WWW.IBISWORLD.COM Book Publishing in the US February 2013 1 Shelved away: Strong competition will continue to weigh down demand for traditional books IBISWorld Industry Report 51113 February 2013 Book Publishing in the US Agata Kaczanowska 2 About this Industry 2 2 2 2 Industry Definition Main Activities Similar Industries Additional Resources 15 International Trade 16 Business Locations 29 Regulation & Policy 29 Industry Assistance 18 Competitive Landscape 18 Market Share Concentration 18 Key Success Factors 18 Cost Structure Benchmarks 20 Basis of Competition 20 Barriers to Entry 21 Industry Globalization 30 Key Statistics 30 Industry Data 30 Annual Change 30 Key Ratios 3 Industry at a Glance 4 Industry Performance 4 4 6 8 Executive Summary Key External Drivers Current Performance Industry Outlook 31 Jargon & Glossary 22 Major Companies 22 Pearson PLC 23 Cengage Learning 24 The McGraw-Hill Companies Inc. 10 Industry Life Cycle 12 Products & Markets 12 Supply Chain 12 Products & Services 13 Demand Determinants 14 Major Markets 27 Operating Conditions 27 Capital Intensity 28 Technology & Systems 28 Revenue Volatility www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com WWW.IBISWORLD.COM Book Publishing in the US February 2013 2 About this Industry Industry Definition The Book Publishing industry edits and designs books. Book publishers also engage in marketing activities and make distribution agreements with wholesalers (IBISWorld report 42492, Book, Magazine & Newspaper Wholesaling). The industry does not include authors (included in IBISWorld report 71151, Performers and Creative Artists) or printing (IBISWorld report 32311). Main Activities The primary activities of this industry are Discovery of authors and stories or other content Editing books Designing book layout and covers Marketing authors and books The major products and services in this industry are Adult trade books Children’s and juveniles’ books Professional, technical and scholarly books Textbooks Other books and revenue Similar Industries 51112 Magazine & Periodical Publishing in the US This industry publishes magazines and periodicals. 51114 Database & Directory Publishing in the US This industry publishes telephone and mailing lists. 51119 Greeting Cards & Other Publishing in the US This industry publishes greeting cards and other products. Additional Resources For additional information on this industry www.bookbusinessmag.com Book Business Magazine www.ibpa-online.org Independent Book Publishers Association www.publishersweekly.com Publishers Weekly www.pubtrackonline.com PubTrack www.suite101.com Suite 101 www.publishers.org The Association of American Publishers WWW.IBISWORLD.COM Book Publishing in the US February 2013 3 Industry at a Glance Book Publishing in 2013 Key Statistics Snapshot Revenue $26.1bn -3.0% Profit Annual Growth 08-13 Annual Growth 13-18 $1.5bn Market Share Exports $1.7bn 4 2 2.8% 2,658 Businesses Revenue vs. employment growth 10 5 Per capita disposable income Pearson PLC 10.4% % change % change Cengage Learning 6.4% The McGraw-Hill Companies Inc. 5.4% 0 −5 −10 −15 0 −2 −4 Year 05 Revenue p. 22 07 09 11 13 15 17 19 Year 06 08 10 12 14 16 18 Employment SOURCE: WWW.IBISWORLD.COM Products and services segmentation (2013) Children's and juveniles' books Key External Drivers Per capita disposable income External competition Technological change Number of college students 7.5% Demand from book stores Professional, technical and scholarly books 18.2% 28.5% Textbooks Adult trade books p. 4 18.6% Other books and revenue SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COM 27.2% Industry Structure Life Cycle Stage Revenue Volatility Capital Intensity Industry Assistance Concentration Level Decline Medium Low Low Low Regulation Level Technology Change Barriers to Entry Industry Globalization Competition Level Light Medium Medium Medium High FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30 that help save money in the long run and create a profit cushion for publishers. Consequently. including a 4. the decrease in consumer spending had already been hampering revenue growth. During this time. publishers will likely increase investment in internet and other media outlets to directly interact with consumers and focus on boosting e-book sales.1 billion. IBISWorld estimates that the Book Publishing industry’s revenue will contract at an annualized rate of 3.8% per year to 2. Meanwhile. increasing input costs have partially offset the savings from restructuring.8% decline in 2013. Nonetheless. In response to the decline in demand and pressure from lenders.658.IBISWORLD. major company Pearson is looking to merge its Penguin book publishing division with Random House. another prominent publishing house. publishing houses have been restructuring. As a result.0% during the five years to 2013 to $26. The resulting drop in consumer demand for physical books has thus led many downstream bookstores to close. The rise in digital publishing is expected to propel the number of companies in the industry upward. However. consumers generally read books for pleasure or for educational purposes. When bookstores order additional books to restock their shelves.9 billion in 2018. the number of industry companies is anticipated to have decreased at an average rate of 0. sales of traditional books will continue to support the bulk of the industry during the next five years. such as digital printers that recycle ink and paper.8% of revenue in 2013. E-books are estimated to generate 26. Therefore. a drop in demand from bookstores results in less demand for book publishing. they have also led consumers to substitute more online content for books. As a result.8% per year to $29. While technological changes have facilitated the proliferation of digital book development and retailing.COM Book Publishing in the US February 2013 4 Industry Performance Executive Summary The Book Publishing industry has restructured during the past five years in attempts to adapt to evolving consumer preferences. Still. a change in total household consumption expenditure can influence spending on books. publishers receive more revenue from the higher sales. The Book Publishing industry lost millions of dollars when Borders. For example. underwent two successive bankruptcies and liquidated its stores in 2011. Therefore. but demand from traditional books will remain revenue. the industry is expected to maintain a profit equal to 5. This driver is expected to decrease in 2013. revenue is forecast to increase at an average rate of 2. and the industry is anticipated to continue consolidating.WWW. Per capita disposable income Books are a discretionary household expenditure.8% of revenue by 2018. Key External Drivers Demand from book stores Bookstores demand a significant share of books once they are published and printed because they are the primary retail outlet for bookselling. These measures have included streamlining operations by taking advantage of new technologies. When . a major book retailer.2% of industry revenue in 2013 and are projected to grow to 32. Over the next five years. the oversupply of books that were already printed has hindered downstream demand for industry products and prevented a rebound in Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Publishers will invest in e-books. Textbook revenue is expected to make up the largest share of industry revenue in 2013. digital devices were introduced to the market. During this time.IBISWORLD. will skyrocket at an annualized rate of 73. Demand from book stores 0 −2 % change 0 −2 −4 % change 06 08 10 12 14 16 18 −4 −6 −8 Year Year 06 08 10 12 14 16 18 SOURCE: WWW. a higher number of college students results in more revenue for the industry now and in the future. External competition As more people connect to the internet. a segment of the Book Publishing industry. providing consumers with new platforms to access and store books. Number of college students Students are required to purchase textbooks throughout their education. representing a potential threat for the industry. according to consumer studies and the US Census Bureau.WWW. Technological change is expected to grow in 2013. IBISWorld expects that the revenue of the E-book Per capita disposable income 4 2 Publishing industry (IBISWorld report OD4579). For example. they increasingly use it as a substitute information source because of its convenience and ease of use. Consequently. Increasing household use of the internet may also reduce leisure time. This driver is expected to increase in 2013. Technological change Technological developments have boosted demand by enabling book publishers to compete with other digital media. External competition is expected to increase in 2013.COM . This driver is expected to increase in 2013. as opposed to traditional books that publishers release. taking up time otherwise used to read books.4% in the five years to 2013. individuals who complete college generally read more books. In addition. providing a potential opportunity for the industry. individuals are more apt to purchase books to read in their leisure time or to gain information.IBISWORLD.COM Book Publishing in the US February 2013 5 Industry Performance Key External Drivers continued disposable income