Book Publishing in The US Industry Report PDF

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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
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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 Childrens 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
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Book Publishing in the US February 2013
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
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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

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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
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Industry Performance
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
Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
Publishers
will invest in e-books, but demand from traditional books will remain
revenue. Consequently, IBISWorld estimates that the Book Publishing industrys 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.
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. 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 income Books 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
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Key External Drivers continued
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 competition As 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 change Technological 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
Per capita disposable income
4 2
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 students Students 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.
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
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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 industrys 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
Industry revenue
6 4
% change
2 0 2 4
Year 05
07
09
11
13
15
17
19
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 companys shutdown dented demand for publishers.
Diversity is key
The industrys 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 industrys
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Diversity is key continued
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 thirdparty 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 Amazons Kindle, have been introduced over the five-year period to ease e-book
Though
the internet has given publishers new markets, it has also increased competition
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
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Format and financial flexibility continued
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 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.
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
The
industry will cut costs by publishing online and using digital printing
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
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Book demand expected to rise continued
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. 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. 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
More
publishers will invest in e-books and create interactive versions to justify higher prices
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 Apples 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.)
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Life Cycle Stage
Spending 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
%Growthinshareofeconomy
20
Company consolidation; level of economic importance stable
Maturity
QualityGrowth
High growth in economic importance; weaker companies close down; 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; minor growth in economic importance; substantial technology change
BookStores PaperMills
5
Magazine&PeriodicalPublishing Book,Magazine&NewspaperWholesaling Database&DirectoryPublishing
BookPublishing
Decline
Shrinking economic importance
10 10
10
15
20
%Growthinnumberofestablishments
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Industry Life Cycle This industry is Declining
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 industrys 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.
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Products & Markets

Supply Chain
KEY BUYING INDUSTRIES
42492 45121 61
Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations
Book, Magazine & Newspaper Wholesaling in the US Book wholesalers are a distribution channel. Book Stores in the US Bookstores are a major retail market. Educational Services in the US Government educational departments and schools recommend and purchase books.
KEY SELLING INDUSTRIES

32212 32311 32591 42411 Paper Mills in the US Paper is a major input in the printing of books; and paper mills supply paper to book printers. Printing in the US Printers supply services to book publishers. Ink Manufacturing in the US Ink is a major input in the printing of books, and ink manufacturers supply ink to book printers. Paper Wholesaling in the US Paper is a major input in the printing of books, and paper wholesalers supply paper to book printers. Performers & Creative Artists in the US Publishers employ or purchase content from authors and ghostwriters.
71151
Products & Services
Products and services segmentation (2013)

Children's and juveniles' books Professional, technical and scholarly books
7.5%
18.2%
28.5%
Textbooks
Adult trade books
18.6%
Total $26.1bn
Textbooks Textbooks 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
Other books and revenue

27.2%
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.
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Products & Markets
Products & Services continued
The textbook market as a whole has increased about 5.0% relative to other book publishing products during thistime. Scholarly, professional and technical books Scholarly, 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 books Adult 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. Childrens and juveniles books Books 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 childrens educational materials like books to computer software and online resources. This dampened the share of industry revenue from childrens 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. Other Other 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.
Demand Determinants
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
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Products & Markets
Demand Determinants continued
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 Markets
Major market segmentation (2013)

Other Consumers aged 15 to 19 organizations
5%
4.8%
Consumers aged 14 and younger Consumers aged 30 to 44
7.3%
Consumers aged 20 to 29
6.9%
Consumers aged 45 to 64
24.1%
11.7%
Total $26.1bn
Government organizations
17.4%
Consumers aged 65 and older
22.8%
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 childrens books for their kids. Especially for childrens 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. Bowkers PubTrack also has broken down channel market share for where books are bought. According to their 2011 mid-year figures, which is the latest
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Products & Markets
Major Markets continued
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.
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; 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.
Industry trade balance

3,000 2,000 1,000 0 1,000 2,000 3,000
Year 05 Exports
07
09
11
13
15
17
19
Imports
Balance
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Products & Markets

Business Locations 2013
West
AK
0.0
New England Great Lakes MidAtlantic

MI
2.0
ME
0.4
WA
0.8
OR
0.8
Rocky Mountains ID
0.1 0.4
MT
ND
0.1
MN
SD
0.0
Plains
IA
1.2
10.6
1 2 3 NY 18.9 5 4 6 7 8
WI
0.7
PA
3.5
WY
0.1
West NV
0.1
NE
0.2
IL
6.4
IN
2.3
OH
7.3
UT
0.5
CO
3.4
KS
0.3
MO
2.0
KY
0.7
WV VA 1.5
0.1
NC
1.4
CA
6.8
OK AZ
0.4 0.2
AR
0.5
Southeast
1.4
TN
SC
0.4
NM
0.3
Southwest
TX
4.6
MS
0.0
AL
0.2
GA
0.4
LA
0.1
FL
2.9
West
HI
0.4
AdditionalStates(as marked on map) 1 VT

0.2 1.3
NumberofEmployeesbyRegion(%) Lessthan3% 3%tolessthan10% 10%tolessthan20% 20%ormore

2 NH
0.2
3 MA
3.6
4 RI
0.3
5 CT
6 NJ
7.4
7 DE
0.1
8 MD
2.5
9 DC
0.3
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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 industrys presence has decreased most rapidly in the MidAtlantic 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.
Employees vs. population

