P1
Good morning, ladies and gentleman.
Today's theme is an overview of industry performance and new business models developed in Japan.
I will first show, as an overview of industry performance, the results of an analysis of how the Japanese printing industry matured through the nation's high-growth period and began to shrink thereafter. I hope those involved in printing in the many FAGAT member nations will find useful tips for their own future by learning from the Japanese experience, since they, too, are heading toward high economic growth.
Next, I would like to talk about the direction in which the Japanese printing industry is heading, and give some concrete examples to illustrate this. It is important, when considering the future of the Japanese printing industry, to both analyze and assess the effects of the popularization of digital media on the printing market and the printing industry. As such, I will also report on the levels of digital media dissemination seen today, as well as on other issues currently affecting the printed media market. Finally, I will introduce some of the new business models seen in the Japanese printing industry.
P2
Japanese Printing Industry's experiment
Shipments in the Japanese printing industry continued to grow for 36 years from 1955, the year in which the statistics were first compiled, through 1991 without experiencing any decline(Fig1). During this term, the value of shipments increased 99 times, while the number of businesses grew 3.9 times and employees 3.0 times. For the two decades from 1970 to 1990, the elasticity coefficient of the printing industry's shipment value to GDP (the industry's shipment growth rate/GDP growth rate) was 1.2, indicating that the industry's growth surpassed the growth of the overall Japanese economy.
It is normal for printing industries in economically developing countries to grow at a rate greater than that of the GDP.
Since 1991, the Japanese printing industry has experienced a cycle of economic troughs and peaks. Further, the value of shipments decreased for seven consecutive years after 1998.
The question here is what was behind the transition in the Japanese printing industry from high growth and maturity to decline as seen in Figure 12.
P3
The maturation of printing demand, overcapacity through technological innovation
Figure 2 shows the balance between demand and supply in combination with the number of printing businesses for each five-year period during the about 50 years from 1955 to 2003. Until 1985, the growth in demand constantly exceeded that in supply because enhancement of the production capacity at existing printing companies could not keep pace with the growing demand. Then, prepress and printing companies emerged to create a new business and filled the gap, boosting the total number of businesses involved in printing.
By the latter half of the 1980s (1985-1990), the increase in demand had almost balanced with the increase in supply, allowing existing prepress and printing companies to meet the demand with their enhanced production capacity. During these years, the number of businesses in the printing industry remained flat. The average annual growth rates both in demand and supply stood at a little over 7% in this period. This suggests that to make all the existing printing companies happy, an annual market growth around 7% is necessary. Although technological advances can enable an annual growth over 7% in supply capacity, a 7% level GDP growth in a matured economy such as Japan sounds unrealistic regardless of the post-bubble economic slump. Accordingly, in the 1990s, as supply outstripped demand, the number of companies began to reduce. The number of printing businesses decreased by around 10,000 in the ten years since the peak of 1993. The overcapacity led to intense competition for new orders, and further to a decline in printing prices.
P4
The decline in added-value in prepress
Figure 3 shows changes in the shipments of prepress film, offset ink and printing paper. It indicates that since 1970, shipments of prepress film products had grown at double the pace of shipments of paper and ink for a while. During the two decades from 1970 to 1990, paper shipments increased 2.3 times and ink shipments 2.8 times, showing a moderate growth, while shipments of prepress film products soared as much as 7.5 times. This suggests that as color print became more common, the volume of prepress work increased twice as much as the increase in printing.
Expanded demand for color printing made prepress more intensive. As color separations are needed for color printing, four times as many films and plates as monochrome printing are used. This explains why the increase in film consumption was much greater than that in paper. In the 1980s, the concept of large-item small-scale production was emphasized and resulted in higher growth in film usage than in ink and paper usage.
However, owing to the digitization of prepress, the growth factors mentioned above that have been so significant for the printing industries are gradually disappearing.
The digitization of prepress in the Japanese printing industry began in the middle of 1993. Through 1996, DTP systems gradually penetrated the industry.
