Imagine having a customer who has agreed to print a certain volume every week, or every month, for four or five years. You know exactly what day the job is coming and when you need to print it. The customer is knowledgeable about printing and often provides locked down PDF files. The format is exactly the same each time, and the customer will provide plenty of notice both on the number of pages and run length requirements for each print run. Not only that, but every so often there will be special effects for which you can charge a premium. The work is largely insulated from off-shore competition. Oh, and did I say that your customer’s print needs are growing, by about 5% per year or more?
What is this gold mine? It’s the magazine business, and while not every printer is capable of serving it, the industry’s sheer size and diversity provides opportunities for many.
Heavily dependent on a strong advertising market, the magazine business can be cyclical in nature. Recent data from Publishers Information Bureau (PIB) in the U.S. reports that advertising revenue for major American consumer magazines in the first half of 2008 show a 3% decline and advertising page counts dropped 7% compared to the first half of last year. “The magazine ad trend this year is similar to the last two drop-offs—in the early 1990s and earlier part of this decade—when PIB revenue and pages declined, but later rebounded as the ad market picked up,” noted Ellen Oppenheim, executive vice president and CMO of the Magazine Publishers of America, in response to the results.
A report from the Audit Bureau of Circulations (ABC) also reveals a drop in readership for the first half of 2008 compared to last year. Of the 60-plus Canadian consumer titles ABC audits, there was a double-digit decline in news stand demand, while subscription numbers also fell slightly over the six month period.
But the overall magazine market contains a number of segments. In addition to consumer titles there are business-to-business and trade magazines (such as Canadian Printer), religious magazines, non-profit and other affinity-type magazines (university alumni magazines, for example) and custom magazines. Of course, in Canada, language is another important method of categorization; French and bi-lingual magazines account for under one-third of magazine revenue.
Despite the recent economic climate, over the long term the Canadian magazine industry has remained relatively healthy. According to Magazines Canada, a national industry association representing primarily consumer magazines, the number of titles has grown from 1,500 in the mid-1990s to more the 2,300 today (with some estimates as high as 3,000). Revenue has also jumped, from $1.3 billion to $2 billion. Annual circulation is well over 770 million copies, with about 100 billion pages printed.
Behind these rosy numbers lurk some issues, however. Total circulation has been essentially flat over the last 10 years, and magazine attrition can be high, with as many as 40% of new titles failing within two years. Distribution costs are also an increasing burden. Newsstand sales incur significant waste through unsold issues, while Canada Post has increased its rates substantially. Nevertheless, despite its challenges, the business can be a good one for large and small printers alike. We spoke with four of the largest in Canada to assess their outlook for this market segment.
Magazines continue to be an important part of Quebecor World’s business. At the end of 2007—while it was still operating in Europe—magazines generated about US$1.5 billion, accounting for over a quarter of the company’s sales. As part of Quebecor World’s most recent reorganization, the U.S. magazine printing business now falls under a larger Publishing Services Group that includes books and directories as well.
The Montreal-based printer, currently operating under creditor protection in Canada and the U.S., reports its Canadian operations as a separate business unit. Headed by Tony Galasso, the Canadian plants tend to be multi-purpose, and of its 17 Canadian facilities, magazines are printed in five (Vancouver, Edmonton, Toronto, Montreal and Dartmouth, Nova Scotia)—all printed web offset, although there is some sheetfed in eastern Canada.
Galasso notes that it is important for a printer to be flexible to meet the needs of the Canadian market. With versioning, targeted geographical editions, language and distance, there are a lot of shorter runs. Canadian publishers want to have a local flavour, says Galasso. And although many titles are struggling, he notes that many city and regional magazines are showing double-digit growth.
The magazine segment is, along with retail, catalogue and directory, a core segment for Quebecor World Canada. The company continues to invest in new equipment, and Galasso is clearly excited by developments in the industry.
“The new technology that is coming on line is tremendous,” he says. “Page counts are increasing on the new presses, and with [their] fast make-ready, quick start-up and low waste, we can run short runs and be on colour [very quickly].
