Our company has been in business since 1953, and the industry has changed dramatically and undergone revolutionary technological changes during these last 59 years. However, not since the invention of moveable type has our media seen such dramatic changes, as during the last 10 years. Technological changes within the industry and outside of the industry have dramatically altered most printing business models. Printers that have not or did not alter their business strategies/models are either going to close or have already closed. What are the major causes of such a downturn in the industry? Allow me to list a few of the major reasons:
1. Over Capacity.
Every new press runs faster and the make-ready labor is less. Theoretically, that is a good thing. In reality, it has created a very high amount of underutilized equipment across the nation. Komori, MAN Roland, and Heidelberg “shoehorned” presses in printers’ plants on leases that eventually broke the printer and/or added to the industry-wide capacity problem. Much like Scitex did in the early 90′s, they saturated the market. As you can see, Scitex is no longer around, MAN and Heidelberg have been on life-support for 5 years or longer….Under utilization creates falling prices, as firms slash prices to try and build utilization.

2. Not Understanding Cost Accounting.
The sad truth is that there are ignorant printing companies that have no idea how, when and why they show a profit or a loss. Some are managed by marketing people who only think in terms of increasing revenue without any regard for cost or price. I have worked for a few of them…they left a trail of broken companies behind them.

3. Kindles, iPads and Nooks
Large publishing plants are consolidating or closing because of decreases in circulation or the elimination of a title. Reading devices are the major cause.

4. Advertising Revenue Decreases in Print Budgets
As advertising goes, so goes the printers’ clients that depend on ads. The printing slice of the ad revenue pie has been decreased, with larger amounts diverted to New Media.

What does the future hold?
How do YOU Survive? Well, you need to think about these three issues:

a. How do I become a low cost producer? What do I reduce? Materials? Labor? SGA? Buyouts? You better “slash” hard somewhere.

b. How do I make money (monetize) my digital product offerings?

c. How do I develop/educate my Salesforce so they can engage with a client in more than just print? If price is the only reason you hold onto an account, they will eventually move the business to a cheaper plant, even a foreign plant if it works for them. (Chinese printers are all over the printing industry marketplace, using Social Media as an entry point.) How can my Salesforce learn to engage with a client in digital/e-media products? Essentially, print Salespeople need to learn how to become Agency Account Executives – as printers become more like Ad Agencies.

There is a cost saving trend in the industry that is becoming more prevalent. With tighter budgets, clients are looking for ways to save more money. And, in the case of existing clients, if they have always been happy with your proof to press color reproduction, the question of whether a proof is needed is valid.
It IS possible not to make hard copy proofs, BUT with these parameters:
1. Know your client – are they very four color process savvy? Understand the pitfalls, even with a hard copy proof or without one?
2. Are you calibrated with G7 and is it monitored closely?
3. New clients with whom you have no pre-existing history should always see a hard copy proof.
4. If the project is a publication you have printed for some period of time, there is much less risk.
5. Get the client to sign a Process color waiver. The agreement should state you will run to G7 standards and that is what they will receive, with no recourse.

These are a few ideas on how to approach the subject. The alternative can be “we will not do that” – but I guarantee that they will find a printer who will.
And then, you lose, the other printer gains…

We live in an age whereby Printers do not survive unless they invest in technology, employees juggle many duties and there is an emphasis on being a low cost producer. If a printing company has high prices – guess what? They go out of business. If their presses are 30 years old – guess what ? They go out of business. You get the idea – it’s really not rocket science.

But when we move from the private to the public sector, the dynamics change. “Government efficiency” is considered an oxymoronic concept. We are shocked when someone in the public sector seems to care about our problem, is competent and has a sense of urgency in their duties. That is very, very sad – but even more so, very destructive. The U.S. Postal Service is the poster child this year for a government agency no longer able to survive in the modern age.

Attempts are being made at restructuring, but what is the long term outlook? Yes, they have labor unions to contend with. But they also have other major problems with far superior competition (UPS, FedEx), and a huge volume decline; not to mention a computer infrastructure that is a joke.

