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Why the new Jersey deal makes sense

AUGUST saw the announcement of a major digital printing investment in the Channel Islands that would see national newspapers printed in Jersey and an end to the daily delivery of newspapers by air.The new generation digital printing operation has been brought together by Kodak Ltd and the Guiton Group, publisher of the Jersey Evening Post, which has formed a new company for the venture – KP Services (Jersey) Ltd.

Gary Cullum, publisher and editor of PJ, recently met up with Kodak enterprise systems division president and Eastman Kodak senior vice-president Philip Cullimore and KP Services (Jersey) newly-appointed managing director Jack Knadjian, to find out more about the venture.

GC: Why is a product and service provider becoming a printer? It can't be a business model you favour…

PC: We hadn’t intended to become a newspaper printer. As you know, for the past few years we have been having long conversations with the biggest publishers around the world, not only in the UK but in Australia, the US and as circulations trickle downwards, the case for digitally printing newspapers gets better and better, particularly when you combine any decline with the increased costs of transport, for example, to remote areas or areas where it is difficult to transport products to.

Printing locally should make more sense, especially with more consolidation of a broader number of titles. A digital press makes sense rather than have a large number of plate changes and other costs associated with traditional offset.

One of the reasons we are becoming a printer is that we decided it was probably the quickest way of proving just how good the business model is.

GC: Is Kodak in it for the long tem?

PC: For us there are a couple of things that are going to happen and obviously over time we will be happy if we gradually exit from being a printer. But this first couple of years with Kodak right in the middle of it should give the publishers confidence to know that the people who invented the kit are the same people standing behind it, making it work.

It is a fantastic testbed to make sure we understand how best to optimise ink, how best to run the press to maximise productivity. And establish any strange foibles or workflows that we need to work through to make sure that we get seamless production.

We are going to learn a lot over the first couple of years that we can then go and replicate around the world for other publishers.

GC: How do the Channel Islands’ stats stack up?

JK: This Channel Islands site is unique in that there are almost 35,000 newspaper copies (27,000 for Jersey and 8,000 for Guernsey) consumed by some 165,000 inhabitants. Some newspapers are really thick pagination national newspaper titles with high pagination, such as the Daily Mail. They are fat titles, not small and thin like the average French newspaper.

So it is a model that will cater for print runs from 300 to 17,000 – the largest being the JEP followed by a contract for around 7,000 copies; 35,000 copies on two islands is a serious volume.

We have resilience in two presses and four finishing lines. We have enough capacity to print that volume. We show aggregation, we show high volumes – 17k of just one title – and we show so many things in just one site. This will be a showcase site.

GC: What’s the offset v digital case?

JK: An offset solution would have been right for Guiton for the JEP based on its numbers but it couldn’t have printed the national broadsheets. 

There is no way an offset press could have done what we are doing on Jersey, printing all newspapers in a night. Take the Daily Telegraph on a Saturday, for example. How many towers would you need to print The Telegraph in one go?

GC: How long has this deal been in the making?

JK: Our initial discussions started around three years ago, which then led to conversations from there on how  to make this happen.

GC: How difficult was it to get all the nationals to sign up?

JK: It's always a challenge if you are entering individual negotiations. There are contracts in place to print 12 national titles plus the JEP. 

GC: What’s the five year plan? 

PC: We don’t have a long term plan to be a printer or in print services, but we are doing this as it is the most expeditious way of proving our model. Our five year plan is to take what Jack’s done here and go replicate it all over the world – probably with other people owning the presses. What we have done here is prove that the model works. 

JK: Not only does it work but we will have running costs and profit in Jersey.

Personally, I think there has been a double reluctance so far – a reluctance that an industry that has been doing roughly the same thing for a hundred and something years suddenly faces huge changes and there has been a  slowness in the decision making process. 

There is fear, a risk as it’s a new technology not well used and you can’t say there are six other people doing it and I’m just the seventh. There is a reluctance, a risk and once you remove the risk because it’s been working for two years and we can show people how much it costs to run and we show them all the other things that go with it, then it can only be strategy reluctance that prevents a large scale move to digital. 

GC: Is Kodak the majority shareholder?

PC: Yes we are. It will become a matter of public record once the company is registered but suffice for now – it is a multi million pound investment. 

GC: Why Kodak and Guiton?

PC: It wasn’t always the case that Guiton and Kodak were in partnership. 

There was an occasion when we went through a competitive position with Guiton about how we were going to solve the problem. And at some point in the process our view became, from our perspective, that doing something with Guiton was the only way to make this thing work. And the question then was could we work with them? I met Claverley group CEO Phil Inman and a couple of board directors and it quickly became clear. I became comfortable that this was a group of people that we could work with.

You never know how things will play out at the outset but the team led by Phil Inman is a group of people  that has the same philosophy that Kodak has got and we shared the common objectives. The chemistry just worked.

GC: Are jobs being created or lost?

JK: Altogether it’s 29 jobs, with some transfer and retraining of existing JEP staff. We have Alan Palin from MNA moving to Jersey as general manager,  three service engineers who will be supporting us from a local company. four people involved in boat transport between the islands and 21 on our workforce.

(PJ: Board members of KP Services (Jersey) Ltd are Phil InmanJack KnadjianJohn Averty, chairman and chief executive of Guiton group, Malcolm Miller, chairman and CEO of the Miller Group, Malta for his expertise on digital printing, and Nick Goater chief financial officer of Kodak Limited.)

GC: Jack, given how long the technology has been in maturing for the news sector, did you ever think you would see the day?

JK: As you know, I did give up. I first had the dream of digitally printed newspapers 12 years and four months ago. I retired, but Phil brought me back. I will be the happiest man alive when this project stabilises, settles down and a profitable model is completely proved.