increases. the company’s shutdown dented demand for publishers. This includes a 4. many people returned to school or chose to continue their education. Therefore. has slumped. During this period.2% jump in 2009 followed by a 2. Because employment fell during the recession. This is largely because the trade-book market.1% increase in 2010 (latest data available). the diversified nature of the industry’s . consumers frequented libraries more often because they sought to spend less. a move that directly reduced industry revenue. which includes fiction and nonfiction books. Borders was a major bookstore chain that had more than 600 locations nationwide. Diversity is key The industry’s slow decline has forced book publishers to reevaluate their activities. According to the Institute of Museum and Library Services. During this time. Because other retailers and consumers purchased books on sale from Borders. After years of declining profit and falling stock prices. Yet despite this bright spot. industry revenue is projected to decrease at an average annual rate of 3.COM filed for Chapter 11 bankruptcy in February 2011 and delayed or restructured some inventory payments owed to book publishers. talent seekers and industry contacts to contract and promote content. Borders could not find an acceptable buyer and was forced to liquidate its assets. library circulation increased significantly. though. postsecondary textbook sales have helped mitigate the industry’s decline. with college enrollment increasing at a 1. Publishers are relying on textbook sales. the company Industry revenue 6 4 % change 2 0 −2 −4 Year 05 −6 07 09 11 13 15 17 19 SOURCE: WWW.WWW.0% during the five years to 2013 as a result of drops in consumer spending. decreasing overall demand for new books.1% five-year annualized pace. In the education segment. Publishers have justified higher pricing with add-on internet services. At the university level. a shift to cheaper digital books and the liquidation of former industry giant Borders. however. hurting demand for the Book Publishing industry. trade-book publishers are printing on cheaper paper and investing in cover art and book design to better appeal to consumers. including a 5.COM Book Publishing in the US February 2013 6 Industry Performance Current Performance As disposable income remained stagnant during the five years to 2013. a federal support agency. consumer and bookstore demand dropped and stayed low.IBISWORLD.1 billion. particularly during the past five years. which have become tools for publishers to reach out to consumers directly. publishers have experienced declines in elementary and secondary school markets because states have slashed budgets for books. higher enrollment has propelled sales in the increasingly profitable textbook segment.8% decline in 2013 to $26. As a result. To make matters worse.IBISWORLD. in turn. Publishers have also spent more time finding content that appeals to wider audiences. largely because governments have slashed budgets for primary and secondary school books. making it easier for authors to self-publish and self-promote. some companies that underperformed prior to the Great Recession were forced into bankruptcy and now must meet tight benchmarks to satisfy lenders.658 firms.8% to 2. have been introduced over the five-year period to ease e-book Though the internet has given publishers new markets.COM Book Publishing in the US February 2013 7 Industry Performance Diversity is key continued products saved it from experiencing severe declines during the recession. both aiding and hurting industry firms. Education is becoming an interactive market for college students and younger students. Pros and cons of technology Technological developments have especially influenced consumer demand during the five years to 2013. it has also increased competition functionality. Additionally. major publishing companies have brought outsourced functions in-house to save on thirdparty costs and to streamline operations. boosting individual book sales and payments to publishers. Devices developed specifically for reading e-books. such as Amazon’s Kindle. Publishers have responded to shifting consumer needs by offering cheaper books that are printed in lower quality. thus taking away business from book publishers. Such diversity is helping the industry maintain a degree of profitability. e-books and video books have emerged as more interactive mediums for all kinds of literature. Companies are also printing smaller quantities of books to downsize stockpiles and decrease storage costs. external competition has increased because literature is increasingly available through online channels.8% of revenue in 2013. With this new growth in technology. For example. While e-book sales are expected to . Publishers are also adapting new systems and technologies to account for lower print demand and the fast-paced growth in the digital books segment. these adjustments are already saving money for companies that adopted them early in the five-year period.WWW. with the number of employees expected to fall at an average annual rate of 3. with recycled ink and paper. with people using computers more often for homework and in-class assignments.IBISWORLD. bookstores have tried to keep up by offering e-books on their websites. Technology is helping operators by providing new markets for books and by encouraging interactive book development. however.9%. As a result. Likewise. as are the various restructuring activities the industry has undergone. Cost-cutting initiatives have also led to a decline in employment over the past five years. and by publishing books in both paperback and e-book formats. The number of companies in the industry is estimated to decline during the five years to 2013 at an annualized rate of 0. A significant amount of content is published in digital formats. Meanwhile. Format and financial flexibility Companies that are flexible with book formats and financial decisions are better able to adapt to meet consumer demand. Some of these changes have required investment in green technologies and new machinery. industry profit (earnings before interest and taxes) is expected to total about 5. where the publisher sets the book price and earns a percentage of revenue from each sale. the current emphasis on higher education will likely increase competition in the job market.4% to $6. These demographic trends will likely boost textbook and trade-book sales in the next five years.8 billion in the five years to 2018. Many book publishing companies like Pearson have agreed to an agency model with e-book stores like Amazon. in 2014. increasing at an average annual rate of 2.IBISWORLD.8% as rising disposable income posts positive returns to publishers for physical and digital products alike. with revenue growth projected to be slow.4% in the five years to 2018. IBISWorld forecasts that revenue for the Book Publishing industry will experience moderate volatility over the next five years. Book demand expected to rise During the five years to 2013.COM Book Publishing in the US February 2013 8 Industry Performance Format and financial flexibility continued account for about 26. revenue is expected to grow 2. According to the US Bureau of Labor Statistics. This arrangement gives publishers and e-book stores an incentive to promote books. using recycled materials and relying on digital printing.7% annualized growth in industry employment through 2018.8% to $29. Industry Outlook Improving consumer sentiment is expected to generate higher demand for books during the five years to 2018. leading to 0. Industry to cut costs Still. This trend will further contribute to rising enrollment in postsecondary education. This technology also lowers the initial costs that book publishers face. decreasing barriers to entry and causing the number of companies entering the business to rise. this percentage is minimal compared with the investments that some book publishers are making in the technology. record-high enrollment rates in higher education will likely lead to higher spending on textbooks and trade books in the next five years. especially because . Wages are expected to grow at an even faster rate as they recover from their current low point.3% of 2018 revenue. profit margins are projected to contract during the next five years to about 5. growth in employment and wages will likely offsetting cost reductions. IBISWorld projects wages The industry will cut costs by publishing online and using digital printing will increase at an average annual rate of 4. enrollment rates for adults have risen as people returned to school following layoffs or because they could not find suitable employment. As a result. better-educated people tend to read more. the industry will continue to cut costs by publishing online. Likewise. Initially. Increased demand for books is also expected to accelerate along with the economic recovery. Since 2008.9 billion during this time. Digital printing allows companies to drastically reduce the need for and costs of storage space. As a result. Nonetheless.2% of industry revenue in 2013. IBISWorld estimates that the number of college students will grow at an average annual rate of 1.WWW. IBISWORLD. and this share is projected to rapidly expand at an