ODS the offset to digital acceleration

Research released by Keypoint Intelligence earlier this year indicates that 98% of print service provider (PSP) respondents are moving page volumes from offset to digital, of which 82% are seeing a moderate to significant shift. Their reasons for this shift include:

• Short run demand

• Larger crossover points in favor of digital

• Customization

• Digital productivity and printing delivery speed

• Increase of digital print shops seeking to retain as much volume and control in-house

Figure 1: PSPs Are Shifting Pages to Digital

We will explore some of these factors in this report, but the preference for digital printing is clearly growing. This is backed up when PSPs were asked about their future equipment purchasing intentions. Nearly a third of US PSP respondents stated that they had ruled out offset, focusing entirely on digital—which presents a big growth opportunity for digital print equipment vendors. Some of the reasons for them to become a 100% digital print shop include:

• Short run and customization increased demand

• Hard to find offset skill operators

• Not being able to compete on price with large offset houses that run economy of scale models:

This forces them to focus on a printing product that is higher in value and utilizes the better flexibility that digital printing offers.

• Outsourcing offset work at a lower price to a PSP for the trade, if needed

Figure 2: PSP Equipment Investment Plans

Larger production digital printing systems have brought digital printing into volume bands that are competitive with offset longer print runs. While crossover points vary among PSPs (and there will always be exceptions), our analysis using our online Crossover Point Estimator tool highlights that it is far more cost effective to print a digital printing job on a large production color digital printer today compared to 14 years ago.

In the chart below, “old large production digital printing” includes A3/B3 electrophotographic devices such as the Xerox iGen, Kodak Nexpress, or HP Indigos 7 series. These devices are based on a $500K capital investment (6% financial interest), $1,500 monthly service, $0.025 A4 running costs, and 550K average monthly print volumes (AMPVs). “New large production digital printing B2” are based on a $850K capital investment (8% financial interest), $4,000 monthly service, $0.01 A4 running costs, and 2.5M AMPVs.

Figure 3: Old Digital Printing Press Versus New

The cost crossover point was historically far lower, which did not help digital printing receive more print volumes from offset. For instance, our analysis shows that (in 2010) the crossover for large production color digital printers could have been around 2,000 A4 prints whereas, today, it has shifted to 10,000 A4s¹.

In the following chart, “old digital printing large production” is based on the same features as the previous chart. “Current digital printing large production B2” is based on $850K capital investment (8% financial interest), $4,000 monthly service, $0.01 A4 running costs, and 2.5M AMPVs. “Old offset costs B2” is based on 10 shifts per week (8 hours per shift), 12-minute make-ready, and 300 sheets of paper waste. Plates cost 30% less and paper waste cost 23% less than current costs. Financial interest at 6%. “Current offset costs B2” is based on 10 shifts per week (8 hours per shift), 12-minute make ready, 300 sheets of paper waste, and current costs with financial interest at 8%.

Figure 4: Crossover Points Shifts in Time

Crossover points could be even larger in terms of A4 color impressions when producing binding applications such as catalogs, magazines, or books. For example, a 64-page A4 catalog could have an economic crossover point based on a specific PSP profile of about 1,800 units between B2 offset and B2 digital printing, which means 115,000 A4s being favorable for digital.

Selling high value specialty print products at a higher price emerged as the top strategy for PSPs to grow their business in the next three years. Specialty printing focuses more on value than large print volumes job runs; therefore, digital printing plays a stronger role in within that strategy.

Figure 5: PSPs strategies to grow their businesses

Additionally, it is great news to see in that 95% of print buyers in the following figure will invest in specialty printing products, which means that—even though price is a strong part of their purchasing criteria—specialty printing (and, therefore, value) is very much in demand again. This creates a great opportunity for digital printing to grow. It is also good news to see customization leading the specialty printing trend, which can be only done with digital printing technologies.

