Taking Advantage of Market Disruption in Book Publishing Taking Advantage of Market Disruption in Book Publishing
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Book Publishing Business Taking Advantage of Market Disruption in Book Publishing Taking Advantage of Market Disruption in Book Publishing If you believe there is no disruption within the book publishing business, following are excerpts from press releases that came out as the industry was gearing up for Book Expo of America 2011: April 14, 2011 May 9, 2011 RR Donnelley’s role as the printer, binder and In a sign of the growing maturation of its In the rapidly changing publishing industry, distributor of HarperCollins’ conventionally publishing program, Amazon has sold trade lines between different parts of the business produced titles. paperback rights to 10 titles in its Encore and are blurring like never before and that could Crossing imprints to Houghton Mifflin Harcourt. not be more clearly seen than in last week’s May 19, 2011 separate announcements from Amazon and After increasing at a 169% rate in the first two May 4, 2011 from Bookish, the soon-to-be launched online months of 2011, e-book sales rose at a relatively With digital content generating 18% of total book platform that has the financial backing modest 145.7% clip in March, to $69 million, revenue in the first quarter of 2011, Simon of Simon & Schuster, Penguin, and Hachette according to the 16 publishers who report & Schuster reported that profits more than Book Group. Amazon’s fall launch of Montlake figures to AAP’s monthly sales estimates. doubled and sales rose 2% to $155 million. Romance pushes the company deeper into the publishing business than it has ever been, while May 4, 2011 the launch of Bookish gives publishers their first destination site where titles from all publishers Similar to Hachette Book Group and “ iPads and other tablets will be will be available for sale. Simon & Schuster, e-books led the gains in the possession of about 20% at Harlequin in the quarter. E-book sales in May 12, 2011 of college students by the fall of North America rose C$7.1 million, offsetting a 2012,” says Xplana director of C$1.7 million decline in print retail sales and HarperCollins Publishers and RR Donnelley a C$800,000 decline in print sales through its … announced their intent to enter into a research, Rob Reynolds. “That's direct-to-consumer business due mainly to a breakthrough global supply chain agreement. a huge impact. It’s the fastest drop in sales via online retailers. Digital sales The agreement is the first of its kind for a major growing technology that we've accounted for 13.6% of total revenue in the general trade publisher. Under the terms of the quarter, or about C$15.6 million. proposed agreement, beginning in November seen in education.” 2011, RR Donnelley will handle the fulfillment Reynolds predicts e-book sales May 5, 2011 of all HarperCollins new releases from its Harrisonburg, VA facility. Additionally, beginning HarperCollins had lower book sales in the third growth in the higher education in July 2012, RR Donnelley will handle fulfillment quarter ending March 31, according to parent market will double over the next of all frontlist and backlist titles for Zondervan, company News Corp.’s 10-Q filing with the SEC. four years to $1.5 billion by 2015, a division of HarperCollins Publishers. RR In a statement issued by HC, the company Donnelley will also provide global print-on- and account for 25% market share. said e-book sales in the quarter accounted for demand (POD) services to HarperCollins, 19% of sales in the U.S. and 11% worldwide. enabling most titles to be printed anywhere HarperCollins holds publishing rights. The agreement also renews and expands 2 Taking Advantage of Market Disruption in Book Publishing As these and other announcements indicate, published in the U.S. By comparison, self- available online tools. In addition, products there are two separate and distinct changes publishing and re-publishing of out-of- like the Espresso Book Machine enable the that are taking place within publishing today copyright materials created more than creation and production of these titles within that will have a significant impact on how 2,776,260 new titles in 2010. In fact, the retail environment, eliminating all of the content is created and comes to market in the according to Bowker, the exclusive source of costs associated with inventory, shipping future. The two changes revolve around the ISBNs in the U.S., the nontraditional book and oversupply. traditional model of book publishing and the publishing space grew 169% in 2010 from Add to this the challenge of alternative rapidly emerging model for self-publishing. the approximately 756,000 titles released in delivery systems such as e-readers and the Both of these changes affect the manner and 2009 to the 