The Volitle State of the Book Industry

As I sit here and watch our beloved industry struggle to remain relevant in this digital age, a few different things come to mind:

• In the digital age, easy access to information, has created an unprecedented demand for information - especially from authoritative sources. ie. demand is increasing
• Many of the needs for information that were formerly supplied by books are now satisfied via electronic content. ie. we probably need less 'hard copy' products.
• Our affluent society has given an increasing number of us the ability to have outside interests and hobbies. ie. the demand for specialty books is increasing, and the creation of communities (of potential readers) is growing.
• Changes in technology have allowed virtually anyone to be an author of a book, and the number of new books being pushed onto the market is skyrocketing. ie. Supply is increasing.
• The demand for new fiction titles has been flat for a long time.
• Most people have limited time for pleasure reading, and are less willing to risk that time on unknown commodities - hence they choose books by authors they already enjoy, or by those recommended by someone who's taste they trust. In fiction, it is about the author, not the book.
• Independent bookstores have become closer to their customers and play a key role as a trusted recommender of new authors. Essentially, they have become the new sales rep.
• For all the technology out there, fiction still sells by word of mouth, and sales reps have a key role in passing the word from the publisher to the bookstore.
• Publishing Operations companies (otherwise known as distributors) have lowered the barrier to entry for new publishers, and have leveled the playing field in terms of opening up the major sales channels for all sized publishers.
• Most Publishing Operations companies are publishers themselves.
• Most publishers I know have margins in the single digits - many times negative.
• Most publishers I know have a ton of dead inventory in their warehouses that they refuse to writeoff. ie. Supply is outstripping demand.
• Some anecdotal evidence has shown that making books freely available on the Internet has improved the sales of those titles. This is especially true for STM titles.
• Price sensitivity for non-fiction is declining.
• Price sensitivity for mass-market fiction is declining.
• Price sensitivity for fiction remains high and is constant.
• The role of technology in the college market is changing the role of the publisher.
• Most large 'Trade' publishers that produce mostly fiction are part of larger media conglomerates.
• Most scholarly publishers (except for the very largest) are associated with a foundation, university or research institute.
• Many of the largest publishers in the STM and College markets are owned by investment bankers.
• Printing technology has evolved dramatically, but the cost to print shorter runs of books is still high.
• Libraries, once the gatekeepers of information access, are being bypassed by many individuals.
• Most publishers either have or are trying to create some form of a digital archive.
• More and more of us are referring to blogs for news and information, bypassing or supplementing other traditional media forms.
• Google, Microsoft, Yahoo, and Amazon are demanding content, and are trying to set themselves up as the new gatekeepers.
• Newsletters, except those that are delivered electronically, seem to be all but dead.

So, what does all this mean for the future? Has technology allowed the masses to obsolete the traditional roles of the media and information gatekeepers? Will there just be media companies and information companies who happen to produce books? Will they become the new gatekeepers - like they have in the movie industry?

It seems like we go through the cycle of market consolidation and expansion at an ever increasing rate. When the big guys get too big, a bunch of little guys pop up. When there are too many little guys for the market to handle, the big guys start acquiring the little guys. When there aren't that many little guys left, the big guys eat each other.

In Trade publishing we now have the 'Big 6', in STM, Nielsen, Elsevier, Wiley, Pearson and a very few others own the majority of the market. And, due to technology, there are literally thousands of 'little guys'.

I don't think the market can handle this situation much longer, and I expect that we are on the verge of tremendous consolidation. The resulting 'big guys' will try to assert new controls of the sales channels and their economies of scale in operations will be the only thing that allows them to be profitable.

When that feeding frenzy is over (doesn't this sound like what's going on in the PGW situation), the financial companies will figure some way to merge the big guys and suck all the cash out of them. Then... the little guys will start popping up again.

comments? email me at ftoolan at qsolution dot com