Executive Summary

Exclusive Commentary from Dr. Joe Webb and Richard Romano

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Executive Summary

Executive Summary

PrintStats is an industry demographic resource produced exclusively for NPES by ExpliStats and Strategies for

Management, Inc. This first edition was created with the support and guidance of NPES staff and an advisory

panel of members.

What are “Demographics”? Demographics are statistics that describe a defined population or industry. In the case of PrintStats, these statistics are an industry’s number of establishments, number of employees, amount spent on payroll, and estimates of the value of shipments and capital expenditures. The data are based primarily on the US government County Business Patterns program. The PrintStats methodology and definitions documents define these data and the statistical processes applied in greater detail.

Demographic data are used by many executives in decision-making, from sales and marketing executives, product managers, market researchers and analysts, logistics and distribution staff, and others. The data are used in decisions such as market size estimation and forecasting, geographic opportunity and share analysis, studying changes over time, sales and distribution territory planning, sales compensation plan design and evaluation, and other circumstances.

The US government operates many demographics programs. The best-known is the population Census conducted every 10 years. There are many business statistics programs. Knowledge of these programs and their methodologies can be very helpful to businesses because data are available to all without fees. The programs are paid by Federal tax collections.

Because many demographic statistics are published every year, they can become an important resource for understanding industry trends.

Demographic Data in This Report The latest available data in the County Business Patterns program is for the calendar year 2015, released at the end of April 2017. Some of the publishing and other industries were supplemented with a report, Nonemployer Statistics, which captures data related to markets that have many sole practitioner professionals and freelance workers.

Where applicable, industry reports contain information about number of establishments, number of employees, amount spent on payroll, and estimates of the value of shipments and capital expenditures. The reports about the number of establishments also include data for 2013 and the difference between the 2013 and 2015 establishment data.

General Trends There are three major areas of industry reports included in this effort:

1. commercial printing,2. publishing and content creation,3. packaging and converting.

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Printing-Related Markets There are many long-term trends that have resulted in changes in the overall decline of the number of commercial printing establishments since the early 1990s. They are:

• Personal computing, especially desktop publishing and the increased sophistication of wordprocessing and office printing technologies. These reduced and eventually eliminated much ofthe preparation process for documents that were to be printed.

• Imaging technologies such as scanning and digital photography, combined with photomanipulation software that eliminated much of the need for specialist businesses and allowedphotographers to independently handle the image enhancement tasks they required.

• Digital media, beginning with publishing efforts on CD-ROM in the 1990s, and followed by therise of the Internet, was facilitated by the constantly decreasing costs of Internet access, and theintroduction of new media categories (such as social media) and new kinds of computers suchas smartphones and tablets.

• Many mainstream printing formats such as brochures, catalogs, and magazines, were displacedby websites, e-marketing methods, social media, digital documents, and other digital formats.

While much of the capacity to produce print exited the marketplace, printing technologies were changing. Offset processes like high-volume web offset saw decreases in demand for the products they produced as publishers found new digital opportunities and a new class of competitors. Sheetfed offset also had a new competitor of toner-based color printing devices, and new competition from high-volume inkjet technologies now coming to market.

Advances in wide-format digital printing also encouraged new applications. Aside from the imaging technologies, new substrates and inks created new opportunities for printers to find new markets and new applications.

• For commercial printing and printing services, California (12.4%), Texas (6.8%), and New York(6.3%) are the three biggest states in terms of numbers of establishments.

• In 2015, in this category, the broadest sense of the printing industry, there were 25,688 U.S.establishments.

The majority (70%) of these establishments are small (1 to 9 employees), almost one-fourth (23%) are mid-sized (10 to 49 employees), and only 7% have 50+ employees.

From 2013 to 2015, the number of establishments declined by -3.9%. Since 2010, the number of establishments declined by -11.8%.

• In 2015, there were a total of 447,618 employees in printing and printing-relatedestablishments.

Since 2010, printing and printing-related employees have declined -10.4%. The 250- to 499-employee size class saw a +4.3% increase in employment from 2014 to

2015, likely the result of consolidation.

• In 2015, printing and printing-related support activity establishments reported revenues of$82.7 billion, with large establishments accounting for 68% of revenues, even though theyaccount for 7% of establishments. Small establishments account for 8% of shipments, eventhough they account for 70% of establishments.

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• Automation in all parts of the enterprise is increasingly mandatory. Increasing reliance onautomated workflows has not seriously impacted overall employment as consolidation andclosures are more of a factor on employment levels.

