Presented by: Dr. Joseph Webb, Director WhatTheyThink.com Economics & Research Center Graph Expo, Chicago September 11, 2007 Graphic Arts 2017: A Speculative Look Ten Years from Today

Agenda A look at the economy and commercial print Graphic Arts 2017 The 9:40 Pause Questions and Answers before we begin…

A look at the economy and commercial print

Graphic Arts 2017

The 9:40 Pause

Questions and Answers

before we begin…

Audio Chart of the Week - FREE Chart of Industry Trend or Topic Weekly 3 to 6 minutes Wide range of topics from content creation and technology to end-use markets and more Use the chart in internal presentations

Chart of Industry Trend or Topic

Weekly

3 to 6 minutes

Wide range of topics from content creation and technology to end-use markets and more

Use the chart in internal presentations

Management, Marketing, and Economic Notes - FREE “ Blog”-like comments about latest news A lot happens between weekly columns Sometimes I just vent “ Road Warrior” Comments and recommendations about personal computing and communications technologies

“ Blog”-like comments about latest news

A lot happens between weekly columns

Sometimes I just vent

“ Road Warrior”

Comments and recommendations about personal computing and communications technologies

Economics & Research Center - FREE ERC Industry Snapshot Updated just hours after new industry data are published Data Shipments, capacity Imports/exports Employment Postal weights and pieces Markets Content creation & printing Paper US & Canada

ERC Industry Snapshot

Updated just hours after new industry data are published

Data

Shipments, capacity

Imports/exports

Employment

Postal weights and pieces

Markets

Content creation & printing

Paper

US & Canada

Wednesday, September 26 Webinar The economy and the subprime aftermath Forecast for Q4-07, 2008, and 2009 Hot and cold: trends that are, and aren’t, driving the business What we know isn't so: a look at industry common wisdom. Is it still wise? .... and Dr Joe's Fall Reading List Signup online at WhatTheyThink.com

The economy and the subprime aftermath

Forecast for Q4-07, 2008, and 2009

Hot and cold: trends that are, and aren’t, driving the business

What we know isn't so: a look at industry common wisdom. Is it still wise?

.... and Dr Joe's Fall Reading List

Signup online at WhatTheyThink.com

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%

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)

“ 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 Segments

Do Commodity Prices Matter? 1967 CPI = 624 494.6 917.9

Commerce Department has Updated Printing Shipments Data from 2003-2007

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

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

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 Q2-07 It’s Not What You Make It’s What You Keep

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

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

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

Steve Forbert: Sounds Like an Executive ? I don't wanna see no fortune teller, I'd rather do without prediction I'll see it when it's all around me, Hey, what's the hurry? Sweet Love that You Give Jackrabbit Slim, October 1979

I don't wanna see no fortune teller,

I'd rather do without prediction

I'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

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

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

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

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

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

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 Source: U.S. Census Bureau

Content Creation Markets

Technologies Re-Shape 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

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

Monetizing content remains mysterious and unpredictable

Newspapers become magazines; magazines become newspapers

The “deadline” or “press time” grows meaningless

Where Have All the Printers Gone? 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

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

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

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

“ 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

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

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

THANK YOU! Questions?

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