Book Printing Outlook : Riding the Higher Ed WaveDecember 2011 By Erik Cagle
Simply put, the book map is too large to characterize with sweeping generalizations.
Popular perception has the e-book methodically stripping away market share from every publishing segment, but that is simply not the case. The e-reader certainly came into its own during 2011, and virtual books went flying off virtual shelves in a post-holiday 2010 downloading spree. But, according to a study titled “BookStats,” conducted by the Association of American Publishers (AAP) and the Book Industry Study Group (BISG), a lion’s share of the growth is relegated to the trade market, particularly adult fiction.
The study, released in August, is billed as the most comprehensive in the history of the U.S. book publishing industry. It spans the period of 2008-2010. It garnered data from nearly 2,000 publishers, databases and other resources in the areas of trade, el-hi, higher education, professional and scholarly. Among its findings:
Publisher net sales rose 5.6 percent (to $27.94 billion) between 2008 and 2010. Unit sales increased 4.1 percent during the time frame.
The trade market saw a 5.8 percent increase to $13.94 billion since 2008, a figure that is certain to spike, given the 2011 “significant explosion in e-book sales,” notes AAP’s Andi Sporkin. Both adult fiction and juvenile segments experienced consistent annual gains.
E-book growth has been monumental; it represented just 0.6 percent of the trade market share in 2008, a figure that ballooned to 6.4 percent in 2010. Unit sales grew 1,039.6 percent during the three-year period. In adult fiction, e-books now account for 13.6 percent of the net revenue market share.
Higher ed has been nothing short of phenomenal, with its $4.5 billion in net sales representing a 23.1 percent increase since 2008.
El-hi (BookStats refers to it as K-12) registered 2010 net sales revenue of $5.51 billion, a net change of -6.2 percent. However, the entire loss can be attributed to a 12.4 percent decline from 2008 to 2009; the market rebounded from 2009 to 2010 with a 7.1 percent increase. It’s a segment at the mercy of federal and state funding and the legacy state adoption market systems.
The professional segment also flourished, growing to $3.75 billion in revenue for 2010, and a 6.3 percent growth rate during 2008-2010.
However, as 2011 draws to a close, it’s evident that the pinch being felt in the trade and el-hi markets is being felt at the book printer/manufacturer level. Brian Freschi, president of Retail, Books and Directories at Sussex, WI-based Quad/Graphics, points out that the demise of book retailer Borders eliminated a channel responsible for 15 percent of trade volumes in past years. This exacerbated the 7 percent annual decline in independent bookstores during the past decade.
“Higher ed shows ongoing single digit growth as adults return to school in the face of persistent unemployment,” Freschi notes. “However, el-hi shows single digit declines in the face of continued tight state budgets. Individual publishers fared quite differently; some were more successful with state adoptions than others.”
Freschi adds that book imports appear to have flattened as Chinese prices rise, turn times shorten, and concerns about sound environmental and safety policies make domestic production more attractive.
Quad/Graphics embarked on a pair of initiatives to help augment its revenue streams. It increased digital print-on-demand (POD) capacity by more than 500 percent with the addition of one- and four-color digital devices across its network, which bolsters its ability to offer publishers life-of-title support. In addition, Quad offers e-book conversions, providing publisher clients a single point of contact on all formats (particularly beneficial for smaller publishers).
Freschi underscores the impact digital readers are having on the trade segment. Quad estimates the overall digital share stands at around 20 percent, and some best sellers will see as much as 50 percent of their overall units accounted by electronic sales. Freschi senses institutional resistance to change in the education markets; e-books are generally viewed as a value-add.
“E-books do reduce total print sales, but they also make demand planning more difficult for publishers,” the Quad executive notes. “As a result, reprint lead times are dropping. The fall trade cycle has seen a higher peak relative to the summer than in prior years.”
Heading into 2012, Freschi sees more of the same: e-book growth will continue, with more bundling of print and digital formats. Publishers will continue to avail themselves of short and multiple POD runs; e-books also enable targeted niche titles to become economically viable. Newcomers and non- conventional retail sources will help offset the loss of Borders.
For Courier Corp., of North Chelmsford, MA, it’s been a year of mixed blessings, with positive results on balance. On the plus side, higher ed was bustling, with customized college textbooks stoking the flames, according to Peter Tobin, Courier vice president. The religious market proved strong, as well. But, while high expectations were not held for the el-hi sector, it proved to be a disappointment, nonetheless. Texas—one of the nation’s Big Three adoption states—spent the year spinning wheels on its adoptions, causing publishers to temper their orders.
