“The highly competitive market conditions and unused industry capacity will continue to put price pressure on both transactional work and contract renewals across all segments,” R.R. Donnelley stated in its 2013 annual report. Translation: Underused presses + shrinking demand = lower print prices.
It was basically same blues, different tune from Number 2 printer Quad/Graphics in the annual report it also released last week: “The industry has excess manufacturing capacity created by declines in industry volumes during the past recession which, in turn, has created continued downward pricing pressures.”
Both annual reports are more straightforward about the companies’ challenges than the accompanying, and more widely reported, press releases that announced their annual results. (Note to business journalists: If you’re just republishing press releases, you’re not really practicing journalism, are you?)
Besides overcapacity and declining prices, the two printing giants spelled out four other key challenges:
- Postal rates: Both printers believe the recent 6% increase in most postal rates will put a significant dent in the amount of mailing their customers do. Thus, expect less demand for printing, even more overcapacity, and weaker prices.
- Digital substitution: “Digital delivery of documents and data” are cutting into demand for print in certain categories, especially directories, financial documents, and books. That's leading to more overcapacity and lower prices.
- Erosion of print-based marketing: “Marketers and publishers [are] allocating their marketing and advertising spend across the expanding selection of digital delivery options,” Quad said. That means shrinking magazines and fewer catalogs being mailed, resulting in less printing demand, more . . . you get the picture.
- Customers’ use of print management firms, which, as Quad noted,“look to streamline processes and reduce the overall print spend of the Company’s clients.”
The two are acquiring not only competing printers but also non-print media providers, such as a translation service (by Donnelley) and a maker of point-of-purchase displays (by Quad).
RRD says the motive for such moves is “to provide a larger share of its customers’ communications needs.” In other words, customers may be printing less, but they still need to communicate, so the idea is to become a broad-based communication enabler, rather than solely a printer.