1. Print and the Future of Integrated Graphic Communications Jeff Hayes President
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3. US Households with Internet Access Sources: US Department of Commerce/NTIA, InfoTrends Internet Access Broadband Access Households 68.7% 63.5% 0% 20% 40% 60% 80% 100% '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 50% 38% - No need 26% - Too expensive 18% - Inadequate/no computer 18% - Other Why not? 39% - Too expensive 17% - Inadequate/no computer 17% - No need 15% - Can use elsewhere 12% - Other Why no Internet at home?
4. US Broadband Usage – 2009 Source: US Department of Commerce/NTIA By Family Income ($000) 29% 35% 45% 59% 70% 79% 85% 89% >$15 $15 to $24.9 $25 to $34.9 $35 to $49.9 $50 to 74.9 $75 to $99.9 $100 to $149 $150+ By Age 59% 81% 68% 69% 66% 46% 5 to 17 18 to 24 25 to 34 35 to 44 45 to 54 55+
5. US Mobile Phone Penetration Percentage of US population Sources: ComScore, Chetan Sharma, InfoTrends, FCC, CTIA Mobile subscribers 3G Subscribers 89.0% 40.0% 0% 20% 40% 60% 80% 100% '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 3G 14 Mbps 2G digital 1G analog 4G 100 Mbps 50%
8. 90 friends 550 friends “ Old” “ New” vs. 65 photos 2043 photos 36 groups I Was Doing Homework, Then I Ended Up on Facebook Andover Townie 1 group
9. US 4x6 Photo Prints, 1990-2010 Sources: InfoTrends, Photo Marketing Association Billions Photo prints 2000 Peak = 30.9 B Digital prints 2008 Peak = 19.5 B
10. US Newspaper Circulation, 1945-2008 Sunday 1990 = 62.6 M Millions Source: American Newspaper Association Daily - Evening 1973 = 36.3 M Daily - Morning 2004 = 46.9 M
11. USPS Domestic Mail Pieces, 1983-2009 First Class 2001 = 103.7 B 20% decline since peak (-40.7 B pieces) Billions Sources: US Postal Service Standard 2007 = 103.5 B US Economic recessions
12. US Printing Industry Value of Shipments, 1992-2008 Source: US Department of Commerce, InfoTrends (2009) Total Printing (NAICS 323) Commercial Offset 2000 = $100.2 B 2000 = $53.1 B Current $ in billions 21% decline since peak (-$20.3 B) US Economic recessions
13. Source: US Department of Commerce Manifold Forms 1997 = $8.3B Book Printing 2000 = $6.2B Prepress Services 1993 = $5.4B Gravure 1998 = $4.1B Trade binding 2005 = $2.5B Current $ in billions US Printing Industry Value of Shipments, 1992-2008 US Economic recessions
14. Source: US Department of Commerce Screen printing 2006 = $7.8B Quick printing 1999 = $4.6B Current $ in billions US Printing Industry Value of Shipments, 1992-2008 $0 $3 $6 $9 '92 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 US Economic recessions Digital = $7.5B Flexo = $7.4B
15. Label Printing by Run Length *for conventional presses figure includes all responses under 1,000 **for digital presses includes all responses 100K and higher Percentage of jobs Run Length Digital trend Conventional trend
16. Uncoated Freesheet Paper Per US Household, 1983-2009 1999 Peak = 29,717 sheets Sources: American Forest & Paper Association, US Department of Commerce, InfoTrends Sheets of paper per household 16,510 sheets Households Internet Broadband 44% decline 40% increase 21,185 sheets 3G 0 10,000 20,000 30,000 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 0% 20% 40% 60% 80% 100% US Economic recessions
23. Core competencies – Old vs. New Quality Service Price Sales Innovation Programming Web & mobile Data & content Analytics Sourcing Prepress Color management Printing Binding Workflow
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25. “ Creativity is just connecting things.” Steve Jobs, Wired Magazine, February 1996
26. Apple vs. Sony 10-year share price performance Source: Wall Street Journal 02 03 04 05 06 07 08 09 10 +3000% +2500% +2000% +1500% +1000% +500% +0% -500% iPod iTunes 4.1 Nano iPhone iPhone 3G Steve Jobs illness rumors iPod Photo iPad
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29. You can do anything you set your mind to! Eminem Lose Yourself
Editor's Notes
Live in a digital, interactive world Printers play an important role and need to participate All applications have a digital version Information-intensive most rapidly converting Enables users to customize and explore Enables capturing of data Can be integrated with systems Printing in all aspects whether books or photos or packaging or direct mail is being affected by digital
