Mondays with Dr. Joe:
October 20th, 2008
Join Us At Graph Expo on Tuesday Morning, Room S105B
Here We Go Again... Pass the Antacid
Printing is NOT a Hidden Industry
Renewing Our Outlook One Print Business Owner at a Time
Upcoming Dr. Joe Sightings
Join Us At Graph Expo on Tuesday Morning, Room S105B
Please join us for the annual WhatTheyThink event at Graph Expo on October 28th in Room S105B, McCormick Place. The event is sponsored once again by manroland, and Dr. Joe will share his unpredictable predictions. Entitled "The State of the Printing Industry: The Real Story," Dr. Joe’s presentation will offer printing and publishing executives direction and insights into what to expect as a new year unfolds with the current economic situation and with a new U.S. President in office. Breakfast begins at 8:00 AM and the presentation is scheduled for 8:30 to 10:00 AM. Bring lots of questions!
Here We Go Again... Pass the Antacid
There are no positive economic news stories, so you'd think that Dr. Doom would be happy. The Fed's Beige Book was pretty clear: every region of the country is experiencing a slowdown. Retail sales were... there are barely words to describe them, but grotesque might do the trick. It almost seemed that whenever any Washington official stood by a microphone, the stock market plunged. I was chatting with an investor the other day when the Dow Jones Industrial Average was up more than 400 points, and I said, “Here we go again, another unsustainable rally.” If stock prices—which are based on expectations of future profitability (whether realistic or not)—have dropped this much, what does that tell us? The comments I made last week in the ERC blog still hold. It's a mess.
There was some interesting economic news. Interesting because they almost don't matter when people are panicking. The Consumer Price Index (CPI) report came in unchanged for September, from the previous month. So what? Fuel oil is still 38% higher than September of last year and gasoline was 32% higher. The report stated that car prices went down. Of course they did: they're not selling any! This is why oil prices are dropping: no demand! Supply chains are full of higher priced oil or contracts for delivery at higher prices, and demand for the goods that would be made with oil have dropped so much that spot prices are falling. Where's Congress now? Shouldn't we be hauling “Big Oil” in front of committees asking why the prices are falling so rapidly? Shouldn't someone be blaming speculators? A big problem looming will be homeowners who signed contracts for winter heating oil at very high prices, looking to protect themselves from the rising oil prices. Local television news should have a field day with hard-hitting reports about that, especially during ratings weeks.
There's no speculation about the direction of consumer magazine ad pages: down sharply. The Publishers Information Bureau (PIB) reported that ad page revenue was down -5%. Don't believe them. The organization calculates ad revenues based on published rate card prices. It would be like Wal-Mart reporting its sales at list price. It was a drop of 9.5% in ad pages. The report does not include the effect of changes in circulation, and we know that's down. Our chart below puts the data on an indexed basis, so it's easier to see the real nosedive compared to last year.
I haven't finalized my economic and industry forecasts for next year, but I will be presenting a small part of it on Saturday at GraphExpo's Executive Outlook, and then in detail at our annual breakfast event on Tuesday, sponsored by manroland.
There are two themes I will be stressing, however. Changes in media allocations are often amplified in economic distress. Technological change from a scientific aspect is not affected all that much, but adoption of new technologies is not always slowed in tough times. Some technologies can provide such cost advantages that they are adopted, even in slow times. We've had that happen in our industry: it was called color scanning and phototypesetting, both of which grew in the late 1970s and early 1980s, despite some rather horrible economic conditions.
Reading tip: One of the best explanations of the whole financial debacle is by economist Frank Shostak. I highly recommend it.
Printing is NOT a Hidden Industry
I've been at more than one industry event where the audience is filled with people who nod in agreement when the speaker says that the printing industry has “a bad image” or is not known to the public at large. This is the supposed reason for our inability to hire workers and other mythical problems of the day. That's a discussion for another time. What I want to deal with here is the misconception that printing is a “hidden” industry,
People promoting this idea make the assumption that the general public knows other industries quite well. They don't. Public knowledge of economics and news is disappointingly low across all topics, so how can one expect the public to know much about any industry and its companies, including ours? The oft-cited need for a “Got Milk?” campaign for printing is one that is particularly odd. Everyone knows the campaign, supposedly. Yet there was no change in milk consumption as a result of that campaign. Milk consumption rises with population growth, and other beverage categories have much higher growth and profit rates. The simple recognition such a campaign generates is meaningless. The campaign has never been effective.
