As Costs Head Up, Will Prices Follow?
Rising paper, printing bills put pressure on prices
by Jim Milliot -- Publishers Weekly, 3/14/2005
The ability of publishers to cut costs by wringing price concessions from their vendors may be coming to an end. In recent years, publishers have benefited from a sluggish national economy, which has helped to keep the price of paper down and left printers with excess capacity. Add in a weak book market, and many publishers' suppliers were left with little choice but to cut prices. But an improving economy and a robust adoption cycle in the elhi market for the next several years mean that paper manufacturers and printers finally may be able to pass along price increases to publishers.
Higher production expenses could translate into higher book prices. Simon & Schuster CEO Jack Romanos said the publisher will raise prices on some backlist titles this year in order to cover higher paper prices. Penguin president David Shanks said Penguin was holding off on a decision about raising backlist prices until it could determine if higher paper prices will stick.
At last week's Book Tech show in New York, a number of manufacturers said business has been improving over the last few months, and some companies were talking about putting through price increases that they expect to be able to make stick. (Over the last year, some companies have raised prices, but rescinded them.) "It's been a rough few years. It's about time we can pass some costs on to publishers," one frustrated small printer said.
Executives at three of the nation's largest printers, speaking on conference calls with analysts to discuss year-end results, were more moderate in tone, but did suggest that business will pick up this year. Geoff Hibner, CFO at Banta, said he expects pricing to become more "normal" by this year's second and third periods, as demand for school textbooks increases. Banta reported good gains in its book division in the fourth quarter, but noted that sales and earnings for the full year were limited, due to a "tough pricing environment." Executives at both R.R. Donnelley and Quebecor also said business in the last quarter of 2004 was the strongest of the year. An increase in orders from the trade, religion and the education segments boosted fourth-quarter sales at Donnelley. Volume at Quebecor increased 9% in the final period, but was up only 2% for the year, and executives said there was "some improvement" in reducing industry overcapacity by year's end.
A number of the smaller printers at Book Tech, especially those in the education field, reported that they were running close to full capacity this year. Capacity issues could become more of a problem later this spring, when what is sure to be a multimillion-copy run for Harry Potter and the Half-Blood Prince goes on press.
