Book Publishing in the US industry report.pdf

WWW.IBISWORLD.COM� Book�Publishing�in�the�US February 2013 1

IBISWorld Industry Report 51113Book Publishing in the USFebruary�2013� Agata�Kaczanowska

Shelved away: Strong competition will continue to weigh down demand for traditional books

2� About�this�Industry2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3� Industry�at�a�Glance

4� Industry�Performance4 Executive Summary

4 Key External Drivers

6 Current Performance

8 Industry Outlook

10 Industry Life Cycle

12� Products�&�Markets12 Supply Chain

12 Products & Services

13 Demand Determinants

14 Major Markets

15 International Trade

16 Business Locations

18� Competitive�Landscape18 Market Share Concentration

18 Key Success Factors

18 Cost Structure Benchmarks

20 Basis of Competition

20 Barriers to Entry

21 Industry Globalization

22� Major�Companies22 Pearson PLC

23 Cengage Learning

24 The McGraw-Hill Companies Inc.

27� Operating�Conditions27 Capital Intensity

28 Technology & Systems

28 Revenue Volatility

29 Regulation & Policy

29 Industry Assistance

30� Key�Statistics30 Industry Data

30 Annual Change

30 Key Ratios

31� Jargon�&�Glossary

www.ibisworld.com��|��1-800-330-3772��| ��[email protected]


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).

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

51112 Magazine�&�Periodical�Publishing�in�the�USThis industry publishes magazines and periodicals.

51114 Database�&�Directory�Publishing�in�the�USThis industry publishes telephone and mailing lists.

51119 Greeting�Cards�&�Other�Publishing�in�the�USThis industry publishes greeting cards and other products.

Industry�Definition

Main�Activities�

Similar�Industries

Additional�Resources

About�this�Industry

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

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


% c

hang

e

4

−4

−2

0

2

1806 08 10 12 14 16Year

Per capita disposable income

SOURCE: WWW.IBISWORLD.COM

% c

hang

e

10

−15

−10

−5

0

5

1905 07 09 11 13 15 17Year

Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2013)

28.5%Textbooks

27.2%Other books and revenue

18.6%Adult trade books

18.2%Professional, technical

and scholarly books

7.5%Children's and juveniles' books


Key�Statistics�Snapshot

Industry�at�a�GlanceBook�Publishing�in�2013

Industry�Structure Life Cycle Stage Decline

Revenue Volatility Medium

Capital Intensity Low

Industry Assistance Low

Concentration Level Low

Regulation Level Light

Technology Change Medium

Barriers to Entry Medium

Industry Globalization Medium

Competition Level High

Revenue

$26.1bnProfit

$1.5bnExports

$1.7bnBusinesses

2,658

Annual�Growth�13-18

2.8%Annual�Growth�08-13

-3.0%

Key�External�DriversDemand�from�book�storesPer�capita�disposable�incomeExternal�competition�Technological�changeNumber�of�college�students

Market�SharePearson PLC 10.4%

Cengage Learning 6.4%

The McGraw-Hill Companies Inc. 5.4%

p. 22

p. 4

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30



Key�External�Drivers Demand from book storesBookstores demand a significant share of books once they are published and printed because they are the primary retail outlet for bookselling. Therefore, a drop in demand from bookstores results in less demand for book publishing. When bookstores order additional books to restock their shelves, publishers receive more revenue from

the higher sales. This driver is expected to decrease in 2013.

Per capita disposable incomeBooks are a discretionary household expenditure; consumers generally read books for pleasure or for educational purposes. Therefore, a change in total household consumption expenditure can influence spending on books. When

Executive�Summary

The Book Publishing industry has restructured during the past five years in attempts to adapt to evolving consumer preferences. While technological changes have facilitated the proliferation of digital book development and retailing, they have also led consumers to substitute more online content for books. The resulting drop in consumer demand for physical books has thus led many downstream bookstores to close. Meanwhile, the oversupply of books that were already printed has hindered downstream demand for industry products and prevented a rebound in

revenue. Consequently, IBISWorld estimates that the Book Publishing industry’s revenue will contract at an annualized rate of 3.0% during the five years to 2013 to $26.1 billion, including a 4.8% decline in 2013.

The Book Publishing industry lost millions of dollars when Borders, a major book retailer, underwent two successive bankruptcies and liquidated its stores in 2011. However, the decrease in consumer spending had already been hampering revenue growth. In response to the decline in demand and pressure from lenders, publishing houses have been

restructuring. These measures have included streamlining operations by taking advantage of new technologies, such as digital printers that recycle ink and paper, that help save money in the long run and create a profit cushion for publishers. As a result, the industry is expected to maintain a profit equal to 5.8% of revenue in 2013. Nonetheless, increasing input costs have partially offset the savings from restructuring, and the industry is anticipated to continue consolidating. For example, major company Pearson is looking to merge its Penguin book publishing division with Random House, another prominent publishing house. As a result, the number of industry companies is anticipated to have decreased at an average rate of 0.8% per year to 2,658.

Over the next five years, publishers will likely increase investment in internet and other media outlets to directly interact with consumers and focus on boosting e-book sales. E-books are estimated to generate 26.2% of industry revenue in 2013 and are projected to grow to 32.8% of revenue by 2018. The rise in digital publishing is expected to propel the number of companies in the industry upward. Still, sales of traditional books will continue to support the bulk of the industry during the next five years. During this time, revenue is forecast to increase at an average rate of 2.8% per year to $29.9 billion in 2018.

Industry�PerformanceExecutive�Summary�� |�� Key�External�Drivers�� |�� Current�PerformanceIndustry�Outlook�� |�� Life�Cycle�Stage

� Publishers will invest in e-books, but demand from traditional books will remain


Industry�Performance

Key�External�Driverscontinued

disposable income increases, individuals are more apt to purchase books to read in their leisure time or to gain information. This driver is expected to increase in 2013.

External competitionAs more people connect to the internet, they increasingly use it as a substitute information source because of its convenience and ease of use, as opposed to traditional books that publishers release. Increasing household use of the internet may also reduce leisure time, taking up time otherwise used to read books. External competition is expected to increase in 2013, representing a potential threat for the industry.

Technological changeTechnological developments have boosted demand by enabling book publishers to compete with other digital media. For example, IBISWorld expects that the revenue of the E-book

Publishing industry (IBISWorld report OD4579), a segment of the Book Publishing industry, will skyrocket at an annualized rate of 73.4% in the five years to 2013. During this time, digital devices were introduced to the market, providing consumers with new platforms to access and store books. Technological change is expected to grow in 2013, providing a potential opportunity for the industry.

Number of college studentsStudents are required to purchase textbooks throughout their education. Textbook revenue is expected to make up the largest share of industry revenue in 2013. In addition, according to consumer studies and the US Census Bureau, individuals who complete college generally read more books. Consequently, a higher number of college students results in more revenue for the industry now and in the future. This driver is expected to increase in 2013.

