News & Trends: How to Adapt to the Shifting Market
"We’ve almost become accustomed to an uninterrupted flow of bad news,” said Michael Healy, executive director of the Book Industry Study Group (BISG) at the organization’s sixth-annual Making Information Pay event, held May 7 at the McGraw-Hill Auditorium in New York City. Falling sales, shrinking margins, closing bookstores and job losses are among the negatives facing the industry, noted Healy. “Some attribute this to wider economic conditions,” he said. “But that implies the book industry will return to normalcy as well,” when the economy recovers.
Others believe that while there are economic factors at work, social and technological forces also are at work. The question for the book industry, Healy said, is: Are we looking at “temporary/transient changes or profound, long-term changes?”
This question formed the foundation of this year’s event, themed: “Shifting Sales Channels and What Publishers Are Doing About Them.”
A View of the Industry
Leigh Watson Healy, chief analyst of research and advisory firm Outsell Inc., shared findings from recent research Outsell conducted with BISG for this year’s annual BISG “Trends” report.
In general, she said, “flat” is the new “up,” and book publishing revenues will be flat in 2009.
Watson Healy also highlighted characteristics common among companies “doing well” this year:
- Market share/brand leaders;
- Innovators and boutiques;
- Publishers of real-time data and workflow solutions (i.e., “publishing at the point of need”) especially in the professional publishing sector—for example, content about how to better manage a law practice fed to lawyers at their desks;
- Having a “digital DNA is absolutely essential to today’s successful publishing company,” she stressed.
Despite current economic challenges, investments are not entirely on hold. According to Watson Healy, the most common investment areas are:
Sales and marketing;
- New product development;
- Technology (we are at the “digital tipping point,” she said, and companies need technology to help them manage this transition);
- Staffing, primarily in editorial and IT;
- Process and infrastructure redesign (aiming to “change the things we do that are holding us back,” she said);
- Global expansion.
Most publishing executives surveyed by Outsell expect the industry will return to growth by Q2 2010.
Facing Threats Head On
Mike Shatzkin, founder and CEO of consultancy The Idea Logical Co., worked with BISG to survey 250 publishers and conduct 15 interviews in preparation for Making Information Pay. He presented highlights from the findings, focusing on threats facing the industry and what publishers are doing about them.
He first outlined where the industry is seeing decline, namely brick-and-mortar stores, book review media, literacy and large advance orders—though the silver lining, he said, is that large advance orders mean large returns, so if orders decline, returns will likely decline as well.
Overall, he said, “Smaller publishers … did not see things as … bleakly as larger publishers.” The segments mentioned most frequently as “slipping” were travel guides, hardcover books and trade paperbacks.
Some areas of growth, he said, are:
- Children’s books;
- E-books—“with growth rates of 100 percent annually expected for awhile,” though still a “very small base [of sales]—1 percent”;
- Amazon.com sales;
- Direct-to-consumer sales;
- Custom publishing sales;
- Digital content sales;
- Mass-merchant channel, which is “growing, but troubled.”
The “sobering reality,” said Shatzkin, is that “what is diminishing is much more substantial than what is growing,” and the revenue potential from the digital realm is still an unknown. Publishers, therefore, are making significant changes, including:
- Eliminating printed catalogs;
- De-emphasizing sales conferences;
- Reps’ focus beyond bookstores;
- More focused lists (moving toward verticalization);
- Reduced travel, reduced presence at trade shows;
- Broader participation in social networking;
- Cutting traditional print advertising.
In order to adapt, Shatzkin said publishers need to:
- Build stronger direct channels;
- Embrace digital sales and distribution;
- Increase custom publishing efforts;
- Analyze mass-merchant and non-book-outlet buyers who don’t live and breathe books;
- End or curtail returns;
- Get closer to authors and customers;
- Develop alternate revenue streams;
- Tighten controls on spending and overhead.
Who Is Reading Books?
Kelly Gallagher, general manager, Business Intelligence, for R.R. Bowker and chair of BISG’s research committee, presented insights into “Who Is Today’s Book Consumer?” “We really have not done a very good job of getting to know our customer,” he said. Customers today are “evading point-of-sale data and buying all kinds of places,” he said.
Gallagher shared a number of statistics, including:
The average age of today’s book reader is 44, but 50 is the average age of the most frequent book buyer.
- 58 percent of readers are women; 42 percent are men.
- Women purchase 65 percent of books.
- 50 percent of Americans ages 13 and older bought a book last year.
- 41 percent of all books purchased are by buyers earning less than $35,000/year.
- $10.08 is the average price paid for a book last year.
- 31 percent of in-store or online purchases are impulse buys.
Gallagher noted that “seniors are leading the way in the digital market.” They are the first group of consumers moving beyond the personal computer for digital content, he said—they are the largest users (by age group) of the Amazon Kindle.
He pointed out that last year, for the first time ever, online became the No. 1 sales channel (with 23 percent of the market), surpassing large-chain bookstores (22 percent).
The key, said Gallagher, is for publishers to watch their consumers closely to know how to reach them. Also, he stressed, “People born before 1966 are our primary consumers. … We’ve got to find a way to grow younger
readers.”
Gallagher seemed to summarize the message that prevailed throughout the event: “The new model is not going to be the old model, but there are blue skies ahead.”
- Companies:
- Amazon.com
- The Book Industry Study Group
- Places:
- New York City