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Trends by Print Process Philippines Report to the 9 th FAGAT. I would like to offer some broad-brush findings – an analysis of the economic, demographic, and social factors that affect the demand for print and that will ultimately affect the structure of the Philippine printing industry.
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I would like to offer some broad-brush findings – an analysis of the economic, demographic, and social factors that affect the demand for print and that will ultimately affect the structure of the Philippine printing industry. The beginning of the new millennium has become reason in itself for companies and executives to wonder and muse about their futures.
First, it is important to put into perspective both the nature of forecasting and the factual basis for our views.
This means that forecasting is never done once; it has to be done constantly. Forecasting is a tool; it is meant to create discussions of alternative plans of action. In essence, data tell us the path or direction of the industry. This path, however, is under constant attack: the daily executive and customer decisions which make this path “come true” also take actions and initiate decisions that create a new one.
The seeds of change have already been planted, and they reveal themselves in industry demographics. Forecasting the graphic arts industry requires a firm grasp of industry demographics and an understanding of the way the industry adopts technology. More important than ever are insights into the creative markets, how and why they specify print or other media. The PPTF database, with its 40 years of industry history, is our main data source for developing quantitative forecasts of industry structure past the year 2005. This data is combined with other proprietary economic models and inputs, including quarterly surveys of both printing industry executives and the creative segments of advertising agencies, publishers, designers, and others who create the demand for print. These efforts are supplemented by proprietary studies of technology issues like digital printing and direct-to-plate.
Offset Duplicator (Multilith, Ryobi, Hamada) • Trends by Print Process Single-Color Sheet-fed Offset (Heidelberg Kord, Solna, Komori, Kobundo) Multi-ColorSheet-fed Offset (Heidelberg, Komori, Ryobi, Roland, Mitsubishi, KBA) Non-Heat-setWeb Offset (Goss, Man Roland, Horizon, Heidelberg Harris, Komori) Heat-set Web Offset (Heidelberg, Hancho, Komori Mitsubishi) Gravure Flexography Digital Black & White Copiers (Canon, Riso, Fuji Xerox, Oce, Ubix, Konica Minolta) High-Volume Black & White Laser Printers (Fuji Xerox, IBM, HP, Oce) High-Quality Desktop Color Printers (Epson, HP, Canon) High-Volume Digital Color Printers (HP, Fuji Xerox)
We like the heat-set market because the fragmentation of competitive media means that the publishing market will continue to do well (with the best growth being in specialty publications) as will the catalog market/direct mail. We believe the main growth areas will be in heat-set offset (full color magazines in coated paper) for the foreseeable future, and eventually digital color printing. Catalog marketing is still a very tiny portion of overall retailing and is expecting to grow at rates higher than GDP, sometimes two and three times, for years to come.
At the high end of this market, heat-set presses continue to make inroads; while at the very low end, color copiers and eventually digital presses are taking away small bites of business, and eventually these will be chunks. Business-to-business printing, predominantly sheet-fed work, falls on the negative side. (Annual reports, corporate profiles, controlled-circulation publications) When this is combined with what is occurring in new media, like the Internet and simple things like just viewing images on screen in corporations, sheet-fed offset products are seriously threatened.
Some of the impetus for this investment will be a declining workforce, which is already tight as new employees look to more exciting computer-based imaging markets. The next decade will see a significant replacement of the sheet-fed offset press base, where companies will find that buying a new press will allow them to eliminate older presses, not on a one-for-one basis, but on a two-for-three or two-for-four basis. Sheet-fed press investment should remain strong for many years, even though supplier consolidation will continue.
Among the largest users of the Internet and non-print alternatives like e-mail are small businesses, the main targets of quick printers. The quick printing part of the market, which uses a combination of offset duplicators and copiers, also raises some concern. The efforts of small printers to move their work away from small business to more corporate work and much less walk-in work has been evident in the marketing thrust of many franchisers. Some of this is defensive, seeking to secure more profitable work because walk-in business does not have sufficient volume to grow.
Copiers clearly have the upper hand, and we see vast disparities in the offset vs. copying volume among independent and franchise firms. The number of offset duplicators in the market is still high, over 10,000 but their utilization is quite low. We expect that many independent small printers will close and that few new firms will be formed to replace them. Franchise locations are a concern,but to a lesser extent. A franchise headquarters’ purpose is to spend time on new products, market development, and demand stimulation that individual owners would have difficulty doing alone. The times will demand that this be done aggressively.
The problem with this market has been the erroneous assumption that the industry has no viable or dynamic short-run production capability. The effect of digital presses like the HP Indigo and the numerous incarnations of the Xeikon engine (as sold by Agfa, IBM, Xerox, and others) prompt frequent questions. All of our surveys about run length, both on the demand and production side, show a very active market – with many, many jobs in run lengths that process color offset is “not supposed to do.”
We believe the digital color printing market will be 5% of the commercial market by 2010, or about Peso 200 million in today’s market size. The short-run color market already exists. The real question is whether other technologies will do it better. We have trouble coming up with a total market potential of more than Peso 600 million, about 15% or so of the market. For at least the next five to seven years, watch for steady but slow growth from digital printing – but no revolution.
The process is capable of commercial-quality work, but there are no suppliers willing to nurture it and few printers willing to risk broadening flexo beyond its current successes. Flexography’s place in commercial printing is to be the new process on the industry’s horizon, and we expect that it will remain there. Right now, graphic arts executives are concerned about digital printing, direct-to-press, and direct-to-plate offset. Until these issues are resolved, flexo is not likely to muscle in.
Our research showed that creative who used digital printing were more active on the Internet, more active with digital photography, and more technology intensive in their daily work than most printers. • One striking difference between printers and the creatives who originate what the printers need to produce is the “digital-ness” of the creative.
In fact, we believe the difficulty that many graphic arts firms are having in attracting design and prepress personnel (one that ultimately affects the decline in the number of trade service firms) is that the new media are attracting many people who have skills the printing industry desperately needs in the future. A serious concern, however, has been the lack of passion for print that we are finding among creative, and their preference for work on more exciting things like new media. For the near future, there may be little passion for print, but it does still represent the bulk of creative work and it does pay the bills.
This is unfortunate because the investments in direct-to-plate and digital printing require front-end investments that most sheet-fed printers have never made, including the employees needed to manage the workflows and output. We do not see printers interested in this “digital-ness.” Prepress is still an investment made grudgingly by many printing firms, and has its best value, according to most print executives, in bringing in work for the press. Investments made grudgingly are usually minimal. Printing organizations will find in the next years that virtually every production decision will represent a raw peso investment in digital technology and an employee training program.