annualized rate of 7. please refer to IBISWorld report OD4579 E-Book Publishing. many smaller bookstores cannot afford to invest in these technologies.2% of industry revenue in 2013. While some stores like Barnes & Noble have expanded into the digital realm. (For more information about e-books.8 billion) by 2018.) . It is also leading to new agreements with e-book vendors. Publishing companies will continue to invest in this new format and create interactive versions of e-books to justify higher prices. IBISWorld estimates e-book sales currently generate 26. Making the switch Many bookstores will be hurt by greater demand for e-readers and e-books. the convenience of e-books only becomes greater. though it will boost direct sales through More publishers will invest in e-books and create interactive versions to justify higher prices publisher websites. As bookstores become more specialized or close down completely. which are already cutting into their sales. In addition.5% to reach 32. Timepoor customers increasingly use e-books since they can store all of them on one small (though costly) device that is easy to transport and access. further detracting from brick-and-mortar bookstore revenue. This cycle is expected to disrupt publishers’ distribution agreements in the next five years. drawing in an even larger audience. The growth in e-book sales will continue to rise as the economy recovers and consumers’ free time shrinks as they return to work.WWW. These consumers usually wield above-average spending power.COM Book Publishing in the US February 2013 9 Industry Performance Book demand expected to rise continued students are more likely to buy and read books in their spare time. Popular tablet devices like Apple’s iPad are contributing to e-books’ popularity by providing a convenient way for the books to be stored and accessed. IBISWorld also anticipates that the convenience of storing e-books will contribute to an increased volume of sales. IBISWorld forecasts an increase in paperback book sales over the period as the market for books expands and consumer sentiment improves with the strengthening economy.8% of revenue ($9. developed technology and markets KeyFeaturesofaDeclineIndustry Revenue grows slower than economy Falling company numbers. large firms dominate Little technology & process change Declining per capita consumption of good Stable & clearly segmented products & brands 15 10 QuantityGrowth 5 Many new companies. level of economic importance stable Maturity QualityGrowth High growth in economic importance.IBISWORLD. substantial technology change 0 BookStores PaperMills –5 Magazine&PeriodicalPublishing Book.COM Book Publishing in the US February 2013 10 Industry Performance Life Cycle Stage Spending on physical books is slowly declining This industry has a stable number of enterprises.COM . weaker companies close down.IBISWORLD. with an expected annualized increase of only 13% between 2008 and 2018 Technology is increasing competition and enhancing some industry products %Growthinshareofeconomy 20 Company consolidation.Magazine&NewspaperWholesaling Database&DirectoryPublishing BookPublishing Decline Shrinking economic importance –10 –10 –5 0 5 10 15 20 %Growthinnumberofestablishments SOURCE: WWW.WWW. minor growth in economic importance. the industry is anticipated to contract as a share of the economy. Technologies are also enabling book publishers to automate systems. The average per-capita consumption of books is constant. including e-books. the Book Publishing industry is considered to be in decline and is expected to remain in this stage of its life cycle during the five years to 2018.WWW. As a result.IBISWORLD. is forecast to decrease at an average annual rate of 0. . Therefore. publishers must adjust pricing and develop new products. which measures the industry’s contribution to the economy.6% annualized 10-year rate to 80. GDP is projected to increase at a rate of 2. employment is projected to decline at a 1. Revenue for book publishers is suffering as a result of consumer substitution to other resources and reading materials that are becoming readily available online.7% in the 10 years to 2018. which indicates that demand for books is relatively steady. especially as technology advances contribute to increased competition. Moderate technological development is not expected to offset the stagnant nature of the industry during the five years to 2018.1% per year on average.COM Book Publishing in the US February 2013 11 Industry Performance Industry Life Cycle This industry is Declining As a result of slow revenue growth and a shift in technology. according to the Bureau of Labor Statistics. Despite publishers’ best efforts to compete.729 in 2018. While industry value added (IVA). Ink Manufacturing in the US Ink is a major input in the printing of books. Magazine & Newspaper Wholesaling in the US Book wholesalers are a distribution channel. technical and scholarly books 7. Book Stores in the US Bookstores are a major retail market. They include online textbooks and primers for all schooling levels and are the highest value-added industry product because of the educational value of the content. Online subscription and download revenue has further bolstered the textbook segment. Paper Wholesaling in the US Paper is a major input in the printing of books. the market for primary education textbooks has declined due to restricted state spending on these materials. college textbooks have made up an increasing market share because of growth in enrollment rates.5% Textbooks Adult trade books 18.6% Total $26. and paper mills supply paper to book printers.5% of revenue.COM 27. 71151 Products & Services Products and services segmentation (2013) Children's and juveniles' books Professional. On the other hand. Educational Services in the US Government educational departments and schools recommend and purchase books. . Performers & Creative Artists in the US Publishers employ or purchase content from authors and ghostwriters. Printing in the US Printers supply services to book publishers.IBISWORLD. and paper wholesalers supply paper to book printers.COM Book Publishing in the US February 2013 12 Products & Markets Supply Chain KEY BUYING INDUSTRIES 42492 45121 61 Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations Book. generating about 28. During the five years to Other books and revenue SOURCE: WWW.5% 18.2% 28.2% 2013. KEY SELLING INDUSTRIES 32212 32311 32591 42411 Paper Mills in the US Paper is a major input in the printing of books.WWW.1bn Textbooks Textbooks make up the largest portion of industry sales. and ink manufacturers supply ink to book printers.IBISWORLD. Along with other media.IBISWORLD. Other Other books make up about 10. This dampened the share of industry revenue from children’s books.6% of industry products in 2013. They include general reference books and religious books. the segment has been on the rise since reaching a low in 2010. this segment is expected to keep earning a similar share of revenue as disposable income and school budgets recover. However. During the next five years. Other services make up 16. Adult trade books Adult trade books constitute about 18. Scholarly. As disposable income has recovered. Demand Determinants The demand for books is influenced by how consumers perceive the entertainment or educational value of a book compared with other media.COM Book Publishing in the US February 2013 13 Products & Markets Products & Services continued The textbook market as a whole has increased about 5. which expanded as a share of revenue during the past five years as a result of their success.2% of industry revenue. professional and technical books Scholarly. which include nonfiction books written for a professional or advanced audience in a specific field like medicine. generate about 18.WWW. This market segment has consistently contributed to Book Publishing industry revenue and is expected to hold steady during the five years to 2018. When consumers tightened their budgets during the recession.6% of the market share. marketing for self-published authors. they bought less expensive books. however. as discretionary spending dipped due to low disposable income during the recession. Due to poor business conditions during the recession. Children’s and juveniles’ books Books written specifically for and by children (up to age 18) make up 7. The content and design of books are also factors that consumers use to judge their perceived value. personal representation and editorial and graphic design commissioned by independent authors. The internet has facilitated the independent publishing process. professional and technical books. The segment declined since 2008. This product segment is expected to grow more slowly in 2013 as business and consumer sentiment improves. companies and entrepreneurs have spent more money on such books to educate themselves instead of attending more expensive seminars or hiring professionals. spurring related book . Sales largely depend on school budgets and consumer income.0% relative to other book publishing products during this time.6% of industry revenue.5% of total industry revenue. Other consumers switched from traditional children’s educational materials like books to computer software and online