Tapping the Digital Book Printing Opportunity

Yet despite the benefits of digital book printing, many publishers, particularly large trade publishers that rely on bestsellers for their income, have been hesitant to adopt. The reasons for this hesitation range from concerns over the quality and cost of digital printing to challenges related to adjusting workflows and infrastructure. While all of these objections have some validity—publishers cannot yet print large, four-color runs affordably on inkjet presses, for example—significant strides have been made in all of these areas. Book manufacturers continue to invest in faster and higher-quality digital printing presses as well as the backend technology that enables publishers to send PDF files to manufacturers who can print the same day—or even immediately.

The revenue implications of these technology advances are huge. Some book publishers have significantly expanded their sales overseas because they are able to deliver digital files to printers outside of the U.S. that can print short, digital runs in growing markets. Others have developed new revenue streams, selling on-demand copies of updated books and volumes. And some are reviving out-of-print titles that previously were too expensive to print offset yet still have a small and loyal following. And of course, many publishers have cited the significant savings of reducing inventory and, in some cases, eliminating their warehouses altogether.

In this article, we will explore what is possible in the realm of digital printing, what steps publishers need to take to expand their digital printing efforts, and how some book publishers are driving revenue and cutting costs with digital printing.

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Rethinking the Economics of Book Printing

Offset printing has been the dominant form of book printing for nearly 100 years, and its tenants have been ingrained in book publishers’ production departments. In the offset printing model, the more copies a publisher prints, the lower the cost-per-unit becomes. The economics of offset encourage book publishers to publish thousands of copies per book to drive down that per unit cost. Then, depending on the success of the title, publishers distribute some or all of those copies to retailers. They warehouse the remainder, or whatever the retailer returns. The unsold copies may sit in the warehouse for several years before they are pulped.

There is a huge potential for waste in this model. If a book publisher incorrectly guesses a title’s success at retail, then that company is stuck with significant warehousing costs. Those costs may even outweigh book sales revenue. James Gaskin, director of publishing technology and production at legal publisher Practising Law Institute (PLI), says that his company used to waste thousands of dollars on inventory and distribution costs annually. “We used to throw away $750,000 in old inventory at the end of each year. For a small company, that’s a lot of wastage.” Gaskin adds that PLI has saved even more using an on-demand model in which the book manufacturer prints and distributes a title when the consumer purchases it: “It’s about $90,000 a year to put books on a truck and get it to a warehouse, so we’re saving that.”

To reap the rewards of digital book printing, publishers need to adjust to the economics of printing. Instead of measuring price by per unit cost, publishers need to understand the lifecycle cost of a book. For example, if a publisher prints 5,000 copies of a book at $3 per unit and sells it at retail for $12, it seems like the publisher will earn a large margin: $15,000 printing cost versus $60,000 earned at retail. But if that publisher only sells 500 copies because the book is by a relatively unknown, debut author, they are already in the hole $9,000. And that doesn’t take into account the retailer’s cut of the profits, the cost to distribute, the cost to warehouse, as well as other overhead costs.

“Look at the complete life of how long that book is sitting in a warehouse versus the ROI,” says Kent Larson, president of the Book Manufacturing Institute. “You’re going to make more money printing digitally because you’re not holding all of that inventory and not knowing what to do with it.”

Gaskin adds that changing from a per-unit cost mindset to a lifecycle cost mindset needs to come from the top of the organization. “We had to involve the CFO who looked at the bigger picture, like what are you paying for storage? What are you actually throwing away? That has to be added to the unit cost of the book that they were talking about. It took some collaboration and some enforcement to say, ‘Hey, this is better for the company,’” explains Gaskin.

Jean-François Lyet, technical director at French-based Hachette Livre, sums up the economics of digital book printing succinctly: “We can reduce the runs; we can reduce the inventory; we can increase the cash. That’s a great opportunity for us.”

Tapping New Revenue Streams With Digital Book Printing

Digital printing offers publishers more than inventory and distribution cost savings. It also unlocks new opportunities for publishers to sell into new markets and sell books they could not in the past.

One of the biggest opportunities digital book printing provides is increased sales of backlist and out-of-print titles. Previously, fans of out-of-print titles had to track down used copies of their favorite books, purchasing them from users on Ebay or discovering the title at second-hand shops. None of this revenue made its way back to book publishers. Now publishers can easily bring a title out of print by printing it when the consumer purchases it.

Rob Malkin, business development executive at equipment manufacturer Ricoh, sees an opportunity for publishers to affordably bring four-color trade books back into print. “While book manufacturers such as Amazon and Lightning Source have been producing black-and-white trade books on-demand, the four-color trade market’s backlists and out-of-print books have largely remained untouched and unavailable to consumers,” says Malkin. “But the rise of a higher-quality level of inkjet capabilities has empowered established publishers to produce high-quality short runs cost-effectively, putting treasured books back in the hands of their audiences.”

Additionally, publishers can react to market changes, capitalizing on digital printing’s speed. If news breaks about an author that the publisher didn’t anticipate, the publisher can quickly ramp up production of that author’s backlist title. Publishers can print a digital short run to accommodate the initial demand and move to offset when interest in the title peaks. “We need to be nimble enough with our vendors and with ourselves to go in and out of digital,” says Michael DeFazio, VP paper purchasing & production planning at Penguin Random House. “It may go from offset to digital. Or if the author dies for instance, we may want to do an offset printing, so we have to be nimble enough to go back from digital to offset.”

