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Presented by:Dr. Joseph Webb, DirectorWhatTheyThink.com Economics & Research CenterGraph Expo, ChicagoSeptember 11, 2007

Graphic Arts 2017: A Speculative Look Ten Years from Today

© 2007, WhatTheyThink.com 2

Agenda

A look at the economy and commercial print Graphic Arts 2017 The 9:40 Pause Questions and Answers

before we begin…


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The Economy & the Outlook for Print


The Overall Economy

Real GDP Y/Y basis Q1-06: 3.31% Q2-06: 3.23% Q3-06: 2.37% Q4-06: 2.60% Q1-07: 1.55% Q2-07: 1.92%


Economic Conditions

“Subprime” fallout Froth is out of credit markets Discipline to lending? Housing stimulus to economy

disappears for minimum of 18 months, possibly more

Budget cuts in financial institutions

Search for cost savings

Future inflation worries ease No recession

No significant growth, either Business investment cools Overseas markets strong over

long term, always volatile Future tax rates still uncertain Fed is about to ease (9/18)


Employment in Key SegmentsJuly 2006 July 2007 August 2006 August 2007

Printing, all 633.5 629.2 634.4 628.5 Printing, production 446.5 446.3 447.0 446.4 Publishing 902.9 906.6 902.6 905.1 Periodicals 146.5 146.2 146.9 Newspapers 358.3 350.6 357.6 Graphic design 70.0 72.0 71.3 Ad agencies 462.9 468.9 465.3 Direct mail 68.1 67.2 68.8

July 2006 July 2007 August 2006 August 2007Printing less production 187.0 182.9 187.4 182.1 Publishing, ex-newspaper 544.6 556.0 545.0 Agency + design 532.9 540.9 536.6


Do Commodity Prices Matter?

1967 CPI = 624494.6

917.9


Commerce Department has Updated Printing Shipments Data from 2003-2007


Old Habits Die Hard: Stop Looking for GDP as Indicator of Printing Shipments

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Printing as a Percentage of U.S. GDP

Based on Bureau of Economic Analysis, U.S. Commerce Department data© 2007, WhatTheyThink Economics & Research Center


Updated Print Forecasts• Conservative model:

– 2007: $103.1B– 2008: $102.1B– 2009: $101.2B

• Aggressive model:– 2007: $96.8B– 2008: $87.6B– 2009: $80.8B

• GDP model using +2.5% GDP growth rate):– 2007: $101.1B– 2008: $99.0B– 2009: $96.8B

• WTT 2007 ERC forecast • $102.0B, -$1.5B, -1.5%– Likely to be revised down– No political campaign bump– Slower growth of direct mail

and direct marketing– 2008: $102B

– The “last” print campaign?– 2009: $ 99B


Encouraging Profits Report for Q2-07It’s Not What You Make It’s What You Keep

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$ Billions of Inflation-adjusted IndustryShipments, 4-qtr moving total

$ Billions of Inflation-adjusted ProfitsBefore Interest & Taxes, 4-qtr movingtotal

Profits peak Q2-1999 to Q1-2000, $14.16B

Profits bottom Q1 to Q4 2001, $2.98B

Latest data, Q3-2006

to Q2-2007, $5.15B

PRINTING INDUSTRY SHIPMENTS & PROFITS©2007, WhatTheyThink.com





Graphic Arts 2017… Finally!


Agenda: 2017

Economic, demographic, technological trends that will create the graphic arts and content creation business

How many printers? workers? designers? publishers? What communications needs will emerge, grow, decline? Where will jobs and opportunities be? Getting ready


Advertising Age: Lies, Damned Lies and Ad Predictions As any media researcher will tell you, the concept of

using benchmark reports and forecasts is intended to serve as less of a crystal ball and more of a hype-driver for emerging technologies and market trends. Sept. 3, 2007 issue

http://adage.com/mediaworks/article?article_id=120208


Steve Forbert: Sounds Like an Executive ?

I don't wanna see no fortune teller,I'd rather do without predictionI'll see it when it's all around me,Hey, what's the hurry?

Sweet Love that You Give

Jackrabbit Slim, October 1979


Forecasting is not very difficult, because it’s about the future

Forecasting long-term and very short term are easy Timing is always the most difficult to predict;

underlying trends are usually right Easy to forget that all actions have reactions

Those penalized by change have a habit of adapting to new situations Not all things can be foreseen; but context can Change is residue of thousands and millions of daily

buyer-seller decisions, not the acts of a single company or even a single industry

Just because it is possible does not mean it is marketable


Why Forecasting with Quantitative Models Alone Can Be Dangerous

Pink line:Forecast based on actual data ending in 2000

Blue line:what actually happened


The Best Forecasts are Always Judgmental

Statistical forecasts or forecast models are springboards for discussion

Remember, this is “a speculative look” Almost anything can be justified by a

consultant with a good vocabulary


Economic trends U.S. government policies that constrict long term

growth and wealth creation seem certain post-2008 election, leading to slow growth economy, stagnant business investment

Developing countries, even “old Europe” decreasing taxes, especially corporate rates

Communications reduce “friction” between economies, increasing transactions, putting new emphasis on logistics and transportation

Emerging economies significantly increasing wealth beyond their natural resources More sophisticated monetary systems Increase in service economies

Economic and monetary policy influence of U.S. and Europe ebbs


Technological Trends Rampant connectivity at declining costs Richer communications, with more video Mobility is habit-forming