Another element of this complaint is that people are surrounded by printed materials but never think of printers. So what? When a person buys a car, for example, they see brochures, signage, postal mail, forms, and an owner's manual (not that many of those manuals are ever read, but that's another matter). Is there any reason for consumers to say to themselves, “Those were manufactured by a commercial printer, one of our country's leading industries, the 500-year old industry that changed the world and helped make Ben Franklin a wealthy man?” Hardly.
Consumers largely assume that printing produced by the entity that handed it to them. Packaging? General Mills, Post, or Kellogg's makes that, not a printer. Printing is part of the product, isn't it? We insiders know that consumer packaging is created by a complex array of specialists, with the supply chain ranging from trees being cut down using heavy capital equipment, to wood products being milled and processed in factories, transported though a logistics chain, and eventually printed, filled, and placed on a store shelf. The images on packaging are envisioned and created by a different set of people that include marketing executives, researchers, designers, printing companies, and others. This is the world of branding and image creation, and it's not a single task of individual effort. Each function of this value chain of creativity and implementation could lay claim to being “hidden” or underappreciated.
In the end, printers are just one small component of a grand economic process, and claiming that our industry is “unknown” is much like a New Year's Eve partier in Times Square demanding that everyone look at him instead of the ball of lights in its midnight descent, or one of those wackos from the stands who runs onto a baseball or football field in mid-game. One voice can't be heard over the others in Times Square at that moment, and the one who runs onto the field is just plain selfish, raising the ire of the fans in the stadium or watching on television.
As far as being a well-known industry, consider of the public perception of banking, oil, pharmaceutical, telephone, utility, and other industries that have far greater visibility, accompanied by significant and vocal consumer distrust. Being well-known is not necessarily a good thing. Ask the public relations departments of these companies. Millions of people never heard of Bear Stearns until the company collapsed; more people know the name now than ever.
What attracts workers and others to an industry? Good wages, good rates of return, and a sense of positive dynamism. The fact that most printing businesses are small means that they are not in position to hire workers with the same recruiting methods that other industries do or larger companies can. Big banks and investment firms, retailers, and manufacturers will always be at the top of college recruiter lists. Our business has always been comprised of entrepreneurs and small business owners. We could benefit more from a booster shot of entrepreneurship right now than the recognition and awe of others. Who wants to work for an industry that whines? Nothing beats companies that do interesting things. And there are plenty of those in our industry.
What we say about ourselves and what others say about us is actually of minor importance in the overall scheme of things. It's how we perform that matters more. People use print to accomplish something. Knowing why people print, not just that they do print, is critical. That’s the job of the printing company as the work to be valuable business partners to their customers.
In the long run, it's great companies that attract workers and the interest of others. It is essential that we go about our business in a creative and innovative manner that helps clients improve the performance of their own businesses. This will earn us a more valuable form of recognition, that of being an indispensable value-creating partner, known to our loyal and delighted clients, even if supposedly “hidden” to others. That’s what pays the bills and keeps us—and our staff—engaged and challenged.
Related items...
We're not the only hidden industry. Most industries are hidden unless you are in one of them or study the subject. “I, Pencil” is a famous essay, now fifty years old, about the complexity of economic interrelationships and the thousands of anonymous workers and businesses behind the production of a mere pencil. This link also has commentary about the essay by the late Nobel Prize economist Milton Friedman. There is a video of Friedman discussing “I, Pencil” online.
As far as how big our industry is, and its “hiddenness,” here's a good indicator. In round numbers, commercial printing employment is 600,000. The US civilian workforce is 145 million. Commercial printing is therefore 0.4% of all workers, or about 1 in 250 workers. At that ratio, we are a lot like the guy running on the field I mentioned earlier.
On the other hand, we are bigger than many other industries. I recently published this chart of shipments for the first seven months of the year for U.S. manufacturing industries as part of the last webinar's Q&A (scroll down a bit to mid-page).
Renewing Our Outlook One Print Business Owner at a Time
I'm still getting positive comments about the revised version of “Renewing the Printing Industry.” It can still be downloaded for free at this special site, courtesy of the 2008 sponsor of the WhatTheyThink Economics & Research Center site, MindFireInc.
Dr. Joe Sightings
Because of the number of upcoming events, we have moved our “Sightings” to a separate page.
Next Week
There's no column scheduled for next week, but be sure to watch for WhatTheyThink's Graph Expo coverage. I'll blog on the ERC page if needed. Otherwise, I'll see you there!
Dr. Joe Webb is available for speaking engagements and consulting projects. To get more information contact us here.
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