% c

hang

e

0

−8

−6

−4

−2

1806 08 10 12 14 16Year

Demand from book stores


% c

hang

e

4

−4

−2

0

2

1806 08 10 12 14 16Year

Per capita disposable income



Diversity�is�key The industry’s slow decline has forced book publishers to reevaluate their activities. Publishers are relying on textbook sales, talent seekers and industry contacts to contract and promote content. This is largely because the trade-book market, which includes fiction and nonfiction books, has slumped, particularly during the past five years. During this period, consumers frequented libraries more often because they sought to spend less, decreasing overall demand for new books. According to the Institute of Museum and Library Services, a federal support agency, library circulation increased significantly, including a 5.2% jump in 2009 followed by a 2.1% increase in 2010

(latest data available). Therefore, trade-book publishers are printing on cheaper paper and investing in cover art and book design to better appeal to consumers. Publishers have also spent more time finding content that appeals to wider audiences.

In the education segment, publishers have experienced declines in elementary and secondary school markets because states have slashed budgets for books. At the university level, though, higher enrollment has propelled sales in the increasingly profitable textbook segment. Publishers have justified higher pricing with add-on internet services, which have become tools for publishers to reach out to consumers directly. As a result, the diversified nature of the industry’s

Current�Performance

As disposable income remained stagnant during the five years to 2013, consumer and bookstore demand dropped and stayed low, hurting demand for the Book Publishing industry, in turn. During this time, however, postsecondary textbook sales have helped mitigate the industry’s decline, with college enrollment increasing at a 1.1% five-year annualized pace. Because employment fell during the recession, many people returned to school or chose to continue their education. Yet despite this bright spot, industry revenue is projected to decrease at an average annual rate of 3.0% during the five years to 2013 as a result of drops in consumer spending, a shift to cheaper digital books and the liquidation of former industry giant Borders. This includes a 4.8% decline in 2013 to $26.1 billion, largely because governments have slashed budgets for primary and secondary school books.

Borders was a major bookstore chain that had more than 600 locations nationwide. After years of declining profit and falling stock prices, the company

filed for Chapter 11 bankruptcy in February 2011 and delayed or restructured some inventory payments owed to book publishers, a move that directly reduced industry revenue. To make matters worse, Borders could not find an acceptable buyer and was forced to liquidate its assets. Because other retailers and consumers purchased books on sale from Borders, the company’s shutdown dented demand for publishers.

% c

hang

e

6

−6

−4

−2

0

2

4

1905 07 09 11 13 15 17Year

Industry revenue




Diversity�is�keycontinued

products saved it from experiencing severe declines during the recession.

Publishers are also adapting new systems and technologies to account for lower print demand and the fast-paced growth in the digital books segment. Such diversity is helping the industry maintain a degree of profitability, as are the various restructuring activities the industry has undergone. For example, some companies that underperformed prior to the Great Recession were forced into bankruptcy and now must meet

tight benchmarks to satisfy lenders. Additionally, major publishing companies have brought outsourced functions in-house to save on third-party costs and to streamline operations. Cost-cutting initiatives have also led to a decline in employment over the past five years, with the number of employees expected to fall at an average annual rate of 3.9%. As a result, industry profit (earnings before interest and taxes) is expected to total about 5.8% of revenue in 2013.

Pros�and�cons�of�technology

Technological developments have especially influenced consumer demand during the five years to 2013, both aiding and hurting industry firms. Technology is helping operators by providing new markets for books and by encouraging interactive book development. Education is becoming an interactive market for college students and younger students, with people using computers more often for homework and in-class assignments. Likewise, e-books and video books have emerged as more interactive mediums for all kinds of literature. With this new growth in technology, bookstores have tried to keep up by offering e-books on their websites. Devices developed specifically for reading e-books, such as Amazon’s Kindle, have been introduced over the five-year period to ease e-book

functionality, boosting individual book sales and payments to publishers.

Meanwhile, external competition has increased because literature is increasingly available through online channels. A significant amount of content is published in digital formats, making it easier for authors to self-publish and self-promote, thus taking away business from book publishers. The number of companies in the industry is estimated to decline during the five years to 2013 at an annualized rate of 0.8% to 2,658 firms.

Format�and�financial�flexibility

Companies that are flexible with book formats and financial decisions are better able to adapt to meet consumer demand. Publishers have responded to shifting consumer needs by offering cheaper books that are printed in lower quality, with recycled ink and paper, and by publishing books in both paperback and e-book formats. Companies are also

printing smaller quantities of books to downsize stockpiles and decrease storage costs. Some of these changes have required investment in green technologies and new machinery; however, these adjustments are already saving money for companies that adopted them early in the five-year period.

While e-book sales are expected to

� Though the internet has given publishers new markets, it has also increased competition



Format�and�financial�flexibilitycontinued

account for about 26.2% of industry revenue in 2013, this percentage is minimal compared with the investments that some book publishers are making in the technology. Many book publishing companies like Pearson have agreed to an

agency model with e-book stores like Amazon, where the publisher sets the book price and earns a percentage of revenue from each sale. This arrangement gives publishers and e-book stores an incentive to promote books.

Industry�to�cut�costs Still, with revenue growth projected to be slow, the industry will continue to cut costs by publishing online, using recycled materials and relying on digital printing. Digital printing allows companies to drastically reduce the need for and costs of storage space. 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.

Nonetheless, growth in employment and wages will likely offsetting cost reductions. IBISWorld projects wages

will increase at an average annual rate of 4.4% to $6.8 billion in the five years to 2018. Wages are expected to grow at an even faster rate as they recover from their current low point. As a result, profit margins are projected to contract during the next five years to about 5.3% of 2018 revenue.

Book�demand�expected�to�rise

During the five years to 2013, enrollment rates for adults have risen as people returned to school following layoffs or because they could not find suitable employment. Likewise, the current emphasis on higher education will likely increase competition in the job market. This trend will further

contribute to rising enrollment in postsecondary education. IBISWorld estimates that the number of college students will grow at an average annual rate of 1.4% in the five years to 2018. These demographic trends will likely boost textbook and trade-book sales in the next five years, especially because

Industry�Outlook

Improving consumer sentiment is expected to generate higher demand for books during the five years to 2018. As a result, IBISWorld forecasts that revenue for the Book Publishing industry will experience moderate volatility over the next five years, increasing at an average annual rate of 2.8% to $29.9 billion during this time. Initially, in 2014, revenue is expected to grow 2.8% as rising disposable income posts positive returns to publishers for

physical and digital products alike.According to the US Bureau of Labor

Statistics, better-educated people tend to read more. Since 2008, record-high enrollment rates in higher education will likely lead to higher spending on textbooks and trade books in the next five years. Increased demand for books is also expected to accelerate along with the economic recovery, leading to 0.7% annualized growth in industry employment through 2018.

� The industry will cut costs by publishing online and using digital printing



Book�demand�expected�to�risecontinued

students are more likely to buy and read books in their spare time.

In addition, 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. IBISWorld also anticipates that the convenience of storing e-books will contribute to an increased volume of sales.

Making�the�switch Many bookstores will be hurt by greater demand for e-readers and e-books, which are already cutting into their sales. While some stores like Barnes & Noble have expanded into the digital realm, many smaller bookstores cannot afford to invest in these technologies. The growth in e-book sales will continue to rise as the economy recovers and consumers’ free time shrinks as they return to work. Time-poor 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. These consumers usually wield above-average spending power, further detracting from brick-and-mortar bookstore revenue. As bookstores become more specialized or close down completely, the convenience of e-books only becomes greater, drawing in an even larger audience. This cycle is expected to disrupt publishers’ distribution agreements in the next five years, though it will boost direct sales through

publisher websites. 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. 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 estimates e-book sales currently generate 26.2% of industry revenue in 2013, and this share is projected to rapidly expand at an annualized rate of 7.5% to reach 32.8% of revenue ($9.8 billion) by 2018. (For more information about e-books, please refer to IBISWorld report OD4579 E-Book Publishing.)