resources. the industry does provide support services to independent publishers. such as the internet. which is not included in this industry. which declined during the past five years and led to a slide in this product segment. they include services like digital publishing. the internet has increased consumer recognition of celebrities and characters. As costs continue to decrease. Consumer sentiment and personal disposable income determine the amount of money people spend on books. the service segment for independent publishers is expected to grow through 2018. have become a staple revenue generator for most major publishers over the past five years.8% SOURCE: WWW. Americans who are older than 15 spend an average of 20 minutes per day reading. The sale of educational books is affected by grade school and university enrollment rates and government policies. digital printing and online distribution have decreased book costs and increased the convenience of books. Family incomes can affect this rate. putting downward pressure on consumer demand for new books. meaning that women are more likely than men to read books and purchase them for others. This trend is significant since many fiction and nonfiction publishers cater to females.9% Consumers aged 45 to 64 24. Bowker’s PubTrack also has broken down channel market share for where books are bought. according to the Bureau of Labor Statistics. However. according to the Bureau of Labor Statistics. because many adults purchase textbooks and children’s books for their kids. According to business intelligence firm Bowker PubTrack. like Pamela Anderson. these advancements have also increased pirated copies of books and developed used book markets. Celebrity authors. which is the latest . Americans spend an average of 20 minutes per day reading. the 65-and-older segment has grown as baby boomers approach the age range.1% 11. As a result. The literacy rate also determines demand for books.IBISWORLD. Especially for children’s books and textbooks. spending on books by age group does not reflect these statistics.0% of trade books are read by women and 65. this market segment has increased while all other age segments have declined.8% Consumers aged 14 and younger Consumers aged 30 to 44 7.COM Book Publishing in the US February 2013 14 Products & Markets Demand Determinants continued sales.1bn Government organizations 17.3% Consumers aged 20 to 29 6. Major Markets Major market segmentation (2013) Other Consumers aged 15 to 19 organizations 5% 4. Over the past five years. 58.COM Consumer book purchases are broken down by age range.IBISWORLD. while people older than 75 read an average of one hour per day because they have much more leisure time. According to their 2011 mid-year figures. Still.4% Consumers aged 65 and older 22.0% are bought by women. Adults between the ages of 20 and 74 spend less than 20 minutes per day reading. The amount of time that people spend reading also influences their demand for books. E-books.7% Total $26. though not as strongly as education.WWW. publishers market to the readers and buyers of various book types. This segment grew 9.6% share of domestic demand. small publishers often sell the rights to domestic titles to foreign publishers. In 2013. industry trade volume is expected to decrease gradually as online products become increasingly adopted abroad. nearby brick-and-mortar bookstore.IBISWORLD. Industry trade balance 3. During the next five years. International Trade Level & Trend xports in the E $ million industry are Medium and Decreasing Imports in the industry are Medium and Decreasing Many major publishers have publishing and printing facilities abroad.3% of book sales. This demise was accelerated with the Borders bankruptcy and liquidation. Online sales of books and e-books are not considered in trade data. mass merchandisers sold about 5.COM Book Publishing in the US February 2013 15 Products & Markets Major Markets continued data available. which left many consumers without a convenient. therefore.000 1.COM .3% in the first half of 2011. about 37. sold the remaining 12. Other bookstores made up about 15.0% of books are bought via e-commerce. IBISWorld estimates that exports will contribute 6.000 0 −1. All other channels.IBISWORLD.000 2. they do not contribute as much to the international book trade. including book clubs and schools.5% of revenue and imports will make up a 6.000 Year 05 Exports 07 09 11 13 15 17 19 Imports Balance SOURCE: WWW.000 −2.2% of books and warehouse clubs sold about 2.3% of books.3% since mid-2010 and has since over-taken large chain bookstores that now sell 27.9% of books.000 −3. In addition.WWW. WWW.9 West HI 0.5 CO 3.4 WA 0.3 5 CT 6 NJ 7.4 NM 0.0 AL 0.0 New England Great Lakes MidAtlantic MI 2.7 PA 3.IBISWORLD.6 1 2 3 NY 18.4 AdditionalStates(as marked on map) 1 VT 0.7 WV VA 1.3 9 UT 0.9 5 4 6 7 8 WI 0.2 3 MA 3.4 CA 6.8 OR 0.1 NE 0.4 LA 0.4 KS 0.2 GA 0.IBISWORLD.3 Southwest TX 4.3 OH 7.0 KY 0.1 FL 2.2 10.0 ME 0.COM Book Publishing in the US February 2013 16 Products & Markets Business Locations 2013 West AK 0.3 MO 2.2 AR 0.5 0.8 OK AZ 0.6 MS 0.3 NumberofEmployeesbyRegion(%) Lessthan3% 3%tolessthan10% 10%tolessthan20% 20%ormore SOURCE: WWW.6 4 RI 0.4 IN 2.5 Southeast 1.1 8 MD 2.4 7 DE 0.COM 2 NH 0.2 1.8 Rocky Mountains ID 0.4 MT ND 0.3 .5 WY 0.2 IL 6.1 West NV 0.1 MN SD 0.5 9 DC 0.4 0.4 TN SC 0.1 NC 1.0 Plains IA 1.1 0. employing 18. During the past five years.IBISWORLD. However. the industry’s presence has decreased most rapidly in the MidAtlantic region. Overall.7% of industry workers. Because these offices are relatively inexpensive to operate. especially in New York and New Jersey. The localization in highly populated areas also cuts costs on book delivery. a relatively larger increase in urban locations is expected as bookpublishing companies return to city centers where they conduct business more conveniently.9% and 7.4% of total industry employment. respectively. Smaller publishing offices are dispersed throughout the country in order to keep track of local press relations and to seek out talent.COM IBISWorld expects employment in every region to gradually increase during the next five years as the industry recovers from recession-related lows. these two states still make up 18.IBISWORLD. where they house most staff and printing facilities and where university publishing houses are located. they were more likely to remain open over the recessionary years. enabling publishers to earn greater profit.6%. the Mid-Atlantic region employs 32.COM Book Publishing in the US February 2013 17 Products & Markets Business Locations The Book Publishing industry has transitioned toward a more dispersed business landscape as independent and online book publishing have become increasingly popular. population 40 30 Percentage 20 10 0 Rocky Mountains Great Lakes Mid-Atlantic New England Southeast Southwest Plains West Employees Population SOURCE: WWW. Employees vs. Book publishers are concentrated in several major cities throughout the United States. . Likewise.WWW. The Great Lakes region follows. COM Book Publishing in the US February 2013 18 Competitive Landscape Market Share Concentration Level Concentration IBISWorld estimates that the top four players account for 26. During the past five years. Two of the top four players have significant textbook publishing segments. is highly concentrated.0% of revenue because .WWW.9% to 77. writers are paid a set amount in advance. when the top four companies generated about 28. Average industry profit.8% of total revenue. In 2013. as publishers streamlined the production process by adopting new technologies. Paper is another major purchase made by the publishing industry. affecting both the input and downstream demand for books. average profit is expected to decline as a share of revenue as lower-margin. contracted or licensed from authors.9% of revenue. Purchases Purchases make up about 60. In the five years to 2018. Ensuring pricing policy is appropriate Appropriate pricing can help maximize revenue and clear stocks (and minimize returns). Content comprises about 30. The textbook publishing segment of the industry. is about 5. This concentration level is similar to the concentration in 2008. and only 4.5% of revenue. paper.2% of revenue. Production of premium goods/services Publishers can incur significant losses on products that fail to meet expected demand. The most important for this industry are: Control of distribution arrangements It is important for publishers to understand and gain control of distribution channels. Management of a high quality assets portfolio It is essential that publishers develop a portfolio of books that are in demand by continually seeking out and promoting talented writers. Depending on the type of arrangement. It is a fixed cost of about 20. Establishment of brand names Strong branding can attract authors and consumers. 