The Line Between Newspaper Publishers and Commercial Printers Continues to Blur

Two announcements within the past week demonstrate that some newspaper publishers are increasingly viewing printing as a profit center while others take the opposite tack and shut down their printing operations.

The Chicago Sun-Times revealed Tuesday that it will become the second major metropolitan daily in the U.S. to outsource all of its printing. But rather than turning production over to a commercial printer, as the San Francisco Chronicle did, the Sun-Times will entrust its printing to the rival Chicago Tribune starting in late September.

The next day, Baldwin Technology Company announced that is has sold UV dryers that will be installed on two newspaper presses in Australia "to significantly improve print quality and enable use of a wider range of paper qualities." In other words, the presses will be able to do heatset offset printing on such higher-grade stocks as coated and supercalendered papers as well as lower-quality coldset printing on newsprint.

As demand for printed newspapers has shrunk in recent years, publishers have more idle time on their presses and less ability to justify investing in new presses. Increasingly, they will either turn their printing over to others or chase after outside printing work to justify the investments needed to keep their printing operations up to date.

The Sun-Times's shift will save it an estimated $10 million annually, partly because it can narrow the paper's width, and will provide more ability to run color ads, according to a Chicago Tribune article. The Tribune plant already produces Chicago editions of The New York Times and The Wall Street Journal but has enough capacity to take on the Sun-Times and seven suburban Sun-Times papers apparently without breaking a sweat.

Newspapers & Technology lists 20 closures of newspaper printing plants this year because of outsourcing to other newspapers. And there are increasing reports of newspaper publishers going after work that used to be done by commercial printers.

Baldwin's announcement suggests commercial printers can expect to see even more competition from newspaper publishers. Rather than the sort of multimillion-dollar investments in new presses for the San Francisco Chronicle plant, Baldwin is adding heatset as an option to the Australian presses for only $375,000 per press.

For its technology, which was originally developed for sheetfed presses, Baldwin envisions "further opportunities as printers around the world add flexibility and quality improvement to their production capabilities."

For further reading: Newspaper Production Enters Colorful, Outsourced Era and Can Transcon transform newspapers?, which explain why the San Francisco Chronicle plant and a similar facility in Montreal are so significant for both the newspaper and printing industries.

Transcontinental and World Color Gear Up for Consolidation While Donnelley Inhales Helium

With Transcontinental borrowing money for possible acquisitions and World Color Press making it clear who is in charge, The Big Printer Consolidation Dance had some interesting moves this week.

Meanwhile, industry leader R.R. Donnelley, which tried to be the Great Consolidator a few months ago, has wandered off for a dose of Helium.

Transcontinental announced Thursday that it will try to raise up to $500 million via debt and preferred-shares offerings “for general corporate purposes, which may include the repayment of indebtedness and the financing of acquisitions and investments provided market conditions are favourable.” That is apparently enough cash to gain a controlling stake in the other big printer based in Canada, World Color Press. Or is it still Quebecor World? Or maybe Novink.

World Color Press hasn't completely worked out the name thing since emerging from bankruptcy in July with its new but old name. Its Web site is still Quebecorworld.com, and many of its legal entities include "Novink", which was chosen and then abandoned as the name of the revived company.

But WCP did clear something else up: Mark A. Angelson, the person most responsible for consolidation of the North American printing industry, is definitely running the show. The company announced this week that the former Donnelley chief is now the CEO as well as chairman of World Color Press. Those who know him say he's there to do deals, not to make incremental changes.

What kind of deals Transcontinental has in mind is not clear. Besides the traditional commercial-printing business, it's involved in outsourced newspaper printing, newspaper publishing, and new media.

There was some speculation that Transcontinental's prospects were strained by its deal to print the San Francisco Chronicle because it might be stuck with an idle $230 million printing plant if the money-losing Chronicle's abandoned ink on paper. Hearst threatened to close down the Chronicle earlier this year if it didn't get union concessions.

But the prospectus for Transcontinental's debt offering says the Chronicle contract "provides for indemnification from Hearst Corporation should the San Francisco Chronicle cease publication or be sold." It also says the "contract size is for more than US $1billion (excluding paper) in revenues over 15 years."

And what of industry leader R.R. Donnelley, which made three unsuccessful attempts a few months ago to buy what was then known as Quebecor World? So far this month, it announced it is getting into the printer business in the form of a joint venture with HP to make digital inkjet presses.

It also spent $4.4 million on a minority stake in Helium, a "social publishing platform" that links freelance writers with publishers. It's not clear why Donnelley's interest has turned from buying other printers to Helium.

Maybe some RRD executives still grieving over the Quebecor debacle thought they could console themselves by taking a few big puffs and talking like Donald Duck.

Newspaper Production Enters Colorful, Outsourced Era

Good model. Bad timing.

A new approach to producing newspapers in the United States had a colorful beginning this week when the production of all copies of the San Francisco Chronicle were outsourced to a new plant built and run by Transcontinental Inc.

The Chronicle’s own 50-year-old flexographic presses were idled, along with about 200 unionized employees, after production of Sunday’s issue. Filling the void is a $200-million-plus Transcontinental plant in Fremont with three heatset/coldset offset presses, new inserting equipment -- and non-union employees.

As Dead Tree Edition has previously explained, the operation breaks new ground in the U.S. on at least three fronts: 1) The presses can run in either coldset or heatset modes, making them able to print on anything from newsprint to coated paper. Not only do they add color and boost quality for the Chronicle, they are also suited to doing general commercial printing. 2) The outsourcing of a major newspaper’s production to a commercial printer. U.S. dailies typically control their means of production. 3) The plant was designed with the ability to produce multiple newspapers, though no other clients have been announced.

The Hearst-owned Chronicle says the new operation will yield substantial savings without Hearst having to invest in new equipment. It’s not clear to what extent the savings come from the inherently greater efficiency of the new presses, narrowing the paper from six columns to five, or the switch to non-union labor. (One newspaper industry veteran tells me that non-union newspapers tend to pay their press operators as well as similar-sized union papers. But their compensation costs for the pressroom are lower because they don't have contract-imposed staffing requirements and assign more of the less skilled work to lower-paid employees.)

Don’t expect Transcontinental to be replicating its innovative San Francisco model in other metro areas any time soon. With the recession squeezing both its printing and publishing profits, the company is indicating it is tapped out for now as far as major capital investments go. And counting on the long-term viability and credit worthiness of major metro newspapers may be too much of a gamble these days.

Here's a roundup of interesting items that have appeared this week about the Transcontinental-Chronicle deal:

• The Chronicle's cool two-minute video of the plant in action, set to "The Sorcerer's Apprentice". (An ironic choice of music? You decide.)
• The Chronicle's article on Monday about the newspaper's new "wrinkle-free" era. Be sure to check out the reader comments, not all of which are glowing. One commenter says the Chronicle is now "San Francisco's trophy wife" because its role is "to hang around, look good, and not say anything." (In defense of the Chronicle, its investigative reporting -- remember when newspapers did that? -- led to the resignation this week of a college president.)
  
• SF Weekly's knockdown of the Chronicle's coverage of the new production arrangement as "an in-house infomercial". The snarky piece also hints of delivery problems on Monday.
  
• Graphic Arts Online has a rundown of the equipment in the new plant.
• An excellent article about the last day at the old Chronicle printing plant and its 200-plus employees, none of whom has been hired by Transcontinental.
• Transcontinental Monday news release, which includes some details about the new plant's energy efficiency.