“With their throughput, speed and large pagination, there’s little waste,” Galasso continues. “The run lengths are as low as 10,000 to 25,000 copies. It gives us a lot of flexibility. We don’t have to go to sheetfed or half webs for the shorter runs.”
Improved efficiency and flexibility aside, Canadian magazine printers continue to face significant challenges. As a North American magazine printer, Quebecor World’s magazine printing platform, including its Canadian operations, are dependent on printing for U.S. publishers, and the recent rise of the Canadian dollar has reduced that piece of the business for Quebecor World’s Canadian operations, with that business diverted to its U.S. plants.
Quebecor World is continuing to sign major magazine printing agreements. Most recently, Burnaby, B.C.-based Canada Wide Media, publisher of more than 40 titles, including BC Business, Alberta Home and Truck Logger, agreed to a new seven-year agreement worth $45 million. And prior to that the company signed a multi-year US$55 million agreement with New York-based Reader’s Digest Association which includes some printing in Canada.
Canada’s other Montreal-based “mega printer”, Transcontinental, has a slightly different perspective, as it both publishes as well as prints magazines. “For Transcontinental, magazine publishing is an important market,” notes President/CEO François Olivier. Transcontinental prints over 300 magazine titles, totaling about 250 million copies. In addition to its own magazines such as Canadian Living, Elle Canada and Coup de Pouce, Transcontinental has printed the Canadian version of Time magazine since 2000. When the contract to print the Rogers magazines [publisher of over 70 consumer, trade and professional magazines, including Maclean’s, Chatelaine and Canadian Printer] kicks in early next year, Transcontinental will be the largest magazine printer in Canada as well as the largest publisher of consumer magazines.
With a Canada-wide presence and a national network, Transcontinental prints magazines at plants in Atlantic Canada, Quebec, Ontario, Winnipeg and Calgary, and Olivier says Transcontinental is well positioned to serve all of its customers. As befits a large company, plant activity shifts with changes in the product mix, equipment and customer requirements. For example, its Boucherville facility was transferred from its Commercial Products Group to the Catalogue and Magazine Group as the product mix at the plant shifted increasingly to magazines.
As new geographic-based cost structures become implemented by Canada Post, Transcontinental is working at finding ways to reduce those costs. With their geographic reach, the company can print closer to the delivery destination. Olivier notes that they have the ability to weigh distribution costs versus the costs of printing. With new, more efficient presses, the cost of make-ready continues to decrease, making it possible to do multiple start-ups. “It is a global supply chain, it is not just make-ready, but trucking, postage and also time to market. There is increasing pressure to shorten cycle time and close the book later.”
Pressure on cycle times have also increased with the emergence of the Internet as an advertising platform, as well as another method of publishing. Olivier believes the two are complementary vehicles. “A good brand and magazine on paper needs a website. The strategy on selling a marketing campaign on a website is much faster than a magazine—the cycle time is much shorter. What we have noticed is that when we make Web and paper work together the amount of traffic on the website, when we can cross promote between platforms, is very powerful.”
This, of course, puts more stress on the paper edition of the magazine to be faster. “You can’t advertise Web activity [in print editions] because the books close too far out. So there is stress to close the book later. Our print network, printing where we distribute, can give a few days or more advantage in closing the book. That’s always the last little piece.”
Olivier believes Canada’s magazine industry remains healthy and will continue to grow. “It’s always been an industry with lots of launches and failures.” As with most businesses, those with the strongest brands will thrive, while those who have not found their voice or target market will struggle. Olivier believes that most Internet-only magazines will not succeed, that a print version is critical.
Transcontinental is not Canada’s only printer/publisher. Like Transcontinental, St. Joseph Communications publishes magazines as well as prints. St. Joseph Media is Canada’s largest privately owned consumer magazine publisher, with titles such as Toronto Life, Wish, Gardening Life, Weddingbells and Canadian Family. So with more than $300 million in annual sales, St. Joseph Communications is also a major participant in the Canadian magazine market.
