white paper 2: digital press profits vs.
traditional offset Profit dynamics, industry trends, total cost of ownership, contribution, selling price, and more
The Changing Demand for Offset vs. Digital Print
By Jim Aust
NexPress
Digital Production Color Platform
with Print Genius
Are you still wondering whether digital printing is right for you, and what the ROI (Return on Investment) truly is? Or, at what run length should you put a job on an offset press vs. a digital press? Jim Aust is a Print Industry Business Analyst with Kodak and spends much of his time auditing print facilities, most recently with a view to helping potential buyers set reasonable expectations about returns that could be expected from a digital printing investment. Out of that work, we have gleaned a number of key findings. This paper is the second of three that reviews those findings, specifically, the changing demand for offset and digital printing. The first paper reviewed the profit margins and other key economic data for both offset and digital. The third and final paper will review the results and experiences of several specific printers that have installed a Kodak NexPress Press and how their offset ratios compare to their digital ratios.
Changes in offset print shipments
According to Dr. Ronnie H. Davis of Printing Industries of America, from 2006 to 2007 total print revenues grew by 1.7%. Traditional ink-on-paper (as opposed to digital, inkjet, and ancillary printing) also grew by 1.7% (not adjusted for inflation or price changes). Data from 2008 shows this decline of traditional in-on-paper print shipments continuing. Compared to the first half of 2007, 2008 shipments are down 1-1.5%. Total print shipments were down 13% in 2009, and are projected to be down 5% in 2010.
Digital printing
With the drop off in offset printing in a down economy, digital printing has been growing. As marketing looks to increase their return on investment and spend less money, they look to personalized marketing, and thus, digital printing. This may accelerate the change to digital print as marketing sees the higher return on investment that personalization provides because more marketing companies are adopting personalization as they are forced to do with shrinking budgets.
The Changing Demand for Offset vs. Digital Print Kodak NexPress Digital Production Color Platform
Why is digital printing growing in a down economy?
As discussed in the previous white paper, certainly one of the reasons for the growth in digital printing is the profit of digital (20-40%) vs offset (1-4%). But, other reasons for the growth in digital are more basic and linked to the changes within the print industry in general. Run lengths for offset are getting shorter. Five years ago, the average sheetfed run length in a commercial print operation was over 10,000 impressions. Today, the average run is under 10,000 impressions, and approx 30% less than 5 years ago, if not shorter. As a result, a larger percentage of print runs are less than 1500 impressions. A 1000 impression run might take only 10-15 minutes on press to run, and the makeready can take over 30 minutes. This leads to an expensive run and cost per page. Printers typically dont think in terms of page counts, but I do because I play between the offset and digital worlds. We consider a page as one 8.5x11, one side. Todays average sell rate for offset in the commercial print industry is 6 to 10 cents per page, with a modest profit of 1% to 4%. The digital side of the business has a different set of numbers. The average cost per page is somewhere around 20-22 cents as an average for small to mid-size digital operations, but high volume users might get it down to 10-14 cents a page. If you are an offset printer and seeing those numbers, you might be tempted to stay away from digital. But those numbers are only averages. Remember, the average offset press run might be 6000 to 8000 impressions.
What happens when you do a 1000 impression offset run? You cant sell that for 9 cents a page and make a profit. As you get in the 500 to 1000 impression range on a typical offset press, the true cost of those jobs runs between 35-45 cents a page. At that point, digital becomes very attractive. You can take a short run that is costing you 40 cents a page and move it to digital, which cuts the cost in half. These economics are driving more work to digital, especially since a NexPress Press is generating offset-class quality. Further, industry leaders have long recognized that having a digital press (especially with web portals, mailing, and fulfillment) gives them the flexibility of producing the job on whatever press makes sense and at peak efficiency, and this configuration makes them more attractive to their customer base. They are viewed as a full service provider. The true industry leaders are leveraging their production assets into positioning themselves as a marketing services provider to their customers rather than a print services provider. Another reason digital print is growing is variable data printing. Not only are offset print runs getting shorter, but marketing managers are looking for ways to maximize the impact of their message. Targeted and personalized messaging is growing. Variable data digital jobs represent a minority of the work being done on a NexPress Press, but it is a growing segment, and represents work that can only be printed on a digital press. The demand for digital will continue to go up and the economics will improve as more work to absorb fixed costs is placed on a NexPress Press.
As you get in the 500 to 1000 impression range on a typical offset press, the true cost of those jobs runs between 35-45 cents a page. At that point, digital becomes very attractive.
The Changing Demand for Offset vs. Digital Print Kodak NexPress Digital Production Color Platform
Summary
Digital print shipments are growing in a down economy, even as traditional offset print shipments decline. The growth in digital is projected to continue. Digital profit levels are one of the drivers to the growth in digital. The net profit on sheetfed offset is 1-4% for most printers, while the net profit on NexPress Press digital jobs is 20-40%. Run lengths continue to shrink on traditional offset, placing greater pressure on margins. Adding a digital press compliments the offset presses and positions a printer to be more of a full service provider. True industry leaders are leveraging their capabilities into providers of marketing services. Finally, there is a steady growth in the demand for variable data jobs. These jobs can only be done on a digital press.
This paper is the second of three that reviews how NexPress Press economics and profit compare to traditional offset. The first white paper reviews the profit that the industry averages for traditional offset printing vs. digital printing. The third and final paper reviews the results and experiences of several specific printers that have installed a NexPress Press and how their offset ratios compare to their digital ratios.
About the author
As a business analyst at Kodak, Jim Aust has been helping printers understand how technology and workflow impact their operations for more than 16 years. Over that time, he has studied over 2,000 printers and trade shops in the U.S., Canada, South America, Australia and Europe, and compiled a database with information on business models and how technology impacts productivity and profitability. He has been guest lecturer at numerous print industry seminars and conferences, and has had his analysis and industry findings published in Seybold and NAPL publications. In early 2009, Jim was interviewed by WhatTheyThink.com, and this interview was published in two installments. Prior to joining Kodak, Jim was director of a graphics division for a large publisher in the midwestern United States.
To learn more about solutions from Kodak: Visit graphics.kodak.com Or in North America, call +1-800-336-8868. Produced using Kodak Technology. Eastman Kodak Company 343 State Street Rochester, NY 14650 USA
Manufacturing Kodak NexPress Presses is ISO 9001:2000 (for quality management) and ISO 14001:2004 (for environmental management) certified. Kodak NexPress Digital Production Color Presses are Pantone PMS and Pantone Goe licensed. Kodak, 2010. Kodak and NexPress are trademarks of Kodak. Pantone, PMS and Goe are trademarks of Pantone, Inc. Subject to technical change without notice.
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