• For commercial screen printers, specialty items is a growth driver. Demand for shorter runs isdriving adoption of digital technologies like UV inkjet presses and digital dye-sublimation, as arecustomization and personalization.

Publishing and Content Creation Markets For many years, traditional publishing markets expanded their business by riding the wave of computer evolution. They benefited from the cost reductions in production through editorial management systems as well as the progress that printing technologies made. That progress allowed the introduction of more color printing, increased quality and consistency, reduced waste and spoilage, and faster speed of production that moved deadlines closer to press times.

Publishers grew in the late 1990s from the “Internet bubble” of rampant spending by new dot-com companies as they tried to establish their brands through advertising. It was not until about 2000 that the overall publishing industry began to feel the ill effects of displacement as digital media became a viable advertising platform and the Internet could be used to promote itself (i.e., through search). Since that time, publishers of print media have experienced declines in advertising pages and have had to reduce page counts, frequency of publication, and often changed the sizes of their publications. Hardest hit were the B2B segments, many consumer publications such as TV Guide and numerous homemaker titles, and weekly news magazines. Their style of presentation became obsolete as the information they contained was available elsewhere. Social change and modified consumer media preference made many high-profile titles less relevant.

On the other hand, content creators, such as graphic designers, advertising agencies, and commercial photographers, found great demand for their services. They had to adjust to new markets and technologies, but the appetite for content kept rising. Basic video production became easier and became a mainstay of social media through sites such as YouTube. The nature of the graphic designer’s work broadened, moving from rough design and specification of print materials that would be produced by someone else, to the empowerment of having the full control of their creative process that technology allowed. In the 1990s, designers and production workers were thrilled to be able to produce their own professional typesetting (and, later, desktop publishing) files. Later, they added their own photographic imaging capabilities, and now often do basic video production for their clients.

Traditional publishers have been in decline, but independent Internet publishing has seen a strong rise. It is easier than ever to publish content to websites thanks to software products such as WordPress. While traditional book publishing has been in decline, self-publishing has been increasing as companies like Amazon and its CreateSpace division, as well as others, have made it easy to submit and proof files for print and ebook formats, and provide complete e-commerce fulfillment and marketing services to small independent and freelance publishers. It is easier than ever for an individual to command a full suite of production and distribution capabilities on a pay-per-use basis without having to ever make significant capital investments in infrastructure or staff.

• Among publishers of all types, California (10.3%), New York (8.2%), and Texas (6.1%%) are thethree biggest states for publishers in general.

• In 2015, there were 17,260 U.S. publishers.

Two-thirds (66%) of publishers overall have fewer than 9 employees, and one-fourth (25%) have 10 to 49 employees. Only 9% of all publishers have 50 or more employees.

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• Overall, publishing establishments have declined -16.4% since 2010.

From 2013 to 2015, publishing establishments declined by -5.1%. From 2014 to 2015, publishing establishments declined -3.6%.

• Establishment declines have been consistent across all size categories. The main growth has beenin independent publishing, especially Internet Publishing, which includes many microbusinessesof sole practitioners.

• In 2015, there were a total of 407,500 employees in the various publishing establishments.

Overall, publishing employment has dropped -24.9% from 2010 to 2015. By 2015, employment declines have slowed, but not stopped; from 2014 to 2015,

publishing employment dropped -5.5%. Only 1- to 4-employee companies saw any kind of employment increase—+0.9% from

2014 to 2015, which translates to 130 employees.

• Among advertising and other creative establishments, California (15.1%), New York (11.5%),and Florida (7.7%) are the three biggest states for “creative” firms.

• In 2015, there were 43,541 U.S. creative establishments.

The majority of these businesses (86%) have less than 10 employees. Only 3% have 50 or more employees. From 2013 to 2015, the number of creative firms grew +0.8%.

• The overall number of creative firms has remained fairly stable over the past decade, with annualchanges since 2010 being less than +1%.

• In 2015, there were a total of 352,865 employees in creative firms. Employment among creativefirms has grown +11.9% since 2010.

• “Creatives” have benefited greatly in the digital media revolution, with greater influence incommunications decisions because of the need for interactive media and integratedcommunications budgets, and the decline in “paid media” such as broadcast and magazines.

Packaging and Converting Markets Packaging and converting markets are not well-tracked by government data sources. Many packaging operations are conducted within other organizations as part of departments or overall production. What the government data do track are often the materials used for packaging purposes, which are the kinds of data presented in PrintStats.

There are several drivers of packaging demand that are much different than publishing and printing. The first role of packaging is to protect the goods inside them during shipping. Secondly, in consumer markets, packaging is designed to sell products on store shelves via imaging and information.