For example, have you ever used the USPS tracking system? I have many times – and 90% of the time, the package is delivered while their system still
says “A label has been generated. No further information is available.” That is a workflow process that does not scan often enough (hardware issue?) or a database that never syncs with field data. Either scenario is from a flawed, and broken system. Compare the tracking to their competitor, UPS, whereby they can tell me on my Droid (with their own app) each and every step in the shipment. AND when it is delivered, I can see the signature in an email within 5 minutes after delivery. Now – is it any wonder that UPS Ground is a better choice than Priority Mail?

Have you ever visited a Post Office, and there is a like-new credit card reader sitting on the counter, but you cannot use it? It even has a sign on it that says “Do not Use” . The Postal worker has to take your card and scan it themselves – once again a broken system. AND taxpayer dollars were wasted on a project that did not deliver on its’ promises. Was anyone held accountable for the waste or cost? Why not? In the private sector, people lose their jobs when
millions are spent on failed projects. They actually have to have an acceptable ROI.

Why is the USPS broken ? I think it’s simple – no U.S. government agency can compete in the private sector, where efficiency and competency is required for survival. Capitalism is Darwinian, eliminating waste and rewarding smart capital decisions. Government agencies tolerate waste, bad decisions and Capital project cronyism. It’s not rocket science…

There seem to be two schools of thought among printers regarding “New vs. Traditional” Media. On the one hand, some printers fight anything that has to do with digital media, viewing it as a threat to their business that they have to treat with utter disdain. And then there are printers that are trying to determine how to add digital to their product and service offerings in order to build more effective and ingrained customer relationships. I submit that the latter school of thought will work and the former will be an utter and bitter failure.

One has to, first of all, believe that print media will always serve a purpose in our society, which I believe it will. And yet, digital media will not be defeated considering the cost of getting a digital message to the marketplace. Second, there is the learning curve for the printer. New software and hardware is needed, new applications have to be learned, and salespeople have to understand how to use a digital product to their advantage. Third, there is the fear factor to overcome. Fear in the customers’ mind is usually based upon the unknown of what a digital product is and how to create and use it. If ad sales reach the point whereby a printed product is unsustainable, clients sometimes look to a digital replacement, in order to keep the title alive. But clients, like printers, have to learn how to launch a digital product, the types of e-media/books available and most of all, how to sell their advertisers and make it profitable for them. They many times fail to do the simple things, like buying an iPad to learn what the craze is all about, and how it can be used for their title.

Printers and their clients have to learn to embrace digital media and determine how they can use it to make their clients more effective in their product sales and/or advertising. The alternative is to keep “kicking and screaming” until the sheriff shows up and lots of people are out of work…

One of the absolutely worst ideas in Sales is to call on a prospect without an appointment. I was on the receiving end today of a bad sales call.The regional representative for an unnamed digital press manufacturer shows up in the lobby unannounced to see me. At the time I was on the phone, had a stack of pricing and proposals staring me in the face, a person in my office waiting to speak with me, a financial report due at 11 and we are short-handed because of employees on vacation during hunting season. The last thing I need is to waste time with an unannounced sales pitch. And to top it off, he says “tell him I am town for the day, call me so we can perhaps meet this afternoon.

Here is what this Salesperson fails to acknowledge or realize:
1. If you are fortunate to have a responsible job in the year 2011, you are doing the job of at least 2 people. YOU ARE BUSY!

2. When you call on a prospect in these circumstances, here is what you are saying: YOUR TIME AND SCHEDULE IS NOT AS IMPORTANT AS MINE.

3. “I am in town for the day – call me” WHAT? A clueless comment.

4. He/she damages their credibility in my eyes. If they do not understand why and what is wrong about their approach, how astute are they in any technical matters of a potential deal? Could they possibly provide any expertise we do not already possess as an organization? Do they bring anything to the table or are they as clueless about consultative selling as they are about prospecting?

Respecting your prospects’ time by making an appointment sends a much different message: “I know you have responsibilities on a daily basis, I understand and respect that, so let me be at your disposal when you think you can carve out an hour.”