Go through a series of data from DOC Really good info with a great historical perspective Large survey of homes tracking Internet access Started in mid-1990’s – concern about growing Digital Divide between wealthy and poor, urban and rural Rapid ascendancy to 50% of households in 2001 Around same time emerged broadband access with 10X speeds – cable, DSL, satellite Overall Internet access has continued but slowed – approach 70% Main issue is cost – service, device. Few people say no need. Different for broadband – perceive no need. Likely to change once experience it. HDTV? Price still an issue National broadband plan – 100 million HH with 100 Mbps+ access by 2020 (10X current rates) Not likely to achieve by then, but will eventually
Dig a little deeper Wealthier HH have much higher access, especially for broadband Reality is these HH do much more purchasing and paying of taxes Consume more print – magazines, news, direct mail, etc. – highly targeted by brands Age is a factor too Younger have more access – universities, elhi, friends house Like the applications that need broadband – games, music/video, photo sharing, etc. Will continue to go up Today’s 18 to 24s are tomorrow’s 35 to 54s – it will soon be 80%+ with broadband
Need to look at mobile also Fundamentally changes behavior Dramatic penetration Took a while – 14 years to reach 50% vs. 10 for Internet, but is now ubiquitous Many households foregoing land lines Significant growth in 3G network with higher speeds Original 1G was analog – Gordon Gekko – wake up Bud Fox 10 years later the 2G networks emerged – digital, SMS – Motorola MicroTak flip phone 10 years later the 3G networks – up to 14 Mbps download, took off with iPhone Data traffic is exploding, up 200% in 2009 vs. 2008. Will continue for next five years 10 years later - This year – is the rise of 4G – up to 100 Mbps Broadband Internet in your pocket – fundamental change in behavior
Interesting what we can learn from our children I have 4 Jessie Homework assignment to list out old and new items With exception of horse drawn carriages, I grew up with every item on the old side PSP = PlayStation Portable I really like the telephone and cell phone and later the old cell phone and iPhone Time and technology march on without regard for anyone You need to adapt or be marginalized
50% log on to Facebook in any given day Average user has 130 friends on the site Spends more than 55 minutes per day on Facebook 100 million active users currently accessing Facebook through their mobile devices Mobile Facebook users are twice more active on Facebook than non-mobile users 35 million users update their status each day 60 million status updates posted each day 1.5 million local businesses have active Pages on Facebook 20 million people become fans of Pages each day Pages have created more than 5.3 billion fans
JH =90 friends, HH =553 JH = 65 photos, HH = 2000 JH = 1 group, HH = 36 groups College in 18 months, check Facebook status
Seeing the impact US photo volume over last 20 years – film + digital Peaked in 2000 – remember that is when we crossed 50% on the Web Digital print gave net growth, but just for a couple years People became more selective with printing Sharing was easy with email Digital printing took off, especially with on-line and when retailers got in Digital printing peaked in 2008 Excludes photo books & merchandise – major growth market – novel, quality, 20%+ growth May grow for another 3 to 5 years Prints business is in trouble. Likely to decline, may plateau – likely go away when everyone has smartphone or iPads
All have watched steady decline of newspapers Evening daily peaked back in mid 70s Evening news, two-income households, FM radio Sunday and morning daily grew I delivered for 3 years – much bigger papers, broader, more pages, more inserts Tremendous pressure with advance of cable TV, Internet, and mobile News publishers moving to pay model. May have poisoned the well, but won’t be free forever Are we better off?