� More publishers will invest in e-books and create interactive versions to justify higher prices


Industry�PerformanceSpending on physical books is slowly declining

This industry has a stable number of enterprises, with an expected annualized increase of only 13% between 2008 and 2018

Technology is increasing competition and enhancing some industry products

Life�Cycle�Stage


20

15

10

5

0

–5

–10–10 10 150 20–5 5

%�G

row

th�in

�sha

re�o

f�eco

nom

y

%�Growth�in�number�of�establishments

Quality�GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

MaturityCompany consolidation;level of economic importance stable

Quantity�GrowthMany new companies; minor growth in economic importance; substantial technology change

DeclineShrinking economicimportance

Key�Features�of�a�Decline�Industry

Revenue grows slower than economyFalling company numbers; large fi rms dominateLittle technology & process changeDeclining per capita consumption of goodStable & clearly segmented products & brands

Magazine�&�Periodical�Publishing

Book,�Magazine�&�Newspaper�Wholesaling

Paper�Mills

Database�&�Directory�Publishing

Book�StoresBook�Publishing



Industry�Life�Cycle As a result of slow revenue growth and a shift in technology, 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. Revenue for book publishers is suffering as a result of consumer substitution to other resources and reading materials that are becoming readily available online. Therefore, publishers must adjust pricing and develop new products, including e-books. Despite publishers’ best efforts to compete, the industry is anticipated to contract as a share of the economy. While industry value added (IVA), which measures the industry’s contribution to the economy, is forecast to decrease at an average annual rate of

0.7% in the 10 years to 2018, GDP is projected to increase at a rate of 2.1% per year on average.

The average per-capita consumption of books is constant, according to the Bureau of Labor Statistics, which indicates that demand for books is relatively steady. Moderate technological development is not expected to offset the stagnant nature of the industry during the five years to 2018, especially as technology advances contribute to increased competition. Technologies are also enabling book publishers to automate systems. As a result, employment is projected to decline at a 1.6% annualized 10-year rate to 80,729 in 2018.

�This industry is Declining


Products�&�Services

TextbooksTextbooks make up the largest portion of industry sales, generating about 28.5% of revenue. 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. During the five years to

2013, the market for primary education textbooks has declined due to restricted state spending on these materials. On the other hand, college textbooks have made up an increasing market share because of growth in enrollment rates. Online subscription and download revenue has further bolstered the textbook segment.

�Products�&�MarketsSupply�Chain�� |�� Products�&�Services�� |�� Demand�DeterminantsMajor�Markets�� |�� International�Trade�� |�� Business�Locations

KEY�BUYING�INDUSTRIES

42492� Book,�Magazine�&�Newspaper�Wholesaling�in�the�US�Book wholesalers are a distribution channel.

45121� Book�Stores�in�the�US�Bookstores are a major retail market.

61� Educational�Services�in�the�US�Government educational departments and schools recommend and purchase books.

KEY�SELLING�INDUSTRIES

32212� Paper�Mills�in�the�US�Paper is a major input in the printing of books; and paper mills supply paper to book printers.

32311� Printing�in�the�US�Printers supply services to book publishers.

32591� Ink�Manufacturing�in�the�US�Ink is a major input in the printing of books, and ink manufacturers supply ink to book printers.

42411� Paper�Wholesaling�in�the�US�Paper is a major input in the printing of books, and paper wholesalers supply paper to book printers.

71151� Performers�&�Creative�Artists�in�the�US�Publishers employ or purchase content from authors and ghostwriters.

Supply�Chain

Products and services segmentation (2013)

Total $26.1bn

28.5%Textbooks

27.2%Other books and revenue

18.6%Adult trade books

18.2%Professional, technical

and scholarly books

7.5%Children's and juveniles' books



Products�&�Markets

DemandDeterminants

The demand for books is influenced by how consumers perceive the entertainment or educational value of a book compared with other media, such as the internet. Consumer sentiment and personal disposable income determine the amount of money people spend on

books. The content and design of books are also factors that consumers use to judge their perceived value.

Along with other media, the internet has increased consumer recognition of celebrities and characters, spurring related book

Products�&�Servicescontinued

The textbook market as a whole has increased about 5.0% relative to other book publishing products during this time.

Scholarly, professional and technical booksScholarly, professional and technical books, which include nonfiction books written for a professional or advanced audience in a specific field like medicine, generate about 18.2% of industry revenue. Due to poor business conditions during the recession, companies and entrepreneurs have spent more money on such books to educate themselves instead of attending more expensive seminars or hiring professionals. This product segment is expected to grow more slowly in 2013 as business and consumer sentiment improves.

Adult trade booksAdult trade books constitute about 18.6% of industry products in 2013. The segment declined since 2008, however, as discretionary spending dipped due to low disposable income during the recession. As disposable income has recovered, the segment has been on the rise since reaching a low in 2010.

Children’s and juveniles’ booksBooks written specifically for and by children (up to age 18) make up 7.5% of total industry revenue. Sales largely depend on school budgets and consumer income, which declined during the past five years and led to a

slide in this product segment. When consumers tightened their budgets during the recession, they bought less expensive books. Other consumers switched from traditional children’s educational materials like books to computer software and online resources. This dampened the share of industry revenue from children’s books. During the next five years, this segment is expected to keep earning a similar share of revenue as disposable income and school budgets recover.

OtherOther books make up about 10.6% of the market share. They include general reference books and religious books. This market segment has consistently contributed to Book Publishing industry revenue and is expected to hold steady during the five years to 2018.

Other services make up 16.6% of industry revenue; they include services like digital publishing, marketing for self-published authors, personal representation and editorial and graphic design commissioned by independent authors. The internet has facilitated the independent publishing process, which is not included in this industry. However, the industry does provide support services to independent publishers, which expanded as a share of revenue during the past five years as a result of their success. As costs continue to decrease, the service segment for independent publishers is expected to grow through 2018.



Major�Markets

Consumer book purchases are broken down by age range. Over the past five years, the 65-and-older segment has grown as baby boomers approach the age range. As a result, this market segment has increased while all other age segments have declined. Americans who are older than 15 spend an average of 20 minutes per day reading, according to the Bureau of Labor Statistics, while people older than 75 read an average of one hour per day because they have much more leisure time. Adults between the ages of 20 and 74 spend less than 20 minutes per day reading. Still, spending on books by age group does not reflect these statistics, because many adults

purchase textbooks and children’s books for their kids. Especially for children’s books and textbooks, publishers market to the readers and buyers of various book types.

According to business intelligence firm Bowker PubTrack, 58.0% of trade books are read by women and 65.0% are bought by women, 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.

Bowker’s PubTrack also has broken down channel market share for where books are bought. According to their 2011 mid-year figures, which is the latest

DemandDeterminantscontinued

sales. Celebrity authors, like Pamela Anderson, have become a staple revenue generator for most major publishers over the past five years. E-books, digital printing and online distribution have decreased book costs and increased the convenience of books. However, these advancements have also increased pirated copies of books and developed used book markets, putting downward pressure on consumer demand for new books.

