Focus on Printing Overlooks Impact on Logistics

Excerpted from the May 13 edition of Mailers Hub News. Subscribers can find the full edition and archived issues here
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In case there’s any member of the hard-copy messaging industry who’s not noticed, the traditional distinction between a “printer” and a “mailer” has been blurred – sometimes erased – in recent years as printing companies add mailing capability and mail producers buy digital printing equipment.
(Of course, both are also adding agency, marketing, fulfillment, and other services.)\

Unfortunately, while this trend has been growing, too many “mailers” have failed to grasp that the resulting integration of the overall printed message industry means that what impacts “printing” also impacts them and what they do. A case in point is the pending merger of two giants in the printing
industry: Quad (recently shortened from Quad Graphics) and LSC Communications. That proposed tie-up is currently under review by the Department of Justice for its marketplace implications. 

An anonymous expert

In a May 7 posting on the Dead Tree Edition website (click here), the expert but anonymous D. Eadward Tree again opined about the merger.
In the blog, Dr. Tree reported that

“A printing-industry expert believes the federal officials who questioned him about the proposed merger … are unlikely to ‘rubberstamp’ the deal. ‘“They were pretty open-minded,’ said the expert, who was recently interviewed by a team from the US Justice’s antitrust division. Although they kept their cards close to the vest, he says, they seemed genuinely interested in understanding claims that the two companies would have several monopolies or near-monopolies in what at first blush looks like a highly fragmented industry.”

While the DoJ is looking for industry input on the proposed tie-up, those who could provide it are shy about doing so. Dead Tree added that

“A publishing company executive tells me that a paper company contacted him in March as part of an effort to get publishers to object to the deal. It found that publishers were reluctant to speak up for fear of angering two key suppliers, he was told.”

On the question of the deal’s impact on the printing marketplace, Dr. Tree observed that, while the two companies may be seen by some as representing “a small percentage” of overall US printing capacity,

“The two companies reportedly have 100% share of the US market for the printing of best sellers and certain other types of books. They also own all of the country’s rotogravure presses that are typically used to produce catalogs, magazines, and freestanding inserts that have print orders of 1 million or more.

“In addition, the two companies dominate the transport of magazines, do the vast majority of co-mailing of magazines and catalogs (to gain hefty postal discounts), and probably own a sizable majority of the large publication presses in the US that are best suited for print orders in the hundreds of thousands.”

The other monopoly

Commenters on the blog focused on the questions by the DoJ, on the loss of rotogravure capacity, and on the impact of constrained printing capacity on prices, but only one comment mentioned, albeit briefly, what should cause anxiety for commercial mail producers, including printers who mail. As Dead Tree Edition noted in the blog’s closing paragraph, the impact on logistics isn’t incidental; as the commenter wrote

“…The big talk at the National Postal Forum was what would become of the logistics side. There is much consternation over the new company, in which LSC has taken over DLS and Fairrington will be merged into Quad’s system, and then the rest of the industry is shut out with no obviously viable alternatives.…

In a March 7 article in Printing Impressions, Dr. Tree quoted from a joint letter from The Authors Guild and PEN America that was written to the DoJ objecting to the proposed merger:

“‘Quad’s acquisition of LSC would make it the monopoly provider of printing services in the long-run magazine and book printing businesses, as well as the monopoly provider of magazine distribution,’ the letter says. …

“‘If a printer in this country wants to ship a magazine from its plant to newsstands, it can only choose between two companies: Quad or LSC. This is because both have vertically integrated into print distribution and logistics provision,’ the letter claims. ‘A publisher currently looking to get its magazine into newsstands across the country after a Quad and LSC merger will have to confront two monopolies along their supply chain: Quad-LSC as printer and Quad-LSC as distributor.’”

Why this matters to “mailers”

The aforementioned traditional but fading divide between printers and mailers may still cause “mailers” to dismiss the Quad-LSC merger as simply a combination of printers about which they have little reason to care.

While no “mailer” may have reason to be concerned over the merged company’s dominance over long-run magazine or catalog printing, and may rightly feel no threat to the short-run or highly-customized work they turn out from their own digital presses, there’s another side to the merger
that doesn’t involve printing.

As Dr. Tree and a commenter on the recent blog noted, the merged company’s logistics capabilities will be far more dominant in that marketplace than in commercial printing. That dominance will undoubtedly translate into Quad+LSC’s added leverage over trucking and comailing equipment capacity and, in turn, over access to those services – particularly to non-customers of the new company – and the prices charged to all customers.

Secondarily, those mail (catalog or publication) producers unable to access Quad+LSC’s logistics services for whatever reason, including price, may find themselves (and their clients) less capable of earning the best possible worksharing discounts for presort or destination entry.

Trucking and load consolidation are agnostic regarding class of mail, processing category, and postage rate, and decreases in availability of such services will be equally agnostic in their impact on those companies who need them. Maybe some “mailers” are safe from the proposed merger’s
impact on their industry – or maybe they aren’t.

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Excerpts from Dead Tree Edition were with permission. Dr. Tree’s blogs are available at https://deadtreeedition.blogspot.com/.

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