82. though textbook publishing profit is greater because of lower advertising costs. receive dividends from sales or have a combination of both. These textbook segments currently generate a higher proportion of industry revenue due to growing college enrollment rates and partly because of a decrease in Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization in this industry is Low sales of trade.977 employees in 2013. scholarly and professional books. employment is anticipated to decrease at an average annual rate of 3.0% of industry revenue.IBISWORLD. and it is commissioned.2% employ between 100 and 500 people. Regular purchases include content. Many smaller publishing companies without a niche market were forced to close as a result of poor sales and a lack of investment capital during the recession. printing equipment and packaging materials. Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. high-volume sales of e-books become a larger share of industry sales.9% of firms in the Book Publishing industry are estimated to employ fewer than 20 workers. as measured by earnings before interest and taxes. however. Cost Structure Benchmarks Profit Industry profit has increased during the five years to 2013. ink. however.2 8. billboard and TV placements.0 Percentage of revenue 60 ■Profi t ■Wages ■Purchases ■Depreciation ■Marketing ■Rent&Utilities ■Other 22. rent and depreciation costs are minimal in this industry.2% of revenue marketing books. Other forms of common book advertisements include online. Purchases are expected to decrease during the five years to 2018 as the increasing presence of e-books reduces paper and other costs. Another way that book publishers conserve purchase expenses is by recycling paper and ink themselves and then using the recycled materials.6% of industry revenue.5 SOURCE: WWW. Printers and computers are the only depreciable assets used.4 80 5. IndustryCosts (2013) 17.IndustryCosts AverageCostsof allIndustriesin sector(2013) 100 increase during the next five years to 22.IBISWORLD. Wages Wages account for an estimated 20. they are a steady share of industry revenue.COM Book Publishing in the US February 2013 19 Competitive Landscape Cost Structure Benchmarks continued of long-term contracts with suppliers and paper-quality flexibility that publishers keep up.IBISWORLD. Publishers provide displays and posters to retail outlets as part of their promotional campaigns. Utility. Publishers contract out to third parties to keep such costs low.1 0.8 20.3% of revenue in 2018. this cost segment expected to Sectorvs. If paper prices increase.WWW. Other costs include transportation and administration costs. Marketing and other costs Companies in the industry spend about 3.2 20 8. Wages as a share of revenue have decreased during the five-year period because employment decreased more dramatically than revenue.8 40 60. Books are marketed to boost sales by differentiating them from other entertainment options.5 0 0.9 15.2 5.6 22. As a result. They include payment to employees for seeking out talent.2 9. and they are relatively durable and inexpensive to replace. editorial services and book design.COM .6 3. books are often printed on lower-quality paper to keep this cost steady. the ability to promote brands and books through advertisements. revenue is never guaranteed. Complementary products are important to authors and consumers.IBISWORLD. allowing companies to offer lower prices. distribution contracts and product placement. Amazon).COM Book Publishing in the US February 2013 20 Competitive Landscape Basis of Competition Level & Trend ompetition C in this industry is High and the trend is Steady Companies in the Book Publishing industry compete for the rights to publish content. counter displays. Authors are often attracted to wellknown publishers that have the financial flexibility to invest in brands.IBISWORLD. developing distribution channels and marketing. This trend takes away from publisher revenue because these sales go through different outlets (e. authors’ tours and competitions is key to generating sales. especially in the textbook market. book publishers compete with players in other media industries. and costs recur for each book published. Vertical consolidation and the increasing popularity of multimedia books have led to higher pressure on pricing. benefiting well-established publishers. Publishers are increasingly offering online education programs. BarrierstoEntrychecklist Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance Level High Low Decline Low Medium Light Low SOURCE: WWW. cutting their production costs. purchasing paper. used and new. Consolidation is also a key factor in driving down unit costs.WWW. In addition. are also taking from publisher revenue as they increasingly pursue publishing and distribution rights to books. Established book businesses streamline operations on a regular basis. browsing the web and reading magazines. Large booksellers. benefiting larger publishers. IBISWorld expects competition to remain high. Publishers also compete on price and brand recognition. These publishers also benefit from a regular presence in points of sale. While most of these activities can be outsourced.COM . are direct substitutes for reading books. such as watching TV. Internal competition Leading publishing groups work to attract best-selling authors and invest in long-term contracts with these authors to guarantee rights to their works. External competition External competition has increased. such as in-store locations or specific online channels. such as Barnes & Noble. Barriers to Entry Level & Trend arriers to Entry B in this industry are Medium and Steady Barriers to entry include the costs of recruiting authors. testing and interactive products with textbooks. Also. This factor enables established publishers to offer books at much lower prices. many major publishing houses are investing in digital technology. with the internet establishing an extremely large market for the resale of books. Alternate forms of entertainment. Horizontal integration is also increasing competition based on pricing. At the same time. printing and printers. allowing them to directly interact with their target markets.g. The ability to negotiate with central buyers is important for book publishers so they can sell their books to consumers at competitive prices. though. particularly by well-known authors and public personalities. During the next five years.WWW. These companies all operate on a few continents. Irish-owned Education Media Publishing Group. aided by increasing internet and e-book sales. English-language publishers can market books to international audiences with relatively minor language edits. However there are legal. However. Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local firms would otherwise supply. economic and political risks associated with dealing in foreign countries. TradeGlobalization 200 150 100 50 0 Local 0 IBISWorld does not expect significant change in the level of foreign ownership in this industry. relatively high upfront investment in the textbook creation process and increasing pressure from the market for add-on products. leading publishers often have a dominant share of shelf space.IBISWORLD.COM Book Publishing in the US February 2013 21 Competitive Landscape Barriers to Entry continued There are higher barriers in the education book-publishing market due to the importance of brand names. Export levels are gradually recovering to prerecession levels. benefiting the industry. Industry Globalization Level & Trend lobalization G in this industry is Medium and the trend is Steady The level of globalization has remained at a medium level during the five years to 2013. marketing to foreign audiences resulted in losses in 2008 when foreign demand for books dropped during the global recession as consumers tightened their budgets.IBISWORLD. In retail stores that carry a small selection of books. Export Global Exports/Revenue 200 Export 150 100 50 Global Exports/Revenue BookPublishing 40 80 120 Import 160 0 Local 0 2000 2013 40 80 120 Import 160 Imports/DomesticDemand Imports/DomesticDemand SOURCE: WWW. Major book wholesalers typically reject books from publishers that have fewer than 10 titles or low sales volumes. Foreign-owned subsidiaries in the Book Publishing industry include English media giant Pearson PLC. Exports offer growth opportunities for firms. benefiting from sharing successful content across subdivisions and opening up foreign markets to best sellers.COM . GoingGlobal:BookPublishing2000-2013 International trade is a major determinant of an industry’s level of globalization. Germanowned Random House and Frenchowned Hachette Livre. 