The literacy rate also determines demand for books. Family incomes can affect this rate, though not as strongly as education. The sale of educational books is affected by grade school and university enrollment rates and government policies. The amount of time that people spend reading also influences their demand for books; according to the Bureau of Labor Statistics, Americans spend an average of 20 minutes per day reading.

Major market segmentation (2013)

Total $26.1bn

24.1%Consumers aged

45 to 646.9%

Consumers aged 20 to 29

22.8%Consumers aged

65 and older

5%Consumers

aged 15 to 19

4.8%Other

organizations

17.4%Government organizations

11.7%Consumers

aged 30 to 44

7.3%Consumers aged 14 and younger




International�Trade Many major publishers have publishing and printing facilities abroad; therefore, they do not contribute as much to the international book trade. In addition, small publishers often sell the rights to domestic titles to foreign publishers. Online sales of books and e-books are not considered in trade data. In 2013, IBISWorld estimates that exports will contribute 6.5% of revenue and imports will make up a 6.6% share of domestic demand. During the next five years, industry trade volume is expected to decrease gradually as online products become increasingly adopted abroad.

Major�Marketscontinued

data available, about 37.0% of books are bought via e-commerce. This segment grew 9.3% since mid-2010 and has since over-taken large chain bookstores that now sell 27.3% of books. This demise was accelerated with the Borders bankruptcy and liquidation, which left many consumers without a convenient,

nearby brick-and-mortar bookstore. Other bookstores made up about 15.3% of book sales, mass merchandisers sold about 5.2% of books and warehouse clubs sold about 2.3% in the first half of 2011. All other channels, including book clubs and schools, sold the remaining 12.9% of books.

$ m

illio

n

3,000

−3,000

−2,000

−1,000

0

1,000

2,000

1905 07 09 11 13 15 17Year

Exports Imports Balance

Industry trade balance


Level�&�Trend��Exports in the industry are Medium and Decreasing

�Imports in the industry are Medium and Decreasing


�Products�&�Markets

Business�Locations�2013

MO2.0

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

VT0.2

MA3.6

RI0.3

NJ7.4

DE0.1

NH0.2

CT1.3

MD2.5

DC0.3

1

5

3

7

2

6

4

8 9

Additional�States�(as marked on map)

AZ0.4

CA6.8

NV0.1

OR0.8

WA0.8

MT0.1

NE0.2

MN10.6

IA1.2

OH7.3 VA

1.5

FL2.9

KS0.3

CO3.4

UT0.5

ID0.4

TX4.6

OK0.2

NC1.4

AK0.0

WY0.1

TN1.4

KY0.7

GA0.4

IL6.4

ME0.4

ND0.1

WI0.7 MI

2.0 PA3.5

WV0.1

SD0.0

NM0.3

AR0.5

MS0.0

AL0.2

SC0.4

LA0.1

HI0.4

IN2.3

NY18.9 5

67

8

321

4

9


Mid- Atlantic

Number�of�Employees�by�Region�(%)�

� Less�than�3%� 3%�to�less�than�10%� 10%�to�less�than�20%� 20%�or�more

Great Lakes


�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. During the past five years, the industry’s presence has decreased most rapidly in the Mid-Atlantic region, especially in New York and New Jersey. However, these two states still make up 18.9% and 7.4% of total industry employment, respectively. Overall, the Mid-Atlantic region employs 32.7% of industry workers. The Great Lakes region follows, employing 18.6%.

Book publishers are concentrated in several major cities throughout the United States, where they house most staff and printing facilities and where university publishing houses are located. The localization in highly populated areas also cuts costs on book delivery, enabling publishers to earn greater profit. Smaller publishing offices are dispersed throughout the country in order to keep track of local press relations and to seek out talent. Because these offices are relatively inexpensive to operate, they were more likely to remain open over the recessionary years.

IBISWorld expects employment in every region to gradually increase during the next five years as the industry recovers from recession-related lows. Likewise, a relatively larger increase in urban locations is expected as book-publishing companies return to city centers where they conduct business more conveniently.

Perc

enta

ge

40

0

10

20

30

Sout

hwes

t

Wes

t

Gre

at L

akes

Mid

-Atla

ntic

New

Eng

land

Plai

ns

Rock

y M

ount

ains

Sout

heas

t

Employees Population

Employees vs. population



Cost�Structure�Benchmarks

ProfitIndustry profit has increased during the five years to 2013, as publishers streamlined the production process by adopting new technologies. Average industry profit, as measured by earnings before interest and taxes, is about 5.8% of total revenue, though textbook publishing profit is greater because of lower advertising costs. In the five years to 2018, average profit is expected to decline as a share of revenue as lower-margin, high-volume sales of e-books become a larger share of industry sales.

PurchasesPurchases make up about 60.2% of revenue. Regular purchases include content, paper, ink, printing equipment and packaging materials. Content comprises about 30.0% of industry revenue, and it is commissioned, contracted or licensed from authors. Depending on the type of arrangement, writers are paid a set amount in advance, receive dividends from sales or have a combination of both.

Paper is another major purchase made by the publishing industry. It is a fixed cost of about 20.0% of revenue because

Key�Success�Factors Control of distribution arrangementsIt is important for publishers to understand and gain control of distribution channels.

Production of premium goods/servicesPublishers can incur significant losses on products that fail to meet expected demand.

Management of a high quality assets portfolioIt is essential that publishers develop a

portfolio of books that are in demand by continually seeking out and promoting talented writers.

Establishment of brand namesStrong branding can attract authors and consumers, affecting both the input and downstream demand for books.

Ensuring pricing policy is appropriateAppropriate pricing can help maximize revenue and clear stocks (and minimize returns).

Market�Share�Concentration

IBISWorld estimates that the top four players account for 26.9% of revenue. This concentration level is similar to the concentration in 2008, when the top four companies generated about 28.5% of revenue. The textbook publishing segment of the industry, however, is highly concentrated. Two of the top four players have significant textbook publishing segments. These textbook segments currently generate a higher proportion of industry revenue due to growing college enrollment rates and partly because of a decrease in

sales of trade, scholarly and professional books.

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. In 2013, 82.9% of firms in the Book Publishing industry are estimated to employ fewer than 20 workers, and only 4.2% employ between 100 and 500 people. During the past five years, employment is anticipated to decrease at an average annual rate of 3.9% to 77,977 employees in 2013.

Competitive�LandscapeMarket�Share�Concentration�� |�� Key�Success�Factors�� |�� Cost�Structure�BenchmarksBasis�of�Competition�� |�� Barriers�to�Entry�� |�� Industry�Globalization

Level��Concentration in this industry is Low

�IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive�Landscape

Cost�Structure�Benchmarkscontinued

of long-term contracts with suppliers and paper-quality flexibility that publishers keep up. If paper prices increase, books are often printed on lower-quality paper to keep this cost steady. Another way that book publishers conserve purchase expenses is by recycling paper and ink themselves and then using the recycled materials. Purchases are expected to decrease during the five years to 2018 as the increasing presence of e-books reduces paper and other costs.

WagesWages account for an estimated 20.6% of industry revenue. They include payment to employees for seeking out talent, editorial services and book design. Wages as a share of revenue have decreased during the five-year period because employment decreased more dramatically than revenue; however, this cost segment expected to

increase during the next five years to 22.3% of revenue in 2018.

