Click on a tab below to view
  articles within channel topics

Banners and Stands


Digital Printing





Grand Format


Inks and Media


Wide Format


Upcoming Events

Digital Print

As the printing industry faces an uncertain economy and other challenges in 2007, digital printing is emerging as the top opportunity for sustained growth.

By Mark W. Fleming

As the printing industry faces an uncertain economy and other challenges in 2007, digital printing is emerging as the top opportunity for sustained growth.

After a year of modest expansion in 2005, the printing industry grew robustly in the first half of 2006. According to the National Association for Printing Leadership (NAPL), nominal print sales—not adjusted for price increases—rose at an average rate of 6.5 percent through August 2006, compared with the preceding year.

The printing industry was propelled by a heated economy early in the year. Real—inflation-adjusted—gross domestic product (GDP) grew at an annualized rate of 5.6 percent in the first quarter compared with the preceding period, according to the U.S. Department of Commerce. However, the economy cooled as the year progressed, yielding real GDP growth of only 2.6 and 1.6 percent in the second and third quarters, respectively.

Since the average annual GDP growth rate has been three percent since 1990, the slowdown late in 2006 was cause for concern, particularly in light of rising prices for energy and materials. A significant portion of the increase in nominal print sales last year was due to inflation in the cost of paper.

In its 2006 State of the Industry Update, NAPL reports that the growth in nominal print sales was 5.7 percent in August 2006, down from a peak of 7.2 percent in June. But more ominously, the trade association anticipates that sales growth will be less than 2.5 percent by June 2007.

It can be expected that the digital segment will also cool a bit this year. However, since digital printing has been growing at a much higher rate than the overall industry, the digital segment will retain a lot of heat despite the chill in the conventional print market.

Approaching Middle Age
It is hard to believe that digital production printing is 18 years old in the publication and commercial printing industry. The technology has matured from noisy adolescence into a quieter, more productive growth stage. In the vernacular of the pundits, it is now mainstream.

According to preliminary results compiled by Strategies on Demand through the third quarter of 2006, digital print volume rose at an annualized rate of 20 percent compared with 2005. Color volume increased by 48 percent as prices continued to drop and much of the excess capacity of the preceding year was absorbed. Monochrome volume also rose, but at a lower 16-percent rate, signifying that this technology is reaching middle age.

These growth rates are turning more and more heads in an industry where total volume increases only a couple of percent per year on average. After a market adjustment in 2005, digital press sales grew in 2006 as existing owners purchased additional capacity and new converts took the plunge.

Digital printing has passed the stage where significant new technology launches are an annual ritual. Although there were no major quantum leaps in 2006, a number of vendors demonstrated incremental advancements in the state of the art last year.

Punch Graphix pushed the rated speed of its new Xeikon 6000 digital color web press to 160 four-color letter-size impressions per minute. In the early days of digital color, few customers could come close to filling the capacity of Xeikon’s high-speed machines, but all that has changed as digital printing moves from simple single-sheet products to more complex applications such as books, brochures, and catalogs, as well as longer-run direct mail.

Canon moved into the higher-speed production color segment with the launch of the imagePRESS C7000VP, a 70-impression-per-minute digital press priced at $230,000 with a Canon imagePRESS Server A3000. The speed is claimed to be independent of substrate basis weight, which is an advantage over some other digital color presses. This product is clearly positioned to compete with comparable-speed machines from Eastman Kodak, Hewlett-Packard, and Xerox. Canon expects to start shipping units in March 2007.

Competition also increased in highlight color. A few years ago, some vendors assumed that the transaction document segment would jump directly from monochrome to full process color. However, they overestimated the growth rate of this market, which has been warming up to four colors incrementally, beginning with two and moving toward three. One supplier that recognized this opportunity early on was Océ, which last year demonstrated its VarioStream 9000 web-fed press printing one, two, or three colors. Using CustomTone toner that can be tailored to match particular spot color requirements, along with registration adequate for color-on-color duotone and tritone screening, the Océ press has a wide color gamut. In response, Xerox announced the availability early in 2007 of custom-blended toner colors for its highlight-color DocuTech 128, 155, and 180 printers. The Xerox presses print very-high-quality solids and halftone tints, but they do not run duotones.

