Richard Romano

Last week, we took a wide-format look back at 2015. Now let’s switch directions. What can we expect in 2016? Before we answer that, though, what is 2016 likely to hold for the printing industry in general?

Dr. Joe Webb and I just completed a new WhatTheyThink special report called The New Dynamics of Commercial Printing: 2016 that offers a both a qualitative and quantitative look back at both the prevailing macroeconomic and industry-specific microeconomic trends, and looks ahead to 2016 and beyond (Dr. Joe offers an economic forecast to 2021—good grief, we’re almost one-fifth of the way through the 21st century?!).

Forecasts are always fraught with peril, which is why I always preface any kind of forecast with two of my favorite quotes:

“The only function of economic forecasting is to make astrology look respectable.” ?John Kenneth Galbraith

and

“It’s tough to make predictions, especially about the future.” —Yogi Berra

One of the things we point out in the report is that the commercial printing industry had its best year in almost two decades. As Bender might say, “We’re back, baby.” We can perhaps think of the years between 2001 and 2011 as a “lost decade” for the industry, and we have seen massive amounts of consolidation. True, it was not the happiest of times for those on the wrong side of the consolidation, but the fact is that we have ended up with a smaller but also healthier industry than has been the case in a long time. Consequently, our Fall 2015 Business Condition Survey (full results are presented in the report) found a very high level of optimism about the new year. This is good news; companies that are optimistic tend to make investments and take other proactive steps to get more business; as we found during the lost years, when print businesses are pessimistic, they hunker down and wait for the storm to pass.

On the other hand, too much optimism isn’t necessarily a good thing; setting expectations higher than is warranted only sets us up for disappointment and unrealistic growth projections. Still, I think we’d all take the optimism over the pessimism any day of the week, but maybe add a dollop of caution to the optimism.

As we write in the report:

Most of the businesses in the industry have come to realize that it’s a vastly different market for print communications and printing companies than it was before the turn of the millennium—and, indeed, many of today’s company are run by individuals who are too young to remember, or have ever experienced, the old ways.…Print is not a dead market, just a different one.

There is no question that macroeconomic trends will impact print businesses; one very big growth area in the past year and which is expected to continue into the new year is AEC—architecture, engineering, and construction graphics. After the housing crash in 2008 this was almost a moribund market for AEC equipment, software, and services, but as construction has dramatically rebounded, it has brought with it a great, perhaps pent-up demand, so we have seen a lot of activity in the technical printing market, with new units from Memjet OEMs, HP, and Epson, to name a few.

One potential macroeconomic pitfall may lie ahead. Some economists and analysts have raised the specter of another recession looming ahead, if not in 2016 then perhaps 2017. By all accounts the economy has been performing pretty well (although it is not doing as well as it could be) and the Fed has announced that it will be raising interest rates for the first time in almost a decade, suggesting that it deems the economy sufficiently healthy to withstand it. Still, the last two recessions were the results of collapsing asset bubbles (the Internet in 2000 and real estate in 2008) which wiped out vast amounts of wealth which had been driving investment and consumption. We don’t have that situation now, so if a recession doesoccur, it probably will not be as bad as what we’ve already experienced. And there are enough positive forces impelling the industry forward—especially with regard to specialty graphics—that we should be able to remain relatively unscathed should trouble arise.

Our New Dynamics report doesn’t look at wide-format and specialty graphics printing in particular, as our quantitative analyses focus on NAICS 323 “General Commercial Printing.” This certainly includes printing companies that are expanding into wide-format graphics, but “specialty graphics” printing is spread among a variety of different NAICS and it’s a tough—if not impossible—job to aggregate them all and determine who does what. (Our friends at SGIAregularly glean assorted statistics specific to specialty graphics each year, and present highlights of recent research in this space.)

As I wrote last week, we are not in the midst of any great technological revolution vis-à-vis wide-format, just evolution and “filling in the blanks” in the industry and in vendors’ hardware and software portfolios. So, unless something comes from out of nowhere in the next 12 months—which is entirely possible—I would expect 2016 to be like 2015, only more so. That is, look for the continuation of trends that began this year and/or have been building over the past few years. Some specific application areas to pay close attention to in 2016 will include:

Textiles. New printing technologies and improved inks and media are making textile printing in all its myriad forms a very strong and fast-growing market niche. Whether it be latex printing for soft signage, dye-sublimation printing on fabrics, or direct-to-garment T-shirt printing, opportunities abound, especially for short-run, often personalized or customized textile products.

Packaging. Prototyping, highly localized packaging, proliferation of SKUs, and—to some extent—customization and personalization are driving down run lengths and thus these types of packaging applications are ideal for digital printing.

Technical Printing. As I discussed above, the rebounding of housing and construction is driving demand for AEC equipment and services. Although a lot of the equipment is increasingly designed for end users, it has become versatile enough that printing companies can produce other types of materials—such as certain types of POS and display graphics—on the same machines that can print architectural plans.

Ad Specialties. Flatbed UV printing on rigid materials will continue to grow, of course, but so, too, will be printing on found objects. Every time there is a new smartphone release—with different dimensions than its predecessor—there is a renewed demand for custom-printed smartphone cases. That’s just one example. Specialty printing of all kinds is taking off in a big way, and printing these kinds of gift items and specialty objects doesn’t require a massive investment and can still yield pretty good margins.

Software. Finally, I think 2016 will be the year software becomes a major topic of conversation in wide-format printing. It always had kind of been, mostly in terms of color management, but automation is going to have to play a bigger role in specialty graphics printing. Web-to-print is also becoming increasingly necessary.

At any rate, we are looking forward to 2016. WhatTheyThink will be taking our annual holiday hiatus, but look for us in the New Year.