Interview with Richard Boulton of Financial Times

newspaper techniques: Can we start by providing some background? I think I am right in saying that all the printing of the Financial Times (FT) has been contracted out for a number of years?

Richard Boulton: Yes, we sold our last press in 1995. Globally, the FT currently uses 27 print sites, 24 for the newspaper and four for our related magazines. For the newspaper, we have eight sites in the United States, four in the U.K. and Ireland, and five in mainland Europe – in Madrid, Milan, Frankfurt, Brussels and Stockholm. We also print the FT in Johannesburg, Dubai and at five sites in Asia Pacific. They all use traditional web-offset newspaper presses. For the magazines, we now have four sites – Chicago, Hong Kong, Peterborough (in the U.K.) and Krakow in Poland.

nt: How are the sites chosen?

R. Boulton: So far as newspaper production is concerned, it’s primarily driven by distribution costs so obviously we are in the major financial cities. For the magazines, it depends on the product. Our weekly magazine, which is primarily circulated in the U.K. and mainland Europe, is printed in Peterborough since it has to be produced to quite a tight time scale. However, with our larger format A3 magazine called ‘How to spend it’, we print in three regions – the United States, Asia and Europe – since it is not quite so timely and so we can drive down costs. For example, we have just started printing at Donnelley’s plant in Krakow.

nt: What about digital printing?

R. Boulton: Some four years ago, we undertook a project in South Africa. We wanted to start printing there but didn’t have sufficient volume for offset. So we went with the digital solution from Océ. That worked extremely well. In fact, to some extent, it was the victim of its own success since the circulation grew to such an extent – to about 2,500 copies – that we had to move to offset.

I think there are four keys to the digital printing of newspapers. They are product size, cost, colour and speed. Of these, the primary one is price point, much of it depending on the economics of offset printing locally.

With digital printing, the cost is pretty much the same anywhere since the local economics don’t actually factor that much in the overall cost. If you install a digital machine in South Africa, the costs are not that different to the same machine in New York or Barcelona or wherever.

However, in the offset world, there is a higher proportion of labour in the cost and so there can be a vast difference between the cost of printing a newspaper in, say, Tokyo, as opposed to Johannesburg.

In Johannesburg, by moving to offset, we were able to halve our costs and, at the same time, produce four times the number of copies. So, unfortunately for Océ, we went from printing 2,500 copies, which cost us ‘x,’ to printing 10,000 copies, which cost us half of ‘x’. It therefore completely blew the digital printing away.

One of the problems with the Océ machine is that it uses electrophotography. This means that you are looking at toner which is incredibly expensive; to produce a copy of the FT you are talking about 30 pence just for the toner. Also, the toner’s particle size has to be incredibly well defined, making it hard to manufacture. In fact, there are only two manufacturers globally, which is another problem.

So I think, if there is going to be a winning digital process for newspapers, it is likely to be inkjet. At the moment, inkjet ink is about 125 euros per litre, but I have been told that by working on the printer and ink technologies, this could come down to 25 euros per litre. That would be a dramatic improvement.

It will still probably work out at around 10 pence per newspaper, but it would be a third of the cost of toner. This would mean that a newspaper would cost just over 1 euro per copy. The problem is that we need it to be less than half of that.

Currently, no FTs are printed using this type of web-fed digital technology. However, we are continuing to talk with Agfa, Kodak, Océ, IBM and anyone else who is working in this space since we have a range of markets where we supply, say, between 1,000 and 2,000 copies. At the moment, we are printing the copies offset and flying them in since it is more economic than to print them locally. We need the cost to be around 40 euro cents per copy to make it worthwhile.

However, I cannot see any newspaper company these days installing such a machine what with the decline in circulation, ad revenues being under pressure and people seeing the Internet potentially as the way forward. It is all about how we transition our products and our revenues to the brave new world of Internet delivery. So in terms of anyone investing in heavy metal, I think the chances are slim.

