PUBLISHED MARCH/APRIL 2021
by Cliff Guren, Thad McIlroy, and Steve Sieck —
A new report finds that the publishing industry has, on the whole, fared well in these trying times.
- Trade sales for 2020 were almost uniformly ahead of 2019, and in several categories, unit
sales were up over 20% through mid-December.
- Most projections for the US COVID-19-recovery economy in 2021 are positive, with expected growth of 6% or more.
- September 2020 e-book sales were up 22% year over year and 16% year to date.
How did 2020 impact your publishing program? The tragedy of COVID-19 struck businesses and workers across the spectrum. Yet in a new report, COVID-19 and Book Publishing: Impacts and Insights for 2021, we found that the publishing industry has, on the whole, fared well in these trying times.
Publishers have largely escaped the COVID-19-inflicted disruptions experienced by several other sectors. Trade sales for 2020 were almost uniformly ahead of 2019, and in several categories, unit sales were up over 20% through mid-December. Supply chain issues, which early in the pandemic appeared potentially dire, have for the most part resolved themselves. It’s not perfect, but things are working—books are being printed, distributed, and purchased.
But what are independent publishers to learn when they lift their heads to survey the surrounding landscape? To answer that question, we looked beyond the usual industry sources to consider the broader economic and social picture, particularly COVID-19’s impact on sectors aligned with and adjacent to the book publishing market itself. We drilled down on the economy as a whole and on retail, libraries, K-12 and higher education, and the entertainment industries, stepping outside book publishing and looking back from multiple perspectives.
Despite a tough winter, most projections for the US COVID-19-recovery economy in 2021 are positive, with expected growth of 6% or more. The new administration in Washington promises further economic stimulus. Given that publishing sales have increased in the economically challenged environment of 2020, the prospects for this year should be encouraging. But among the questions we try to answer are whether the reading-favorable environment of stay-at-home living has been just a short-term stimulant or represents a longer-term trend; and whether books can hold their share of consumers’ discretionary time and budgets versus the rapid growth of streaming media.
The Outlook in Related Sectors
In the retail environment, COVID-19 has driven a huge shift from brick and mortar to online, and from weaker to stronger players. At the end of the third quarter of 2020, the e-commerce share of retail sales had increased by over a third from the previous year. While several well-established chains have filed for bankruptcy, Amazon, eBay, Walmart, and Target reported record sales, with reenergized online efforts.
Although books themselves have performed well, year-to-date bookstore sales were down by almost a third through September, and a full comeback by independent bookstores will be challenging. Barnes & Noble also faced a tough year—CEO James Daunt projected sales down by some 20%.
The most contentious pre-COVID-19 issue in the library market, a conflict over publishers’ terms for e-book offerings, was superseded in the pandemic by an explosion of patron demand for e-books (and audiobooks). Publishers backed off on many sales restrictions, although it’s unclear whether they’ll return post-pandemic.
But beyond publisher conditions for library e-book sales, many other questions remain for libraries post-vaccine(s). A lingering distaste for handling shared physical objects and reluctance to spend time in public spaces may dampen demand for the return of more traditional library services. And library budgets are likely to be early targets for the chopping block at the state and local level.
Back to School
The pandemic has brought longstanding weaknesses in both K-12 and higher education to the fore, testing the value proposition of higher-ed institutions and making stakeholders in K-12 more aware of alternative approaches to classroom instruction. Publishers faced challenges in the form of deferred textbook orders and stressed institutional budgets. But digital solutions and a focus on flexible and inclusive subscription business models appear to be paying off in the higher-ed market, with strong growth in digital offerings that for some leading players has more than offset declines in printed textbook sales.
COVID-19’s impact on different segments of the entertainment industry has varied widely. The gaming and streaming video and music markets have seen big gains from homebound consumers, while the movie industry has been plagued by halted productions and shuttered theaters. The big winners appear to be those players with recurring revenue models who can bring a wide choice of original programming directly into consumers’ homes. While competing for consumers’ discretionary time and dollars, publishers will also be leveraging subsidiary rights from existing properties to feed the demand for that programming.
We found a number of overarching themes emerging from our analysis of book-publishing-related markets, including:
- Price sensitivity. Consumer discretionary spending should rise with the economy’s anticipated growth in 2021, a positive note for book sales. But there are clear signs that, for example, consumers are willing to switch or cancel video streaming services to lower their monthly cost, and that they resist paying high prices for home rental of first-run movies.
- Digital technology. The pandemic has accelerated the analog-to-digital evolution in every sense. With September e-book sales up 22% year over year and 16% year to date, trade publishers are revisiting the format with new respect. And educational publishers are seeing a long-awaited payback from their investments in digital learning offerings, accompanied by a flow of venture investment toward educational technology innovations.
- Direct-to-consumer marketing revisited. Publishers, large and small, have been uneven in their efforts to bypass their traditional book retailer model for book distribution. But the crisis in brick-and-mortar bookselling, growing demand for e-books, an emerging direct-to-parents channel for educational content, and the compression of supply chains in an increasingly direct-to-home entertainment industry all point to the need to reenergize direct online strategies.
- Demand for video content development. The explosive growth of streaming video entertainment represents a two-sided coin for publishers: a competitive venue for some successful authors, but also an opportunity for book rights holders to develop video properties and perhaps novel packaging strategies for entertainment industry partners and other potential distribution channels. It’s not just the large publishers that can benefit.
- The social element. Enforced isolation naturally results in increased interest in alternative forms of social connections. For example, we found that 60% of gamers are playing more multiplayer games, and specifically with social components. Publishers should continue to focus on developing community-oriented activities, such as online book tours and social media initiatives.
Where Do We Go from Here?
The implications of COVID-19 on the book publishing sector are both subtle and deep. Although the sudden pandemic-driven shifts may slow or revert toward the mean with the achievement of a “new normal,” we believe that important underlying changes will persist and continue to evolve.
The report is 50 pages and available for download without cost here.
Cliff Guren is the founder of Syntopical. The firm provides strategic planning and business development services to publishers, technology companies, and industry service providers. Guren has held senior management positions at Apple, Microsoft, Quebecor, and Asymetrix.
Thad McIlroy is an electronic publishing analyst and author based in San Francisco and Vancouver, British Columbia. His site, The Future of Publishing, provides in-depth coverage of the book publishing industry. He is also a partner in Publishing Technology Partners.
Steve Sieck is president of SKS Advisors, a New York-based research and strategic consultancy firm specializing in business, professional, and academic publishing and information services, and a partner in Publishing Technology Partners.