In the monochrome segment, Océ launched the VarioPrint 6250, the fastest sheetfed perfecting press in the market, with a throughput of 250 letter-size impressions per minute. Deliveries began in the fourth quarter last year. Not to be outdone, Xerox gave a technology demonstration of a twin-engine Nuvera Digital Production System, a sequential in-line duplexing configuration operating at 288 impressions per minute. An advantage of this approach is that the press will continue to operate at half speed if one engine fails. The actual product launch will occur in the second quarter of 2007.

The new year holds uncertain prospects for the printing industry. In addition to the tightening economy, three other important developments will influence how well printers fare.

Thanks to rising mailing costs and the pervasiveness of the Internet, print is losing its franchise as a preferred medium, particularly for time-sensitive communication. Publishers and advertisers are increasingly adopting digital products such as e-newsletters, Web site and email advertising, and blogs to reach and engage customers and prospects. Ironically, even the two major printing industry associations now use the Internet for many of their communications and services to members.

Last November’s elections illustrated the continuing migration to electronic advertising. Historically, general election years have been good for the printing industry, as political parties and candidates purchased signs and posters, direct mailings, and newspaper advertising. But in the 2006 election, the battlegrounds clearly shifted to television and the Internet, where candidates were better positioned to react quickly to the changing political climate.

Data compiled by Universal McCann and incorporated into the NAPL 2006 State of the Industry Report demonstrate the impact of electronic media on print advertising in newspapers, magazines, and direct mail. Print’s share of total advertising spending dropped from 47.1 percent in 1995 to 42.5 percent in 2005, while the share of spending on electronic advertising via television, radio, and the Internet rose from 30.4 percent to 35.8 percent over the same period.

First it was lightweight manufacturing in industries such as apparel. Then it was professional services in fields such as information technology. Now it is print that is being outsourced to Asia, driven by advances in digital prepress workflow in combination with Internet transmission and lower-cost overseas production. In fact, outsourcing is an unintended embodiment of the distribute-and-print model that technologists envisioned a decade ago.

At this point, the evidence for print outsourcing is incomplete. However, this threat is clearly in the crosshairs of a domestic industry struggling with rising labor and energy costs, soft demand, and a lingering commodity image.

Digital Empowerment
Electronic substitution and outsourcing trends are most troublesome for conventional printing, since they force offset into shorter-run, quicker-turn territory where it is less profitable. On the positive side, shorter run lengths and compressed cycle times represent an ideal opportunity for digital printing.

One area in which digital printing can coexist with Internet advertising is the print-on-demand (POD) model popularly called Web-to-print. Web-to-print applications fall into two major categories: (1) template-based print specification and ordering by print buyers and (2) fulfillment of printed marketing materials or other products in response to consumer requests. This capability dates back at least a decade, but it was largely ignored during the adolescent years of digital color in the late 1990s, when POD was eschewed by most digital press vendors. Today, however, Web- to-print is turning into a big business, particularly for the software vendors who are rushing to market with versatile template-based layout and specification features as well as customizable, user-friendly Internet ordering. These capabilities are increasingly embraced by printers in partnership with larger customers in a wide range of industries, including manufacturing, financial services, wholesale and retail distribution, membership organizations, and business services.

Led by the growth in POD and Web-to-print marketing response, personalized printing continues to gain volume. However, in spite of supply-side forecasts several years back that 1:1 marketing would become the killer application for four-color digital printing, most personalization consists of one- or two-color insertion of some variable text and simple graphics on a fixed layout. This is the same format that direct marketers have used over the last couple of decades. The majority of full-color digital print volume is short-run POD, sometimes from a customized document but usually without personalization from copy to copy.

