Thad McIlroy on the Future of Print

Eric J. Adams

Few industries have suffered as much of late as the printing industry. Even before the recent economic downturn, printers and related services saw their profits slip away to the Internet, and before that to television. Hence, at print trade shows and seminars around the world, the question often arises, “Is print dead?”

The answer is absolutely not, though the short-term prognosis is hardly pleasant, according to Thad McIlroy, president of the graphics-arts consulting firm Arcadia House and program director for Seybold Seminars. McIlroy just completed a Seybold-commissioned study on the state of the printing industry.

In this Q&A session with creativepro.com, McIlroy argues that the print world’s wounds are largely self-inflicted, that the worst is yet to come, but that yes, Virginia, there is a light at the end of the press run.

creativepro.com: Many people are bemoaning the state of the print industry. What are the latest figures?

McIlroy: Certainly there’s been good news. Paper sales are at record levels. For the most part printing sales remain strong. Some 44 percent of all mail handled by the U.S. post office is now direct mail, an enormous increase over the 32 percent of direct mail handled in 1978. This is just one example of the general health of the print-based economy. I could offer many more.

creativepro.com: Sounds like print is doing just fine, then.

McIlroy: It does, but these ongoing reports only serve to mask the real problem that has begun to emerge. The U.S. printing and publishing industries experienced real double-digit growth in most of years prior to 1988. During the 1990s growth has been generally below five percent. Since 1997 growth has been slow to negative.

The Gallup Poll did a survey with the simple question: “Did you read a newspaper yesterday?” In 1961, 80 percent of adults answered yes. By 1999 that figure had dropped to 58 percent of adults.

More troubling is the trend in youth demographics. A recent study from the Audit Bureau of Circulations found that while some 58 percent of adults continue to read a daily newspaper, that number dropped below 45 percent for younger adults aged 18 to 34 years.

The book publishing industry is facing similar challenges with consumers purchasing fewer books. And it’s no better for the prepress industry, in which product confusion is leading to lower sales and profit margins.

In a nutshell, print-based publishing has peaked and has begun a decline that will continue into the foreseeable future. It’s not popular to say, but most print-based publishing industries will be unattractive for years to come.

creativepro.com: How will the downturn affect companies?

McIlroy: Print will never be dead, and I do believe print will have a significant role in the future. But take, for example, all those printing companies operating at an industry-average profit margin of 3.5 percent. Now slash off 10 percent of their most profitable sales. You end up with a lot of companies teetering on the edge of bankruptcy.

creativepro.com: Does the recent Internet collapse compound the situation?

McIlroy: For printing companies it’s tempting to look at this collapse as some kind of return to normal. Don’t be mislead. The Internet is doing just fine. Total Web visitors are up 9 percent year-to-year. Online shopping volumes are up 32 percent; Christmas sales online were up 60 percent. Advertising revenue is up 38 percent. The collapse of over-inflated share prices is a red herring. The Internet is here to stay and will continue to cannibalize print sales.

creativepro.com: Sounds pretty dire for the print world.

McIlroy: It is. On the one hand, printers are forced by competitive pressures to continue to invest in new and more efficient equipment. On the other hand, where’s the money going to come from? If you’re a bank and a $20 million printer comes to you and says we want to buy a $3 million printing press with a 20-year loan, how can the bank possibly believe with any certainty that the company will be in any position to repay that loan? The dropping share prices of publicly traded printing and prepress companies suggest they’ll have real problems attracting new capital or, increasingly, even debt financing.

creativepro.com: So what’s the industry to do?

McIlroy: There’s no magic bullet, but rather a series of small steps, well executed. The most important step the printing industry must take is the move to a true manufacturing model. It’s been classified that way but its practices have had more to do with basket weaving than the making of automobiles.

There are really only two ways to improve manufacturing productivity. Either you train and/or motivate your existing staff to produce more, or you buy better technology for existing staff to use. Staffing is the most underrated problem printers face. In a recent survey, 77.2 percent of web printers rate this as their number one problem (second to a 75 percent rate for “Competition/Low pricing”). Human resource management can no longer be assigned to junior management. It has become a top management responsibility.

creativepro.com:: What technology improvements can be made?

McIlroy: Technology investments fall into two categories — incremental improvements and major capital investments. Few printers are doing everything they can, incrementally, to explore asset management, color management, and PDF workflows. For relatively minor capital investments, they could be operating more efficiently, with fewer errors and greater customer satisfaction. Technologies like JDF, PDF, and CIP4 are going to make the concept of a press check obsolete and bring printers into the modern era.

If a printer is talking about the difficulties of online proofing and the viability of their Web site, they’d better stop talking and get back to taking care of these things, because they will serve as the foundation for all that’s to come.

Additionally, most printers need to confront the large investment challenges of the new millennium — CTP, digital printing, and new offset presses.

creativepro.com: How important is digital printing?

McIlroy: The Web really was the first move in a broad marketing shift away from a market-centric model to a customer-centric model, with companies engaging in one-to-one marketing rather than investing in mass advertising, with the idea of engaging in a personal conversation with customers rather than shouting messages at them.

In the printing world this will translate into variable printing, a different message for each customer. The value proposition of digital printing is variability, and that can’t be underestimated. Variability will be required to meet customer needs in the future.

creativepro.com: What does the future of printing look like?

McIlroy: It’s a future of Web publishing, e-books, and wireless content delivery — what Adobe is calling networked publishing.

There will always be a need for printing, and specialists will thrive. But printers will need to become network publishing service providers –- helping their customers get their content delivered in whatever medium it might be. It will require printers to acquire or master full digitization of current processes, a closed-loop manufacturing model, digital asset management, full online accessibility, database know-how, Web design and hosting facilities, and consulting abilities.

Not every printer will be able to make the move. But there are better margins in services than in products. And if printers want to become something other than low-cost manufacturers in a declining industry, they’ll have to learn to make the transition.