Supercomputers in one’s hand, and nobody knows it Storage becomes “free” Instant access to information and content, anywhere,

anytime, anybody, any format, with printing optional E-commerce a normal course of business for everything


Considerations

Technology and adoption do not move in lockstep More alternatives chase same resources, solve same problems

Technology and profits are rarely simultaneous All technologies are two-sided

Internet competes with print Creates and expands opportunities for print businesses


U.S. Population Trends

2002 2007 2010 2015 20200-14 21.1% 20.2% 20.0% 20.2% 20.1%

15-24 14.1% 14.2% 13.9% 13.0% 12.6%25-44 29.3% 27.6% 26.8% 26.3% 26.2%45-64 23.1% 25.4% 26.2% 26.0% 24.9%65-79 8.9% 8.9% 9.2% 10.7% 12.3%

80+ 3.4% 3.7% 3.8% 3.9% 4.0%Total Population 100.0% 100.0% 100.0% 100.0% 100.0%

2002 2007 2010 2015 2020US Population 287.7 301.1 308.9 322.4 335.8

Average age 36.1 36.9 37.3 37.9 38.6

Source: U.S. Census Bureau


Content Creation Markets

Employees Establishments >50 Emps/estab Freelance Total Workers2005 60,188 16,516 86 3.6 82,942 143,1302007 60,000 17,175 87 3.5 90,620 150,6202012 59,500 19,320 87 3.1 109,825 169,3252017 58,750 21,465 87 2.7 129,025 187,775

Employees Establishments >50 Emps/estab Freelance Total Workers2005 413,509 38,640 1,317 10.7 111,524 525,0332007 391,655 39,070 895 10.0 121,300 512,9552012 356,185 43,745 120 8.1 139,215 495,4002017 320,710 54,345 90 5.9 159,775 480,485

Graphic Design Services

Advertising Agencies


Technologies Re-Shape PublishingEmployees Establishments >50 Emps/estab Freelance Total Workers

2005 158,843 7,846 618 20.2 14,115 172,9582007 157,350 8,220 620 19.1 15,420 172,7702012 156,000 9,110 630 17.1 18,690 174,6902017 154,500 10,005 640 15.4 21,960 176,460

Employees Establishments >50 Emps/estab Freelance Total Workers2005 83,555 3,359 292 24.9 4,140 87,6952007 83,690 3,800 290 22.0 4,525 88,2152012 81,260 5,035 320 16.1 5,480 86,7402017 78,825 6,740 380 11.7 6,440 85,265

Employees Establishments >50 Emps/estab Freelance Total Workers2005 25,047 1,321 69 19.0 475 25,5222007 22,930 1,320 69 17.4 520 23,4502012 17,640 1,315 65 13.4 630 18,2702017 12,350 1,310 60 9.4 740 13,090

Periodical Publishing

Book Publishing

Miscellaneous Publishing


Publishing’s Future

Monetization of content remains a serious issue Critical beyond publishing; content needs to create value

Contrary to popular belief, the Internet has limited space “Shelf space” is part of the Internet, too

Small publishing grows and grows and grows Redefinition of publishing as a business

Severe downsizing of infrastructure


Is This Too Optimistic for Newspapers?

Monetizing content remains mysterious and unpredictable Newspapers become magazines; magazines become newspapers The “deadline” or “press time” grows meaningless

Employees Establishments >50 Emps/estab2005 380,144 8,395 1,231 45.32007 374,365 8,145 1,120 46.02012 355,890 7,380 775 48.22017 337,420 6,540 535 51.6

Newspaper Publishing


Where Have All the Printers Gone?

Employees Establishments >50 Emps/estab2005 657,759 34,385 2,827 19.12007 609,540 32,595 2,700 18.72012 491,850 28,130 2,405 17.52017 374,165 23,660 2,105 15.8

Commercial Printing and Printing Services

On-demand printing is a weak competitor to computer screens Mobile computing of all types continues to reduce reliance on print Are there really opportunities in non-print media? Digital printing has market value because of its inherent integration

with communications and information storage and transmission


Evolving Nature of Business

Globalness for more aspects of business, even the smallest “Digital proximity”

Production is still becoming global, creation and content has not; that will change

Increase in global specialization of labor, capital and ideas Interconnectedness becomes more evident


Rising Global Wealth Effects

Decreased birth rates Increased interest in environmental issues Longer & healthier lifespans Increases in services compared to manufacturing Increasing demands for information, of greater variety

and wider means of access


What communications needs will emerge, grow, decline? “Managing” content is not the issue; deploying content is Reaching desired targets is not as important as having targets find

the content Search is a natural way of finding information now Social networking “fad” will pass; easy to confuse the tool with a centuries

old trend to associate with others of similar nature New trend: lifelong social communications? – “digital neighbors”

Bewildering number of access devices is not a call for standardization, but a bewildering number of standards iPhone is culmination of past events, a new building block


Where will jobs and opportunities be?

Decrease in sales jobs now evident in economic data “Internationalizing” content and deployment Content creation with new tools, in new formats, in new

markets: “newness” is always a market-changing trend Specialization in multiple media applications,

implementation and deployment


Getting ready

Create and encourage curiosity Play in the new communications and new media

Be the gadget guru for others It’s only cool if you can create unforeseen uses

Media rules are being re-written every day The Geico-ization of media strategy

Rules may change, but the objectives do not Long-term profitability and innovation never go out of style





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