As I write, I have been on hold with Adobe for 29 minutes…I had a very simple, simple question which I needed answered. In order to get that answer I had to provide my name, software serial number, email address, version of Acrobat X, version of the problem software (Firefox 5). I also had to previously wade through a menu that did everything it possibly could to discourage me from talking to a live human being. When I finally did reach a “warm body”, the usual occurred: first, the impression that I am in a boiler room in Calcutta; then interrogate me for 5 minutes to verify my identity; ask me to define the problem; rifle through papers so they can find a canned script to fire back at me; put me on hold to discuss the problem with their “service team” (code for they are clueless how to fix the problem). Then, after returning to my call, ask me a few of the same questions I already answered. Bottom line: there is no fix for the problem yet. (Firefox 5 does not allow you to create a pdf from within the browser, as it did before with Acrobat X….). He could have simply told me that in the first 60 seconds after I identified the problem, if he was knowledgeable.

In commercial printing, if you “jerk people around” like that, you are out of business eventually. Why? Because I can hang up the phone and call another printer for a price or schedule or design help. Customer Service is very important for survival in this age of printing. In some cases, it is the only thing that separates you from your competition.
What about quality? Everyone prints well these days…
What about service? Deliver jobs in 3-10 days or your shop will quickly be empty.
Price? This industry is so cheap already I am amazed at pricing levels. With technology, prices have plummeted. A job that would have cost $10,000 in 1980 will now cost $3,000. Name me another industry where you charge 70% less for your product and you still survive (maybe electronics?).

Treat your customers well, and they will come back…and your customer service can be the difference maker, and possibly the only thing that separates you from your competitors.

In the printing industry, sometimes we get defensive about the business we are in (“print is not dead”), or we use phrases like “when the economy turns around____”, trying to be positive about the future. What we are experiencing in the printing industry is two fold: radical technological shifts (think e-books, web advertising, lights-out Prepress, 10 minute makereadies) coupled with a global restructuring of economies. Riots in Turkey, the downturn in housing, outsourcing issues, unavailability of bank credit, clients paying their bills slower, etc. – ALL have the same underlying results/causes: Leveling the playing field for the middle class around the world; and the U.S. will be squeezed the most of any country.

There is no “getting better” for the economy, in the traditional sense of the term. We are not going to have dramatic increases in Revenue and earnings, unless one has invented a new product (like iPads). Any “recession” predictions for 2012 are somewhat humorous – of course it will be a tough year, and
you will scrape and claw to survive – not because of any recession, but because the WORLD is changing and equilibrium has not yet been established.

Markets will continue to go up and down for the classic reasons (product life cycles, consumer confidence, monetary policy, etc). BUT as a business manager you MUST constantly be looking for ways of reducing your costs, run lean, and be nimble or you will not survive in the long run. Translation: cheaper products, high unemployment continues, stagnant housing markets, shorter prosperous business cycles (weeks and months instead of years), clients going bankrupt. And, perhaps most importantly, this new economy requires every employee to be willing to change more rapidly, learn and apply more skill sets. A complacent or stubborn employee will eventually be unemployed, because the rules of the business world have changed. Learn, adapt, change or become extinct. That is the new world we live in. Business is very Darwinian, now more so than ever.

We will have to PERMANENTLY deal with having less in this country. The world has changed, we need to all get used to that. Stop waiting for the
rainbow – it’s gone and not coming back. I am neither bear nor bull – just a realist with lots of experience on an everyday basis in the business world. This is a different business climate now, and not like any other I have experienced in the last 35 years in my industry. It’s not impossible to succeed, it is just more difficult and requires a higher degree of industry knowledge and acumen, as a manager and as an employee.

Having been in the industry for 35 years, one tends to see many fads and fashions come and mostly go by the wayside. We have seen foil stamping become a “must use” design feature for high-end coated products, recycled papers spike and plummet in popularity and most recently the advent of certified paper, pulp and wood products. Based on my own observations, it looks like the FSC products are headed in the same downward direction.
I would say there are a few very logical reasons for this.

First, when the heart and the wallet collide in a conflict of objectives, the wallet wins 98% of the time. If a designer or publisher is faced with “being green” or not publishing an issue, they will skip going green. And let’s face it, many publications are barely hanging on by their fingertips, hoping to sell enough ad space to turn a profit.