Marketing and other costsCompanies in the industry spend about 3.2% of revenue marketing books. Publishers provide displays and posters to retail outlets as part of their promotional campaigns. Other forms of common book advertisements include online, billboard and TV placements. Books are marketed to boost sales by differentiating them from other entertainment options. As a result, they are a steady share of industry revenue.

Utility, rent and depreciation costs are minimal in this industry. Printers and computers are the only depreciable assets used, and they are relatively durable and inexpensive to replace. Other costs include transportation and administration costs. Publishers contract out to third parties to keep such costs low.

Sector�vs.�Industry�Costs

■�Profi�t■�Wages■�Purchases■�Depreciation■�Marketing■�Rent�&�Utilities■�Other

Average�Costs�of�all�Industries�in�sector�(2013)�

Industry�Costs�(2013)�

0

20

40

60

Perc

enta

ge o

f rev

enue

80

100

17.4

15.5

5.98.28.2

22.8

22.0

5.8

9.10.53.20.6

60.2

20.6




Barriers�to�Entry Barriers to entry include the costs of recruiting authors; purchasing paper, printing and printers; developing distribution channels and marketing. While most of these activities can be outsourced, revenue is never guaranteed, and costs recur for each book published.

Established book businesses streamline operations on a regular basis, though, cutting their production costs. This factor enables established publishers to offer books at much lower prices.

Basis�of�Competition Companies in the Book Publishing industry compete for the rights to publish content, particularly by well-known authors and public personalities. Publishers also compete on price and brand recognition. Vertical consolidation and the increasing popularity of multimedia books have led to higher pressure on pricing. Horizontal integration is also increasing competition based on pricing, distribution contracts and product placement. IBISWorld expects competition to remain high, benefiting well-established publishers.

Internal competitionLeading publishing groups work to attract best-selling authors and invest in long-term contracts with these authors to guarantee rights to their works. Authors are often attracted to well-known publishers that have the financial flexibility to invest in brands, benefiting larger publishers. These publishers also benefit from a regular presence in points of sale, such as in-store locations or specific online channels. Complementary products are important to authors and consumers, especially in the textbook market. Publishers are increasingly offering online education programs, testing and interactive products with textbooks.

Also, many major publishing houses are investing in digital technology, allowing them to directly interact with their target markets.

The ability to negotiate with central buyers is important for book publishers so they can sell their books to consumers at competitive prices. Consolidation is also a key factor in driving down unit costs, allowing companies to offer lower prices. In addition, the ability to promote brands and books through advertisements, counter displays, authors’ tours and competitions is key to generating sales.

External competitionExternal competition has increased, with the internet establishing an extremely large market for the resale of books, used and new. This trend takes away from publisher revenue because these sales go through different outlets (e.g. Amazon). Large booksellers, such as Barnes & Noble, are also taking from publisher revenue as they increasingly pursue publishing and distribution rights to books. At the same time, book publishers compete with players in other media industries. Alternate forms of entertainment, such as watching TV, browsing the web and reading magazines, are direct substitutes for reading books.

Level�&�Trend��Competition in this industry is High and the trend is Steady

Barriers�to�Entry�checklist� LevelCompetition HighConcentration LowLife Cycle Stage DeclineCapital Intensity LowTechnology Change MediumRegulation & Policy LightIndustry Assistance Low


Level�&�Trend��Barriers to Entry in this industry are Medium and Steady



Industry�Globalization

The level of globalization has remained at a medium level during the five years to 2013. Foreign-owned subsidiaries in the Book Publishing industry include English media giant Pearson PLC, Irish-owned Education Media Publishing Group, German-owned Random House and French-owned Hachette Livre. These companies all operate on a few continents, benefiting from sharing successful content across subdivisions and opening up foreign markets to best sellers. During the next five years,

IBISWorld does not expect significant change in the level of foreign ownership in this industry.

English-language publishers can market books to international audiences with relatively minor language edits, benefiting the industry. However, marketing to foreign audiences resulted in losses in 2008 when foreign demand for books dropped during the global recession as consumers tightened their budgets. Export levels are gradually recovering to prerecession levels, aided by increasing internet and e-book sales.

Barriers�to�Entrycontinued

There are higher barriers in the education book-publishing market due to the importance of brand names, relatively high upfront investment in the textbook creation process and increasing pressure from the market for add-on products.

In retail stores that carry a small selection of books, leading publishers often have a dominant share of shelf space. Major book wholesalers typically reject books from publishers that have fewer than 10 titles or low sales volumes.


Trade�Globalization Going�Global:�Book�Publishing�2000-2013

Expo

rts/

Reve

nue

Expo

rts/

Reve

nue

200

150

100

50

0

200

150

100

50

0

Imports/Domestic�Demand Imports/Domestic�Demand0 040 4080 80120 120160 160

International trade is a major determinant of an industry’s level of globalization.

Exports offer growth opportunities for fi rms. However there are legal, economic and political risks associated with dealing in foreign countries.

Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local fi rms would otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocalBook�Publishing2000

2013

Level�&�Trend��Globalization in this industry is Medium and the trend is Steady


Player�Performance Pearson is an international media conglomerate involved in publishing, education and business information. The company’s main business operations are in the United Kingdom and United States; however, it also runs substantial businesses in Australia, Canada, Ireland, India, South Africa and New Zealand. Two of the company’s three major divisions are involved in book publishing: Pearson Education runs a textbook-publishing business and the Penguin Group publishes trade books. Pearson’s book publishing segment comprises 32.7% of total company revenue, and its US operations make up about 60.0% of total company revenue.

In early 2013, the company is awaiting regulatory approval to form a joint venture between its Penguin-brand publishing arm and Bertelsmann AG’s Random House. Such a merger would help the publishers cut costs. While the company has not made any acquisitions

in the Book Publishing industry during the past five years, it purchased Harcourt Assessment and Education and eCollege. These companies produce supplementary materials and course outlines to Pearson’s textbooks, giving the publisher a leg up in the digital world of books and education.

Multimedia books allow Penguin to develop interactive book interfaces and focus on the book art in order to make them more appealing to consumers. The company is focusing on redesigning books and reinterpreting classics to increase consumer demand. Penguin has been successful in redesigning and remarketing old books to new readers, contributing to Penguin’s substantial position in the Book Publishing industry.

Financial performanceIn 2012, Pearson’s book publishing revenue dropped an estimated 0.3% to $2.8 billion because of a continued shift

�Major�CompaniesPearson�PLC�� |�� Cengage�LearningThe�McGraw-Hill�Companies�Inc.�� |�� Other�Companies

77.8%Other

Pearson�PLC�10.4%

Cengage�Learning�6.4%

The�McGraw-Hill�Companies�Inc.�5.4%


Major�players(Market share)

Pearson�PLC�(US�book�publishing�segment)��–�fi�nancial�performance*

YearRevenue�

($ million) (% change)Operating�Income�

($ million) (% change)

2007 2,797.0 28.4 389.8 59.4

2008 2,744.2 -1.9 421.1 8.0

2009 2,831.3 3.2 613.2 45.6

2010 2,863.6 1.1 723.0 17.9

2011 2,811.0 -1.8 679.7 -6.0

2012 2,801.2 -0.3 720.2 6.0

*IBISWorld�estimatesSOURCE: ANNUAL REPORT AND IBISWORLD

Pearson�PLC��Market share: 10.4% Industry�Brand�NamesPenguin Puffin Prentice Hall Berkley Dutton New American Library Viking Hamish Hamilton Addison Wesley Cisco Press


Major�Companies

Player�Performance Thomson Learning was renamed Cengage Learning in 2007 after a shake-up within the company. Cengage’s higher education business offers textbooks, electronic information and online products. The company is also a provider of specialized products that support education and research in academic and K-12 libraries. The company earns about 88.5% of its revenue domestically.

