Printed Books Hold Their Ground

Black Friday and Cyber Monday have come and gone, yet Santa still has difficult-to-buy-for names on his Nice List. If you want to buy someone a luxury gift this holiday season, consider giving a printed book. “Print is a luxury item with an emotional connection,” Marco Boer, VP of I.T. Strategies, told MyPRINTResource.com in a pre-Thanksgiving interview. “Local history books are making a comeback,” he said, “as are family cookbooks.”

Boer’s research firm has released details of a new study, commissioned by Ricoh and introduced at its “Next Chapter” event last month. The report, entitled The Evolution of the Book Industry: Implications for U.S. Book Manufacturers and Printers, reveals some unexpected findings, including that “most consumers do not see themselves giving up print books due to the benefits the physical form offers. Nearly 70 percent of consumers feel it is unlikely that they’ll give up on printed books by 2016. Consumers have an emotional and visceral/sensory attachment to printed books, potentially elevating them to a luxury item.”

Additionally the research, conducted in conjunction with the University of Colorado, shows that college students prefer printed textbooks to e-books “for their ability to concentrate on the subject matter at hand.” Electronic display devices, such as Apple iPads and tablet PCs, tend to tempt students to distraction, respondents said. Separate research from the Sesame Workshop studied younger children (three to six years of age) and found that parent-child pairs engaged less with story content when reading enhanced e-books than when reading printed books. In addition, the children who read enhanced e-books recalled fewer narrative details than children who read the print version of the same story.

Two other key findings of the new I.T. Strategies/Ricoh study:

• Eye/screen fatigue and a love of the print medium lead to an overall positive outlook for the printed book.
• Three of five e-books downloaded are never read.

These findings fly in the face of what popular culture and the pop press wants us to believe, Boer continued. “The consumer perception is [e-book] growth,” he explained, primarily due to access points such as mobile/smartphone technology. However, “our research shows that there is a silver lining for the printed books and the digital production print industries,” he stated. “As book orders become smaller in quantity and more frequent, and as an unprecedented number of titles are introduced each year, digital print is helping book manufacturers tackle potential challenges head on through automation and more intelligent printing.”

Digital Repro

It is clear that digital production inkjet printers have opened the door to a business model shift. Combined, the I.T. Strategies/Ricoh study estimates that only 50 production inkjet systems owned by 25 book manufacturers produced more than 10 percent of all printed book pages in the US last year. (More details on the research can be found here.)

Tonya Powers, a segment marketing executive at Canon Solutions America, pointed to 2012 research from InfoTrends that demonstrated offset printing’s ongoing erosion, projecting 14 percent compound annual growth in digital book volume, reaching nearly 95 billion pages in 2015. The expansion of high-speed inkjet presses is driving down the cost curve, added Canon Solutions America colleague Michael Poulin, who is senior product marketing manager for manufacturer’s continuous-feed business. “There is continued improvement in substrates and media,” he said, although heavy coated stock still poses a problem. The response from the paper mills was uncharacteristically quick and unexpected, in Poulin’s opinion. He also stressed the importance of expanded inline finishing solutions that can handle the requirements of 20- and 30-inch equipment.

Frankly, readers do not care how books are manufactured. “Consumers have become indifferent as to how the printed product is produced,” admitted Rick Mazur, Kodak’s marketing director in North America. “They don’t care if our Stream technology is used versus drop-on-demand [DOD] inkjet,” or whether cut-sheet toner devices are employed or conventional offset presses, for that matter. And publishers don’t care either, according to Xerox’s John Conley, VP of commercial print and publishing in its graphic communications group, who said most customers are “technology agnostic.” That goes for e-books, too.

More than one in five people 16 years or older have read at least one e-book in the last year, according to the Pew Research Center’s Internet & American Life Project, on which Publishers Weekly reported in June. Putting book market conditions into perspective, Boer acknowledged what everyone knows: overall print volumes are in decline. “People are reading less,” he noted, citing multiple research sources. It is also true that “the number of dedicated e-book readers has peaked and [actually] declined over the past 12 to 18 months,” he added, “yet tablet PC sales are growing.”

The self-publishing marketplace disruption is akin to the transformation in the music industry, Boer explained, where the big record labels became devalued. “Large publishers used to control an author’s success or failure, but the ‘ecosystem’ has changed,” he said. It doesn’t work like that any longer. “Royalties have gone from the three percent to seven percent traditional range to 30 percent to 70 percent,” Boer continued. “As a result, the number of titles has increased.” In addition to hardware, end-to-end workflow automation also is a critical component—from integrating orders to pushing them out the backdoor on a cart. “The fewer manual labor steps, the more money you make,” he noted. “You can’t hold an author’s hand because there are just too many of them now.”

The I.T. Strategies analyst wondered aloud, however, whether Amazon.com wields too much monopolistic power when it comes to content control. “Nine of every 10 e-book sales come from Amazon [Kindle],” he reported, “and two of every 10 print book sales.”

Mixed Media Profits

Granted, without mega best-selling titles flying off book shelves, 2013 did not stack up compared to 2012 or 2011. “Trade book sales were flat this year,” noted Kodak’s Mazur, pointing to the fact that Random House/Penguin previously had sold more than 90 million copies of the E.L. James “Fifty Shades” erotic romance novels worldwide. A motion picture, due out in February, is expected drive more 2014 print orders.

