Symbiosis or ‘Death Spiral’?
The Internet and a legion of new
digital-communication techniques are the obvious cause. Printers lose customers who put material online instead of printing it; publishers lose customers who prefer the dynamically up-to-date and generally free information available online to the printed material they’d have to purchase.
I’ll leave the great hand-wringing over this development to others, but it’s fair to say that both industries are mature. Publisher and printer have reached an age when significant annual growth is the result of acquisitions, not the flourishing of the garden already planted.
THE WORST-CASE SCENARIO
There is a worst-case scenario that could lie ahead. We publishers could continue to lean harder and harder on printers, seeking a steady stream of price concessions in order for them to get our business. We can claim all we like that it’s a partnership we’re building, but in fact, we’re weakening the printer by using his price cuts to inject an artificial increase in our profitability. It works, of course, on a short-term basis. Eventually, however, the technique initiates what could be called a “death spiral,” and our so-called partner can’t replace or augment his technology. The printer limps before we do, but we both go down together in the end.
The short-term downside for publishers is small—in return for price reductions, we build somewhat more wobbly businesses. When your publishing economics are based on a cost of goods that saps your supplier’s health, you haven’t really won; you’ve exploited a weakness. You can take advantage of your printer’s sales anxiety for only so long before service, quality and capabilities begin to suffer. Most important, your company’s profitability hinges on artificially depressed prices––prices that may be unsustainably low.
This isn’t to say that solid, keen negotiation should go out of style. The improvement in equipment yields means that printers’ costs have gone down, and so should our prices. But when price cuts are based on the hope of volume growth or the fear of losing work, they can and do backfire. Printer self-interest should curb this last-ditch sales strategy, but it takes courage that, frankly, some printers can’t muster. A cynical publisher can take advantage of a hopeful printer every time.