Most recently, Cengage purchased the National Geographic Society’s School Publishing Unit, which contributed $74.4 million to revenue in 2012. In July 2010, the company announced plans to merge its academic and professional

group, which includes Delmar and South-Western, with its Gale library division to cut operating costs and produce more library-classroom integrated products. In 2008, Cengage acquired the Houghton Mifflin College Division, expanding its higher education business. In connection with the regulatory review of this acquisition, Cengage reached an agreement with the US Department of Justice to divest certain higher education titles.

Financial performanceDomestic company revenue increased an estimated 35.3% annually on

Player�Performancecontinued

to digital formats, balanced out slightly by the positive effects of improving consumer sentiment. While trade book publishing and primary-education book sales dwindled since late 2007 due to decreasing consumer sentiment and government spending on public education, textbook sales increased as college attendance rates grew.

Due to success in the textbook publishing segment and increasing discretionary spending, Pearson is expected to earn a 16.6% operating profit

margin in 2012, compared with 15.4% in 2011. Pearson’s profit is well above the industry average because the company takes advantage of its international brand and low production cost per book. Profit margins are expected to increase as e-books gain popularity, especially in the textbook market, because e-books are much cheaper to produce and distribute than physical copies. The company organizes several literacy initiatives, which promote reading and propel interest in new ways of reading books.

Cengage�Learning�(US�book�publishing�segment)��–�fi�nancial�performance*

YearRevenue�



2007 379.0 7.7 30.0 21.9

2008 856.7 126.0 644.2 2,047.3

2009 1,673.3 95.3 716.5 11.2

2010 1,738.9 3.9 408.1 -43.0

2011 1,616.8 -7.0 364.4 -10.7

2012 1,717.2 6.2 343.4 -5.8


Cengage�Learning��Market share: 6.4% Industry�Brand�NamesGale South-Western Wadsworth Delmar


Major�Companies

Player�Performance McGraw-Hill’s education business publishes books aimed for students and professionals. The company plans to spin off this part of its business from its securities-related company. As of February 2013, Apollo Global Management is preparing to purchase the publishing segment of McGraw Hill’s business.

McGraw-Hill has two education divisions: the School Education Group (SEG) and the Higher Education, Professional and International Group (HPI). The international segment of the HPI division, which has publishing facilities worldwide, does not operate as a part of the US Book Publishing industry. It is estimated that 71.3% of McGraw-Hill’s revenue is produced in the United States and 25.0% of total company revenue is generated by its book publishing business.

McGraw-Hill has invested in multimedia technology to promote its textbooks. In 2008, the company founded a website called Grade Guru that allows students to share notes, giving McGraw-Hill a direct link to this significant customer base. It also partnered with Pearson and four other companies to sell e-textbooks on a subscription basis through a website called Course Smart. 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.

Financial performanceIn 2012, the firm’s combined book publishing revenue totaled an estimated $1.5 billion, reflecting a decrease of 7.9% from 2011. This


average over the five years to 2012 to $1.7 billion as a result of the company’s significant acquisitions. Cengage also benefited from strong higher-education textbook sales due to rising enrollment rates for adult education during the recession. Operating profit is estimated to total 20.0% and is

above the industry average due to high profitability for many of the electronic education products that the company publishes. ln 2012, domestic digital product sales comprised about 37.5% of the company’s total domestic revenue, which is well above the industry average.

The�McGraw-Hill�Companies�Inc.�(US�book�publishing�segment)��–�fi�nancial�performance*

YearRevenue�



2007 1,929.1 7.7 285.2 21.9

2008 1,901.6 -1.4 231.6 -18.8

2009 1,695.6 -10.8 196.0 -15.4

2010 1,722.7 1.6 257.3 31.3

2011 1,591.0 -7.6 209.9 -18.4

2012 1,465.1 -7.9 192.0 -8.5


The�McGraw-Hill�Companies�Inc.��Market share: 5.4% Industry�Brand�NamesMacmillan Open University Press Wright Group


Major�Companies

Other�Companies Bertelsmann AGEstimated market share: 4.7%Bertelsmann is publishing arm of Random House and may undergo a merger with Pearson’s publishing business in 2013. Bertelsmann will own 53.0% and Pearson the remaining 47.0%. The closing of the transaction is scheduled to take place in the second half of 2013, following regulatory approval.

Bertelsmann is based in Germany and involved in various enterprises, including a strong interest in media. Book publishing revenue is estimated to total $1.3 billion in 2012, representing an average annual decrease of 1.2% during the past five years. Random House is one of the few mass-producers of paperback books that has committed to printing books on paper for the foreseeable future.

Education Media and Publishing Group Ltd.Estimated market share: 4.4%Houghton Mifflin Riverdeep Group PLC formed Education Media and Publishing Group (EMPG) after it purchased Reed Elsevier’s Harcourt book publishing divisions. EMPG is privately owned by several holding companies predominantly based in Ireland. EMPG’s original book publishing business, Houghton Mifflin Harcourt, is

headquartered in Boston.The company underwent significant

financial restructuring in early 2010 and has undergone changes throughout the past five years. Most notably, it went through bankruptcy in mid-2012, though it emerged within a couple of months. Previously, it had sold the Houghton Mifflin College Division to Cengage Learning in 2008 for $750.0 million. The company’s revenue declined at an estimated annualized rate of 13.9% in the five years to 2012 as a result of its production cuts and struggling operations, especially as sliding school budgets limited demand in its key market.

Scholastic Inc.Estimated market share: 4.2%Scholastic is the world’s largest publisher and distributor of children’s books. The company’s major operating segments include children’s book publishing and distribution; educational publishing; media, licensing and advertising; and international. IBISWorld estimates that Scholastic generates its book publishing revenue in the United States solely from the Children’s Book Publishing and Distribution segment.

During the past five years, the company has sold or discontinued a few


decrease has resulted from lower school adoption rates as education budgets continued to get slashed. Revenue has fallen at an estimated annualized rate of 5.4% during the five years to 2012 because of the company’s lower sales during and following the recession, when consumers, companies and governments tightened their budgets. SEG revenue was hit particularly hard because states delayed textbook purchases for public schools. HPI revenue declined as a result of poor

consumer sentiment in 2008 and 2009, but it experienced a rebound in 2010. In particular, its new e-book subscription service has been popular with universities.

The company restructured in 2008 and 2009 in order to keep out of the red, with more than 750 employees laid off from McGraw-Hill’s publishing segments. The company’s profit margin is expected to grow through 2017 as e-book sales increase and the company further streamlines operations.


