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Click go the sheets boys! – Andy McCourt’s ReVerb

Tuesday, 16 July 2013
By Andy McCourt
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Andy McCourt weighs in on a second round of debate about the local printing industry’s digital click-charge model following a spate of lively reader comments last fortnight in response to his ReVerb article, ‘Give the click the flick’. This time around, McCourt highlights how it can often be horses for courses when it comes to the click-charge model race.

“Click go the shears boys, click, click, click
Wide is his blow and his hands move quick
The ringer looks around and is beaten by a blow
And curses the old snagger with the blue-bellied joe.”

Apologies to all the genuine shearers out there but this traditional Aussie bush ballad could easily be adapted to the pace at which digital click-based printing is thrusting into our industry – with sheets instead of shears.

Two weeks ago I had the audacity to challenge the click charging model in the digital printing sector in what was originally entitled: ‘Is it time to give the click the flick?’ Publishers being what they are, and quite rightly so, condensed this to ‘Give the click the flick’ – it makes more sensational reading. But the debate is still there, naked and raw.

I have never said click-based charging where the digital press supplier gets a slice of the printer’s profit is wrong. With the pun unashamedly intended, I’m not saying it’s ‘fleecing.’ It’s a business model offered and it’s up to the printer to negotiate a rate on the basis of his volume if he wants to; or buy equipment on a non-click basis of paid-for consumables and service if he prefers and is able to drill down to his real costs.

Evangelists, disciples and atheists

Nevertheless, the article produced some emotive commentary, which I will divide into three categories:

EVANGELISTS: True believers in the click, mostly suppliers who of course benefit from it because each month hundreds of thousands of dollars turn up based on metered usage of their equipment. It is in the best interests of suppliers to keep their machines in production, and so service is included, and this takes some worry off the shoulders of the customers.

DISCIPLES: Customers who have done well out of forging close relationships with suppliers on a click model. They don’t have to worry about accurate costings – it’s all done for them and hidden inside the click rate and, so long as they can maintain or increase monthly volumes, they roll over to a new machine every 2-4 years. So long as prices per A4 (still the standard sheet area for resale calculation) do not drop below the click+paper amount, they make profit and are happy, so “it’s not broke and we don’t see why it needs fixing.”

ATHEISTS: Believe in the separation of power between Church (brand of supplier) and State (the wider printing industry). Will not accept suppliers taking a chunk of their profits with digital anymore than an offset vendor taking a cut of every offset sheet. Prefer to finance equipment, pay for consumables, parts and service and calculate their own cost of production, which should be lower than the click+paper model.

There are also the Agnostics; a sort of hybrid between Disciples and Atheists. They have majority offset or flexo (if labels) production where a click is unthinkable, but also run a digital division where they accept click charges because it is too much trouble not to, for the small amount of production it represents.

It is apparent to all in western developed economies that digital production is growing at a rate where it will eventually catch up to or overtake offset in the number of pages produced. When is a matter of conjecture. This is occurring at both micro (many installations of lower-volume digital presses into SMEs and print departments) and macro levels (high to very high volume digital, mostly inkjet webs).

Shift happens

With this shift in our industry come new challenges in costing. Marco Boer, VP of US research organization IT Strategies, recently commented: “Even those who have bought and are running these ink jet production printers on a daily basis may not fully understand their costs; all they know is that they are making profit.

I think Boer is right, so long as there is ‘slack’ in the market, demand is rising and profits are being made; who cares what a click is? In the same discussion: “The Pluses and Minuses of Inkjet ROI” initiated and superbly articulated by Xerox USA veep of Inkjet Dustin Graupman here, the issue of ‘co-dependency’ between suppliers and printers comes up.

This co-dependency appears to be the kernel of the issue – at what point is a supplier welcome to be an integral part of a printer’s business and at what point are they like party guests who won’t go home at midnight even though you have your pyjamas on already? Worse still; what if they sleep with your spouse? By that I mean the contentious issue of suppliers becoming printers and competing for accounts that you may already be servicing: it’s happening.

Think about wide-format digital, possibly the most successful sector in the graphic arts right now. The click or usage charge model just doesn’t exist there: businesses buy the presses, buy their inks coatings, service and parts and are in control of their costs and mark-ups. The presses have resale value as used machines because someone else can buy it, run it, and do so on the level playing field of an open market. Most small format digital presses are hard to sell openly as used because, without a re-negotiated click/service from the supplier, they are almost worthless. It’s almost like restrictive trade since only a supplier can put their own equipment back into market, holding all the ‘aces’ of parts, service, consumables and click rate.

We are an industry in change; not just because of technology but also in the way we function at the business level. Certainly, the awful failures of the past couple of years have highlighted the need for a re-think of the way traditional sheetfed offset businesses are run and financed but we should not forget that, for every failure there are several success stories who have quietly held their ground and can now pick up the low-hanging fruit left behind by the failed companies.

With the increased thrust of digital, each business must decide what works best for them. Higher volumes of digital approaching offset might necessitate a re-think of the click model and therefore knowing the real costs – a task made more complex by the myriad variables of digital. I’m working on such a calculation method, and it is indeed complex.

In the meantime:

“ Shearing is all over and we’ve all got our cheques
Roll up your swag for we’re off on the tracks
The first pub we come to it’s there we’ll have a spree
And everyone that comes along it’s, “Come and drink with me!”

2 Responses to “Click go the sheets boys! – Andy McCourt’s ReVerb”

  1. July 16, 2013 at 9:15 pm,

    Fred
    said:

    Hi Andy,

    the debate shouldn’t sound like click is negative and the evil suppliers are the only ones to make profit.
    Click is a combination of consumables, spare parts, service and profit.
    If printers don’t want to pay a click, they will pay for consumables, spare parts and service (incl. profit) as they go.
    Is it really different?
    May be on larger machines but for sure not in the light production segment or for low volume users.

    How does it actually work in Offset printing?
    They pay for consumables, spare parts and service as they go.

    Not really all that different.
    I ask myself, what the fuss is all about?
    It’s not like the margins are as high as they used to be 10 years ago.
    Click has gone down substancially and is reasonably affordable.

    I have an issue wth your wide format example.

    Wide Format is very diverse.
    A basic Canon IPF 8xxx/9xxx is relatively cheap to acquire, all the printer needs is a basic laminator (as the ink is not UV or water resistant, a cutting board and a decent RIP.
    Easily available for under $20k

    No click, that’s right. But ink only from a Canon reseller.
    Gues how Canon re-finances the “cheap” machine (not the reseller, margins in ink cartridges are low).
    I have used Canon only as an example, other manufacturers are not much different.

    There is no resale value on cartridge based wide format printers.
    They usually get run into the ground and get replaced.

    Who buys a 5 year old second hand flatbed?
    Technology is forever changing and there is a need for more colours, faster speed and more versatility to print onto different materials and substrates.

    BTW…. Plan printers (toner and ink) are charged on a metreage basis, so something similar to click 😉

    I hope more people show an itnerest in this matter, as digital won’t go away and it is crucial for all involved to understand where this is going.

    Best regards,
    Fred

  2. July 22, 2013 at 12:28 pm,

    Flavio
    said:

    Why does it seem it’s wrong for a supplier to make a profit on servicing their machines. Would the industry be better served by having multiple suppliers go bust as their margins were unsustainable leaving a whole pile of hardware that is worthless and unserviceable?

    The click model does allow certainty in cash flows and costs, if you presume your income is relative to your throughput.

    The non click model can be frought with danger if a major part fails causing thousands of un budgeted invoice costs, it aslo relies on the user to keep some money aside in anticipation of a scheduled service.

    As always horses for courses

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