The questions are: Will publishers pay for them, and will it be enough to make up for lost print revenue?
B-to-b print advertising pages plummeted 28.6% in 2009 compared with the previous year, according to American Business Media's Business Information Network figures. Although pages have grown modestly in the two years since, they have not increased nearly enough to restore that lost revenue. And magazine publishers have not been the only companies to suffer. Printers have seen significant revenues disappear as a result of this plunge in printed pages.
A recent report from Dave Novosel, Gimme Credit senior investment analyst, pointed out that the entire magazine printing industry is grappling with “volume decline” and “price reductions.”
Like publishers, printers are fighting back by offering expanded services that extend far beyond print. Some now provide publishers with digital editions, content management systems and marketing services. Some printers are even supplying publishers with content as part of an effort to get deeper into their customers' work flows.
“I've been in print production for 20 years and have never seen the industry change more than it has in the past four years,” said George Shurtleff, production manager at Summit Media Group's Automation World.
Here is a partial list of efforts by printers to add new services to their businesses:
R.R. Donnelley & Sons Co. acquired Journalism Online and now offers its Press+ platform to help media companies charge for portions of their online content. Donnelley also acquired Helium, a freelance content marketplace. (See sidebar, page 16.)
Publishers Press launched ContentXpress, a system to help publishers create a digital content archive. “It's integrated with prepress work flows,” said Dick Ryan, director-business development at Publishers Press.
Fry Communications partnered with Blanchard Systems to offer SendMyAd cloud-based software to help streamline the process of handling print advertisements. Fry offers an “ecosystem” of expanded services through companies it owns or partners with, said Steve Grande, Fry's VP-sales.
Brown Printing Co. has a network of affiliated companies that allows it to offer consulting services to publishers trying to figure out how to take advantage of apps and mobile, according to Jennifer Bergin, VP-marketing at Brown.
Printers no longer just help publishers make their content visible with paper and ink; they also use pixels and backlighting. “It's the right move,” Novosel said. “I can't fault management.”
It's unclear, however, to what extent these new ventures will succeed in making up for lost print revenue. “They seem to be replacing print dollars with digital dimes and pennies,” said Drew McReynolds, an analyst with RBC Capital Markets.
B-to-b media companies are using the expanded services offered by printers to varying degrees. Industry observers say small publishers are more likely to take advantage of these offerings. “For smaller publishers, who don't have a lot of resources and organizational support, this is a great opportunity,” said Robert Brai, COO of Superior Media Solutions.
Advanstar Communications, one of the nation's largest b-to-b media companies, doesn't use its printer, Donnelley, for either content management or digital editions. Keith Hammerbeck, Advanstar's corporate director-media operations, said his company is in the early stages of considering Helium, Donnelley's freelance content market.
For now, Hammerbeck said, the main value-added service Advanstar uses from Donnelley is a somewhat old-fashioned one: co-mailing. “It delivers significant savings,” Hammerbeck said.
Vance Publishing Corp. also takes advantage of co-mailing with Donnelley and also uses Donnelley to create digital editions of some of its magazines, said Tom Fogarty, Vance's director-production.
Fogarty is also intrigued by Donnelley's Press+ system, which enables publishers to install a metered model on their websites in order to charge for some segments of online content. “The idea of paid content—I think that is the way the market could be moving,” Fogarty said.
Meister Media Worldwide is a customer of Quad/Graphics. When Quad acquired Meister's printer, World Color Press, in 2010, Nick Mlachak, director-media services at Meister, was concerned. “Are we going to be a small fish in a very large lake?” he wondered.
But so far, Quad has delivered—especially in value-added services, Mlachak said. Co-mailing has generated “significant savings” and “consistent delivery,” he said.
Meister has also taken advantage of Quad's ability to create digital editions from prepress files created for print publications. Mlachak said Meister's Productores de Hortalizas, a magazine serving vegetable growers in Mexico, has seen its digital editions foster improved renewal rates. And Cotton International's digital edition has provided an inexpensive way to penetrate the Chinese market, Mlachak said.
Summit Media Group's Shurtleff said Automation World had been using its printer for digital edition services but was dissatisfied with the turnaround time. So Automation World recently switched to a different digital edition supplier, Turn-Page. “We found a place that did it cheaper and did it faster,” Shurtleff said.
In many cases, that is the crux of the issue. Can printers move beyond their perceived core competency of putting ink on paper to become high-quality providers of different kinds of electronic content services, whether that involves creating digital editions or moving deeper into a media company's work flow to help prepare content for websites, tablets and smartphones?
And as printers increasingly move to these value-added services, can they maintain their pricing power to ensure that these new offerings drive both top- and bottom-line growth? For now at least, publishers have noticed that printers have lost some of their leverage—one of the biggest changes in the industry.
“It's a fair statement to say printers are at a disadvantage,” Superior Media Solutions' Brai said.
“We have buying power now,” Shurtleff said. “We can tell them we're going to be a little late, and they will accommodate us. Back in the old days if you were late, you were at the printer's mercy.”