4% Pearson PLC 10.4 -1.IBISWORLD. Two of the company’s three major divisions are involved in book publishing: Pearson Education runs a textbookpublishing business and the Penguin Group publishes trade books.COM Book Publishing in the US February 2013 22 Major Companies Major players (Market share) Pearson PLC | Cengage Learning The McGraw-Hill Companies Inc.7 720.4% Industry Brand Names Penguin Puffin Prentice Hall Berkley Dutton New American Library Viking Hamish Hamilton Addison Wesley Cisco Press Pearson is an international media conglomerate involved in publishing.8% Other The McGraw-Hill Companies Inc. The company’s main business operations are in the United Kingdom and United States.3% to $2.863. Ireland.0 6.0 2. Pearson’s book publishing segment comprises 32.831. India. the company is awaiting regulatory approval to form a joint venture between its Penguin-brand publishing arm and Bertelsmann AG’s Random House.1 613.744. These companies produce supplementary materials and course outlines to Pearson’s textbooks. however.2 2.9 3.4 8.3 OperatingIncome ($ million) 389. and its US operations make up about 60. it also runs substantial businesses in Australia. giving the publisher a leg up in the digital world of books and education.8 421.6 17.0 SOURCE: ANNUAL REPORT AND IBISWORLD .8 billion because of a continued shift PearsonPLC(USbookpublishingsegment)–fi nancialperformance* Year 2007 2008 2009 2010 2011 2012 *IBISWorldestimates Revenue ($ million) 2. Pearson’s book publishing revenue dropped an estimated 0.9 -6.1 -1. Canada.4% 77.2 (% change) 28.811. | Other Companies Cengage Learning 6.2 723. Penguin has been successful in redesigning and remarketing old books to new readers.797.2 1.801.3 2.0% of total company revenue.0 679.6 2.0 45.IBISWORLD. Multimedia books allow Penguin to develop interactive book interfaces and focus on the book art in order to make them more appealing to consumers. 5. education and business information. Such a merger would help the publishers cut costs.0 2.4% SOURCE: WWW. While the company has not made any acquisitions in the Book Publishing industry during the past five years. South Africa and New Zealand. it purchased Harcourt Assessment and Education and eCollege.8 -0. In early 2013.WWW. The company is focusing on redesigning books and reinterpreting classics to increase consumer demand.COM Player Performance Pearson PLC Market share: 10. Financial performance In 2012. contributing to Penguin’s substantial position in the Book Publishing industry.2 (% change) 59.7% of total company revenue. 9 2. Cengage purchased the National Geographic Society’s School Publishing Unit. expanding its higher education business. balanced out slightly by the positive effects of improving consumer sentiment.2 (% change) 7.4 343. Most recently. In connection with the regulatory review of this acquisition. which promote reading and propel interest in new ways of reading books.3 1. While trade book publishing and primary-education book sales dwindled since late 2007 due to decreasing consumer sentiment and government spending on public education.0 6.4% in 2011.9 1. In July 2010.0 856.WWW.9 -7. Pearson is expected to earn a 16. Due to success in the textbook publishing segment and increasing discretionary spending.0 644.2 OperatingIncome ($ million) 30.2 716. which contributed $74.4 million to revenue in 2012. Cengage’s higher education business offers textbooks.0 -10.047. the company announced plans to merge its academic and professional group.738.5 408.1 364. Cengage acquired the Houghton Mifflin College Division. compared with 15.717.2 -43. Player Performance Cengage Learning Market share: 6.673. because e-books are much cheaper to produce and distribute than physical copies.0 95. The company organizes several literacy initiatives.7 1.3 3. especially in the textbook market.4% Industry Brand Names Gale South-Western Wadsworth Delmar Thomson Learning was renamed Cengage Learning in 2007 after a shakeup within the company. Financial performance Domestic company revenue increased an estimated 35. The company is also a provider of specialized products that support education and research in academic and K-12 libraries.7 126.IBISWORLD.COM Book Publishing in the US February 2013 23 Major Companies Player Performance continued to digital formats.8 1. with its Gale library division to cut operating costs and produce more library-classroom integrated products. The company earns about 88.6% operating profit margin in 2012. textbook sales increased as college attendance rates grew. Profit margins are expected to increase as e-books gain popularity.3% annually on CengageLearning(USbookpublishingsegment)– fi nancialperformance* Year 2007 2008 2009 2010 2011 2012 *IBISWorldestimates SOURCE: ANNUAL REPORT AND IBISWORLD Revenue ($ million) 379.4 (% change) 21. which includes Delmar and South-Western.8 . In 2008. electronic information and online products.7 -5.5% of its revenue domestically.3 11.616. Pearson’s profit is well above the industry average because the company takes advantage of its international brand and low production cost per book. Cengage reached an agreement with the US Department of Justice to divest certain higher education titles. 591.7 billion as a result of the company’s significant acquisitions.465.9% from 2011. In 2008. Financial performance In 2012.722.1 (% change) 7.3 -18.(USbookpublishingsegment)– fi nancialperformance* Year 2007 2008 2009 2010 2011 2012 *IBISWorldestimates SOURCE: ANNUAL REPORT AND IBISWORLD Revenue ($ million) 1. The company plans to spin off this part of its business from its securities-related company. domestic digital product sales comprised about 37.6 1. giving McGraw-Hill a direct link to this significant customer base.8 1.0 257.0% and is above the industry average due to high profitability for many of the electronic education products that the company publishes.2 231.929.1 1.3% of McGraw-Hill’s revenue is produced in the United States and 25.901. does not operate as a part of the US Book Publishing industry. Player Performance The McGraw-Hill Companies Inc.4 -8.6 1. The international segment of the HPI division.8 -15. It also partnered with Pearson and four other companies to sell e-textbooks on a subscription basis through a website called Course Smart.4% Industry Brand Names Macmillan Open University Press Wright Group McGraw-Hill’s education business publishes books aimed for students and professionals.695.5 billion. McGraw-Hill has invested in multimedia technology to promote its textbooks.9 192.9 -18.3 209. It is estimated that 71.6 -7.6 -7.0 1. which is well above the industry average. reflecting a decrease of 7.0 (% change) 21. This TheMcGraw-HillCompaniesInc.4 -10.IBISWORLD. the firm’s combined book publishing revenue totaled an estimated $1. which has publishing facilities worldwide. the company founded a website called Grade Guru that allows students to share notes.7 1. Using the internet as a marketing and research tool in these ways has helped McGraw-Hill create new revenue streams and generate interest in the company. ln 2012. Operating profit is estimated to total 20.7 -1. Market share: 5.COM Book Publishing in the US February 2013 24 Major Companies Player Performance continued average over the five years to 2012 to $1.4 31. Cengage also benefited from strong highereducation textbook sales due to rising enrollment rates for adult education during the recession. As of February 2013. Apollo Global Management is preparing to purchase the publishing segment of McGraw Hill’s business.9 OperatingIncome ($ million) 285.0% of total company revenue is generated by its book publishing business. McGraw-Hill has two education divisions: the School Education Group (SEG) and the Higher Education. Professional and International Group (HPI).6 196.5% of the company’s total domestic revenue.5 .WWW. Bertelsmann is based in Germany and involved in various enterprises. SEG revenue was hit particularly hard because states delayed textbook purchases for public schools. representing an average annual decrease of 1. it went through bankruptcy in mid-2012. Estimated market share: 4. The company’s revenue declined at an estimated annualized rate of 13. especially as sliding school budgets limited demand in its key market. The company restructured in 2008 and 2009 in order to keep out of the red. Random House is one of the few mass-producers of paperback books that has committed to printing books on paper for the foreseeable future. following regulatory approval. licensing and advertising. HPI revenue declined as a result of poor consumer sentiment in 2008 and 2009. when consumers.0% and Pearson the remaining 47. and international. EMPG is privately owned by several holding companies predominantly based in Ireland. is Estimated market share: 4. The company underwent significant financial restructuring in early 2010 and has undergone changes throughout the past five years.0 million.9% in the five years to 2012 as a result of its production cuts and struggling operations.COM Book Publishing in the US February 2013 25 Major Companies Player Performance continued decrease has resulted from lower school adoption rates as education budgets continued to get slashed. educational publishing. Other Companies Bertelsmann AG Estimated market share: 4. the company has sold or discontinued a few . companies and governments tightened their budgets. media.2% Scholastic is the world’s largest publisher and distributor of children’s books. headquartered in Boston.IBISWORLD. In particular. though it emerged within a couple of months. Previously. Bertelsmann will own 53. its new e-book subscription service has been popular with universities.0%. IBISWorld estimates that Scholastic generates its book publishing revenue in the United States solely from the Children’s Book Publishing and Distribution segment. Most notably. The company’s major operating segments include children’s book publishing and distribution.2% during the past five years. including a strong interest in media. The closing of the transaction is scheduled to take place in the second half of 2013.3 billion in 2012.4% during the five years to 2012 because of the company’s lower sales during and following the recession. Houghton