In 1997, shipment volumes of film turned into a sharp decline. The year 1997 is known as the year when the installation ratio of Macintosh among Japanese printers first reached 50%. From then, companies who had been hesitant actively began implementing DTP systems. It was also around 1997 that the move toward full digitization started among more advanced businesses, leading them ahead to CTP.
The number of CTP recorders installed in Japanese printing businesses was 250 as of the end of 1999, before it topped 500 by the end of 2000 and 3000 by June 2006.
In the midst of the printing industry's transition from analog prepress to full digitization, prepress film reduced its volume of shipments by 50.1% during the nine-year period to 2005, as seen in Figure 3. The drop was a result of the shortened prepress process. As there are no longer expenses for processes such as typesetting, color separations and stripping, which could have been added to customer bills in analog prepress, a significant part of the prepress sales value has been lost. The largest driving force of the printing industry's growth during the 1970s and 1980s is now about to disappear due to technological advances.
Even while prepress operations were undergoing a great deal of transformation as described above, shipments of offset ink increased about 31%. This is calculated into a fare average annual growth rate of 3.4%. Printing paper shipments growth rate was 4%, almost flat in eight years. In other words, the total volume of printed products and printing work was rising.
P5
The extent of the effects of overcapacity and the decline in added-value of prepress
Figure 4 shows the extent of the effect that overcapacity and the decline in added-value has had on shipment values within the Japanese printing industry.
'Nominal shipments' indicate the total value of shipments in the printing industry consisting of printing, prepress, bookbinding and other relevant service industries. Note, however, that the values for 2005 were estimated by JAGAT. 'Real shipments' are the shipment values after eliminating factors of price fluctuations and estimated by JAGAT based on the volume of shipments for film and ink products for printing. Thus, the difference between nominal shipment values and real shipment values represents a fluctuation in prices.
Looking at how both values changed indicates that they had been on almost the same track since 1975 through 1992 before they separated in 1993, since when the difference between them kept expanding until 2005. The nominal values standing below the real values mean that prepress and printing prices had declined. Constant over capacity has resulted from a slowdown in printing demand under the country's matured economy as well as from a faster increase in supply capacity enabled by accelerating the development of technology. For example, a printing plant, which had four web offset presses, has replaced one of them with a new one, which provides a 60% higher productivity than the old press. Consequently, the replacement has improved the overall productivity of the printing office by as much as 15%. On the other hand, growth in demand remains about 1-3% even in a favorable economy. What is likely to happen when the above company tries to make full use of its expanded productivity is obvious.
The difference between the nominal and real shipment values for 2005 was 2.4 trillion yen. In other words, since 1993, prices for prepress and printing have declined a little less than 25%, causing a loss of 2.4 trillion yen for the industry.
Top line plotted in Figure 4 is 'Prepress adjustment'. Values for this item are hypothetical shipments in the printing industry without full digitization and CTP, where costs for typesetting, color separations and stripping could have been added to sales. Hypothetical shipments Value in the printing industry for 2005 were assumed to reach 13.0 trillion yen. There is a gap of 3.4 trillion yen between the hypothetical and Real value of shipment. This is translated as a 3.4 trillion yen loss in added value for nine years as a result of the digitization of prepress.
Such devaluation can occur in any country where prepress is becoming digitized. It has nothing to do with economic conditions and excessive competition in the country's printing industry.
As a result of both overcapacity and a decline in the added-value of prepress, the GDP elasticity value of the Japanese printing industry has fallen to less than 1.0. In other words, the shipment value of the printing industry has fallen below the GDP growth rate.
P6
Figure 6 compares the transitions in the growth rate of nominal GDP in the USA with the growth rate of shipment values for the printing industry. The growth rate for GDP in the USA between 1985 and 1989 was 3.7% per annum, compared to a 4.6% growth rate for the shipment values in the printing industry. In other words, the growth rate of printing industry shipment values exceeded the national GDP growth rate by 0.9%. This represents 1.24 (=4.6÷3.7) in terms of GDP elasticity value. However, between 1990and 1997, the growth rate of the printing industry shipment value fell 0.4% below that of the GDP, with printing industry shipment value growth at 2.4%, compared to 2.8% for the GDP. We can further see that this discrepancy between the growth rates of the printing industry shipment values and the GDP increases to 2.8% and 4.4% in the periods 1998 to 2000, and 2001 to 2003 respectively.
