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Print to Prevail Differently: Speakers predict PRINT OUTLOOK Conference

Press release from the issuing company

By focusing on niches, broadening their services, improving productivity and offering marketers more targeted and accountable communications tools, America’s printers will be able to translate a continuing national economic rebound into a healthy future for their own companies. Those were the key messages of the 24th PRINT OUTLOOK conference presented by NPES The Association for Suppliers of Printing, Publishing and Converting Technologies in Alexandria, Virginia December 9-10. The conference explored the theme “Challenge and Opportunity in the New Media Mix,” and many speakers returned to the premise that print can and will thrive as a valued part of comprehensive marketing and communications programs. Many printers have already reaped significant benefits from adding new services, speakers said. Davis cites strong growth for 2004, continuing in 2005 “This is the best print market I’ve seen in about five years,” reported Ronnie H. Davis, PhD., chief economist of PIA/GATF. He said total shipments of the printing industry for the first nine months of 2004 were up 4.1 percent, with no impact from price inflation. Even though many printers are increasing their revenues by offering ancillary services, Davis said “ink on paper” shipments were also up by 3.5 percent during this period. Several key opportunities will attract printers’ attention in the near future, Davis said, including growth in such niches as direct marketing and increasing sales of digital and toner/based printing, as well as expansion of ancillary and print logistics services. For 2005, Davis projected that overall print shipments will rise two to three percent. On the horizon, however, a likely postal rate increase in 2006 could have a serious negative effect on the industry. Cappo: Print meets demand for proven return The conference keynote speaker, author and retired advertising industry leader Joseph Cappo, said diverse opportunities for print are arising today because advertisers are putting more emphasis on accountability for their marketing budgets. “Direct marketing in all its forms will continue to grow,” Cappo said, “because it is accountable. Sales promotion will grow even faster.” Sales promotion includes such print niches as point of purchase advertising and signage. In addition, Cappo cited such trends as custom magazine and book publishing. Some large retailers, for example, are now producing their own magazines, as are such television networks as ESPN. In the past, Cappo said, advertisers “spent far more money on television than they should have, without their agencies being able to tell clients what their results were.” Today, he added, such new technologies as digital recording devices are enabling TV viewers to avoid commercials altogether, making the return on TV advertising even harder to track. Bivens sees print’s future in “engagement and extension” With advertisers ducking commercials in other media, print can prosper by emphasizing what it does best--create an intimate personal relationship with readers. That was the view of Carolyn Bivens, President and Chief Operating Officer of Initiative North America, a leading media planning and buying company. “Print has unique advantages over other media,” she said. “Marketers know this. Media planners know this, and you should know this as well.” As consumers have more and more media options available, including the option of avoiding ad messages in many media, print should capitalize on its ability to engage readers, Bivens said. “Research...consistently points to print as the medium through which consumers develop the closest and most engaged relationships with advertisers and their brands,” she said. For example, she went on, “90 percent of magazine readers pay full and complete attention. No other medium can say that. In an age defined by multitasking, this is a real competitive advantage.” She predicted that growth in print advertising will be in the 8-9 percent range in 2004 and 4-5 percent in 2005, with consumer magazines one of the hottest properties.  Niches, success models cited Vince Mallardi, Chairman of the Printing Brokerage/Buyers Association, told PRINT OUTLOOK attendees that print’s future lies largely in currently underserved niches. The top 25 business categories using print, Mallardi said, offer more than 120 different identified niches. Similarly, nearly 240 metropolitan areas around the United States now have a demand for print that exceeds the supply of printing services, the opposite of the overcapacity situation that’s so widely discussed, Mallardi said. Patricia Sorce, PhD., co-director of the Sloan Printing Industry Center at the Rochester Institute of Technology, sounded a similar theme in a presentation describing four distinct “success models” printers could follow to make money with variable data digital printing. Despite varying levels of equipment investment and different businesses mixes, printers in the four model configurations Sorce described had nearly the same strong rates of annual sales growth. “You don’t need to mimic the super-high investment approach,” she concluded. Trends in consolidation Harris DeWese of Compass Capital Partners briefed attendees on trends in mergers and acquisitions, noting that “most transactions in 2004 involved specialized companies,” and “deals were bigger and fewer.” He also reported that significant pent-up demand and a plentiful supply of “motivated sellers” should mean that M&A activity will be lively for the next several years. He noted that bankruptcies and liquidations are increasing, and “the general commercial printer that doesn’t have a specialty is in trouble.” Printers’ panel reinforces diversification message A panel of four top executives from printing companies described how their firms have built impressive growth records in recent years, giving “real world” examples of the diversification, broader service offerings, and niche marketing recommended so strongly by other PRINT OUTLOOK speakers. Stephen J. Esser, president of Kutztown Publishing Co., Kutztown, Pennsylvania, described how his firm works with not-for-profit organizations to “offer the ability to coordinate everything from research, writing and design to printing and distribution.” Kutztown has also reached out to other printers in its region, offering them 24-hour turnaround on critical jobs they might not be able to handle otherwise. The strategic plan at Franklin’s in Warrenton, Virginia, also includes offering more marketing and communications services, said CEO Arvind Gupta. He noted that printing now accounts for a minority of the company’s revenues. Most revenues now come from non-print services, including complete personalization, mailing and fulfillment. Michael Marcian, President of Corporate Press, Landover, Maryland, said his firm is planning to add a marketing agency to its organization. Corporate currently runs a very busy variable data printing operation and cross-sells intensively with its own fulfillment operations, often finding that non-print services generate important print revenues, as well. John Berthelsen, President of Suttle-Straus, Waunakee, Wisconsin, reported that his company has had significant success with side format digital imaging. He agreed that “non-ink services drive print,” and that these services “have value that goes beyond what you actually invoice for them.”