WEB EXTRA: How Outsourcing Might Work for Small Shops

By: Jim Rosenberg

NOTE: In addition to this sidebar to the March E&P cover story, see related stories on ‘The Gazette,’ in Cedar Rapids, Iowa, (E&P, Dec. 20, 1997, p. 8 and 22), and on outsourcing and consolidating production.

Not every daily is big enough to merit the attention of a major newspaper printer, or near enough to a city where such a printer will likely have a plant.

So, in the business of outsourcing newspaper printing, where does that leave certain small dailies or, for that matter, small commercial web offset printers?

For a daily that is not part of a newspaper group, or for a group-owned paper that is an outlier geographically, consolidating production at another print site may be impossible, impractical, or, for competitive reasons, undesirable.

Where such a paper seeks to send out its printing, a solution may to bring in a printer. Within a certain distance, local newspapers and commercial printers usually do know each other. But how much, if anything, would a comparatively small commercial printer and that newspaper know about each other if they are a couple of counties or even states apart? And why could they expect to do business?

Role for brokers, manufacturers?
The emerging urge to oursource may represent a new business opportunity for newspaper, equipment and/or print brokers, who can use their knowledge of newspaper equipment’s age, condition, capacity and capabilities, as well as newspapers’ needs, goals, strategies, to bring together the printer and the newspaper pressroom.

If the printer takes over the newspaper’s pressroom, it gains a new, high-volume customer without taxing its existing press capacity or needing to build another plant and buy another press. In return, the newspaper is relieved of its print responsibilities – but not its presses – at comparatively little cost.

And if the arrangement proves unsatisfactory, the parties return to their own pressrooms without having had to bet their businesses.

“That’s a possibility,” says Web offset Services President Sam Wagner. But he and others cite major obstacles.

It’s certainly true that, as Inland Newspaper Machinery Corp. President Beau Campbell says, with smaller papers “all being gobbled up and clustered,” production consolidation naturally followed, with few outlying sites left that might benefit from the services of an area commercial printer.

But even where potential partnerships exist, perhaps the most important obstacle is a difference in cultures. Commercial printing and newspapers are both businesses, but as Gannett Production Vice President J. Austin Ryan says, the latter also is a passion.

That difference may be more obvious in the reverse, where newspapers have tried to run commercial work. Over the last 15 years, many attempted to use extra press capacity (e.g., sole survivors of joint operating agreements) for more than just the daily editions, says Wagner. Some were successful, but most were not, he says, owing to a failure to understand the marketplace or the commercial printing business. The latter, he explains, requires “a very different mindset” of satisfying client’s demands – typically “quality first, deadline second.”

Furthermore, if a newspaper failed once or twice to make a go of contract work, what are the chances a third party will succeed with the same equipment? Was it the press, perhaps with the wrong cut-off” Or was the color, auxiliaries, or automation inadequate? Are there nearby competitors? Is the sales force the right one for the job? All require answers before an insourcing deal is considered, says Wagner.

In the end, the real question is whether the a third party will make money. Most often such an arrangement will not be viable, but “with the right equipment in the right area,” he thinks it can succeed.

Where both partners are comparatively small, says Global Press Sales CEO and Goss International Chairman Ed Padilla, “there’s a possibility of that working if the newspaper leases … to the commercial printer.”

Obviously if insourcing involves leasing a newspaper’s pressroom, it must be priced so that the printer makes a profit. Depending on, among other things, the size and value of the plant and equiment and the size and value of a paper’s circulation, a lease might by nominal – its cost being no more than the satisfactory (on time, good quality) daily production of the paper. Revenue from any other work could be split between publisher and printer.

Still, just to get that far, others in various ways echo Wagner’s point. “In most cases, says Ryan, “I can’t imagine that someone would want to come into your shop and inherit your equipment.” Too often, he says, it will be old, even obsolete.

Even assuming the model is agreeable, says another industry executive, who insists on not being named, both sides should consider if “using the same old equipment makes sense” wherever there may be a choice of printer (and a printer surely needn’t always be near its customer). In the prevailing market, he warns, it’s very difficult to compete for jobs with existing commercial shops when they “will cut your nuts off for a nickel” per thousand copies.