Digital printing can also open up new markets. Yvette Nora, director of global procurement at Reed Elsevier says that the STM and educational publisher could not meet the demand for its science and technology titles in markets like China, Malaysia, and Brazil. Sometimes it took as long as a month to print and ship a title abroad. Nora and her team recognized an opportunity to use digital printing technology and implement a decentralized printing model, where book files are sent to book manufacturers in the market where there is a demand. This reduced turnaround from a month to three to seven days, says Nora.

“The important thing is it’s not just a cost savings exercise. It’s a sales enabler,” says Nora. “So in December, normally you might print one title offset. You’d want that published December 1st to get into the warehouse. But now, we can stretch out our revenue and publish titles on December 23rd, and still get that book out. So we’ve essentially added 30 days into each month’s production cycle and we can instantly get revenue from those titles.”

On-demand printing can also fuel publishers’ direct-to-consumer book sales. Because on-demand titles are distributed directly from the printer to the consumer, publishers avoid giving away a portion of the profits to a retailer. Sean Smyth, a print consultant at U.K.-based consulting firm Smithers Pira, says that when publishers cut out the retailer, they can earn 13% of the retail value of the book as opposed to 8%. The printer’s cut of the profits also increases from 4% to 10%. “Digital book production allows printers to make more money, publishers to make more money, and paper suppliers to make more money. That’s why it will be increasingly adopted,” says Smyth.

Cooperation Between Publishers & Printers Is Critical

None of the above initiatives are possible without a strong infrastructure on both the publisher’s and the printer’s sides, which enables quick and accurate sharing of book files. One of the biggest concerns publishers voice when discussing how to scale digital book printing is the difficulty of delivering files quickly and accurately to multiple printing locations. “We have to think a lot about content management,” says Lynn Terhune, the global digital print manager at John Wiley & Sons. “It’s tough to move our content around.”

One of the challenges to sending accurate files to book manufacturers is the lack of standards for print books. While standards like EPUB 3 and ONIX detail how an ebook file should be structured and what information publishers should provide booksellers, respectively, there is no established standard for print books that defines how those files should be delivered to book manufacturers. The German-based, print research association Fogra is developing these standards, but as yet there has not been widespread adoption.

As more publishers adopt a decentralized printing model, or what PRH’s DeFazio describes as “satellite” printing, print standards and IT infrastructure become even more important. “We need our IT infrastructure and the printer’s infrastructure to support satellite printing and quick delivery of files,” says DeFazio. “There is a lot of infrastructure that needs to happen before satellite printing is realized.”

Nora and her team have addressed this infrastructure and file-sharing issue by building a repository of book files that provide rich metadata about the book. Nora describes this as Elsevier’s “virtual warehouse,” explaining that it not only stores book files, but also sends them out to the appropriate printing partners. Nora says that this repository took a few years to develop, but that it has enabled Reed Elsevier to scale its digital printing program and eliminate nearly all inventory for its science and technology titles.

Gaskin says that PLI addressed the file-sharing issue by adopting an XML-first workflow across the board. By creating all book files in XML, titles can be converted to a variety of formats and delivered to printers in a standardized way. “We were one of the first legal publishers to adopt an XML-first workflow. We also looked at the print side, not just delivering ebooks and content online, but to have those print files consistent,” says Gaskin. “You deliver a PDF file to the printer and you know they don’t have to do anything with it.”

The importance of accurate information exchange changes the dynamic of the publisher-printer relationship, says Nora. Publishers and printers are growing their digital printing capabilities together, meaning their partnerships may span several years and their businesses may integrate more closely than before. “We have to trust that our print partners are going to be in there, not just where they are today, but that they’re going to evolve as well. Their technology has got to be scalable. It’s got to evolve. It’s got to grow.”

The Future of Digital Book Printing

Many print experts have made predictions for the future of digital book printing and its impact on the book industry. At Book Business’s 2015 Digital Book Printing Conference, conference chair and vice president of IT Strategies Marco Boer shared his prediction for the proliferation of digital print technology. He said that by 2019 the share of book pages printed digitally worldwide will double. In 2015 digitally printed book pages represented 6% of all book pages printed and by 2019 Boer predicted that will rise to 12%. “As the market transitions to shorter and shorter runs, digital printing will become much more relevant because it’s the only way to address publishers’ inventory problem,” said Boer.

Smyth of consulting firm Smithers Pira analyzes digital printing’s growth in terms of titles in the market. By 2020 he predicts 13.7% of all titles will be printed digitally, adding that those titles will represent 47.8% of the market’s value. Digitally printed books will represent nearly half of publishers’ overall revenue because nearly all digitally printed books are sold. A significant portion of offset books sit in the warehouse, driving up inventory costs and decreasing offset’s contribution to publisher revenue.

PRH’s DeFazio relates his predictions for the future more simply. He hopes that by 2020 publishers won’t be talking about digital printing anymore. “It’s part of our offering as a publisher, and it becomes commonplace. It really shouldn’t be a novelty at that point, and it should become an everyday practice.”