Whether the application involves personalized printing or more basic POD, digital printing continues to present challenges on the operational side. When run lengths are small and turnaround times are short, the cost of managing an order through the operation can eat up a sizable share of the revenue. Suppliers have tried to address part of this problem with workflow automation. Thus far, most of the products are concentrated in the prepress and print areas, with advances last year in Web-based ordering and the unification of digital and offset workflows. Moreover, most major workflow products are now Job Definition Format (JDF)-compliant, with JDF links to the more popular print management information systems (MIS).

In the case of digital printing, the remaining challenge is to fully integrate these JDF-compliant islands of workflow automation across all manufacturing and administrative functions in the operation. Printers have been slow to embrace computer-integrated manufacturing (CIM), although it is a pervasive technology in other major manufacturing industries. However, some off-the-shelf MIS systems are appearing on the market with the potential to orchestrate the high frequency of digital printing orders cost effectively. Of equal importance, these systems can operate in real time. At this point, Press-sense appears to be the leading MIS and enterprise resource planning (ERP) system for digital printing, but competition is sure to increase in this area in 2007.

Financial Results
Last year’s review and forecast, "A Brief Intermission," Digital Publishing Solutions, January/February issue, included an examination of investor confidence in the digital print market, as reflected in the stock prices of the major digital press manufacturers. This analysis has been extended through 2006.

Digital printing is the core business of Xerox and Océ, and it accounts for nearly one-third of the revenue in Hewlett-Packard (HP). Although these companies compete in the office, they all have major stakes in production printing as well. Eastman Kodak has invested heavily in the digital and conventional production printing market as a hedge against the decline in its core photographic film operations.

Wall Street’s opinions of these players were mixed last year. Confidence in HP continued to rise on the basis of the company’s recovery under new management. However, in earlier years its share price had been hammered by difficulties in the cutthroat personal computer business. Xerox performed steadily in 2006, with a stock price that tracked the rise in the Dow Jones Industrial Index (DJIA). The other two companies in the analysis did not fare so well. Océ’s stock rode a roller coaster over most of the year but generally underperformed the DJIA. Although Kodak’s investments in the graphics sector should help its recovery in the longer term, its overall performance last year continued to disappoint investors.

Market Summary and Forecast
Strategies on Demand’s annual review and forecast published in January 2006 showed that domestic digital publication and commercial print volume would reach 827 billion letter-size impressions by 2010. Color volume was forecast to rise at a compound annual growth rate of 38 percent. Using an econometric analysis, Strategies on Demand was the first analyst firm to predict that the annual output of monochrome would peak by the end of the decade, as color takes on a greater share of total print volume.

These projections were validated by studies released by other analysts later in the year. A report published by Interquest in July 2006 projected that the volume produced on digital full-color production systems by graphic arts providers would increase by 35 percent per year from 2005 through 2010. In August, InfoTrends released its print on demand forecast for 2005-2010, in which the firm predicts that total print volume will reach 921 billion impressions in 2010. Significantly, InfoTrends echoed Strategies on Demand’s earlier assertion about the maturing monochrome segment, noting that "annual impressions will reach their peak in 2009."

After more than a decade of wildly different analyst forecasts on digital printing, particularly in the color segment, a consensus is finally beginning to develop on the size and growth of the market. This is another sign that the industry is growing up.

Looking forward, Strategies on Demand projects that digital publication and commercial production print volume will increase at a 13-percent compound annual growth rate (CAGR) through 2011. Color will grow at a healthy 34-percent rate on volume that is far from negligible, reaching 275 billion impressions.

In spite of its middle-age status, digital monochrome printing will continue to grow in volume at an eight-percent CAGR. In a refinement of the econometric model underlying last year’s forecast, Strategies on Demand now projects that the peak in monochrome volume will occur in 2013. The shift to color will not draw away enough monochrome volume to stall its growth until that time.

Just as color will not immediately supplant monochrome, digital will not replace offset anytime soon. But in an industry facing a host of uncertainties, digital printing is looking like the number-one opportunity for sustained growth in 2007 and beyond.

Jan2007, Digital Output

Home  |  Buyers Guide  |  Privacy  |  Reprints
Rockport Custom Publishing, LLC © 2003 - 2014