2.8 million referred to above. This impact growing sales of e-books are having speed in which content comes to market and growth is actually understated as it reflects on the overall mix of books sold, and you the change in the distribution model that is only those titles where the author purchased clearly have an industry in the throes of critical to their success. an ISBN number. There are also thousands of massive disruption. titles released every year on self publishing Traditional book publishers are faced with the platforms like the Espresso Book Machine®, This document discusses the state of the challenge of both creating products that will where no ISBN is ever requested or issued. book publishing industry, and the impact best meet the needs of their customers and that the structural change it is undergoing authors while at the same time reinventing The power of this model is clear. Anyone will have on publishers, book retailers and their model for profitably going to market. can become a published author with the book printers. The current publishing value chain carries a significant cost burden that is associated with the print, ship, store and fulfill order paradigm Growth of Self-Publishing and Nontraditional Titles 2,776.3 that has dominated the industry for close to 80 years. This model is burdened with a waste factor of 30 to 50% depending on the publishing market segment. The emerging self-publishing model is even Nontraditional more significant. It opens the door for literally millions of content creators to produce books Traditional at an economical price. Consider this: there 714.4 are only about 316,000 traditional titles 274.4 284.5 271.8 289.7 288.4 316 123.4 21.9 2006 2007 2008 2009 2010 Taking Advantage of Market Disruption in Book Publishing 3 Book Publishing: A Market in Transition The combination of the impact of the Internet, the transition from analog to digital and the recent economic downturn has accelerated the rate of change impacting the book publishing and printing markets. Add to that the growing control consumers have over content—both its creation and its consumption—and their changing behaviors, most book publishers and printers have come to the conclusion that the business models that worked so well for them in the past are no longer effective. Although change breeds challenges, it also breeds opportunities. Savvy publishers and printers are looking to new technologies to create a more effective business model and a more efficient supply chain for a more profitable future. 4 Taking Advantage of Market Disruption in Book Publishing Taking Advantage of Market Disruption in Book Publishing 5 Structural Changes Abound According to research firm INTERQUEST1, the book publishing industry has historically weathered recessions well, and the most recent case is no exception. The U.S. Census Bureau estimates that retail bookstore sales dropped slightly less than 1% in 2009 compared to the prior year, while overall retail sales declined 7.5%. As the economic turbulence began to settle, retail sales surged in the last six months of 20102 resulting in an uptick of 6.7% for the full year, compared to 2009. Retail book sales, however, continued their decline, down 1.5% from 2009, from $16.732 billion to $16.497 billion, according to the United States Census Bureau. 1 Digital Book Printing: Market Analysis & Forecast (2010–15), INTERQUEST 2010 2 Retail Sales Surged 6.7% in 2010, The Associated Press, 6 Taking Advantage of Market Disruption in Book Publishing January 14, 2010 The chart below shows retail bookstore It should be noted however, that by negative impact from the Borders bankruptcy, sales have declined four out of the last five combining the sales of e-book units with combined with other events. years. In its recent forecast, INTERQUEST printed units, the total number of books being For many years, Barnes & Noble and attributes this to the dual impact of sold has increased year over year. This leads Borders battled it out as the top two tightening of consumer wallets and a general to the conclusion that e-books may be having U.S.-based brick-and-mortar retailers. A clear decline in readership of printed books. As this a positive impact on either attracting new differentiator between the two, however, was transition continues, in order to survive, retail readers or expanding the reach and spend the fact that Borders had no digital strategy, bookstores, which have been a community of traditional readers. But they are also while Barnes & Noble has both its Nook gathering place for years, will need to having a devastating impact on traditional e-reader and an active digital book sales reinvent themselves with products and book retailers. channel, and it is also playing a growing role services that enable them to continue to These changes have left retail channels in specialty markets.