USPS suffering in primary areas of 1 st class and standard (direct) mail 1st class peaked in 2001 – proliferation of email, EBPP grew, businesses reduced Rate of decline has accelerated with this recession Down 6.4% in Q1 FY 2010 vs. 2009 Direct mail held up through 2007 Effective in driving leads. Shift to drive people to web pages vs. to telephone or mail Huge cutback in spending with recent recession Standard down 10.9% in PQ1 2010 In fact, US Post Master John Potter stated last week that the USPS “ current business model is not viable“ $7 billion in the fiscal year that ends in September and could lose at least $238 billion in the next decade if Congress fails to act. May come back as economy improves Not sure if ever will reach the 2007 peak – need to increase by nearly 25%, not likely
Department of Commerce – excl. packaging, photo, in-plants Value of shipments – revenue from production of goods and services in current dollars (not inflation adjusted) Grey = recessions Printing industry – including offset, gravure, flexo, screen, digital and other formats growing steadily Peaked in 2000 at $100B just before the 2001 recession – a mild recession of 8 months Offset also peaked at $53B Continued to decline for two years Grew with rapid growth of economy and job market Never quite caught up with its peak in 2000 Started to decline in late 2007 Significant declined in 2008 and 2009 – down around 20% Down 6.1% in first two months of 2010 vs. 2009 We do not believe it will ever match or exceed the peak of 2000
Other conventional printing technologies have all peaked 10 years ago or more Prepress services back in early 1990s – DTP, migration in-house, imagesetters, platesetters Forms steady decline since 1997 – laser printers, email, Internet, in free fall Gravure – faster, high quality web presses in 1990s, decline of magazines and catalogs in 2000s Book printing – changing reader habits, shift to POD, shorter runs, eReaders will severely impact Around 3.3 million units Amazon Kindles shipped 450,000 iPads, downloaded 650,000 books in first week Trade binding – grown steadily, difficult to automate, peaked but may come back, likely to decline with automation, constrained
Quick printing – essentially short run, fast turnaround offset – has also peaked in 1999 Many QPs have diversified into other means of production and services Screen printing has grown through 2006 – pressured by digital, sustainability, signage networks? Declined each of the last 3 years May come back as economy grows, but not guaranteed Flexo and digital grew through 2008 Both dropped in 2009 – economy Flexo likely to grow again – labels, packaging will rebound; technology advances Digital also likely to grow further – technology advances + more in tune with customer requirements Fast turnaround, JIT, versioning, variable data, sustainability Should be a wake up call – growth of print is not assured. Not just moving from one print technology to another.
This chart illustrates an important trend in the printing industry It is based on a survey InfoTrends did with label converters about their run lengths You can see that digital label printing is mostly short run and conventional printing is mostly longer runs However, notices the significant overlap Notice how a portion of digital run lengths extend far into conventional runs – up to 100K labels or more These are often jobs that need variable data or need to be printed JIT – traditional economics don’t apply We see the digital trend moving towards longer runs with advances in technology - Faster speeds, better workflow, more substrates, in-line finishing, lower costs We also c onventional moving down based on changes in customer needs – JIT, versioning, personalization, tracking This trend is being repeated in virtually all applications and forms of print be it offset, screen, or flexo printing
Last data slide Shows US UFS – not all printing & writing, but brings in the office and some production Converted tonnage to sheets by assuming 200,000 per ton Divided by number of households over last 25 years Steady increase in sheets per household until 1999 Computers, digital printers (create more paper)+ paper-based processes 40% increase Rapid decline over last 10 years by 44% Less today than in 1983 Less mail, direct mail, home and office printing, collateral, maps, etc. See how it correlates with advance in Internet penetration Don’t expect it to come back with recovering economy 2000 – start of 21 st century was truly a new era for print
Problem is many people suffer from Marketing Myopia Don’t see the big picture, and if they do they … Don’t want to acknowledge it, and if they do they … Don’t know what to do about it
Term developed in 1960s by Ted Levitt Marketing executive turned economist & professor for Harvard University
Key attributes Focus on products, not customer needs Assume growth from growing/more affluent population – like China or developing markets – it’s a mirage Too focused on mass production and cost reduction Don’t see substitutes – even as they siphon away demand Much of the printing industry suffers from Marketing Myopia We need to find a path forward
Need to ask one key question Example is railroads of early 20 th century Primary means for moving cargo around countries Brutal pricing wars Monopolies of lines Focused only on traditional values – faster, lower costs per unit hauled Customer needs = getting products from A to B = which often required intermodal distribution New forms of transportation emerged – steamships, trucking, airplanes Rapid consolidation of rail Missed opportunity to leverage into bigger need, more deeply serve customers
Are you in the printing business or integrated graphic communications? Have solutions to help companies drive revenue with a variety of graphically rich information Help them design programs Generate and manage content Deliver to multiple platforms including web, mobile Resources to gather, analyze data Connect content assets with data assets to deliver effective messages at right time to right person through most effective channel Physical Targeting Information Analytical
