By: Mark Fitzgerald
Their market is shrinking, their once-impressive margins are falling nearly to the levels of supermarkets, and their customers expect them not only to provide more hand-holding than ever but also to finance the industry’s research and development (R&D).
So why do vendors stay in the newspaper prepress business? “I guess you kind of get hooked on newspapers,” John Barry, president and CEO of Brainworks Software, Sayville, N.Y., said during the recent Newspaper Association of America SuperConference here.
Addiction is as good an explanation as any. David Frenkel said his company, which sells editorial, classified advertising, and business software, was lucky to have a financial backer who knows — and actually likes — the industry. “The vanilla VCs [venture capitalists] who have heard about the newspaper business or have been in it once are usually cured for two lifetimes,” said Frenkel, chief operating officer of Media Command Inc., Tampa, Fla.
Certainly, fewer prepress suppliers are willing or able to contend in a shrinking market, as newspapers fold, merge, and, especially, form clusters with centralized production. It’s been a long-term trend, said David M. Cole, a newspaper consultant who publishes The Cole Papers newsletter: “There weren’t a whole lot of system sales before March , when we realized how badly things were going to go, and Sept. 11 knocked out about a dozen projects I personally know about.”
Supplier consolidation is also a long-term trend. Grady Cooper, product marketing vice president at Harris Publishing Systems LLC, Melbourne, Fla., estimated that, of about 275 prepress exhibitors at last year’s Nexpo, “at least a third” will be absorbed by other companies or defunct by this year’s show in June.
“There’s certainly consolidation among vendors,” Frenkel said. “I know, because our company is buying them.” Among companies that are now part of Media Command are Collier-Jackson, Cybergraphic, and Matrix.
But for vendors, consolidation does not necessarily mean shrinking opportunities, executives say. Brainworks Software, which last year bought Freedom System Integrators Inc., figures it increased its reach with the acquired classified and editorial software, Barry said. “The [acquisition’s] payback is an increased market,” he said.
Vendors also look to expand into other media, said Harris’ Cooper: “We’re not just looking at broadening the product line — we’re looking at broadening the market itself. Harris now has a radio division, and we’ll have other divisions in the future.” And like other companies, Harris is a big fan of CRM (customer-relationship management) and looks to “extend the relationship with existing customers,” he added.
Unisys Corp. Vice President for Global Media Stephen Dienna said his company’s products increasingly will focus on content management distributed through all forms of media. One growing business, he predicted, will be managing copyrights and digital rights of content “assets.” Asian papers already are showing interest, he said.
As never before, vendor offerings will focus on productivity and revenue, suppliers say. “We need to follow the buying habits of the newspaper industry, and right now that is focused on increasing sales and profits,” Barry said. “We need to respond to that. Otherwise, we’re building hypothetical products that no one wants to buy.”
While no vendor suggested future product development was imperiled, nearly all voiced a common complaint: Newspapers expect suppliers to underwrite nearly all the industry’s prepress R&D. “I think that in the past, and certainly still today, [newspapers] expect us, the vendors, to do this and do that, and it’s going to be harder and harder to do in this environment,” Cooper said.
While there are “occasional pockets” of newspaper-financed R&D, Cooper added, “Most newspapers, to be honest, are quite content to stay with the status quo, to ride the wave. They only think about [R&D] when the wave peters out.”
Still, those with strong products and customer bases will soldier on, even as peers fall by the wayside, said Media Command’s Frenkel, who noted that “economic lulls” of this sort “make for ultimate efficiency in the market.”