Countdown to Drupa: Report on impact of internet on print, part I

The changing demand for print

Before the mid-1990s, virtually all publishing as well as personal and business communications were analogue in nature, in the main split between print, broadcasting and telephony. Print was the oldest medium and global demand for paper was strong and stable. The last 15 years has seen the arrival of digital technologies and an ever-increasing proportion of communications is now digital not analogue. It is important to examine how print companies across the globe have adapted and how their experience has contrasted with the wider impact on the world of this fundamental transition.

Amongst the total Drupa global expert panel, 46% reported a decline in demand for conventional (non-digital) print over the last five years, compared with 21% who reported an increase, an overall net balance reporting a decline of 25%. When the answers were analysed between sectors, packaging came off by far the best, with a far smaller net balance reporting a decline of 14% compared with 33% for commercial and 42% for publishing printers.

In terms of substrates, a net balance of 9% reported a decline in demand for paper over the last five years, compared with those that reported an increase. This contrasts with net balances reporting growing demand for carton board, flexibles, metal, glass and fabrics.

The relative decline of print is not across all markets. However, for some sectors, it has been severe. Take newspapers, where in the US demand for newsprint has dropped 62% between 1999 and 2012. Over the same period, print advertising fell by 60% as marketers swapped to digital channels.

In contrast, packaging is forecast to grow at about 4% per annum to 2018, as the internet has not removed the need to protect our goods and promote them on the shelf. Equally, industrial/functional print is growing at an annual rate of about 13%, albeit from a much smaller base.

The digital flood

To understand the radical changes in communications, we must understand the revolution in digital technologies over the last 25 years. The ever-reducing cost and ever-increasing power of computer chips, the ever-increasing network communications speed and bandwidth and the ever-accelerating number of users connected has driven the astonishing growth in the internet. Add mobile communications (increasingly internet-enabled) and you see why digital communications increasingly dominate all other communications channels.

By 2012, it was calculated that 35% of the world’s population was connected via the internet, although distribution was patchy. As for mobile phones, by 2013, there were 3.4 billion subscribers, equivalent to just under half the world’s population. As print is now part of the broader communications industry, printing companies need to be increasingly IT-led. Yet, only 23% of Drupa expert panel reported that IT expenditure had grown over the last five years and virtually all reported difficulties in recruiting adequate IT skills.

Migration to digital communications

A range of factors explains the rapid migration to digital communications over the last 30-odd years:

• Digital communications are rapid, even real-time.

• Interactivity offers great advantages.

• The consumer has adapted to an ‘always on’ communications lifestyle.

• We are mobile with access to multiple touch-points and channels.

Marketers will, therefore, consider all the channels available and choose those that fit within budget and prompt the best (ideally recordable) response. Regrettably, younger marketers may only consider digital channels. Yet, print can add huge value to multichannel campaigns. The average response rate for standard direct mail is reported at 3.4%, compared with 0.12% for email. Thus, direct mail that drives consumers to a digital channel, ideally via an interactive element, is an attractive way forward.

How have commercial printers on the Drupa panel responded to these challenges? Commonly they have sought additional revenue streams by adding new services such as web-to-print (W2P), customer database management, digital asset management, etc – most of which use the internet to function.

Publishers of newspapers, magazines and books have faced equally stiff challenges from the internet. In 2012, US online advertising overtook the total print advertising in newspapers and magazines combined. For every USD 25 of lost print advertising, it is calculated that newspaper publishing gains just USD 1 of digital advertising.

Nevertheless, while digital revenues are growing rapidly for magazine publishers (particularly for business-to-business), it will be many years before print advertising and circulation revenues cease to be the dominant source. As for books, again the printed book will remain the dominant revenue source for professional publishers for some years. However, in the book publishing supply chain a radical transformation, enabled by ecommerce and digital print-on-demand (POD), has taken place.

Furthermore, use of eBooks is steadily increasing, but in complement to print, not as a full alternative. The other big features for books are that with POD no book need ever go ‘out of print’ and there is a huge growth in so-called ‘self-publishing’. The Drupa expert panel of printers who work in publishing has responded to these challenges by adding on-demand or short-run digital print; adapting to ecommerce-led supply chains and adding a variety of new services, such as customer database management, adapting files to alternative output devices, etc. Indeed, while conventional book production was reported as declining or at best stable, 59% reported growth in short-run digital production and 51% reported growth in on-demand digital production.

Sustainability is an issue of increasing concern for publishers, marketers and the consumer. As the comparative debate matures past naïve anti-paper slogans, and the environmental costs of digital infrastructure and use become better understood, there can now be a more effective selection of the right combination of media channels for each occasion while considering the sustainability implications. Reflecting this, the expert panel reported shifts in the paper purchasing habits of their customers, most notably the rise in demand for accredited papers.

The rise and rise of eCommerce

Over 20 years, the volume of eCommerce in many countries has grown from negligible to huge, including virtually all companies and most consumers. The growth figures are just astonishing; with even the most mature market, the US, still growing at 8% per annum, with China due to overtake it in volume terms in 2015 and to triple its volume of online trading by 2020.

There are many advantages to eCommerce that explain this explosion in participation, and the pace will accelerate further with increasing numbers of consumers using their internet-enabled mobile phones to participate in ‘mCommerce’. The report highlights the huge impact eCommerce has had on vast industries, such as music publishing, book publishing, retail and banking. Yet, print has struggled to exploit the opportunities.

While 51% of the Drupa panel had web-to-print, only 14% reported they used it to transact more than 25% of their orders. The commercial printer panel members offer a variety of products for sale via the internet, but while there are individual success stories, a recent US survey reported that only one in four W2P installations was considered a success by the printers concerned.

In terms of catalogues, 47% of the panel reported a decline in demand for conventional print (versus 15% an increase), a net balance of 31% decline. However, there was much better news for shorter-run ‘versioned mini-catalogues,’ with 47% reporting growth and 60% reporting growth in short-run digital production. The reason is clear – marketers see that print catalogues drive online sales, so print is a valuable ally for eCommerce when it becomes part of an integrated multi-channel process.

(Courtesy blog.drupa.com)