Many companies have made the transition We can learn from them and find path forward Apply to our customers and markets “ leader in automated, mass-customized manufacturing and fulfillment for the consumer print-on-demand market”
Core competencies are changing and expanding Traditional don’t have as much value. Not sufficient. Have been commoditized by technology Need to build up skills and tools for 21 st century Centered around information and data Ability to gather, analyze, apply Link with content Deliver through optimum platforms Provide feedback, insights Still are foundation skills – Quality, service, price, salesmanship New foundation skill is Innovation History of innovation – printing equipment, POD, W2P, personalization Need to strengthen your Innovation Skills
December 2009 HBR – what makes innovators different? 6-year study by Brigham Young University and Harvard Business School Studied 25 innovative entrepreneurs, surveyed 3,000 executives and 500 individuals who started innovative companies or invented new products Top execs – responsible for facilitating innovation vs. coming up with innovations 85% of Execs at the most innovative companies don’t delegate innovation 5 discovery skills – spend 50% more time on these areas than CEOs with no innovation Associating = connect unrelated questions, problems, or ideas from different fields (Pierre Omidyar eBay) Questioning = Why, why not, what if? Imagine opposites/devil’s advocate; Embrace constraints (can’t sell to current customers) Observing = Common phenomena & small behavioral details in potential customers, suppliers, competitors (Scott Cook, Intuit) Experimenting = Interactive experiences & provoke unorthodox responses to generate insights, work overseas (Bezos, Amazon) Networking = Diverse individuals, different industries, countries, perspectives – TED Practice, set aside time, attend events outside your industry – Questioning is most important You need to embrace and develop innovation skills – it will help you succeed in the new era
Who comes to your mind when you think of innovative CEOs? I think about Steve Jobs Apple, GUI, NeXT, Pixar, iPod, iPhone Creativity is just connecting things. When you ask a creative person how they did something, they may feel a little guilty because they didn't really do it, they just saw something. It seemed obvious to them after awhile. That's because they were able to connect experiences they've had and synthesize new things. And the reason they were able to do that was that they've had more experiences or have thought more about their experiences than other people have. Unfortunately, that's too rare a commodity. A lot of people in our industry haven't had very diverse experiences. They don't have enough dots to connect, and they end up with very linear solutions, without a broad perspective on the problem. The broader one's understanding of the human experience, the better designs we will have.
Impact of innovation and innovators % change in stock over last 10 years Sony (used to be very innovative, but focused too much on product enhancements) vs. Apple with industry-changing product design, interface, market models Over 8 years since intro of iPod Picked up with iTunes 4.1 for Windows Late 2004 = iPod Photo – more than music Late 2005 = Nano – solid state, lower price Early 2007 = iPhone – amazing interface, Internet, iTunes, phone and, oh yeah, 3 rd party apps Mid 2008 = iPhone 3G – 3G network, camera, video, updated software Early 2010 = iTablet – Projections are to ship around 3 million Two drops – 2008 market meltdown and Steve Jobs rumors Sony is a good company, just not an innovative company like before. Different skills and approaches
What does it all mean to me? What should I do? A few thoughts on your strategy
Integrated graphic communications is a growth opportunity Major threat if you don’t understand economics, applications, customers Get close to customers – what are they trying to accomplish, where are the problems, inefficiencies? Examine competition, look outside direct competitors - ideas Embrace digital technology in all facets of your business. Many value-added service opportunities – begin offering additional services design, DAM, web site, integration, supply chain Look for partnering opportunities – technical, content, distribution Need to re-think your business, your workflow Don’t overlook sales & marketing – major issue for many printers and converters Who you hire, how you compensate, training, positioning of firm, etc. You must innovate, take risks Work processes Business model Customer interaction Prepare for interactive world – iPhones, QR codes, web to print, augmented reality – its all coming You have an incredible advantage. Get out there and be an innovator.
Integrated graphic communications is a growth opportunity Major threat if you don’t understand economics, applications, customers Get close to customers – what are they trying to accomplish, where are the problems, inefficiencies? Examine competition, look outside direct competitors - ideas Embrace digital technology in all facets of your business. Many value-added service opportunities – begin offering additional services design, DAM, web site, integration, supply chain Look for partnering opportunities – technical, content, distribution Need to re-think your business, your workflow Don’t overlook sales & marketing – major issue for many printers and converters Who you hire, how you compensate, training, positioning of firm, etc. You must innovate, take risks Work processes Business model Customer interaction Prepare for interactive world – iPhones, QR codes, web to print, augmented reality – its all coming You have an incredible advantage. Get out there and be an innovator.