This means that packaging demand is affected by

• Population growth

• Longevity and health of populations

• Changes in income and savings levels

• Regulatory environment, especially for food and medical markets

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• Materials innovations

• Product innovation

• Consumer tastes

• Brand competition

• Distribution changes (such as changes in retail categories)

• Other factors

The overall growth of the packaging market is usually less than GDP in the US, but it is positive, and can be very dynamic. This means that suppliers to the industry can have distinctly different revenue performance based on changes in any of the factors noted above. For example, a few years ago Walmart had a significant effort to downsize product package sizes to optimize shipping costs and to minimize consumer waste. This program was felt through the entire packaged goods supply chain, requiring product reformulations, package redesign, shifts to new materials, and many other factors.

Converting markets use raw goods and change them by cutting to different sizes or package quantities for a particular market needs. For example, converters may purchase coils of aluminum that need to be cut and packaged to sell as consumer food wrap. Paper may be cut in rolls to be used to wrap foods at deli counters. Paper is converted into envelopes, shopping bags, shipping sleeves, and many other forms.

• The main drivers for packaging are overall economic activity such as household formation andhousehold income, population growth, and longevity.

• California (10.2%), Ohio (7.3%), and Illinois (6.5%) are the three biggest states for converted paperproducts and plastics packaging materials manufacturers.

• These are widely distributed industry segments, with few centralized manufacturing geographies.

In 2015, there were 5,046 companies classified in these categories.

• Just under one-fourth (23%) of establishments in these categories have 1 to 9employees, over one-third (36%) have 10 to 49 employees, and 41% have 50+employees.

• From 2013 to 2015, these manufacturing establishments declined by -4.3%.

• Since 2010, the number of establishments in this category has declined by -7.0%.

• In 2015, there were a total of 345,562 employees in converted paper product and plastics packagingmaterials manufacturing establishments.

• ~100,000 of those employees are in the plastics packaging materials manufacturers.

• Software prototyping of packaging is leading to more innovation and productivity, and reducing time-to-market

• Digital printing technologies are appearing in all segments, often for proofing, but there is adeveloping market for specialty and novelty applications (such as personalization).

• Materials are an area for innovation because of environmental concerns, distribution costs, productprotection, product safety, and other factors. factors.

Summary Tables The following tables summarize the changes in each of the segments for establishments, employees, shipments, and capital expenditures for 2015, 2016, 2017, and 2022.

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Conclusions Demographic changes are the result of the interaction of numerous competing forces of technology, economics, social change, economic policies, and regulations. They reflect the net result of the millions of daily decisions made by consumers and business executives who use the products these industries create. This means that the net result of demographic change can be measured, even though the exact nature of the competing forces that created that net result can’t be known with certainty.

The study of demographic trends is important, but not because of the underlying trends. Trends may be entrenched and unchanging, or may settle out or reverse. Unless one studies the trends, changes in the direction of the marketplace cannot be discerned. While there is a publishing lag with County Business Patterns data, one of the government data series that is closer in time to changing events is Quartely Census of Employment and Wages (QCEW). There are ways to tap into these data series as early indicators of trends that are on the verge of manifesting themselves.

An important aspect of demographics is that the net result does not imply industry stagnation. The actions of those competing forces can be very dynamic, opening opportunities for new approaches and new markets at the same time they pose challenges. It is important that users of demographic data also seek to understand the nature of those dynamics in their market assessment. Demographic change is a net result but not necessarily “the bottom line.”

These are the trends as they can be assessed now:

• Hard copy print is still in a shift from offset to digital. Digital media have displaced andcontinue to displace hard copy mass communications that were the specialty of the industry’slargest establishments. The number of commercial printing establishments is decreasing andthe average size of establishment is trending down.

• Specialty industries such as commercial screen printing, though small, are more resilient aspromotions and events, which require signage, displays, and promotional items, play a biggerrole in communications.

• Publishing markets are still adjusting to the downsizing of past production investments andfixed costs because the latest computer technologies make it easier for competitors and nichepublishing to be carried out by smaller organizations. Internet publishing, as it is described inNAICS, has a strong growth trend.

• Digital publishing means that more and more practitioners will not be tracked in CountyBusiness Patterns, so monitoring Nonemployer Statistics will increase in importance.

• Packaging is a dynamic market even though the demographics appear stagnant. It is importantto always realize that there are many factors at work in packaging applications, especially asmarketers and distributors adapt to changing consumer tastes and materials innovations.

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