Paper Cuts

If you’ve ever dreamt of launching your own magazine in South Africa, and then done a bit of research as to how to get the thing printed, one point becomes evident— It is going to cost you much, much more than you ever thought it would.

The print and paper industry in South Africa operates on four distinct tiers: paper producers, paper merchants, printers and publishers. The paper producers are Mondi and Sappi, they grow the trees, in twelve year stints (like a good single malt), pulp ’em, mill ’em and turn ’em into paper. This works well for newspapers, but for high-end magazine use, many publishers feel there’s not enough of a choice from the local manufacturers and that the importers offer a greater range of the quality stuff.

Pat Legge of paper merchant First Paper explains: ‘When it comes to text and cover grades the variety and quality is a lot better internationally. In terms of normal uncoated paper the quality is as good in South Africa. As for the coated, the quality is slightly better from overseas.”

Yet just as many publishers feel Sappi’s quality is fine, and that pricing is the only issue. Here the local giant has been taking a bit of flak lately.

‘I know that there is some sensitivity around this,” says Andre Oberholzer, Sappi’s corporate affairs and communications manager. ‘If the international climate is weak and the rand is quite strong, so you can get imports, and everybody runs after the imports. The moment it runs the other way, everybody runs to Sappi and says we shouldn’t be increasing our prices. It seems to be that the people forget that they are working in an industry that is price sensitive. And you can’t have your cake and eat it.”

Oberholzer points out that the importers use Sappi’s prices as a benchmark, and that it’s not sustainable in the long run to undercut the prices the market will bear. ‘Within the whole print channel everybody has a role to play and must make a living. If we had overplayed our hand, then there would have been a reason not to use us. But we are still here, and that speaks for itself.”

So the market also bears paper merchants – like Nampak, First Paper and Peters Paper – who source different grades of paper from all over the world and provide it directly to the print industry as required.

‘Paper merchants buy in bulk, store it and resell it to the printers in smaller increments. The industry is about distribution and storage,” says Legge.

The printing industry itself is largely dominated by two big fish: Paarl Web and CTP. These leviathans control 85% of the commercial web and publication gravure printing market in South Africa.

Between them, Paarl (Media 24) and CTP (Caxton) have the high bulk magazine printing, web and gravure industry in their pockets. Toni Venturini, publishing manager for repro house and publisher Hirt&Carter, and a print industry expert, says that ‘big publishers will only make use of web or gravure printers, so that narrows the market considerably. You either have the Paarl stable or the CTP stable, those are the two major players in the industry.”

Moreover, both Caxton and Media 24’s print operations are big enough to source and store paper directly from the producers, thereby cutting out the paper merchants and their mark up. The two groups are also intensely vertically integrated, owning everything from a veritable smorgasbord of magazine titles to the printing presses and the distribution networks and infrastructure that gets the publications onto the shelves and into the punter’s hands.

Whereas smaller publishers’ costs snowball as they outsource pre-press, printing and distribution functions, Media 24 and Caxton run very tight ships by owning the various stages of production and keeping overall costs down and profits up. This vertical integration has allowed them to invest in streamlining the publishing and printing process with the latest technology, hardware and software.

Media 24’s pre-press manager Neville Poulter explains: ‘We took the people who do the pre-press (scanning, retouching and assembly) out of a factory environment and put them in editorial. Our designers can talk directly to these guys, whereas previously the process was quite complicated. We’ve saved an incredible amount of time by doing that.

‘We have a fairly complex back-end scenario using servers that unite the workflow from design to pre-press, which in turn gets put on a server and goes directly to the printers. And then that goes straight from disc to plate. The whole thing is vertically integrated. In the past everything ran late, and that became a norm and there was a high level of anxiety and stress attached because obviously the on-sale date doesn’t change. In the new workflow we haven’t actually missed a deadline, the guys don’t have to work these long hours, we’ve done away with the shift system and it’s just made a far more pleasant working environment.”

Of course the benefits of vertical integration do not just manifest in pleasant working environments and easy deadlines, they also make the business a lot more money. It is fairly safe to bet that even though Media 24’s magazines, printing presses and distribution infrastructures operate as independent companies, they operate at close to cost when serving their sister companies in the chain. This keeps overheads low and creates the biggest bottom line for the corporation, and is a very different scenario to that of the independent publisher, who pays top dollar at every stage.