Secondly, FSC is making it cost prohibitive for printers to continue to pay for an annual audit and certification without the benefit of an increase in Revenue. Once again, if I am going to lose a very small amount of business if I am not certified, why pay the expense in a down economy with predatory pricing?

Thirdly, many customers eyes gloss over when you try and explain how the process works. Other have not even heard of it. So – why should my Salesforce be educating the marketplace, when that should be the job of the certifying body?

The fate of certified papers is still undecided by the marketplace – but its’ prominence is diminishing daily.

Over the last 2 or 3 years, the amount of State and municipal work that is “Set a Side” has gotten out of control. “Set A Side” simply means that you cannot bid on the project unless your business is “small”, minority owned, female owned, owned by a handicapped person or a veteran. In theory this sounds very noble and altruistic to award business to such suppliers. After all, it’s a good thing – right?

Here is who these policies harm when they get so out of control and QUOTAS are mandated by the politicos:

1. They harm the TAXPAYERS. Why ? Because the taxpayer pays much more for printing. There are not enough “set-a-side” suppliers that can provide the thousands of types of printed products without them also sub-contracting and putting a mark up on it. Or, even if the business has the equipment, they operate in a non-competitive environment, which always results in higher prices! Price is no object when quotas need to be filled, and yet in the meantime 42 of 50 States are operating in the red this year-and considering how to make bankruptcy legal.

2. They harm society by BREEDING CORRUPTION. We once lost a nice multi-year contract that was converted to a set-a-side contract when it expired. I was told by the State Procurement official, that “there are quotas to fill”. We had done a great job for over 5 years and yet were left with no chance to bid. A week prior to bid opening, I received a phone call from a “set-a-side qualified” print broker who wanted to subcontract the job to us. I refused, since that was illegal according to the bid specs. He laughed and said he would certainly find 10 printers that would print for him. I told him to enjoy his stay in the state penitentiary.

3. They harm all the employees who work for “non-set-a-side” owned companies.
What about the employees who are not working for a “set a side” company? What about their desire and willingness to work hard and earn a living? They get harmed by enjoying less overtime, having to work reduced work weeks or having wages frozen: because revenue has decreased at their company.

Projects from the private sector are always awarded on the basis of price, performance, value added and quality. It is ludicrous to award them on the basis of class, race, gender. It is another example of a good intention gone awry. It provides no societal or economic redeeming value/benefit, it harms legitimate businesses, and breeds corruption. Our state and federal governments are in crisis situations with their budgets. It’s about time time we got rid of this wasteful and corrupt practice.

Tuesday, January 18, 2011

The owners of North America’s two largest makers of coated paper are discussing a deal that could result in one of them having a significant ownership stake in both manufacturers, according to a published report. NewPage’s owner, Cerberus, and Apollo Management, which has a controlling interest in #2 maker Verso Paper, are discussing what to do about NewPage’s high levels of debt, PPI Pulp & Paper Week reported recently. Apollo is also the largest holder of #1 NewPage’s $800 million second-lien bonds, the publication said. “One mutually beneficial scenario could see Cerberus retaining a diluted equity stake by sharing ownership… with Apollo through debt equitization,” the publication said. “Debt equitization” means debt held by Apollo would be converted to an ownership stake.
Apollo’s apparent “loan to own” intentions for NewPage came to light early last year when it and two other hedge funds snapped up more than 50% of the second-lien bonds, apparently under the assumption that NewPage’s inability to make debt payments would eventually give them control of the company.
Magazine publishers, printers, catalog companies, and other major buyers of coated paper would certainly cry foul if two companies controlling more than half of the continent’s coated paper capacity tried to merge. But it’s not clear whether Apollo would trigger any antitrust alarms if it obtained a sizable equity stake in NewPage by swapping debt for equity.
Analysts and industry executives have touted consolidation as the path to reasonable profitability for paper manufacturers. The tactic has worked well in the North American uncoated freesheet market but not so well in the newsprint market. UPM is trying it in the European coated and supercalendered markets with its proposed purchase of Myllykoski.
Source: http://deadtreeedition.blogspot.com/2011/01/newpage-verso-owners-reportedly.html