Nor do I think that there will be much call for such machines for international production if manufacturers are looking for three or five year deals and are only interested in installing a machine in a location if the publisher is basically prepared to fund it. It would be a different proposition, if they convinced a portfolio of publishers to get together.

nt: You have been promoting this idea for some time in order to make the economics of digital printing more realistic. Why hasn’t this happened?

R. Boulton: I think it is an issue of scale. One of the problems is that newspaper circulations, at least in the U.K., are relatively large. If you have somebody dealing with, say, 700,000 copies a day, printing 300 copies in city X in, say, Estonia, it does not appear on their radar.

We are all resource constrained companies so the circulation guy more naturally migrates to managing a wholesaler who is taking 20,000 copies a day than spending his time thinking about how to produce 100 or 200 copies.

However, I do believe that there is a good business opportunity if someone was prepared to go down the outsourcing route, taking care of all the international part of the business for a number of newspapers using web-based digital machines.

I am slightly disappointed that Océ has not done this. They are pushing the Digital Newspaper Network, but any facility has to have an instant payback. In other words, they are investing significant sums in the technology and the product, but I would like to see investment in the marketing area.

The NewspaperDirect model is much better in that essentially they have put the cart before the horse. They have basically gone out and sold the concept, and are building the system, the publishers and the copies alongside that.

nt: So do you use any type of digital printing to produce the FT?

R. Boulton: What we are doing is using NewspaperDirect. It has this great global footprint and pumps hundreds of titles a day through its system, outputting them around the globe using an Internet site, a PC and an A3 format printer producing photocopier grade quality which, for a newspaper, is fine.

The newspapers are typically sold through hotels, cruise ships and private aircraft. We use the system in specific areas. For instance, we use them in South America quite a bit. We also use them in a few other selected places such as Alaska and Hawaii.

From our point of view, it is quite straightforward. We just supply them with the feed. They can print the newspaper wherever we have specified and we receive a royalty per copy printed. In other words, they take care of distributing the newspaper through their network, and the printing and paper costs.

We also work with NewspaperDirect for specific events. For instance, during the G8 Summit in St Petersburg last July, for security reasons, the Russian government shut down the airport and railway stations. This meant that there was no way we could get newspapers into the city. We therefore did a specific deal with NewspaperDirect, whereby it printed about 1,000 copies a day for us during the conference, making around 4,000 copies in total.

I can see us doing more with NewspaperDirect over the next few years, expanding our partnership further around the globe. As the printers do not run particularly fast, you are probably talking in terms of up to maybe 10 to 30 copies a day scenario, whereas with the web-based type machines you are into the thousands. However, there are particular markets where we might look to print, say, 30 copies in a city.

nt: What about delivering newspapers through mobile devices? Do you see this as having an effect on digital printing?

R. Boulton: The view we take is that we are publishers and what we are seeing is effectively a fragmentation and a change in the channels to market.

The traditionally printed newspaper is just one channel to market for our content. The digitally printed product is another.

We also have a product which we call our e-edition. This is effectively a pdf on-line which we use mainly in the education market in the U.S.

Since college students don’t like paying for newspapers, rather than supplying newspapers to American business schools at highly discounted rates, we supply them with the e-edition, which effectively has the same feel as the printed newspaper but is on-line.

Then we have the .com formats: our web-site, ft.com, is a channel for our content and mobile devices will be another.

In the future, I think there are likely to be more products coming down those more electronic channels, but it will still be our FT comment/analysis and high value content that will be coming along the different pipes. In other words, we will have a spectrum of channels to market.

nt: Finally, based on your experience, do you have any advice to offer other newspaper publishers?

R. Boulton: I would suggest that they outsource the whole of their international business. It offers a great opportunity but it is not straightforward and compared to the core, it is relatively small.

For many newspapers, their international business is a complete distraction. It is therefore not run effectively. If it was to be contracted out to someone whose sole concern was international printing and distribution, it would receive much more focus, time and effort.

They would also be able to bring a variety of publishers together. If that happened, then digital printing offers a great business opportunity.

The interview was conducted by Ifra correspondent Caryl Holland





Page first published: 21.12.2006