The digital transformation of publishing—kicked into high gear by devices like the iPad, the Kindle, and the Nook—is one of the top business stories of the turn of the millennium.
Running in stealth mode alongside it, however, and with equally powerful implications for connecting authors to readers, is the digital transformation of manufacturing, printing, and binding with machines—machines now capable of speed, transition, and format flexibility undreamed of just a few years ago in the web-press world.
In the spirit of TV’s Jeopardy we might see the following answer: “the biggest loser as reading migrates to dedicated e-readers and other electronic devices,”’ to which the question would be: “what’s a printer?”
This is a more complex situation than it may seem. For the past 250 years, up to and including today, printers have been publishers’ most important and largest suppliers. And publishers have been all too happy to outsource to these trusted companies the complex, artful, and messy process of putting ink on paper; creating signatures, book blocks, and covers; and binding them into customer-enticing hardcover and paperback products. Moreover, often printers are the ones who store and/or are able to locate necessary old files for re-releases, updates, digitization, and the like.
Unfortunately, the inefficiency of the legacy system, the amount of “friction”—and therefore lost revenue—involved in the process of manufacturing, warehousing, distributing, and retailing of physical product is one of the reasons that publishing margins have historically been so thin. The time has come, therefore, to ask: is the printer-publisher relationship doomed?
Two recent gatherings—the annual meeting of the Book Industry Study Group, and the semiannual meeting of the Book Manufacturing Institute’s Digital Roundtable—illuminate these problems and possible solutions. Both the text and the subtext of the BISG discussions (PW Daily, September 28) focused on the ongoing, profound, and unknowable outcome of the current disruption in traditional publishing. Among the comments:
“We are only at the beginning of this transformation....”
“We have no idea what the industry will look like even five years from now.”
“Are we in the ‘book and author’ business or the ‘content’ business?” (“That’s easy,” said one printing company executive. “If you are outputting to multiple print and digital formats, you’re in the content business.”)
However, as BISG/AAP statistics show, while 20% of U.S. trade revenue came from digital in 2011 and will continue to grow, some $20 billion of revenue overall in U.S. publishing is still generated by the sale of printed books. The percentage of print to digital is even higher around the globe.
As noted in the article about digital print production (p. 18), the change from a just-in-case business model with a few large print runs and large warehouses to house them, to a just-in-time business model with multiple shorter runs and smaller warehouses that in some cases are actually virtual, is the reason for concern. The POD leader, Lightning Source, an Ingram Content Group company, has more than nine million titles in its warehouse—which consists of large, heavily guarded, and extensively redundant rooms full of blade servers, routers, cables, etc. Not a single piece of paper, book cover, box, or skid can be seen, except on the printing floor itself, where 38 long rows of high-speed machinery at seven locations worldwide turn huge rolls of paper into hundreds of thousands of printed books from orders, on average, of less than two copies/title.
As one printer lamented at a previous BMI Roundtable: “It used to be that I was asked to make 1,000 copies of one thing. Now I am being asked to make one copy of a 1,000 things.”
The question is, can the business of printing survive such a change? Can printers who have sunk millions of dollars into traditional web presses (increasingly seen as monolithic and inflexible behemoths) change their presses, their people, and their processes quickly, inexpensively, and effectively enough to meet this sharp pivot in the publishing business? In some cases, companies are doing it already, and this is where the digital transformation of printing and binding engines enters the picture.
Like so many so-called overnight successes, whether in business or entertainment, digital printing has been building for at least a decade. Early adopters like John Wiley and Cambridge University Press began working with Lightning Source, and then other providers, to make their manufacturing and distribution processes more efficient and thus more responsive to marketplace demands as they change over the lifetime of a title. This has not been without competitive speed bumps, such as when Amazon turned off the buy buttons of publishers who chose to use someone other than Amazon’s own POD service.
Problems of quality, flexibility, and reliability were key concerns in the early days, when publishing customers pushed for more POD templates; more clarity of the text on the page; color; and better-looking products. We have now reached the tipping point, however. Digitally printed books are, from a customer’s perspective, the equal of offset printed books. This maturity of digital was evidenced by response to the new printing and binding engines offered at this year’s Drupa, the Druck und Papier quadrennial printing and paper trade show, the printers’ equivalent of Frankfurt + BEA.
