Is Your Printing Contract Working Against You?
The other core problem is that cost increases typically are geared toward changes in the CPI. Printers have admitted that the CPI doesn’t adequately express their changes in operating expenses, and they routinely set increases as fractions of the CPI. But at a time when prevailing prices are falling, any index pointing up is pointing the wrong way.
Print-price history is, of course, just history. If contracts that escalated prices in step with the CPI have been flawed for the last 10 or 15 years, does that mean they’re just as dangerous in the future? In other words, could prices go up again?
The printers certainly would hope so. Even as equipment yields have reduced the labor costs behind each printed page, printers have faced the same onslaught of rising health care and energy costs that have permeated the rest of the economy. And all that nifty technology that reduced labor hours wasn’t free. Printers would like to earn a better return on that equipment instead of using it to fight for market share with price cuts.
If prices do rise, the printing contract can provide some protection for publishers. We’ve seen the error of letting the CPI tell us where costs are headed, but it may be no better a guide in a time of increased costs than it was when it rose while print costs went down. The arrows may end up aimed in the same direction, but the severity of the trajectory still may not match.
The solution seems to be that good old fraction of the CPI, but the timing and extent of price changes in the overall economy often are poor mirrors of the printing plant. Consider the printer’s major costs: labor and benefits, utilities and the cost of capital. The last two match up well, but the first one does not.