Mifflin Harcourt.WWW. During the past five years. Education Media and Publishing Group Ltd. Revenue has fallen at an estimated annualized rate of 5. The company’s profit margin is expected to grow through 2017 as e-book sales increase and the company further streamlines operations.4% Houghton Mifflin Riverdeep Group PLC formed Education Media and Publishing Group (EMPG) after it purchased Reed Elsevier’s Harcourt book publishing divisions.7% Bertelsmann is publishing arm of Random House and may undergo a merger with Pearson’s publishing business in 2013. Book publishing revenue is estimated to total $1. Scholastic Inc. it had sold the Houghton Mifflin College Division to Cengage Learning in 2008 for $750. with more than 750 employees laid off from McGraw-Hill’s publishing segments. EMPG’s original book publishing business. but it experienced a rebound in 2010. WWW. as the publishing segment of News Corporation is spun off from its other businesses. the United Kingdom. broadcasting. The company publishes books in the United States.0% of total company revenue. News Corporation Estimated market share: 3. which represents 4.1 billion in the five years to 2012. which will possibly boost sales. . During the period.5% growth in 2012 driven by an increase in consumer spending. During the five years to 2012.” which include bonus content like teaching videos or extra essays and are priced higher than regular e-books. Australia. which contributed more revenue in 2008 than any other book. The company is also releasing some bookrelated children’s applications for Apple products like the iPad and iPhone. IBISWorld expects layoffs and restructuring to occur within the company during early 2013. Scholastic’s top-selling book was the final Harry Potter book.6% annualized revenue decline to $1.9% News Corporation is a multinational company that is primarily involved in book publication. TV and movie production.COM Book Publishing in the US February 2013 26 Major Companies Other Companies continued international businesses and closed a store in New York. New Zealand and India. news. News Corporation’s book publishing revenue declined at an average annual rate of 1.IBISWORLD. News Corporation experienced a significant decline in revenue in 2009 as a result of poor sales and few best sellers.2 billion. especially on the successful Hunger Games trilogy. Scholastic experienced a 3. Its book publishing business is under the HarperCollins umbrella and is headquartered in New York.6% to $1. Canada. this includes about 20. The company is now implementing strategies in the digital market by releasing “enhanced e-books. However. This move generated cash to restructure the business and streamline operations. To increase revenue firms need superior debt management.3 0. InvestmentEconomy Information.IBISWORLD.4 0. Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance Capital units per labor unit 0. Traded goods can be produced using cheap labor abroad. such as seeking out talent.WWW. a stable macroeconomic environment and a sound investment plan. contract management. For every dollar spent on labor.COM Book Publishing in the US February 2013 27 Operating Conditions Capital Intensity Level The level The Book Publishing industry has a labor-intensive production process. the industry spends only five cents on capital. high-value products.5 0.1 0. designing cover art and marketing. Mining. such as printers. which depends heavily on people to sort through information.COM ChangeinShareoftheEconomy .IBISWORLD. SOURCE: WWW.Communications. writing. PaperMills BookStores Book. or specialize in niche. The publishing process involves tasks that cannot be done by machinery. determine what is relevant to consumers and portray it in an interesting way. Brand awareness and niche labor skills are key to product differentiation.FinanceandReal Estate. Firms benefit from personal wealth so stable macroeconomic conditions are imperative.0 Economy Information Book Publishing Capital intensity of capital intensity is Low Dotted line shows a high level of capital intensity SOURCE: WWW. HealthandEducation. The industry is similar to others in the information sector. Functions cannot be outsourced therefore firms must use new technology or improve staff training to increase revenue growth. editing. To expand firms must merge or acquire others to exploit economies of scale. CapitalIntensive LaborIntensive BookPublishing TraditionalServiceEconomy WholesaleandRetail. Reliant on labor rather than capital to sell goods.2 0.PersonalServices.Magazine&NewspaperWholesaling OldEconomy AgricultureandManufacturing.COM ToolsoftheTrade:GrowthStrategiesforSuccess NewAgeEconomy Recreation.IBISWORLD. Online retailers now claim about one-quarter of the consumer trade-book market. Also. this industry is subject to fads and trends that cause some volatility. and economic conditions VolatilityvsGrowth 1000 Hazardous Rollercoaster Revenuevolatility*(%) 100 10 BookPublishing 1 0. The internet is also a powerful complement to books.COM . This advancement reduces the cost of books to consumers and helps drive demand.IBISWORLD. particularly back listed titles. which cater to all ages and interests and provide entertainment and A higher level of revenue volatility implies greater industry risk. subscription-based book purchases limit the time that a book is available to a reader or enable a consumer to purchase individual chapters to save money. Revenue Volatility Level The level of Volatility is Medium Volatility in the Book Publishing industry is softened by the diversified nature of its products. Photo-typesetting equipment includes image setting and scanning. Online bookstores are supported by fast search engines that enable customers to locate books by title. When a firm makes poor investment decisions it may face underutilized capacity if demand suddenly falls. Publishers are building online communities centering on authors and genres to strengthen relationships with readers and create new revenue streams. such as desktop publishing. Continued improvements in these processes will reduce the employees and time costs that are needed to publish a book. Digital technology allows digitized information to be transferred directly from the computer to the printed page and materials to be customized. has decreased the time it takes to publish a book. which involves electronic or laser color scanners. Nevertheless. or capacity constraints if it rises quickly.IBISWORLD. Automation in printing has enabled continuous monitoring of quality and self-correction. Consumers can download books via the internet and then print them out on ordinary printers. computer composition software. from order placement and production to delivery and invoicing. personalized and individualized. especially in the trade book market. information. saving the time and costs it would require for people to do these tasks by hand. author or keyword in only a few seconds. They can also save them in notebook-sized computers that display one page at a time on their screens.COM Book Publishing in the US February 2013 28 Operating Conditions Technology & Systems Level The level of Technology Change is Medium The development of online bookstores has enhanced the visibility of books.1 Stagnant –30 –10 10 30 50 BlueChip 70 Fiveyearannualizedrevenuegrowth(%) * Axis is in logarithmic scale SOURCE: WWW. such as the time frame for capital investment. providing updated information. tutorials and testing.WWW. Volatility can negatively affect long-term strategic decisions. Industry-specific software systems help automate the entire process. Similarly. antitrust. fair-pricing and copyright regulations.3% in 2011 and a 0. fluctuating maximally between a decrease of 4. The higher-education textbook market is relatively stable. the industry is subject to waste-management. which cause significant year-to-year fluctuations in school textbook sales. these categories had not been distinguished.WWW. however. Previously.IBISWORLD.COM Book Publishing in the US February 2013 29 Operating Conditions Revenue Volatility continued influence consumer spending on books. Regulation is Light and the trend is Steady Industry Assistance Level & Trend he level of T Industry Assistance is Low and the trend is Steady The Association of American Publishers actively lobbies Congress and state legislatures to protect book publishers’ interests. in 2008. Regulation & Policy Level & Trend he level of T There are no industry-specific policies or regulations.6% decline in 2012. . offsetting the volatile consumer book and schoolbook markets. Revenue volatility is expected to be relatively steady during the five years to 2013. For instance. partly because of state adoption cycles. According to the definition. Many states purchase primary-school textbooks according to a schedule determined by their education budgets each year. while bundled textbooks include other publisher-owned products that must be sold independently. The US schoolbook market is relatively volatile. the association convinced Congress to formally distinguish between integrated and bundled textbooks to protect textbook publishers’ existing agreements with third parties that produced materials that could not be sold separately from textbooks. yet countercyclical. and textbook companies took issue with states that required third-party materials to be sold separately. integrated textbooks include third-party materials that do not have to be offered separately. 