Major�Companies

Other�Companiescontinued

international businesses and closed a store in New York. This move generated cash to restructure the business and streamline operations. Scholastic experienced a 3.6% annualized revenue decline to $1.1 billion in the five years to 2012. However, this includes about 20.5% growth in 2012 driven by an increase in consumer spending, especially on the successful Hunger Games trilogy. During the period, Scholastic’s top-selling book was the final Harry Potter book, which contributed more revenue in 2008 than any other book.

News CorporationEstimated market share: 3.9%News Corporation is a multinational company that is primarily involved in book publication, news, broadcasting, TV and movie production. Its book publishing business is under the HarperCollins umbrella and is headquartered in New York. The company publishes

books in the United States, Canada, the United Kingdom, Australia, New Zealand and India. IBISWorld expects layoffs and restructuring to occur within the company during early 2013, as the publishing segment of News Corporation is spun off from its other businesses.

During the five years to 2012, News Corporation’s book publishing revenue declined at an average annual rate of 1.6% to $1.2 billion, which represents 4.0% of total company revenue. News Corporation experienced a significant decline in revenue in 2009 as a result of poor sales and few best sellers.

The company is now implementing strategies in the digital market by releasing “enhanced e-books,” which include bonus content like teaching videos or extra essays and are priced higher than regular e-books. The company is also releasing some book-related children’s applications for Apple products like the iPad and iPhone, which will possibly boost sales.


Capital�Intensity The Book Publishing industry has a labor-intensive production process. For every dollar spent on labor, the industry spends only five cents on capital, such as printers. The publishing process involves tasks that cannot be done by machinery, such as seeking out talent, contract management, writing, editing, designing cover art and marketing. The industry is similar to others in the information sector, which depends heavily on people to sort through information, determine what is relevant to consumers and portray it in an interesting way.

�Operating�ConditionsCapital�Intensity�� |�� Technology�&�Systems�� |�� Revenue�VolatilityRegulation�&�Policy�� |�� Industry�Assistance

Tools�of�the�Trade:�Growth�Strategies�for�Success


Labo

r�Int

ensi

veCapital�Intensive

Change�in�Share�of�the�Economy

New�Age�Economy

Recreation,�Personal�Services,�Health�and�Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional�Service�Economy

Wholesale�and�Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old�Economy

Agriculture�and�Manufacturing.�Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment�Economy

Information,�Communications,�Mining,�Finance�and�Real�Estate.�To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Book,�Magazine�&�Newspaper�Wholesaling

Paper�MillsBook�StoresBook�Publishing

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit

Book PublishingInformationEconomy

Level��The level of capital intensity is Low


Operating�Conditions

Revenue�Volatility Volatility in the Book Publishing industry is softened by the diversified nature of its products, which cater to all ages and interests and provide entertainment and

information. Nevertheless, this industry is subject to fads and trends that cause some volatility, especially in the trade book market, and economic conditions

Technology&�Systems

The development of online bookstores has enhanced the visibility of books, particularly back listed titles. Online bookstores are supported by fast search engines that enable customers to locate books by title, author or keyword in only a few seconds. Online retailers now claim about one-quarter of the consumer trade-book market. Consumers can download books via the internet and then print them out on ordinary printers. They can also save them in notebook-sized computers that display one page at a time on their screens. This advancement reduces the cost of books to consumers and helps drive demand. Similarly, 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.

The internet is also a powerful complement to books, providing updated information, tutorials and testing. Publishers are building online communities centering on authors and

genres to strengthen relationships with readers and create new revenue streams. Industry-specific software systems help automate the entire process, from order placement and production to delivery and invoicing. Automation in printing has enabled continuous monitoring of quality and self-correction, saving the time and costs it would require for people to do these tasks by hand. Also, computer composition software, such as desktop publishing, has decreased the time it takes 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, personalized and individualized. Photo-typesetting equipment includes image setting and scanning, which involves electronic or laser color scanners. Continued improvements in these processes will reduce the employees and time costs that are needed to publish a book.

Level��The level of Technology Change is Medium


Volatility�vs�Growth

Reve

nue�

vola

tility

*�(%

)�

1000

100

10

1

0.1

Five�year�annualized�revenue�growth�(%)�–30 –10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue�Chip

* Axis is in logarithmic scale

Book�Publishing

A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Level��The level of Volatility is Medium


Operating�Conditions

Industry�Assistance The Association of American Publishers actively lobbies Congress and state legislatures to protect book publishers’ interests. For instance, in 2008, 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.

According to the definition, integrated textbooks include third-party materials that do not have to be offered separately, while bundled textbooks include other publisher-owned products that must be sold independently. Previously, these categories had not been distinguished, and textbook companies took issue with states that required third-party materials to be sold separately.

Regulation�&�Policy There are no industry-specific policies or regulations; however, the industry is subject to waste-management, antitrust, fair-pricing and copyright regulations.

Revenue�Volatilitycontinued

influence consumer spending on books. Revenue volatility is expected to be relatively steady during the five years to 2013, fluctuating maximally between a decrease of 4.3% in 2011 and a 0.6% decline in 2012.

The US schoolbook market is relatively volatile, partly because of state adoption cycles, which cause

significant year-to-year fluctuations in school textbook sales. Many states purchase primary-school textbooks according to a schedule determined by their education budgets each year. The higher-education textbook market is relatively stable, yet countercyclical, offsetting the volatile consumer book and schoolbook markets.

Level�&�Trend��The level of Regulation is Light and the trend is Steady

Level�&�Trend��The level of Industry Assistance is Low and the trend is Steady


�Key�StatisticsRevenue�

($m)

Industry�Value�Added�

($m)Establish-

ments Enterprises EmploymentExports�

($m)Imports�

($m)Wages�($m)

Domestic�Demand

($m)

Domestic�E-book�Revenue�

($m)2004 32,480.2 7,293.6 3,377 3,087 84,997 2,110.5 2,345.6 5,604.6 32,715.3 24.32005 31,699.1 7,176.5 3,359 3,066 83,555 2,223.5 2,378.4 5,464.8 31,854.0 41.02006 30,369.3 7,168.1 3,335 3,042 83,504 2,215.7 2,416.1 5,680.0 30,569.7 52.22007 30,733.8 7,536.9 3,321 3,052 87,016 2,359.9 2,521.4 5,908.1 30,895.3 158.22008 30,297.8 8,084.4 3,097 2,761 95,192 2,363.8 2,392.7 6,478.6 30,326.7 435.22009 29,127.3 6,480.7 3,038 2,672 83,744 2,126.4 1,868.3 5,723.5 28,869.2 888.12010 28,769.2 6,112.6 3,017 2,641 80,098 2,032.6 1,858.9 5,738.6 28,595.5 1,683.72011 27,539.2 6,209.8 3,072 2,678 78,978 1,962.7 1,792.6 5,576.4 27,369.1 4,223.12012 27,383.7 6,275.6 3,144 2,728 78,657 1,863.0 1,795.5 5,628.7 27,316.2 5,799.12013 26,058.0 6,075.4 3,077 2,658 77,977 1,698.9 1,719.3 5,443.3 26,078.4 6,830.22014 26,786.0 6,362.3 3,199 2,750 78,639 1,634.0 1,783.9 5,686.5 26,935.9 7,363.52015 27,909.0 6,753.0 3,371 2,885 80,387 1,570.6 1,856.7 6,021.3 28,195.1 8,349.02016 28,240.0 6,932.1 3,449 2,938 79,638 1,532.6 1,857.3 6,191.8 28,564.7 9,063.42017 29,344.0 7,308.1 3,624 3,073 81,019 1,518.4 1,891.6 6,538.5 29,717.2 9,325.12018 29,863.9 7,520.0 3,730 3,149 80,729 1,462.1 1,856.1 6,762.6 30,257.9 9,810.0Sector�Rank 16/86 24/86 24/86 22/86 18/86 4/11 2/11 16/86 3/11 N/AEconomy�Rank 316/1190 386/1190 523/1189 485/1189 386/1190 130/418 164/419 253/1190 91/418 N/A