At the same time Media 24 and Caxton, being the biggest players, offer their printing and distribution services to the industry at large. Which means that many of their ‘in-house’ magazine and newspaper titles are in direct competition with independently published titles that rely on the Caxton and Media 24 printing and distribution services. It creates an interesting tension in the industry.

Associated Magazines, publishers of leading women’s magazines Cosmo, Femina, Marie Claire and O, are intimately affected by the situation. They maintain a shareholding relationship with Media 24 for their print and distribution needs, but for all intents they are the largest independent bulk magazine publishers in South Africa.

Julia Raphaely, Associated Magazine’s business director, reckons vertical integration can often distract publishers from their core business. ‘We’re an independent, family run business. We choose to specialise in our core strength, which is publishing magazines. Sometimes in a company you find printers taking on magazines to feed the printing press, because it is a contribution to overheads. And that is when you get magazines that are not published with the same passion or focus that a core publisher will have.”

But Associated Magazine’s huge print runs on magazines like Cosmo necessarily dictate that they have to go with either Caxton or Media 24 because there are no other printers in South Africa that can handle their volume.

‘I can honestly say that in terms of printing we have a good relationship with Paarl,” says Raphaely. ‘It is a mutually beneficial relationship and they are good partners. But I always think competition is good. I would never say it is good that there is so little competition in our critical areas of printing and distribution.”

For the smaller print runs (up to about 50 000) there are several independent printing presses such as Ince, Ultra Litho and Printability, as well as printers associated with Caxton and Media 24 – like Paarl Post and BM Litho – that compete for the publisher’s hard-earned Titos.

Toni Venturini reckons these smaller printers provide a little bit of competition to the CTP/Media 24 block. They have some advantages of their own. ‘If one of the machines at CTP Web or Paarl Web go down you lose 50% of the productivity – whereas with a small printer, running 5 or 6 small presses, you feel you are in safer hands.”

Printability in Durban are fast becoming one of the most proactive and competitive small to medium printing operations in South Africa.

Their client, Atoll Media’s publisher Craig Sims, says: ‘My printers do a great job. I find printers to be radically pro-active and sympathetic to the reality of publishing, and that is simply that we never get our shit together and we are always late. I have never met a printer who does not accept that as part of the territory. I don’t have anything negative to say.”

But Leslie Heeger of Printability laments the slackness of the industry at large. ‘One of the biggest impediments we have is the state of the material we receive and are expected to work with. If everyone were like Atoll it would be great. We’re totally digital and we don’t receive film, but many of those putting together the material to supply it print ready are not sufficiently informed – so when we get it, we find so many mistakes and errors.”

Yet surely the impetus rests with the publisher?

‘No. It doesn’t work that way. We are in the service industry. We go back to them and report that these things are wrong and they say please fix them. And there are a lot of companies out there that don’t understand, and are not fully informed as to what is required when one says ‘print ready material’.”

Venturini concurs: ‘There is a sense of service here in South Africa that is really great in terms of printers who work for publishers. Yes, there is very little competition but everybody is always afraid of losing business. Also, new small printers are becoming players, they’re not as big as the big ones but they want to be players.”

So despite the lopsided shape of the print industry when it comes to bulk printing, the overall relationship between publishers and printers is strong.

‘Publishers won’t change printers as quickly as other industries like advertising,” Venturini continues. ‘Our print prices are quite competitive in terms of web printing and the quality is also quite good, comparable to any magazines in Europe.”

But regardless of South Africa’s global print price comparability, printing remains a very costly business. Magazine cover prices rarely cover their printing, production and distribution costs. Cover prices are necessarily subsidised by advertising sales. What this means is that your most influential player in the magazine publishing industry is, most often, not the reader but the advertiser.

‘I think all the consumer magazines are not making money off the cover price,” explains Julia Raphaely. ‘The problem is that we’re not able to get another revenue stream from cover prices because of the cost of distribution, plus you’ve got very high printing costs. So it’s all good and well to sell an added value supplement, and it’s great for the reader. But you can also end up, if you don’t do your costing right, just bringing in more business for the printer and not bringing in more revenue because the costs of producing it are so high.”

Necessarily what happens is that magazines go all out to attract advertising to cover their costs and increase profitability. They might increasingly refuse to run edgy content that could challenge the status quo, or offend advertisers in any way. So, like Darth Vader, publishers tend to the dark side, with content morphing into ‘added value’ and editorial into ‘advertorial’.

In this scenario, readership is seen only as a way of justifying more advertising spend. And the lack of competition in print is one more reason why the publishing industry is forced to nurse on the nipple of advertising.