-Mirror Group, reports on a survey that should be no surprise, but is yet another sign of the changing media mix. And don't forget... the kids in high school today will have habits that are even less print-oriented.

To quote the report: "In growing numbers, young adults are turning away from the news media their parents and grandparents rely on for information about their neighborhood, region and world. The trend started 30 years ago but has accelerated since the late 1990s. It now is seen by many as a crisis that threatens the long-term survival of some celebrated news organizations...The prospect of losing an entire generation - those 18 to 34 years old, whose numbers rival that of the Baby Boom - has produced a whirlwind of activity at companies that once were slow to change - and proud of it…Only 33 percent of U.S. families led by someone age 25 to 34 bought a daily newspaper in 2001 compared with 63 percent in 1985, according to surveys of consumer spending by the Bureau of Labor Statistics. This decline in newspaper purchases is accelerating with a drop of 21 percentage points in the five years ended in 2000, or triple the rate seen during 1985-1995."

Newsday covers Long Island and has some circulation in New York City. The article includes this table:

Where 18-to 34-year olds in the metro area get their information.

Daily newspaper 55%
Sunday newspaper 56%
Magazines 94%
Internet 80%
Radio 92%
Television 79%


Are Laser-Printed Newspapers Gaining Traction?

I recently read an article about a new offering promoting access for travelers to laser-printed versions of their newspaper of choice. The laser-printed newspaper has been around a while, aimed at international travelers who are tired of paying $75 for a two-day-old New York Times when traveling in Japan. I wonder how long this business will last or how successful it can be when I can get to my online Wall Street Journal from anywhere there is internet access. Ditto for almost every U.S. newspaper, of course.

We must note that internet access around the world can be quite spotty, but the August 2002 Wired had an interesting article on broadband internet access in South Korea that may offer some ideas on how wired things can really get. See This



Trends in South Korea -- a Harbinger of What’s to Come in the US Market?

The reports on the impact of increased broadband internet access are nothing -- this article on the rapid migration away from print to online advertising in South Korea, where online advertising is now bigger than magazine advertising, should send chills down everyone's spine:

See This

Of course, the US magazine market is much more highly developed and diverse than South Korea’s -- and many other countries -- but if emerging and growing economies can bypass development of a similar magazine industry structure, that's news. What does it mean for the US business? I'll be writing about that sometime in the near future.


Newspaper Advertising Rebounding?

The Newspaper Association of America released data on the industry's Fourth Quarter 2002 results, and they were generally positive.

See This

Digging deep into the data, though, the surge in spending by retailers in the fourth quarter still could not prevent a full-year decrease of 0.5% in spending over 2001. While auto and real estate ad spending was strong, these have been the strongest areas of the economy in terms of sales to consumers. Even more interesting to me is that the holiday shopping season was portrayed by major retailers as disappointing. Now with this latest newspaper data, one might wonder whether the surge in spending was really worth it or whether it actually prevented the holiday shopping season from being a total disaster.

Whatever the case, newspapers still provide access to a huge audience at a relatively low cost. But the change in newspaper readership patterns cited above mean that newspapers will become a means to reach older and more affluent consumers -- not the younger ones so cherished by advertisers.

While newspapers are getting better at having a cross-media Internet presence, the dollars from Internet advertising are not likely to provide the kind of support required for their full overhead costs. Look for more newspaper masthead consolidations, more joint operating agreements and more centralized production facilities in the coming years, continuing a decades-long pattern of market-by-market adjustment by the industry.