Publishers React to Recent Printing Mergers (posted 2/6)
Following an announcement Monday by Cadmus Communications that it has acquired the conventional and digital printing operations of LexisNexis, some publishers say they are concerned that the recent wave of printing consolidations could hurt pricing negotiations and flexibility down the road.
“In the long term, when dust settles, I’m not sure printing consolidations are the best thing for the industry, from the perspective of a print buyer,” said Jerry D’Elia, vice president of manufacturing and distribution at Hearst Magazines. “There’s very little competition out there now, especially for a company like Hearst that only has about 3 majors they can negotiate with now.”
Since November, Chicago-based R.R. Donnelley & Sons, the world’s largest printer, has announced its intention to acquire three companies including the $1.3 billion buy-out of Menasha, Wisconsin-based Banta Corp. In December, the company said it would also acquire Waterloo, Wisconsin-based Perry Judds’. It acquired St. Louis-based Von Hoffmann in early January. Donnelley said last month it will close Banta’s headquarters and lay off 85 people later this quarter as part of the merger.
After a failed attempt to acquire Banta, Stamford, Connecticut-based Cenveo Corp., a printer of envelopes, labels, packaging and business products, said in December it would buy Cadmus for $430 million. In addition to buying the printing operations of LexisNexis, a division of publisher Reed Elsevier, Cadmus also signed a five-year agreement with LexisNexis to provide all its printing requirements. Terms of the deals were not disclosed.
The consolidation sits uneasy with Trish Faubion, enthusiast publisher Aspire Media’s vice president of production, as well. “It certainly reduces my short list,” she said. “During my last negotiations, Perry Judds’ was on my long list and both R.R. Donnelley and Banta were on my short list, so that reduces my short list by 20 percent next time around.”
Cameron Bishop, CEO of Ascend Media, said he is concerned with the limited negotiation capabilities and the logistical challenges that come with printer consolidations, but hopes there will also be positive outgrowth from the mergers. “I think there can be advantages in that it can give you a greater scale in efficiency, which can lead to cost-savings to printing clients,” he said. “If (the printer) is a paper buyer, it will also give them greater buying power, which can lead to better pricing. And different printers have different specializations, so when they consolidate it can make them more flexible in meeting their clients printing needs.”
But D’Elia says he’s noticed less flexibility since the printing consolidations, including the merger of Quebecor Printing and World Color Press in 1999, began several years ago. “I think things have gotten progressively worse,” he said. “I’ve noticed less open press time and less flexibility. And as publishers, we need flexibility because our advertisers want to make decisions later and later and the printer wants it earlier and earlier.”
D’Elia says he also has concerns about quality. “As the company’s get bigger, they’re buying these bigger and faster presses,” he said. “Before the offsets were 32, then they went up to 48, now they’re at 64. So they’re running bigger presses with smaller crews so I am concerned about the quality. Also some suppliers claim that bigger presses give more open press time. But, if you have two 32’s and one goes down, you still can do some thing with the other one. If you have one 64 and it goes down, now what?”
Consolidation: Long Overdue?
Although publishers are concerned that consolidation may hurt them in the long run, at least one printer says it’s long overdue. “Normally, when you have a recession in your business cycle, people will leave the arena,” said Ned Kulka, marketing director for Shepherdsville, Kentucky-based Publishers Press, which specializes in printing short-run trade magazines. “But we didn’t notice that in this past swing. When things got bad, everyone stayed in business for the most part. And now that things have gotten better prices have stayed extremely low because there’s so many printers fighting for demand and so much capacity. So there wasn’t really a recovery for printers.”
Kulka says the recent wave of consolidation is focused on recovery and reducing the over-capacity that has depressed printing prices over the past few years. “To me, it’s not a surprise,” he said.
“What is a surprise, is how long it has taken. To us, it’s natural. The magazine industry is on a rebound and printers haven’t really seen that yet.”
But Kulka said he’s not sure prices will automatically rise because there are now fewer players in the printing field. He said the effect of declining print subscriptions and an increase in the use of digital publications could offset the effects of the consolidations. “That’s something that has played a big factor in the demand for printing services,” he said. “The other issue is just simple economics and whether the demand will be there from the publishing industry.”
Although Publishers Press now has to compete against significantly larger printers, Kulka says the consolidations are actually good for the company. “We have seen three competitors disappear,” he said. “There are not as many people to compete against and that, in essence, makes the playing field better. The other thing is that Donnelley has to merge three companies into one. We feel that’s a big advantage to us. There’s bound to be a duplication of efforts and they’re going to have to consolidate the efforts into one while changing the culture at two of the companies. People, who are used to a Banta culture or a Perry Judd culture, now have to get used to a Donnelley culture.”
Recent Printing Acquisitions:
November: R.R. Donnelley Buys Banta in $1.3 billion deal
December: R.R. Donnelley Buys Perry Judds’ for $47 million
December: Cenveo Inc. Buys Cadmus for $430 million
January: R.R. Donnelley Buys Von Hoffmann for $412.5 million
January: Cadmus Buys Printing Assets of LexisNexis, Price N/A