The Borders closure proved to be a surprise and greatly impacted trade publishing, as many observers expected the company to emerge from bankruptcy smaller, but healthier. With liquidators pushing out Borders inventory to second-tier retailers, like dollar stores and wholesalers, a short-term impact was felt by other booksellers, with remainder sales temporarily flooding the market.
A year after debuting its new Courier Digital Solutions (CDS) operation, equipping it with an HP T300 digital inkjet web press, Courier added two more of these presses at the facility. Tobin is very happy with the offset-type quality of one-, two- and four-color books being produced on the T300s. The strengthening of the digital platform is an acknowledgment of the variables that are driving shorter print runs—the Borders demise, custom textbook publishing, publishers’ needs to reduce inventories and obsolescence, as well as consumer caution and the growth of e-readers.
The printer also invested in an additional binding line and sewing capabilities at CDS. In March, Courier made the difficult decision to close its Stoughton, MA, one-color paperback plant. Excess one-color capacity was one of the reasons behind the move, and Tobin points out that all of the products produced there could be manufactured at other Courier facilities.
A stronger economy and improved consumer confidence could provide a real boost in 2012, he relates. It helps to have a presidential election year, which traditionally spawns a bounty of political titles leading up to November. With Borders’ exit, Tobin believes the number of retail outlets has stabilized.
“Publishers have had time to plan for 2012 in terms of inventories,” he says. “I don’t think we’ll see a big dip in 2012 the way we did in 2011. We’ve invested considerably in the ability to produce short-run, custom four-color textbooks for a particular adoption at a particular college, as well as one- and four- color trade books within our short-run, digital inkjet plant. This will allow publishers to produce quantities they’re confident they can sell. That is a good business for us, and will be strong in 2012.”
The el-hi market will continue to be challenged in 2012, Tobin predicts. “The adoptions out there for 2012 are fairly modest. But, there’s a tremendous amount of pent-up demand for textbooks that, during the past two years, have not been purchased due to funding. That will hopefully create more demand that will be met in 2012.”
The 2011 campaign started out promising for Ann Arbor, MI-based Malloy Inc., but a downturn in the second quarter set the tone for much of its duration (though the Texas legislature finally came through in the summer, providing an uptick for el-hi). E-book erosion hurt Malloy’s trade business, and its professional book segment did not meet up to expectations, according to President Bill Upton.
Late last winter, Malloy obtained a new casebinding line. Unfortunately, Upton expects to see more encroachment in the paperback market, and the printer has invested accordingly.
“Trade paperbacks are down more than the trade hardcover segments,” he notes. “In general, our theory is that consumers who were willing to buy the hardcover premium product in the past will be more likely to stick with that product than those who opted for less-costly softcover products. So, we’ve beefed up our hardcover binding capabilities.”
Upton points out that Malloy’s sales initiatives include spotlighting fulfillment services. Warehousing, along with picking-packing-shipping services, “dovetails nicely with our offset and digital printing services from the perspective of publishers, particularly the small- and medium-sized ones,” he adds.
With e-books continuing to make inroads from a trade perspective, Upton says that publishers will focus on maintaining a lean inventory while keeping unit costs down. Thus, providing inventory management will be a considerable part of Malloy’s value proposition in 2012.
While numerous issues slowed demand in the one-color segment, Chicago-based RR Donnelley (RRD) continued to raise the product and service ante to handle the evolving needs of its publishing clientele. Custom publishing and digital printing helped RRD thrive in the higher ed space, offsetting the disappointing el-hi adoption rate.
The religious space enjoyed growth without a significant challenge from the e-altnerative end, while Donnelley’s international platform appealed to clients in the trade, juvenile and religious sectors, notes Ed Lane, president of books and directories.
RRD continues to hold up its end with significant investments in its equipment and technology platform. On the digital side, Donnelley acquired Austin, TX-based LibreDigital, a provider of digital content distribution, e-reading software, content conversion, data analytics and business intelligence services to book publishers and e-reading device providers.
On the digital front, Donnelley rocked the inkjet world with the announcement of its 60˝ ProteusJet press to be installed at its Harrisonburg, VA, facility, with more capacity slated to go online in 2012 (the technology will be expanded to include an integrated softcover binding line and piezoelectric inkjet heads). And, from the content creation and distribution side, RRD unveiled its CustomPoint Solutions Group this past fall, which provides enhanced content creation, management and delivery designed to increase customer revenues and compress costs.
As for what 2012 holds, Lane sees the trade segment growing, led by e-books, best sellers and movie tie-ins. The fortunes of el-hi will ride on state funding, while higher ed may see some erosion from e-books, but should remain stable overall.
“In a world where printed and e-books will coexist, we believe that our broad capabilities reach across the breadth of the supply chain, to deliver solutions that enable the fast, efficient creation, management and distribution of content in a variety of media,” he says. PI