Figure 6 illustrates a comparison of the growth rate of shipment values in the Japanese printing industry and of the Japanese GDP growth rate during the same period covered in Figure 6. The results are very much the same as the USA comparison, with the growth rate for printing industry shipment values surpassing the GDP growth rate by 0.8% during the years 1985-1999. However, for the 3 years from 1999, the growth rate for printing industry shipment values has continued to drop further below that of the GDP. Another similarity with the USA data is the fact that this gap in growth rates continues to increase with time. The price decline within the printing industry and the decrease in added-value have occurred as a result of overcapacity and the digitization of prepress; further significant factors are the stagnation of economic growth, and technological advances. This situation is common to most developed countries.
P7 2. Factors that will influence the printing industry and the printing market from now on
The foundation of the printing press is population, and economy. Japan's demographic aging problems are the most pronounced anywhere in the world. It is an undeniable fact that the population will start to decline from now on. Further, the GDP growth rate is predicted to be around 2% in real terms. As a result, the growth rate of printing demand in Japan, and consequently of the Japanese printing industry, can be expected to reach a maximum of around 1% in the absence of any other specific factors.
When thinking about the future of the printing industry, there is one more important factor to consider. That factor is the influence of digital media on the printing market, and it is a factor that affects every printing industry in every country around the world. How far is digital media likely to expand and develop? And what does the future hold for paper-based media?
Firstly, I would like to touch upon the rapid growth and dissemination of the internet and mobile devices as digital media, and further on the trends regarding paper-based media that can be seen within these circumstances.
P8
1) Spread of the internet and mobile devices
Internet and mobile phone growth exceeds projections
Figure 7 and 8 shows projections for Japanese internet users and mobile phone users through 2005 and actual figures through 2004. The number of internet users and mobile phone users exceed projections. ITU has indicated that Japan has the most 'inexpensive and widely-available' and 'fastest' broadband environment in the world. 90% of all mobile phone users have the ability to access the internet from the mobile phones.
Over the last 2-3 years, mobile phones have advanced significantly. Not only can users send e-mail, but also phones are equipped with digital cameras and TV receivers capable of picking up digital broadcasts. Furthermore, phones now can be used as pre-paid cards and cash cards. Service content for Japan's mobile phones is the most advanced in the world.
P9
Internet usage time exceeds time spent reading books and magazines
Figure 9 shows transitions in personal media usage time inside the home. The types of media used on a daily basis have diversified over the last 30 years. As a result, time spent for computers and internet use surpassed books and magazines in 2001. Since then, this gap only continues to grow.
There is one point that must be noted regarding the change that has occurred over the last 30 years. That is, regardless of the media , the emergence of a new media will result in a temporary drop in share but as time passes that media will settle into a stable position.
P10
2) Effects of the growing internet/mobile phone use
Downturn in the publishing industry
With the diversification of media available to users and time and money previously spent on books and magazines being directed at other media formats, Japan's publishing industry has faced steady decline (Fig. 10). Weekly magazine sales have been particularly poor. Reasons for the decrease in time spent reading magazines included 'most information can be obtained from the internet or television'.
P11
Rapid growth of internet advertising
Figure 11 shows transitions in the 4 major mass communication mediums since 1985 and the positioning of internet advertising. In Japan's advertising market, newspaper advertisements began to decline in 1992. Radio and magazine advertisement also have suffered.
Conversely, internet advertising has maintain annual growth of 40% or higher since 2003. The catalyst behind internet advertising growth has been search engine advertisements. Reasons for growth in search engine advertisements is that these provide the advertiser with a highly efficient and transparent method of advertising.
P12
Another sector with significant meaning for internet advertising is mobile phones. In 2005, mobile internet advertising represent 10.3% of all internet advertising. Third generation mobile phone, fixed-price system, and improvements to mobile phone hardware and software have brought mobile internet closer to fixed-lined internet. Include with this the ability to output location-related information, it is without a doubt that mobile phones will only increase their status as a personalized media source.
