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 user 2005-03-10 at 11:06:00 am Views: 174
  • #10783

    <>Who are the Digital
    We explore the emergence of a new, fast-growing market
    Printing is a tough business, and very few companies have
    managed to grow and thrive over the past few years. But one group of printers
    that is doing particularly well surfaced in a recent survey. If you are looking
    for opportunities to improve the growth of your business, perhaps you can learn
    something useful from the experience of this group.

    Each Fall, Caslon & Co. conducts a survey to assess the
    state of digital printing in North America. We recently completed the 2004
    survey process, and the data we gathered revealed an intriguing change in the
    digital printing market. We had previously divided the users of digital printing
    into six market segments (Commercial Printers, Quick Printers, Service Bureaus,
    Direct Mail Printers, In-plants, and Data Centers) but this year we noticed that
    a seventh group had emerged. We call them the Digital Printers.

    Digital Printers, as the name implies, do mostly digital
    printing, although some do a small amount of offset printing as well. This makes
    them a distinct group from the Commercial, Quick Print, and In-Plant segments,
    which typically produce a majority of their pages using either offset presses or

    They also do a fair amount of full-color printing. At least
    ten percent of their pages had to be color to qualify for placement in the
    Digital Printer category, and they usually did a lot more than that (40 percent,
    in the median case). This distinguishes them from the groups that have
    traditionally done the most digital printing—the service bureaus and corporate
    data centers where large volumes of bills, statements, policies, and reports are
    printed. In these market segments, it is unusual to encounter a printing
    facility that does even one percent of its pages in color. Direct Mail printers
    also print almost exclusively in black, at least when it comes to the digital
    part of the task. In many cases, they print variable black text on a shell that
    has been pre-printed in color, using offset presses.

    As the survey results came in, it became clear that we were
    dealing with a segment that was different from those we had considered in the
    past. We wondered what the characteristics of this new group would be.

    Who are the Digital
    Since the Digital Printer segment
    is a new one, it is difficult to say exactly how many companies there are in it.
    Based on our survey data and on data from the Census Bureau, we think the number
    may be about 1,100 in the U.S. Most of the Digital Printers are small. The
    majority have less than five employees, and only about 250 of them have more
    than ten employees.

    In an industry where many firms are still fighting to
    survive, the Digital Printers are thriving. Their sales are growing nicely. Our
    survey respondents’ sales were up 15 percent last year in the median case, the
    highest figure among the seven market segments surveyed. Page volume is also
    typically growing at about 15 percent. To keep up with the growth, Digital
    Printers are also adding staff, at a typical rate of about ten percent per year.
    Most of our respondents from other segments were adding few, if any, new

    Digital Printers produce a variety of printed products.
    Although they all do some color pages, B&W printing still accounts for the
    majority of pages for most companies in this segment. Books and manuals make up
    the biggest page volume, and these products are printed predominantly in B&W
    and sold at a relatively low cost per page. The balance shifts, if you consider
    dollar volume instead of page volume. The revenue makers and growth areas are
    color applications, such as brochures, other sales collateral, and direct-mail.
    Individual companies have also developed specialized color markets, such as
    business cards, short-run posters, and calendars.

    Digital Printers serve customers from a variety of vertical
    industries. In fact, it is hard to point to a vertical that they don’t serve.
    The most often-mentioned markets for the Digital Printers in our survey were
    business services, financial services, retailers, non-profits, and
    education/government. But those are just a few of the many markets

    Productive Printing

    Digital Printers are well equipped
    for growth. We asked our survey respondents about their existing equipment and
    what purchases, if any, they had in mind. We found that firms in the Digital
    Printer group are more likely than firms in other segments to have color digital
    printing equipment in the speed range from 60-ppm upwards. In proportion to
    their numbers, they are far more likely than others in our survey to have
    B&W sheetfed machines at 106-ppm or higher.

