Review & Outlook

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The Evolution of Monotype Imaging (TYPE)

2 July, 2014 by Ben O'Brien in Commentary

The Economist has a story today on digital typography, the design of fonts for the web and other digital applications. The article features one of our small cap stocks Monotype Imaging (TYPE):

Few people use more than a couple of the hundreds of typefaces that come installed on their computers. Fewer still realise that the revenues from licensing those letters go to some of the media industry’s great survivors. The firms that design, own and sell fonts have lived through successive waves of technological change, first as computerised printing replaced metal type and then when much reading moved to screens. Now websites and apps are shaking up their business once more.

Monotype, an American firm founded in 1887, is the industry’s biggest. Its customers, who are mostly technology companies and designers of printed material and websites, pick from a catalogue of 18,000 fonts, which include classics such as Arial, Times New Roman and Helvetica as well as more unusual ones such as Officina (which we use in the captions and on the contents pages of our newspaper). In its early days it sold ingenious machines that enabled Edwardian printers to cast lines of type in seconds; now, as well as the right to use its fonts, it sells software that renders text on screen. … Printer firms and computer-makers have long paid for the right to use fonts in their gadgets; such licensing deals are getting more common as manufacturers add flashy displays to car dashboards, televisions and even white goods such as hot tubs.

Though the stock has pulled back this year along with most other small caps and technology stocks, Monotype is a great example of how a company can adapt and reinvent itself even as technology thoroughly disrupts its entire industry. The next challenge for Monotype is the rise of free online fonts which could disrupt the company once again. Still though licensing of fonts in Monotype’s Creative Professional division, which includes, is growing strongly. Revenue was up 16% last quarter, suggesting their is still a lot of demand for premium fonts. Monotype has also expanded into other businesses such as sophisticated software for presenting the fonts and corporate marketing and design consulting, demonstrating that the company can still adapt and grow.