Figure 6: Print Buyers Interest for Specialty Printing Products

The rise of customized marketing materials has been a major factor in the shift towards digital. Consumers today expect and enjoy tailored and more relevant experiences; variable data printing (VDP) and specialty printing can help marketers and brands achieve this. Customization is a growing trend that accounts for 25% of marketing budgets (based on our 2022 US Print Buyers Purchasing Trends Primary Research). We also see direct mail is predicted to grow by 6% from 2022 to today, with most common run lengths for direct mail in the digital printing range. There is good opportunity for digital printing to keep gaining market shares from offset.

More recently, a different study (2023 Vertical Visions research) reported that, of the brands that used direct mail to reach their customers, a strong majority (86%) were customizing it for more targeted messaging. Some examples of customization include changing images or modifying text for different groups of recipients. On average, those respondents that were creating more targeted direct mail estimated that about 60% of their total direct mail campaigns included customization, which is higher than our other research mentioned before. Not surprisingly, most of the brands (97%) acknowledged that customized campaigns delivered significantly or moderately higher response rates.

Raw Material Costs

While digital color printing has become more cost-effective over the last decade, offset printing costs have surged. Since the COVID-19 pandemic, the average costs for raw materials such as paper and aluminum have risen by 23% and 30%, respectively. This directly impacts offset printing expenses and contributes to the diminishing crossover points between traditional offset and digital printing.

Additionally, higher interest rates have made capital investments in offset equipment more expensive; this also applies to large production digital printers. However, advancements in offset technology are helping to mitigate these challenges. For example, improved make-ready times have made the production process more efficient, and significant strides have been made in reducing waste and costs.

Labor Challenges

A significant concern is the broader economic labor market—particularly the aging workforce and skilled labor shortages. Offset printing is particularly affected due to its more technical complexity and reliance on manual processes, especially around older presses. It requires highly skilled operators for press make-readies and consistency quality/color output during a job and/or repeat jobs. Regular maintenance, efficiency optimization, and troubleshooting also need experienced technicians. The steep learning curve required for these challenges and the fact that less people go to school to become an offset operator makes it difficult to quickly replace retiring workers. This leads to a knowledge drain that impacts long-term operational capabilities.

In contrast, digital printing involves more automated, flexible, and user-friendly systems that are easier to train on, maintain, and operate—reducing the dependency on skilled labor.

Sustainability

Digital printing is generally more environmentally friendly compared to offset, which can generate waste through make-ready processes, and has the potential for overproduction. Digital printing, with its ability to print on demand, reduces waste by producing only the required quantities. This, in turn, reduces energy usage. This also aligns with the growing emphasis on sustainability in business practices. Additionally, the process of plate manufacturing consumes lots of energy and is not environmentally friendly.

Product upgradeability helps PSPs protect their capital investments by extending a machine’s potential lifespan, avoiding the need to continually purchase new presses. This also reduces its environmental impact in terms of waste, transportation, and remanufacturing. For instance, Ricoh is committed to the recyclability and upgradeability of its products. Products within the PRO series and high-speed continuous feed PRO VC series are upgradeable in various ways, including speed, an optional fifth color, and substrate capabilities.

The transition from offset to digital printing has been an ongoing trend, but recent digital printing technology advancements that increase productivity and lower costs, the larger rising costs on the offset side, as well as the growing demand for shorter runs and specialty printing (which includes customization) are building momentum. While the transition poses challenges, such as the initial investment and the need for training, the benefits for PSPs are substantial.

However, despite its challenges, it is evident that offset printing is not on the verge of obsolescence. Offset continues to hold a strong and relevant place in the market for larger run lengths. As digital printing steadily makes in-roads into its territory, offset vendors are working hard to bring products and technologies to the market that may slow down the transition as well as cement their place in the market. Leveraging artificial intelligence (AI) is one essential way for OEMs to improve their press technology—making them more user-friendly, efficient, and cost-effective.

Of course, the fundamental consideration for individual PSPs comes down to their customers’ demand and which technologies are better suited to provide greater value to their customers, while trying to differentiate themselves from competitors.

Want to discuss offset to digital?