    But as impressive as their current levels of equipment
    ownership are, their purchase plans are even more impressive. The Digital
    Printers, more than any other segment in our survey, have ambitious plans for
    expanding their capabilities. They expect to buy top-of-the-line color digital
    presses, like the Xerox iGen3, HP Indigo machines, NexPress, Xeikon devices, and
    the Canon CLC series, in the coming year at a much higher rate than firms in
    other segments. Lower-speed color devices are also in the plan for many of the
    Digital Printers. On the B&W side, they plan to purchase lots of high-speed
    monochrome sheet-fed printers—Docutechs, Nuveras, and competitive products—and
    even continuous-feed monochrome printers—at much higher rates than other

    Building a Business with Affordable

    What is the key factor that has
    allowed the Digital Printers to grow in an environment where other printing
    companies cannot? It appears to be the arrival of affordable digital color. The
    printed products that these companies produce (business-card printing,
    postcards, brochures, posters, and direct-mail pieces among others) have been
    impractical to print in color in short runs until now. But with color digital
    printing costs dropping below ten cents per letter-size page, the economics have
    become attractive. Many color devices now have operating costs that are well
    under ten cents per page, and a few have broken the five-cent mark. We expect to
    see a lot of new machines with per-page costs under five cents over the next few

    For the immediate future, though, the cost per color page
    for digital printing is still too high to compete with offset printing for long
    runs. But for runs of up to a thousand or more pages, it is now cost-effective.
    The rapid growth of the Digital Printers proves this point.

    As the cost of digital printing continues to drop, the range
    of applications that can be economically printed using digital technology will
    expand rapidly. We expect that the Digital Printer segment will expand just as
    rapidly—far faster than any other segment of the printing industry.

    Are They Using VDP?
    Interestingly, the Digital Printers are not primarily focused on
    variable data printing (VDP), although almost all of them own software to handle
    variable data. A few of them are variable data specialists, but most are not.
    Typically, only 15 percent of their pages are variable. This was the median
    value, meaning that half of them do more than 15 percent variable work and half
    do less. Commercial printers in our survey actually did proportionately more
    variable pages as a share of their digitally-printed pages (median value: 25
    percent) than the Digital Printers.

    For the last ten years, vendors of digital printing
    equipment have been promoting VDP because, in certain applications, variability
    could justify the high cost of digital color pages. Digital printing was not
    able to compete with offset for the printing of static pages, except in
    extremely short runs. With the emergence of the Digital Printers, we can see
    that the era when digital printing was confined to exceptionally high-value
    niches has drawn to a close. There will continue to be compelling reasons for
    doing VDP, but there will be plenty of other work printed on digital devices as

    This is not to say that the use of VDP will stop growing. On
    the contrary, after years of much promise but minimal payback, VDP is finally
    achieving wide-spread use. Evidence for this can be found in the annual Best
    Practices competition run by PODi, which now gets far more and better
    submissions than it did just a few years ago.

    So, VDP is indeed growing. But it looks to us as though
    short-run printing of static pages will be growing at a much faster rate. Two or
    three trillion pages are being printed in North America each year, mostly on
    offset equipment, and much of that volume will eventually be a candidate for
    digital printing. For at least half of those pages, printing cost is the primary
    obstacle to shifting from offset to digital. And the cost of digital printing is
    finally reaching the level at which it can compete for a perceptible fraction of
    those trillions of pages. Offset displacement will be the real growth area for
    digital printing.

    Joining the Digital Segment

    Are you a Digital Printer? Do you print a majority
    of pages digitally, and more than ten percent of them in full color? If so,
    that’s great! You are well positioned for growth. If not, this is a good time to
    review your equipment and marketing focus. Becoming a digital printer doesn’t
    guarantee you’ll be a success—you’ll still need a good marketing strategy, an
    efficient workflow, great customer service, and all the other factors required
    for a successful business—but it might improve the odds. DPS

    Caslon & Company’s initiatives are to provide products
    and services that leverage rapidly advancing digital technologies, especially
    digital printing. Since 1998, Caslon has lead PODi, the Digital Printing
    Initiative, a consortium of the leading vendors of digital printing equipment