P13
Internet advertising in Japan is projected to surpass newspapers as the advertising medium second only to television (Fig12)
P14
The steady growth of DM
JAGAT has worked with the Japan Post and DM-related associations to hold the 'Postal Forum' in an effort to invigorate and expand the DM market. This is because JAGAT believes that, amidst a maturing economy, DM will grow in importance as a sales promotion tool.
Looking at transitions in the DM market over the last 10 years, we see that this market continued to grow even after the spread of the internet and mobile phones (Fig. 13).
The main reason has been an ease of regulations.
The main need of clients in today's DM market is cost reduction. Pressure-sensitive postcards meet the demand and has increased it's share rapidly (Fig. 14).
There is no doubt a correlation between a greater need for cost reduction and the growing use of the internet and e-mail. This led to an awareness of the high cost of DM.
P15
Free magazine growth driven by the wave of internet expansion
Advancements in network media have led to a drop-off in paid weekly and monthly magazine subscriptions while creating growth among free magazines.
The number of copies published is already more than double the number of magazines sold in stores. In the background of the dramatic growth of free magazines is due to the internet leading to a change in reader thinking that, 'information should be free'.
P16
This concludes my introduction to the state and effects of internet and mobile growth, and the nonconventional media environment this growth has created.
Internet and mobile phone growth in Japan exceeds projections. But, we cannot say outright that the growth of the internet and mobile devices has resulted in across-the-board declines for paper mediums. On the other hand, we can see fundamental changes such as the diversification of media､ the fact that the weaknesses of traditional printed media compared to digital media are increasingly obvious, and a decrease in the readership of paper-based media.
P17
Projections for the printing market
As a result of the circumstances described above, the Japanese printing industry has leveled off from its previous state of growth, and seems likely to enter a period of decline from now on.
Figure 15 shows transitions in the volumes of printing paper and ink sold in Japan since 1994. Printing paper, printing ink volumes were on the rise through 1999 but have not increased since 2000. At the very least this is in part due to the effects of diversification of media.
P18
contraction of the industry
Advances in printing technology have brought about a state of over capacity in the printing industry and caused fierce bidding wars. As a result, 1000 printing offices are closing every year and this trimming of businesses operating in the industry is expected to continue(Fig16)｡This is not limited to Japan.
In order to break out of contraction of the industry, we must look to develop
new business models to stir up print demand or develop new business sectors .
P19
new business models developed in Japan
There are a multitude of new business models developed in Japanese printing industry. Today I would like to focus on four opportunities.
Those are
＜Stir up print demand＞
1.[Tapping latent need] by utilizing new technology
2.[Value improvement within printing] through the utilization of new technologies
＜Develop new business model＞
3.[Securing new revenue] sources by offering ancillary services
4.[New business development] through cross-media development support for customers
P20
Using new technology to tap into latent needs
Vanfu Co., Ltd, which began in typesetting and expanded into a service bureau, installed a 4-color sheet-fed offset printing press 6 years ago to begin offering printing services. Before launching their printing services, Vanfu tested performance levels for a printing press equipped with features such as CIP3 ink control and automated plate exchange. Through tests, the company confirmed that they could complete ten 4-color very short run jobs per hour. Vanfu was convinced that using such printing press, short run jobs would be more profitable than high-volume jobs. The maximum lot size for any one job is 3000 copies Turn-around is one day. Pricing is based on the published pricing of each specification.
Praised by customers for their quick turn-around times and guaranteed pricing, Vanfu's printing business grew from zero to annual sales for \3 billion,
That is 30million UD$ per year in 6 years
P21
Value improvement in printed matter through the utilization of new technologies
One of the issues that the printing industry will have to occupy itself with from now on is the question of how best to stimulate demand for printed matter through efforts to improve the value of such products. One of the ways in which value can be added to printed matter is post-print processing work. In order to reduce the time and cost involved in any such post-print processing work, the number of printing companies electing to use a sheet-fed offset press and undertake post-print processing inline is increasing. However, a greater variety of post-print processing can be made possible by by connecting inline finishing equipment to a web offset press. The Atariya Printing Corporation is a printing company with an annual turnover of 7 billion Japanese yen, and which employs around 140 people. It uses web offset presses as its core equipment, and focuses on commercial printing as its core business. The Atariya Printing Corporation has, through connecting inline finishing to its web offset press, succeeded in developing technologies that allow highly unique post-print processing to be performed at a low cost, and within a short period of time. As a result, it is enjoying a very positive sales performance.