Magazine printing represents about one-fourth of the company’s printing revenue, split about equally between its own titles and others. Most are printed at its Concord, Ontario facility, which accounts for about one-third of its work. Magazines printed in its other facilities tend to require some specialty work or serve a local market. For example, cover work, special sections and inserts are often done sheet fed. Similarly, its Ottawa facility prints magazines geared to that market.
John Gagliano, President of St. Joseph Print, notes that as both a printer and a publisher they have the knowledge and ability to provide support to publishers’ efforts to control costs, so they can keep putting out magazines. St. Joseph “looks at everything, from printing costs to moving to lighter basis weight paper without losing integrity. We’re very proud that we’ve been able to reduce [the publisher’s] costs,” says Gagliano.
An important part of that effort is a recent $50 million investment in technology, designed to strengthen St. Joseph’s competitive position and increase capacity. Most noteworthy has been the installation of three manroland ROTOMAN S heatset presses at its Concord facility, including an eight-unit 48-page press, a six-unit 16-page press, and a four-unit 16-page press, to go along with three additional heatset presses and one coldset press. St. Joseph Print’s Thorn facility in Toronto does magazine work on a Mitsubishi web, Zircon half-web, and two Heidelberg sheetfed presses, including one of the few 12-unit roll-to-sheet presses in the area. St. Joseph’s print facility in Ottawa is equipped with a coldset web and two Heidelberg sheetfed presses.
High-volume magazine printing is not limited, however, to large players such as Quebecor, Transcontinental or St. Joseph. Ironstone Media, located in Pickering, Ontario on the outskirts of Toronto, includes both 47-year-old printing operation Web Offset Publications and seven-year-old LinkPath, a software development and services company that creates digital editions of magazines. It’s a $30 million company with 125 people that has managed to thrive through a combination of investment, innovation and focus. Offering a complete front to back solution, Web Offset prints 130 to 150 regular titles, primarily trade and controlled circulation magazines.
According to CEO John Bacopulos, page growth in the business-to-business and trade segment of the market has been relatively flat. With the bulk of readership in Ontario, it’s one of the first to be hit by a slowing of the overall economy. “The industry is under stress,” notes Bacopulos. “Page counts are not where [publishers] want them to be… manufacturers are cutting back on their ads.”
Nevertheless, the market remains dynamic. Publishers are launching new titles in order to diversify or to recapture parts of the market. “Publishers that are doing a good job of keeping advertisers are offering other services,” he says. And he notices an increase in versioning, especially in advertisements.
With run lengths varying between 5,000 and 150,000, this can present a challenge for the printer, as can the relentless pressure to keep costs down. One way to meet these pressures is to continue to invest in new technology. Web Offset has purchased a five-colour Mitsubishi web press and a six-colour Mitsubishi 40-inch sheetfed in the last three years, to go along with two older five-colour Hantscho webs, an eight-colour Royal Zenith half web and an Indigo for variable information.
“We have capacity because of the new presses. The speeds are phenomenal. We do plate changes and make-readies in six minutes. That makes a 50 percent increase in productivity, depending on the product. We didn’t expect that much.”
With their expanded capabilities and capacity, Web Offset has started to move into the commercial market as well, principally to provide more services to their magazine clients. “With the sheeter on the end of the web presses, we are able to provide high quality commercial as well as publication work,” says Bacopulos. “Publishers have other materials, [such as] pricing sheets and promotional materials for their advertisers.” And the company’s rapidly growing LinkPath division, putting magazines online, is another example of how this printer is extending its offerings without moving too far from its core business.
All four of these printing executives cite the necessity of remaining flexible and recognizing the challenges of their customers—magazine publishers—and investing in the infrastructure that will accommodate the need for faster turnaround, lower-cost mailing solutions or offering digital alternatives where appropriate to keep meeting the demands of this deadline-driven industry.
John Zarwan is a PEI-based consultant specializing in business development and profit improvement. He can be reached through his website www.johnzarwan.com.