| “Print necessities” face uncertain future Ink, paper, and postage are three indispensable elements in printing, and all three present the printer with unclear prospects for the coming year. Benjamin Cooper, Executive Vice President of PIA/GATF, warned that the impending 2006 postal rate increase could have profound consequences for printing. “If we fail to address this properly, the industry is going to have a very, very difficult time in the next few years,” Cooper said. He noted that a postal reform bill failed to pass Congress before its adjournment in December and will have to start from scratch in the new Congress, and that in the meantime the U.S. Postal Service probably needs to announce a rate increase proposal in the spring in order to implement it in early 2006. Demand for print quality papers will probably increase in the next three years, said Stan Lancey, Chief Economist at the American Forest & Paper Association. This demand had already risen to a new peak late in 2004, he said. James Coleman, Executive Director of the National Association of Printing Ink Manufacturers, reported that sales of ink for heatset web offset printing had risen by 4.6 percent in the first three quarters of 2004, reflecting growth in magazine ad pages. Across all specialties, he said, high grade energy-curable inks were growing more quickly in sales than other types. Print markets battle for growth Newspapers, magazines and direct mail marketers -- three traditional mainstays of the print business -- are all fighting to maintain their growth and revenues in the new media mix, speakers said. Owen Smith, President and Managing Director of Technical Solutions LLC, a joint venture of the Newspaper Association of America and Ifra, said the newspaper industry has improved its profit margins in the last five years by adopting new strategies to expand revenues and “squeeze costs out of operations.” Newspapers are turning to more data mining and database applications, local auction systems, combined customer service operations, more cross-media selling, increased use of the web and other tools, Smith said. Rita Cohen, Senior Vice President of the Magazine Publishers Association, noted that magazine advertising pages have been increasing in recent months, and that the number of magazines is also growing, although many of the new magazines are small and specialized publications. News stand sales remain intensely pressured by tight display space, she said, and magazines are exploring a wide range of distribution strategies that may help cut costs and enable smaller magazines to achieve wider distribution. Direct mail grew by about 8 percent in 2004 and is poised to increase another 7.5 percent in 2005, said Bruce Biegel, Managing Director of the Winterberry Group, direct mail consultants. Catalog production is likely here to say, Biegel said, and “many retailers are using catalogs to drive traffic to their websites.” In addition, Biegel disputed the conventional wisdom that ordinary billing, statements and other transaction printing will soon disappear. Many companies, he said, feel that “the statement is where we most touch our customers...so maybe the printed statement won’t go away so quickly after all.” Evans: Slower growth in 2005 NPES Consulting Economist Michael K. Evans predicted that national economic growth, which has been roughly 4 percent in 2004, will slow to 3 percent in 2005 and 2 percent in 2006. He also predicted that interest rates will rise and the federal budget deficit will continue to expand. “Next year, consumer spending will rise at a slower rate, and the double-digit growth in capital spending will also come to an end,” Evans said. However, he said, all of the pressures on the national economy next year will be nothing new. “We’ve been through all of these things before, and the economy is still here,” he said. “We will have some negative impacts but we’re far from driving off a cliff.” Strong economy still faces challenges, Olson says Pam Olson, tax partner at the law firm Skadden, Arps, Slate Meagher & Flom and former assistant secretary for tax policy with the U.S. Department of the Treasury, reported that economically “we’re actually doing quite well.” She added that America’s Gross Domestic Product, inflation and unemployment rates “are all very positive.” Still, she warned, Congress must soon address key issues like tax reform and reform of the Social Security and Medicare systems. Internationally, the United States is challenged by the emergence of highly educated knowledge workforces overseas, our reliance on foreign oil and other “looming fundamental issues.” With the breakup of the old Soviet bloc, the emergence of India as an economic power and the admission of China to the World Trade Organization, Olson noted, “over one-quarter of all humanity has recently entered the global marketplace.” Barone: A “sloppily successful” second term for Bush? Political reporter Michael Barone of U.S. News and World Report spoke at the PRINT OUTLOOK luncheon and predicted that President George W. Bush would have a “sloppily successful” second term. “The president has a serious domestic policy agenda, and a serious though not very specific dedication to tax reform,” Barone said. Tax reform is one of several areas Bush will emphasize in the coming year, he said. Although President Bush has been working hard to build up the national Republican Party, Barone said he has no clear successor. Barone discussed the prospects of several possible nominees in both parties. Romano: Print will be different RIT Professor Emeritus Frank Romano, opening the conference, sounded what turned out to be the event’s key message. Reviewing all of the policy, technology and other factors that are shaping print’s role in the marketplace, Romano predicted that “print will prevail, but it will prevail in a much different way than it has in the past.” Conference proceedings are available from NPES for $150 by contacting the Member Services Department at 703/264-7200.

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