The reasons for this success are clear: by being able to offer printed matter that is more suitable for effective advertising and promotions use than traditional printed matter, and by possessing technologies that other businesses do not yet have, the Atariya Printing Corporation is able to avoid becoming entangled in a price war, and can secure a greater volume of business.
Below are some examples of the printed matter that the Atariya Printing Corporation is able to offer its clients.
P22 Zigzag holding
P23 Glue binding
P24 glue binding + index folding
P25 Pressure sensitive insert
P26 Pressure sensitive finishing + Die cutting
P27 Pressure sensitive finishing + perforating
P28
Securing new revenue sources by offering Ancillary services
The second business chance for printing companies involves accepting pre and post-print production work together with print jobs.
Toppan Forms, Japan's third largest printing company and No. 1 in the form printing industry, continues to see success in its DPS (Data Print Service) business.
The company's sales from BF printing, their original service, continue to decline while DPS sales are growing at a rate of better than 10% per year (Fig. 17)
Toppan's DPS service offers a one-stop outsourcing solution including processing client data, printing, and mailing. Business developments like those seen at Toppan Forms have become standard practice in Japan's form printing industry.
P29
From prepress processing to post-print handling, there are many possibilities for ancillary services (Fig.18). By offering these services, printing companies will be able to create new revenue sources.
P30
(4) Developing cross-media as a new business
Lastly, I would like to talk in detail regarding another significant business opportunity. That opportunity is cross-media. How the term [cross-media] is interpreted differs vastly depending on who you are. I first must state that to those in the printing industry, [cross-media] is best defined as [cross-media marketing] or [cross-media publishing].
I believe the key to the printing industry's expansion will be its ability to catch the tide of the upcoming media mega trend. The cross Media is significant business
Opportunities for printing industry to catch the tide.
I have already spoken about the influence that the dissemination of the internet and of mobile devices has had on the printed matter market. We cannot say outright that the growth of the internet and mobile devices has resulted in across-the-board declines for paper mediums.
However, as indicated by Moore's Law and Metcalfe's Law, the digital world has changed on an exponential level and most likely will continue to change. As was mentioned earlier, in 2-3 years time mobile phones have gone from simple phone and e-mail functions to offering features that include use as a cash card, digital camera, and digital television reception. There is no doubt even more advanced services will continue to be launched.
In such an environment, will the role of printed media and its effect on the printing market remain the same? It is difficult to make accurate projections on this issue. However, even with little movements occurring today, if such a movement has real potential, it must be watched closely. Doing so, we should be able to determine the future of paper-based media and direction that the printing industry should take.
P31 (2) Paper-based vs. electronic media
1) Indications seen in mail-order sales
Internet expanding the market
Figure 19 shows transitions in the scale of the mail-order market which have surpassed previous year sales for six years straight since 1999 and printed matter used for mail-order business.
A major reason for the growth of the mail-order industry has been the growth of the internet (Fig20). With the growth of the internet, in place of expensive advertisement mediums such as catalogs and DM, positive results can be expected from internet advertising and even small size companies are able to break into the mail-order business.
However, this does not mean that mail-order companies have given up paper-based mediums and switching to internet-only structures.
According to a major mail-order company, the average purchase for customers using catalogs exceeds purchase for customers using the internet only. What is the reason for this difference?
P32
Customer needs and purchasing patterns
The Web is superior in searchability. In other words, a customer using the internet to make a purchase already knows what he/she want to buy and simply turns on the computer, searches various sites, and buys the product he/she originally had in mind (search and buy) (Fig. 21).
