PRIMIR Books Study Points to Morphing Industry ModelApril 2009
There are six major industry segments in the book industry accounting in 2008 for 3.0 billion publisher net book copies valued at $35.7 billion. They are: trade, religious, professional, university, elementary/high school (ElHi) and college.
Although factors differ among the various specific book segments, overall the health of the economy and the emerging e-book and/or digital substitutions for books will clearly have a negative impact on book volume. The report concludes that three clear-cut conclusions can be drawn from the study:
• Book content in its present paper form will continue to be a mainstay product through the 2009-2012 forecast period, but at reduced volume levels from the industry’s recent history.
• Book content will morph from being primarily an ink-on-paper product to a multiple media product distributed through a variety of channels.
• Paper books and their key selling outlet, book stores, may have reached the pinnacle of their product life cycle and will emerge from the forecast period on the downside slope of the cycle.
Unlike most other print media, books are a stand-alone product that does not depend upon advertising, or function as a part of a support mechanism for other products. Since the early 90s, U.S. book publishing net unit sales volume has been relatively flat with most ups and downs moderately reflecting fluctuations in the general economy. Industry sales have been buoyed up by blockbuster hits that sell hundreds of thousands, sometimes millions of copies. More limited but steadily growing volume in recent years has come from the small publishers who rarely sell more than 10,000 copies of a title. But the study questions the viability of many of these small publishers as they are challenged by the economic downturn.
Also lurking is the potential of a change in the publisher-bookseller relationship. Currently, the industry’s model is a consignment approach which provides for a full-credit unsold-return privilege.
The traditional consignment business model places the sales and profitability risk with the publisher—the reduced publisher price model shifts the risk to the bookseller; a risk that they had previously declined to take with the occasional exception of a specific title. However, economic conditions and the need to take cost out of the entire book industry system to ultimately reduce consumer prices, may lead to the adoption of the no-returns model. Returns and unsold copies account for over 50% of the print run in some book categories. Thus, a change in the publisher bookseller business model will have a significant negative impact on conventional book manufacturers and their print supply chain. Run length reductions are likely to favor digital printing technology at the expense of offset.
Discussion about e-books substituting for printed books continues as a hot topic. The term e-books encompasses a wide range of electronic files and file readers that have been in development over 40 years including Amazon’s Kindle and the Sony Reader that have seen some recent adoption.
With a murky definition of an e-book, there are no reliable sources for book unit or dollar volume data to use to assess displacement of the printed book. Nevertheless, as the e-book product and its various read-out devices are undergoing development, they are beginning to become noticeable competition for printed books although e-books are unlikely to become serious competition before 2010.
The PRIMIR study forecasts that over the next several years the displacement of printed textbooks by e-books will accelerate so that sometime between 2012 and 2015, the printed textbook market especially, will have virtually disappeared in a fashion similar to what has already happened with dictionaries and encyclopedias.
It is worth noting that in 2009 most high schools and a handful of elementary schools have laptops in daily use by the school’s total enrollment.
In these situations some schools report that up to 50% of books and related learning materials that used to be purchased in print are now being supplied on CDs/DVDs or through downloaded electronic files.
While it will take years for e-books to penetrate all aspects of the traditional print book market, the handwriting is on the wall. The study concludes with the admonition that without exception in every market that has introduced digital substitutive products, the digital product has driven out the analog one. There is little reason to think that over time the same will not be true for books.
In the short term the economic situation will be the prime driver of change in the book industry. In the longer term the continuing development of electronic competition will become the prime driver of major changes in the book industry’s products which will impact on all elements in the graphic communications industry’s supply chain.
The 300-page report “Trends in Books: 2008-2012” will be distributed exclusively to PRIMIR members later this spring.
Contact Jackie Bland, Managing Director of PRIMIR at phone: 703/264-7211 for membership details.