IVA/Revenue�(%)

Imports/Demand�

(%)Exports/Revenue�

(%)

Revenue�per�Employee�

($’000)Wages/Revenue�

(%)Employees�

per�Est.Average�Wage�

($)

Share�of�the�Economy�

(%)2004 22.46 7.17 6.50 382.13 17.26 25.17 65,938.80 0.062005 22.64 7.47 7.01 379.38 17.24 24.87 65,403.63 0.062006 23.60 7.90 7.30 363.69 18.70 25.04 68,020.69 0.062007 24.52 8.16 7.68 353.20 19.22 26.20 67,896.71 0.062008 26.68 7.89 7.80 318.28 21.38 30.74 68,058.24 0.062009 22.25 6.47 7.30 347.81 19.65 27.57 68,345.19 0.052010 21.25 6.50 7.07 359.18 19.95 26.55 71,644.74 0.052011 22.55 6.55 7.13 348.69 20.25 25.71 70,607.00 0.052012 22.92 6.57 6.80 348.14 20.55 25.02 71,560.06 0.052013 23.31 6.59 6.52 334.18 20.89 25.34 69,806.48 0.042014 23.75 6.62 6.10 340.62 21.23 24.58 72,311.45 0.042015 24.20 6.59 5.63 347.18 21.57 23.85 74,903.90 0.052016 24.55 6.50 5.43 354.60 21.93 23.09 77,749.32 0.052017 24.90 6.37 5.17 362.19 22.28 22.36 80,703.29 0.052018 25.18 6.13 4.90 369.93 22.64 21.64 83,769.15 0.05Sector�Rank 81/86 4/11 11/11 36/86 50/86 31/86 48/86 24/86Economy�Rank 854/1190 321/418 334/418 477/1190 481/1190 425/1189 226/1190 386/1190

Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.

Revenue�(%)

Industry�Value�Added�

(%)

Establish-ments�

(%)Enterprises�

(%)Employment�

(%)Exports�

(%)Imports�

(%)Wages�

(%)

Domestic�Demand�

(%)

Domestic�E-book�Revenue�

(%)2005 -2.4 -1.6 -0.5 -0.7 -1.7 5.4 1.4 -2.5 -2.6 68.72006 -4.2 -0.1 -0.7 -0.8 -0.1 -0.4 1.6 3.9 -4.0 27.32007 1.2 5.1 -0.4 0.3 4.2 6.5 4.4 4.0 1.1 203.12008 -1.4 7.3 -6.7 -9.5 9.4 0.2 -5.1 9.7 -1.8 175.12009 -3.9 -19.8 -1.9 -3.2 -12.0 -10.0 -21.9 -11.7 -4.8 104.12010 -1.2 -5.7 -0.7 -1.2 -4.4 -4.4 -0.5 0.3 -0.9 89.62011 -4.3 1.6 1.8 1.4 -1.4 -3.4 -3.6 -2.8 -4.3 150.82012 -0.6 1.1 2.3 1.9 -0.4 -5.1 0.2 0.9 -0.2 37.32013 -4.8 -3.2 -2.1 -2.6 -0.9 -8.8 -4.2 -3.3 -4.5 17.82014 2.8 4.7 4.0 3.5 0.8 -3.8 3.8 4.5 3.3 7.82015 4.2 6.1 5.4 4.9 2.2 -3.9 4.1 5.9 4.7 13.42016 1.2 2.7 2.3 1.8 -0.9 -2.4 0.0 2.8 1.3 8.62017 3.9 5.4 5.1 4.6 1.7 -0.9 1.8 5.6 4.0 2.92018 1.8 2.9 2.9 2.5 -0.4 -3.7 -1.9 3.4 1.8 5.2Sector�Rank 83/86 81/86 70/86 73/86 62/86 11/11 8/11 78/86 10/11 N/AEconomy�Rank 1171/1190 1135/1190 1080/1189 1071/1189 1005/1190 412/418 400/419 1147/1190 407/418 N/A

Annual�Change

Key�Ratios

Industry�Data



Jargon�&�Glossary

BARRIERS�TO�ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL�INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT�PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC�DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY�CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY�REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

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, or profit plus wages and depreciation.

INTERNATIONAL�TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE�CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

Industry�Jargon

IBISWorld�Glossary

ADOPTION The process of reviewing textbooks and mandating that certain ones are used or that teachers can select books from an approved list.

BRICK-AND-MORTAR A store that has a physical presence and location, as opposed to an online retailer.

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.

E-BOOK A book in a digital format that can be read on a computer or on a variety of mobile devices.

POST-SECONDARY�EDUCATION College- or university-level education that includes graduate or post-graduate (PhD) education.

PRIMARY�EDUCATION Education from kindergarten through eighth grade.

SECONDARY�EDUCATION Education from ninth grade through 12th grade.

TRADE�BOOK A fiction or nonfiction book printed for general distribution.


Jargon�&�Glossary

NONEMPLOYING�ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

IBISWorld�Glossarycontinued

Disclaimer

This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use by its authorized licensees strictly in accordance with their license agreements with IBISWorld. IBISWorld makes no representation to any other person with regard to the completeness or accuracy of the data or information contained herein, and it accepts no responsibility and disclaims all liability (save for liability which cannot be lawfully disclaimed) for loss or damage whatsoever suffered or incurred by any other person resulting from

the use of, or reliance upon, the data or information contained herein. Copyright in this publication is owned by IBISWorld Inc. The publication is sold on the basis that the purchaser agrees not to copy the material contained within it for other than the purchasers own purposes. In the event that the purchaser uses or quotes from the material in this publication – in papers, reports, or opinions prepared for any other person – it is agreed that it will be sourced to: IBISWorld Inc.

At IBISWorld we know that industry intelligence is more than assembling factsIt is combining data with analysis to answer the questions that successful businesses askIdentify�high�growth,�emerging�&�shrinking�marketsArm�yourself�with�the�latest�industry�intelligenceAssess�competitive�threats�from�existing�&�new�entrantsBenchmark�your�performance�against�the�competitionMake�speedy�market-ready,�profit-maximizing�decisions

Who�is�IBISWorld?We are strategists, analysts, researchers, and marketers. We provide answers to information-hungry, time-poor businesses. Our goal is to provide real world answers that matter to your business in our 700 US industry reports. When tough strategic, budget, sales and marketing decisions need to be made, our suite of Industry and Risk intelligence products give you deeply-researched answers quickly.

IBISWorld�MembershipIBISWorld offers tailored membership packages to meet your needs.

Copyright 2013 IBISWorld Inc

www.ibisworld.com��|��1800-330-3772��| ��[email protected]

Documents

Book Publishing in the US industry report.pdf