On the other hand, a customer using a catalog to buy something, even if he/she began looking at the catalog with nothing particular in mind, during the process of browsing the catalog he/she may run across something that seems useful or subconsciously wanted to buy. Even is the customer has a particular item in mind when first looking at the catalog, there are many cases of a single item purchase turning into 3 or 4 items (discover and buy ).
There are two types of consumer need: latent need and explicit need.
Catalogs ,as push media, have the ability to draw out the consumer's latent needs. Conversely, the internet offers a high level of convenience to consumers with explicit needs. All consumers have both latent and explicit needs. Thus, for a mail-order business, the use of both catalogs and the internet becomes a very effective option.
Based on this, the previously mentioned major mail-order company linked their catalog to the internet. Through a scheme that draws a customer from catalog to website to catalog, the company was able to increase the customer's single purchase amount.
P33
Information needs and media characteristics
Humans have the three basic needs related to information.
1 Acceptability of information
2 Passivity in taking information
3 Need for immediate news
Acceptability of information refers to the individual emotional insecurity that comes from not knowing what everyone else knows.
Passivity in taking information refers to the passive style of not actively seeking out information, but rather selecting the necessary information from what is provided. According to a survey by Dentsu Inc., more than 80% of all people fall into this passive category.
The need for immediate news refers to the desire to have reliable information as soon as possible when a disaster occurs.
Conventional mass-media acted as push media and fulfilled the three basic needs as described above. This is the same for printed media, which is also a form of push media. And the basic human needs related to information will not change for over several decades. As long as these basic needs continue to exist, push media will continue to exist as an important form of media.
P34
Cross-media for the printing industry
When considering the relationship between paper-based and electronic media, we must look to align the basic information-related needs of people with the individual characteristics of each media type, [push media] or [pull media].
From now on, [cross media], in other words using both push- and pull-media, and effectively exploiting the particular advantages of both paper-based and electronic media, will become an inevitable and necessary part of marketing and publishing.
As such, I am certain that [cross media marketing] and [cross media publishing] represent significant business chances for the publishing industry, as it has become in the study of mail-order businesses described above.
2) Key points to turning cross-media into business
Recently, media has diversified into websites, mobile, DVD, etc., and the amount of digital media production work going to printing companies has increased but these companies have not been able to develop these services into larger businesses.
This has been because in today's environment of rapid technological advancement, a business that only involves absorbing new technology soon loses its value. This is clear when you look at past technological advances and the changes in values that those advancements brought about.
Securing and developing personnel is vital.
3) JAGAT's contribution
JAGAT, through discussions with specialists that have worked with JAGAT on media-related work, has been able to clarify the type of personnel needed to work with cross-media in the printing industry.
P35
Role players involved with cross media
This is the [Production Director] located in the middle of Fig. 15. We further created a schematic for the knowledge and skills required of the desired [Production Director]. While this may seem like a Herculean task, that is not the case at all. One person does not have to have in-depth knowledge of every field. The point is to have personnel capable of communicating with various specialists based on a broad range of knowledge and experience.
We further established a Cross-Media Expert Certification system as a goal for those striving to work in such positions. The first test was conducted on February 26, 2006.
Of the 204 who took the first test, 35 passed. 60% of those taking the test worked for printing companies but those who passed included those with publishing, design, processing, and other backgrounds.
P36
JAGAT was the first, even among Japan's printing and other related industries, to focus on the digitalization of the prepress process and has implemented a DTP Expert Certification system since 1994. This system is not to certify DTP operators but certifies that a person has the capabilities required for a person in a leadership role related to the various aspects of DTP.
While the first test had only 100 participants, over the last few years each test has more than 2000 test takers. Of a total 37,072 test takers, 15,346 have passed. Test takers began with those from the printing industry but have expanded to include editors, designers and even students from specialized schools.
It is clear from these figures that the DTP Expert Certification system has been effective for printing industry.
Like the DTP Expert Certification system, the Cross-Media Expert Certification system will contribute to printing industry internal personnel development and securing young, talented personnel from other industries. And this we hope will help lead the printing industry from industry-wide contraction to broad expansion.
Thank you.
2007/07/12 00:00:00