Similarly for publishers, whatever savings may accrue from an outsourcing lease, it seems unlikely they will pay for a paper no better looking than what they already produce. Satisfying both sides may well mean adding to and/or upgrading equipment.

So besides brokers of printing, papers, and presses, “I think this may be a source for press manufacturers to get into that business,” says the same industry executive.

But when the same notion is put to Padilla, a veteran of both the press manufacturing and resale businesses, he’s circumspect. If there is anything to be gained strictly from the role of middleman, he says, it would depend on the people involved and the depth of that middleman’s involvement.

At the low-end of the industry, a big payoff isn’t to be expected – except, perhaps, in a brokering fee. It is, however, where a press manufacturer or refurbisher might find business when an upgrade is called for. And for a print broker, it might mean a a source of affordable work.

(Of course print brokers themselves may see an opportunity to take on some of the printing business themselves. But their numbers are fewer and the risks great. Wagner recalls an Atlanta group of brokers who decided to join in purchasing equipment for their own commercial printing enterprise. Their new business did grow but “eventually fizzled out,” he says. “I can’t tell you the number of times that’s happened in this country over the years.”)

In contrast to outsourcing to a printer far from readers, leasing a newspaper’s plant to a printer may help assure that deadlines are met and deliveries are on time. According to Wagner, more people fail for not meeting deadlines than any other reason. A publisher might worry less about what Ryan refers to as a 60-mile rule of thumb: that a daily’s print site should not be much more than an hour’s drive away.

But what if a paper goes to press earlier?

Deadlines and distance
What Ryan has in mind, though it seems a heretical suggestion, is not asking newsrooms to accept something new, but rather to acknowledge something that has been true for many years: Newspapers are seldom the first to deliver most breaking news stories.

Whatever broadcast’s shortcomings, it is faster than print. And while publishers and broadcasters alike have Web sites where news may move on a moment’s notice, how many people wake up to the Web or surf the ‘net while shaving in the morning? The morning paper may before breakfast, but its latest news is at least seven hours old. Fewer and fewer among even avid readers of sports and business sections will wait to see the stats in ink.

Newspapers, of course, are superior sources for judicious editing, depth of reporting, number of news stories, especially local stories and many that lack an attention-grabbing a video component, as well as explanatory and investigative reporting. Developing stories may require days or weeks of in-depth follow-up that newspapers do best.

“If you believe that we as an industry do not break news [in print], why do you need to go to press at midnight? Why not 10 or 11?” Ryan asks. “That, to me, becomes the bigger question.”

Handing a pressroom an extra two hours not only can provide time for superior printing, but also expand options to outsource beyond a 60-mile limit. The latter benefit would be especially useful to dailies that for reasons of business or equipment will look to farm out printing rather than bring in a printer, but are distant from a suitable production partner.

Relatively remote, served by unclogged highways and publishing on an afternoon schedule, the Silver City (N.M.) Daily Press was well positioned to break the 60-mile barrier when in February it moved printing to Signature Offset, two counties and more than 110 miles away in Las Cruces.

Better color and consumables pricing “allows us to compete with the big chains that are all around us,” says owner and Publisher Christina Ely. The Daily Press moved from printing 121/2-inch-wide pages on six King Press units with difficult color register to 111/2-inch-wide pages on a three-tower Goss singlewide.

The King Press equipment is still used for the paper’s tv programming tabloid and several local contract jobs. But Signature brought new technology that would have cost the paper plenty and possibly forced it from its historic headquarters.

Instead, says Ely, her 9,200-circulation paper (counting 300 paid e-edition subscribers) and its much-visited Web site (scdaily press.com) can focus on publishing news and information for and about Grant County without the stress of daily press runs.

“Imagine, if you could open that [on-press] window, how many more opportunities would be out there,” says Ryan. “Our industry needs to explore creative and cost-effective ways to reach our customers. There should be no boundaries.”

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