One major OEM representative at the BMI roundtable declared, “At this Drupa it became clear that digital is no longer a nice-to-have, but a must-have for all printers.” Refining this idea somewhat, a mid-sized Michigan printer countered, “Drupa clearly represents the industrialization of digital. These new digital engines could handle a lot of my current, long-run business, and that makes them interesting. But I’m not yet ready to make the million-dollar investment.” Printers around the globe are taking note of these digital engines capable of switching on the fly from “book of one” orders to a thousand-copy run, with automated binding, both in-line and near line, as part of the digital solution. As a consequence, it is no longer a question of “if” but rather “when” printers choose to invest in digital print and binding machinery.
It became clear from the BMI discussion, that “niche” is now a key strategic decision for printers as their possible customer spectrum expands from small and large traditional publishers to include self-publishers, as well as corporate, governmental, and overseas clients. (Some 148,000 titles were self-published in 2011, according to Bowker’s newest report.) Printers who have already bravely chosen the business model of “book of one” and short run are doing sustainable business. As one of these companies put it, “We make money on every single book.” So, printers, what is your niche? What business are you in?
From a certain point of view, printers and publishers are in the same situation: what’s broken is not the business per se, but the business model. How can sustainable revenue and profits be maintained as we move from a print marketplace based on scarcity to a print plus digital marketplace characterized by glut? As a leading publisher put it at the BISG meeting, “There is now so much product out there that the real problem is discoverability. How can any book achieve breakthrough?”
Across all industries, profound difficulties caused by onrushing technology, globalization, and scientific advances have led to a need for sustained efforts at innovation. Transformation, however, is costly, uncertain, and failure-inevitable. It involves managing risk in an uncertain environment. One Canadian printer who has taken the plunge to digital machinery noted: “We are far from achieving the ROI we planned, and sometimes we find ourselves at the bloody end of the sword.” Nonetheless, as he continued his description, it became clear that there is no real alternative to innovating. You do your best to fail cheaply and quickly, learn from your mistakes, and move forward.
Despite the ecosystem of a common supply chain, the printer-publisher relationship remains, as it has for decades, like that of the squid and the whale, locked in battle at the bottom of the ocean for the cheapest price per page. This is becoming increasingly foolish, not to say tragic. What is needed is a new strategic vision, one in which the industry, working together, can redesign the business (not the pricing!) model, and then focus on technologies that provide the most cost-effective and efficient systems.
The time has come for printers to build upon their centuries-long relationship with publishers to be not just a trusted vendor of a specific service, but rather a partner providing supply chain products to meet the needs of a dynamic and unknowable marketplace. Printers have begun to have these discussions, but with little success so far, given that their publishing interlocutors are usually executives charged with legacy printing and manufacturing jobs. Only when senior publishing leaders understand that disruptive market forces urgently require strategic rethinking and revisiting of old patterns in publishing and printing will progress be made.
To facilitate this progress, printers need to demonstrate to their publishing customers that they can provide the technologies, data, and analytics that will allow the supply chain to manage profitably as market dynamics change. Understanding shifting needs of the ultimate customers (in close to real time) will make it more likely to be able to create a sustainable workflow across the supply chain.
Fortunately, we have reached the point where new technology can streamline, improve, enhance, and expand workflow possibilities with the promise of returning the publishing industry to greater stability. The answer is not the equipment per se but the overall systems that can be put in place using new digital technology to serve customers’ evolving and still unknown needs.
For all their accomplishments, OEMs like Kodak, HP, Oce, RICOH, and Xerox have further responsibilities beyond their brilliant new printing and binding machinery. In order to make the unpredictable, frequent, short-run, small-to-no warehouse printing model work, true automation and touchless processes are a must. And the only way to make that happen, given the multiplicity of devices and OEM equipment that characterize the print floor, is through transparency and standards.
Granted, the new machinery is able to transition from a run of one to a run of thousands in a matter of minutes. But without full understanding of how the new hardware and software components work together, and how other order-flow and workflow systems from different manufacturers can be coordinated with them, printers will not be able to serve their publishing partners effectively and sustainably. Of course, there are competitive issues that need to be respected, and these make complete transparency impossible. Recognizing this, OEMs are providing support teams that work with individual customers after the new products’ sale is made.
Perhaps the best way to understand the business implications of the digital revolution in printing is a comment made by a printer at the BMI roundtable in Chicago: “We have to stop thinking of ourselves as printing companies with technology and software capabilities, and start thinking of ourselves as software and technology companies with printing capabilities.”
Jim Lichtenberg, president of Lightspeed LLC, serves as a longstanding board member of the Book Industry Study Group and more recently as facilitator of the Book Manufacturers Institute’s IT and Digital Roundtables.