PC: There is something very unique about our Stream Technology which can produce dots up to 10 times faster than any other technology on the planet and that is the thing that makes it work. 

GC: Will Guernsey have a digital press installed?

PC: That is s question you must ask Phil Inman and Paul Carter in Jersey. It is a business development discussion for Guiton.

JK:  If circulation drops, and drops higher or faster than one might imagine, then it would be logical for one of the Prosper Presses to be moved to Guernsey. The same applies if national copies reduce and you have spare bandwidth on the presses.

GC: What have been the main issues?

PC: I like to think we have become good friends with all those national newspapers of the NPA (now the News Media Association with regional press members of the former Newspaper Society) and with Guiton too.

In any negotiation with so many partners, getting everybody to reach an agreement has been the biggest issue and the unique thing about this project is that everyone has gone into this wanting to reach an agreement but – like so many things and the wide range of requirements everyone has – it has taken much longer to get there. We have had to enter into a contract with each publisher. That’s been the biggest challenge.

JK: The other challenge was in finding a suitable location – the agreed location is the third location that was found. That’s been tough. When we went many years ago there were many warehouses – former video warehouse and European distribution centres. It has been challenging to find the right premises – a 13,500 sq ft warehouse on an industrial estate with no housing around it. The  new print plant is just five minutes by car from the JEP’s own facility at St Saviour.

PC: An inkjet press is all about ink and paper interaction, of saturation, of colour control and  getting that tuned to give you quality that is significantly better than the quality you’ve been used to getting today. But this costs a lot of money so getting that balance between exceptional quality and cost per page – that was quite a challenge, enabling us to get the product right, finding a place to locate the press and getting everyone to agree.

GC: Versamark v Prosper. What are the speed and efficiency advantages of Prosper?

PC: Versamarks last for ever. Malcolm Miller of Malta has had printing units six to seven years and during that period he has missed just one night and that was due to unavailability of a spare part in finishing. These presses just keep going.

JK: Our Versamark is fine for foreign sales rather than domestic sales. And so for the foreign market that type of inkjet press was perfect, making national newspapers available same day in remote places.

But two Prosper presses digitally on those islands will throw up so many more opportunities than a Versamark, which has a much more limited production capacity.

PC: A Versamark costs around 1.5 million dollars. Prosper is somewhere north of three million. But Prosper runs at 300 metres a minute, which is five metres a second. Versamark is 125 metres a minute. So Prosper is wider, faster and better quality, and gives you a minimum 3.3 x capacity of Versamark for only twice the price.

GC: Was it easy to get buy in from Kodak USA?

PC:  This model is completely new to Kodak, equally the newspaper segment has not always been our number one target market for us as an inkjet division. However, the industry trends have made it obvious to us that this is a key market for us – why? Because you have multiple short run variable pages that are otherwise produced with extremely high capital investment. You have increasing transportation costs, you have a quality level that inkjet can easily do. You have all of those things and you can say that actually the newspaper is right up there in my mind with packaging and direct mail as the perfect application for a Prosper press. I’m very supportive of it and more importantly, this has gone all the way up to the Kodak board. Our chairman James V Continenza and our CEO Jeff Clarke have met with the senior publishers within the UK to understand the activity more and there is a real excitement from board level within Eastman Kodak about not only  this project but about how many more similar project we can undertake in the next two to three years.

GC: Where are the lands of opportunity?

JK: An island is an obvious market as there is a need to get national newspapers to that island. 

PC: With Versamark you are limited to small islands, then transport costs are prohibitive. And small islands don't have a press big enough to print all the national newspapers.

JK: But imagine you are in Australia…  you consolidate and you shut down print plants. You then have whole communities without printed newspapers unless you fly them in.

GC: What about newspaper downtime use?

PC: The presses have all day for other work to help meet our costs.

JK: For us it would be extremely interesting to see how easy or difficult it is to find other non newspaper work, books for instance. Newspaper printers thus far have not been successful at that. Don’t forget, we sell the same technology to a book printer that we do to a direct mail centre. It’s a business issue not a technology issue – let’s have another interview in a year’s time.

GC: Will KP Services be employing a salesman?

JK: No. Guiton will be helping us fill the press.

GC: Back up and resilience. What happens if one of the machine fails?

PC: We have the resilience of two presses and four finishing lines and we will have a service engineer, fully trained on duty at all times.

GC: What about larger paginations and national magazines?

JK: The finishing line can fold 144 page tabloids. We will pre-print some sections of weekend newspapers as required.

We are not printing magazines. All publishers are responsible for organising delivery to the islands of their weekend supplements and magazines for insertion with the main publication. They will deliver to us earlier in the week. We are printing on newsprint only.

GC: Why Hunkeler finishing systems? 

PC: We have a good relationship with both Hunkeler and Manroland (Foldline). We are impressed by the new saddle folder from Hunkeler which gives us the right flexibility and automation.

JK: The question is inline or nearline. On Jersey the folders will be nearline – reel to reel printing, then to one of the four finishing lines. The finishing is at 300 metres per minute.

GC: What are the costs per page or per copy of manufacture? 

JK: Less than what they are doing now. Nobody, including the JEP, is spending more money than they were before. In Kodak’s opinion, we don’t believe any publisher local or national is paying more than they were. 

GC: What are the major benefits for Kodak? 

JK: There are multiple benefits for Kodak. It’s a demo centre, a live lab, a fantastic case study to showcase. 

PC: Our preference will always be to find a printer to work with. But in 12 months’ time, even now, Jack can say: this is the business plan, this is the cash flow, this is the capital you need. This is the model that works if replicated. Find a printer and say go speak to Jack because he knows how to make it work.

JK: The JEP is 125 years old. Once we are established what else will we do together? Only time will tell.

 

Copyright Cullum Publishing

            September 2015

 

 

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