BtoB Media Business - October 2011 - (Page 20)

Production PRODUCTION Paper pains As digital publishing booms, paper mill closings are not enough to raise demand, price BY MARK J. MILLER PRESSING ISSUES Production faces budget cuts first om Fogarty is the director of production for Vance Publishing Co., which publishes Dairy Herd and Modern Salon. Fogarty landed his first production job in 1990 at Intertec Publishing, which has since been largely subsumed into Penton Media. We asked him about the major challenges production departments are grappling with. Media Business: BIO What are the big isTOM sues your production FOGARTY department is dealing Director of Production, with right now? Vance Tom Fogarty: Bud- Publishing Co. gets and how to cut costs in a down economy. Dealing with the United States Postal Service, and its service-reduction announcement. (The Postal Service announced numerous potential changes, including possibly shutting down more than half of its post offices.) I’m sure we will be looking at more electronic-delivery options. We’ll be more vigilant on schedules, to get into the postal stream in a timely fashion. Media Business: What are the issues you think are most vexing to production departments across the industry right now? Fogarty: Doing more with less. Production departments do not drive revenue; we support it. The first place companies look to reduce cost is the production department manufacturing efficiencies. Media Business: What has your department done in the last six months that you’re most proud of? Fogarty: We overhauled our work flow for better uniformity and standardization. We also introduced Adobe InCopy to our editors, by demonstrating the advantages of InDesign and InCopy working together. M aybe someone could start a paper airplane craze. The paper industry needs to try something, because it doesn’t look like the media sector is going to be buying more paper in the future. Paper use by the magazine, newspaper, book and other publishing sectors will fall by 12% to 21% by 2015 compared with 2010 levels, according to a report released this summer by RISI, which provides information to the paper industry. The report, “The Impact of Media Tablets on Publication Paper Markets,” found that tablet device sales will reach 195 million units by 2015 and contribute to the decline in paper usage. “Many graphic paper producers make their living selling paper to the publishing industry. Those companies will be greatly affected by media tablets,” John Maine, RISI’s VP-world graphic paper, said in a statement. “Significant demand impacts could come as soon as 2012.” Dire reports aren’t the only signs the paper industry is suffering. In February, papermaker NewPage Corp. shut down its plant in Whiting, Wis., removing 250,000 tons of coated paper from the marketplace. This loss of supply didn’t create more demand; ultimately, paper prices stayed the same. And none of this seemed to help NewPage. In mid-August, the company announced that it would file for Chapter 11 bankruptcy. Its Canadian affiliate also filed for protection from its creditors in Canada. “The mill and machine closures are still not keeping pace with the ever-increasing shrinkage in the demand for the product,” said Gerry Chisholm, senior VPsales at Gould Paper. He said that the third quarter and start of the fourth are usually when things heat up in the coated-paper market. “One of these coated-paper mills took a week off during what should be the hottest time in the market,” Chisholm said. “What does that tell you about the business?” Doug Poles, VP at Strategic Paper Group, said that despite the shutdown of NewPage’s Whiting plant, demand for coated paper never recovered. Additionally, the usual boom of the catalog season never came about for papermakers this year, leaving the groundwood market much weaker than expected earlier in the year. Bill Lufkin, president of Lufkin Strategic Procurement, said that in the four weeks before NewPage’s bankruptcy filing, the coatedpaper market was softening. “This would normally mean we should see prices going down over the next four quarters,” he said. “Longerterm demand for coated paper is continuing downward, even if the economy improves.” However, mills that create supercalendar paper (SC), a higher grade than newsprint and often used for free-standing inserts, are seeing some movement on price thanks to NewPage’s closing of another mill. That plant, in Nova Scotia, produced more than 30% of the SC and SC+ paper used in North America. Poles said that other mills have at least attempted to implement price increases as a result. Lufkin said that some publishers may try to switch from supercalendar to coated, even though coated is traditionally 7% to 10% cheaper than SC. Chisholm doesn’t see much of this happening. For publishers looking for a discount, Poles said that some mills are “willing to offer quick and hopefully quiet discounts” to those who will buy large slugs of groundwood (more than 1,000 tons). “As word of these deals leaks out more and more, it could move the overall market down as people know the mills are very weak,” he said. As for pricing, Poles said, considering that there’s been no seasonal increase, NewPage’s announcement didn’t create a jump in demand. Plus, since late October to early February is usually the weakest time in the paper market, “pricing could start to erode over time,” he said. He sees December to February as a good time to try to negotiate the best pricing for 2012 and onward. “I believe the malaise in the overall economy has found its way into the paper markets,” he said. “People aren’t spending money on advertising unless it’s absolutely necessary; and that probably won’t change unless there’s a meaningful boost in the overall confidence of all Americans about the future.” T —M.J.M. 20 | Media Business | October 2011 | mediabusinessonline.com http://www.mediabusinessonline.com

Table of Contents for the Digital Edition of BtoB Media Business - October 2011

BtoB Media Business - October 2011
Contents
McGraw-Hill Split Raises a Number of Questions
Who's Who in Business Publishing
Virtual Events are Moving Beyond the Booth
Sales & Marketing
M&A
Audience Development
Production
Benchmarks
How to Keep Up as B-to-B Media Transforms

BtoB Media Business - October 2011