Meanwhile, in the US alone, competitor Scholastic has sold some 24 million copies of the young-adult sci-fi novel “The Hunger Games”. Together, those 114 million books represent a lot of ink on paper tonnage. To date, approximately 50 percent of revenues from the James series have been from printed books, compared to Random House’s global average of about 20 percent from e-book sales. “Fifty percent may be the norm by 2020,” predicted Boer from I.T. Strategies, but Kodak’s Mazur believes the 50-50 split may take even longer. “In the next 20 years, I don’t think we’ll see digital dominance,” he opined.

A big-screen adaptation of “Catching Fire”, Suzanne Collins’s second book in her “Hunger Games” trilogy, opened in movie theaters last month. As subsequent, blockbuster print book orders have flowed in during the holiday season and in the future, according to Mazur, supply-chain management is a critical component to success. “Building relationships between wholesalers and the publishers themselves is key,” he said, adding that Kodak advises book printers to look at a mix of traditional web-offset lithographic printing and digitally produced products. When not in back-to-school or holiday rush mode, product seasonality poses a capacity challenge for print firms reproducing digitally. The trick, according to I.T. Strategies and others, is to back-fill during down times with less-seasonal titles, such as trade books and cookbooks.

It clearly is a print-plus-digital world in 2013, says Kodak’s Mazur. “The demise of the printed book?” he asked rhetorically. “It’s working in the opposite direction: There are more trade and education titles being printed today. The book market is vibrant,” he proclaimed, “with a very low decline in [printed] units—between three percent and five percent—projected between now and 2015.”

Furthermore, the number of brick-and-mortar book stores has grown significantly in the past 18 months, according to research conducted by the venerable Book Manufacturers’ Institute (BMI), despite the rash of Barnes & Noble closings that begin earlier this year. “There has been a rebirth of local book stores,” Mazur explained, “in smaller towns and communities not near large malls.”

Still, as Publishers Weekly forecast this past June, “There’s every reason to believe the number of e-book readers will increase.” PW cited a report by PricewaterhouseCoopers projecting that e-books will make up half of the US trade book market by 2016. More than 75 percent of all public libraries nationwide now offer e-books, and some 40 percent offer e-readers.

Although a slowdown was inevitable, the e-book plateau has occurred faster than Boer and Conley thought it would. “E-books are not taking over the world,” concluded the former. “What we have learned is that they have a natural life cycle. Where e-book growth was at 100 percent year over year, now it is 20 percent.”

Xerox’s Conley pointed out, “In August, e-books shrank [by] $54 million year over year.” The former longtime executive in RR Donnelley’s book group added that hardcover books are enjoying double-digit sales increases.

As a Washington Post article stated in August, these declining numbers are “evidence that e-books (whether for Kindle, Nook, tablet computing devices, or any other device you might wish to use to read many thousands of words) are starting to become a more mature technology. They seem to be through their explosive growth phase. The question was always ‘at what share of the book market will e-books settle,’ not ‘when will print books cease to exist.’ Old technologies never die, they just fade into a smaller, niche offering; television supplanted radio as the dominant mass medium in the middle of the last century, for example, but radio is still a big business.” One reader comment in the Post perhaps summed it up best: “I see e-books and print happily coexisting. What the Kindle has done for me is increase my reading and book buying (both electronic and paper).”

Mazur of Kodak predicted that “the longevity of books will go on forever. It will just be more dynamic. Digital print is adding to the longevity of the printed product,” he clarified. “There’s still room for growth in digital, especially in the education and professional space. There’s more digital conversion happening in professional books, due to tablets,” but BMI projections do not see digital print overtaking offset within the next eight years.

The biggest surprise for him is why book publishers have not migrated to digital printing faster, especially with rapid-replenishment inventory models in place to help them fulfill the same number of orders with fewer books. “The business case for reprints is proven with a 40 percent profit potential,” he noted, adding that digital print makes it economically feasible to bring back older titles. “We have customers who ‘get it’ and added more Prosper [high-speed inkjet web] presses this year. There is still growth to tap into in 2014, but people need to look at the total manufacturing cost of a title as opposed to the single book cost.”

Digital print advancements are healthy for a book business that once had inherent channel waste of 25 percent to 35 percent built into its pricing models, said Conley of Xerox. The days of big-box stores serving as “retail warehouses” for one million books are over. He envisions more customization in the K-12 educational space, “down to the classroom level.”

As Canon’s Powers concluded, “Publishers are looking for risk reduction. They need to understand how new technologies can help reduce waste and cycle time.” That’s where digital print comes into play.

Survey Says …

The top three reasons why consumers choose printed books, according to the new I.T. Strategies study commissioned by Ricoh:

1. Paper’s lack of eye strain
2. The look and feel of paper
3. The ability to add it to a library or bookshelf

Those who can’t bear to be without physical print can turn to Vancouver-based BitLit, a reading hybrid business that started operations earlier this year. If a customer can prove that a printed copy was purchased, he or she can request a digital version at a discounted price. Working with publishing companies, BitLit has released an app that will record ownership of printed books.

Download the I.T. Strategies white paper, The Evolution of the Book Industry: Implications for U.S. Book Manufacturers and Printers at www.MyPRINTResource.com/11271594.

Download the case study: How the Ricoh (InfoPrint) 5000 helped CGX’s Frederic Printing get into the POD/variable-data book business at www.MyPRINTResource.com/11271599.