2 888.4 29.0 6.098 2.7 6.1 -0.097 3.570.17 4.69 353.55 25.7 2.5 1.199 3.7 29.2 6.0 1.1 7.9 83/86 81/86 70/86 1171/1190 1135/1190 1080/1189 Enterprises Employment (%) (%) -0.977 2.7 2.74 27.349.8 -0.4 2.9 5.016 2.80 6.75 24.1 29.3 1.8 -0.24 68.2 -4.719.7 1.795.47 7.058.192 2.344.539.769.7 0.3 -4.0 5.0 1.863.4 5.2 -0.0 1.8 0.5 9.06 0.3 203.0 1.2 7.1 2/11 164/419 Wages ($m) 5.5 -3.68 7.04 0.8 -0.9 2.1 5.4 1.806.4 -0.16 7.7 -11.71 68.28 347.7 -3.830.042 83.020.176.345.6 1.63 68.723.504 3.223.7 27.2 6.8 2.55 20.783.6 1.4 -3.60 362.6 1.604.18 354.38 19.3 -6.699.2 158.063.576.857.392.275.23 21.8 10/11 407/418 Domestic E-book Revenue (%) 68.9 2.518.2 -4.52 26.87 25.3 1.072 3.48 72.8 -1.6 2.1 5.639 2.8 4.3 7.786.416.5 2.021.2 -2.90 11/11 334/418 Revenue per Employee ($’000) 382.480.5 -0.520.07 7.5 6.5 2.1 0.4 -1.4 1.8 -1.43 5.569.20 318.9 7.50 6.3 4.449 3.2 7.62 6.3 4.628.4 1.480.37 6.6 1.891.1 -21.06 0.799.7 1.13 4/11 321/418 Exports/Revenue (%) 6.69 67.17 24.6 0.1 30.856.6 150.657 2.36 21.209.9 4.932.5 8.31 23.05 24/86 386/1190 Figures are inflation-adjusted 2013 dollars.5 30.2 -4.7 5.58 23.COM .8 -3.05 0.8 6.5 5.127.2 5.738.9 1.532.57 26.2 6.06 0.8 27.126.564.65 19.7 28.22 21.717.1 1.6 -0.4 73/86 62/86 1071/1189 1005/1190 Exports (%) 5.335 3.9 -4.6 2.9 -0.2 26.7 30.57 21.3 3.70 19.5 6.1 2.0 1.038 3.1 27.6 4.0 30.885 80.3 5.2 2.00 71.1 2.8 7.087 84.240.17 7.06 0.2 N/A N/A Key Ratios 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank IVA/Revenue (%) 22.64 50/86 481/1190 Employees per Est.084.110.403.05 0.8 7.257.9 4.6 1.896.28 22.383.4 -2.57 6.62 347.4 5.15 48/86 226/1190 Share of the Economy (%) 0.3 -2.2 -10.89 6.9 -3.4 1.IBISWORLD.073 81.2 -9.4 2.7 2.908.7 -4.075.3 30.02 25.9 -3.63 5.WWW.0 6.7 1.0 28.6 1.683.29 83.978 2.3 -0.1 -8.144 3.6 -0.297.80 65.1 6.3 41.7 1.5 0.703.560.6 5.59 6.4 -5.733.38 363.729 22/86 18/86 485/1189 386/1190 Exports ($m) 2.8 5.81 359.854.195. SOURCE: WWW.59 6.46 22.7 1.078.325.634.0 16/86 24/86 316/1190 386/1190 Establishments 3.7 11/11 412/418 Imports (%) 1.8 13.869.215.8 5.1 9.369.13 6.19 369.50 7.20 30.9 3.149 80.7 -0.18 81/86 854/1190 Imports/ Demand (%) 7.0 -1.04 0.359 3.3 17.1 104.1 28.4 6.20 24.607.168.6 1.18 348.0 4.792.01 7.09 22.753.678 78.223.0 6.017 3.5 3.6 -4.92 23.856.9 -1.6 27.26 17.0 52.7 4.293.1 175.4 8.3 31.8 4.311.321 3.1 -0.2 3.938 79.60 24.2 30.191. 25.363.345.749.9 -19.69 348.71 25.74 70.05 0.47 6.4 7.8 8.3 4.4 1.24 18.14 334.2 1.93 36/86 477/1190 Wages/Revenue (%) 17.066 83.938. Rank refers to 2013 data.9 28.4 26.032.761 95.5 5.1 -1.3 4.359.9 8/11 400/419 Wages (%) -2.9 2.06 69.2 -5.4 78/86 1147/1190 Domestic Demand (%) -2.1 6.5 -4.363.05 0.IBISWORLD.0 N/A N/A Annual Change 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank Industry EstablishRevenue Value Added ments (%) (%) (%) -2.6 26.658 77.55 22.34 24.1 29.25 21.68 22.9 -0.COM Book Publishing in the US February 2013 30 Key Statistics Industry Data 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank Industry Revenue Value Added ($m) ($m) 32.25 20.13 379.1 1.641 80.0 6.698.0 9.3 1.308.04 26.4 26.536.25 22.90 25.1 2.895.64 23.90 77.369.8 -4.0 7.868.2 28.32 80.378.997 3.2 435.4 -1.052 87.7 28.4 -3.8 2.05 0.464.858.019 3.9 -2.7 -1.10 5.8 -0.64 31/86 425/1189 Average Wage ($) 65.52 6.05 0.4 2.362.9 5.55 6.89 21.377 3.644.9 2.730 24/86 523/1189 Enterprises Employment 3.95 20.50 6.6 1.6 5.7 4.6 3.762.1 89.686.1 0.85 23.538.90 8.316.058.3 6.769.93 22.112.810.6 5.9 1.935.077 3.728 78.326.672 83.443.19 71.8 37.6 16/86 253/1190 Domestic Demand ($m) 32.387 2.45 74.0 -4.5 0.680.638 3.1 4/11 130/418 Imports ($m) 2.863.371 3.55 24.624 3.7 -0.4 9.521.478.5 3.715.9 30.3 6.6 31.18 340.4 -5.3 1.8 4.4 -1.5 27.9 1.744 2.30 7.30 7.750 78.3 27.903.962.909.555 3.595.8 -3.9 3/11 91/418 Domestic E-book Revenue ($m) 24.462.06 0.4 -0.80 7.2 -12.8 -3.05 0.0 9. including forecasts. High capital intensity is more than $0. ESTABLISHMENT The smallest type of accounting unit within an enterprise. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator. . and rent. POST-SECONDARY EDUCATION College. Low is less than 40%. medium is 5% to 20%. while low barriers mean it is easy for new companies to enter an industry. medium is $0. leaving only the “real” growth or decline in industry metrics. regardless of their country of origin. Receipts from interest royalties. year published) as the base year. all other operating income from outside the firm (such as commission income. This removes the impact of changes in the purchasing power of the dollar.COM Book Publishing in the US February 2013 31 Jargon & Glossary Industry Jargon ADOPTION The process of reviewing textbooks and mandating that certain ones are used or that teachers can select books from an approved list.or universitylevel education that includes graduate or post-graduate (PhD) education. CAPITAL INTENSITY Compares the amount of money spent on capital (plant. E-BOOK A book in a digital format that can be read on a computer or on a variety of mobile devices. and high is more than 35%.125 of capital for every $1 of labor. Imports/domestic demand: low is less than 5%. temporary and seasonal employees. It is derived by adding imports to industry revenue. the rate of technological change. part-time. IBISWorld Glossary BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry. EXPORTS Total value of industry goods and services sold by US companies to customers abroad. LIFE CYCLE All industries go through periods of growth. CONSTANT PRICES The dollar figures in the Key Statistics table. machinery and equipment) with that spent on labor. INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax).WWW. low is less than $0. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity.333 of capital to $1 of labor. medium is 5% to 35%. PRIMARY EDUCATION Education from kindergarten through eighth grade. managers and executives within the industry. and the level of customer acceptance of industry products and services. TRADE BOOK A fiction or nonfiction book printed for general distribution. the growth rate of the number of establishments. the amount of change the industry’s products are undergoing. leasing and hiring income). INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. DIGITAL PRINTING The process of printing a batch of books (typically a few hundred) using laser printer technology to save on production and inventory costs. or profit plus wages and depreciation.IBISWORLD. and high is more than 20%. partners. Multiple establishments under common control make up an enterprise. and then subtracting exports. EMPLOYMENT The number of permanent. an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Medium is 40% to 70% of industry revenue. ENTERPRISE A division that is separately managed and keeps management accounts. IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States. Concentration is considered high if the top players account for more than 70% of industry revenue.e.125 to $0. repair and service income. and capital work done by rental or lease. Each enterprise consists of one or more establishments that are under common ownership or control. SECONDARY EDUCATION Education from ninth grade through 12th grade. as opposed to an online retailer. BRICK-AND-MORTAR A store that has a physical presence and location. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP. INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. are adjusted for inflation using the current year (i.333 of capital to $1 of labor. dividends and the sale of fixed tangible assets are excluded. For exports/revenue: low is less than 5%. subsidies on production. DOMESTIC DEMAND Spending on industry goods and services within the United States. working proprietors. INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP. maturity and decline. PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses. WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure. Volatility levels: very high is more than ±20%. high volatility is ±10% to ±20%.COM Book Publishing in the US February 2013 32 Jargon & Glossary IBISWorld Glossary continued NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll.WWW. and low volatility is less than ±3%.IBISWORLD. These are mostly set up by self-employed individuals. VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. excluding interest and tax. also known as nonemployers. moderate volatility is ±3% to ±10%. . com | 1800-330-3772 | info @ibisworld. emerging & shrinking markets Arm yourself with the latest industry intelligence Assess competitive threats from existing & new entrants Benchmark your performance against the competition Make speedy market-ready.com At IBISWorld we know that industry intelligence is more than assembling facts It is combining data with analysis to answer the questions that successful businesses ask Identify high growth. the data or information contained herein. or reliance upon. sales and marketing decisions need to be made. IBISWorld Membership IBISWorld offers tailored membership packages to meet your needs. Copyright in this publication is owned by IBISWorld Inc. 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