40 30
Percentage
20 10 0 Rocky Mountains Great Lakes Mid-Atlantic New England Southeast Southwest Plains West
Employees Population
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 bookpublishing companies return to city centers where they conduct business more conveniently.
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Competitive Landscape
Market Share Concentration
Level 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
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, 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.
Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
Control of distribution arrangements It is important for publishers to understand and gain control of distribution channels. Production of premium goods/services Publishers can incur significant losses on products that fail to meet expected demand. 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. Establishment of brand names Strong branding can attract authors and consumers, affecting both the input and downstream demand for books. Ensuring pricing policy is appropriate Appropriate pricing can help maximize revenue and clear stocks (and minimize returns).
Cost Structure Benchmarks
Profit Industry 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.
Purchases Purchases 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
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Cost Structure Benchmarks continued
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. Wages Wages 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
Sectorvs.IndustryCosts
AverageCostsof allIndustriesin sector(2013) 100
increase during the next five years to 22.3% of revenue in 2018. Marketing and other costs Companies 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.
IndustryCosts (2013)
17.4
80
5.8 20.6
22.0
Percentage of revenue
60
Profi t Wages Purchases Depreciation Marketing Rent&Utilities Other
22.8
40
60.2
20
8.2 8.2 5.9 15.5
0.6 3.2 9.1
0.5
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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, 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 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. Authors are often attracted to wellknown 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 competition External 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.
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; 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.
BarrierstoEntrychecklist
Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance
Level
High Low Decline Low Medium Light Low
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Barriers to Entry continued
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.
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. Foreign-owned subsidiaries in the Book Publishing industry include English media giant Pearson PLC, Irish-owned Education Media Publishing Group, Germanowned Random House and Frenchowned 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,
TradeGlobalization
200 150 100 50 0 Local 0
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.
GoingGlobal:BookPublishing2000-2013
International trade is a major determinant of an industrys level of globalization. Exports offer growth opportunities for firms. 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 firms would otherwise supply.
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
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Major Companies
Major players
(Market share)
Pearson PLC | Cengage Learning The McGraw-Hill Companies Inc. | Other Companies
Cengage Learning 6.4%
77.8%
Other The McGraw-Hill Companies Inc. 5.4% Pearson PLC 10.4%
Player Performance Pearson PLC Market share: 10.4% 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, education and business information. The companys 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 companys three major divisions are involved in book publishing: Pearson Education runs a textbookpublishing business and the Penguin Group publishes trade books. Pearsons 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 AGs 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 Pearsons 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 Penguins substantial position in the Book Publishing industry. Financial performance In 2012, Pearsons book publishing revenue dropped an estimated 0.3% to $2.8 billion because of a continued shift
PearsonPLC(USbookpublishingsegment)fi nancialperformance*
Year 2007 2008 2009 2010 2011 2012
*IBISWorldestimates
Revenue ($ million) 2,797.0 2,744.2 2,831.3 2,863.6 2,811.0 2,801.2
(% change) 28.4 -1.9 3.2 1.1 -1.8 -0.3
OperatingIncome ($ million) 389.8 421.1 613.2 723.0 679.7 720.2
(% change) 59.4 8.0 45.6 17.9 -6.0 6.0
SOURCE: ANNUAL REPORT AND IBISWORLD
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Major Companies
Player Performance continued
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. Pearsons 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.
Player Performance Cengage Learning Market share: 6.4% Industry Brand Names
Gale South-Western Wadsworth Delmar
Thomson Learning was renamed Cengage Learning in 2007 after a shakeup within the company. Cengages 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 Societys School Publishing Unit, which contributed $74.4 million to revenue in 2012. In July 2010, the company announced plans to merge its academic and professional
group, which includes Delmar and South-Western, with its Gale library division to cut operating costs and produce more library-classroom integrated products. In 2008, Cengage acquired the Houghton Mifflin College Division, expanding its higher education business. In connection with the regulatory review of this acquisition, Cengage reached an agreement with the US Department of Justice to divest certain higher education titles. Financial performance Domestic company revenue increased an estimated 35.3% annually on
CengageLearning(USbookpublishingsegment) fi nancialperformance*
Year 2007 2008 2009 2010 2011 2012
*IBISWorldestimates SOURCE: ANNUAL REPORT AND IBISWORLD
Revenue ($ million) 379.0 856.7 1,673.3 1,738.9 1,616.8 1,717.2
(% change) 7.7 126.0 95.3 3.9 -7.0 6.2
(% change) 21.9 2,047.3 11.2 -43.0 -10.7 -5.8
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Major Companies
average over the five years to 2012 to $1.7 billion as a result of the companys significant acquisitions. Cengage also benefited from strong highereducation 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 companys total domestic revenue, which is well above the industry average.
Player Performance The McGraw-Hill Companies Inc. Market share: 5.4% Industry Brand Names
Macmillan Open University Press Wright Group
McGraw-Hills 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 Hills 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-Hills 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 performance In 2012, the firms combined book publishing revenue totaled an estimated $1.5 billion, reflecting a decrease of 7.9% from 2011. This
TheMcGraw-HillCompaniesInc.(USbookpublishingsegment) fi nancialperformance*
Year 2007 2008 2009 2010 2011 2012
*IBISWorldestimates SOURCE: ANNUAL REPORT AND IBISWORLD
Revenue ($ million) 1,929.1 1,901.6 1,695.6 1,722.7 1,591.0 1,465.1
(% change) 7.7 -1.4 -10.8 1.6 -7.6 -7.9
(% change) 21.9 -18.8 -15.4 31.3 -18.4 -8.5
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Major Companies
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 companys 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-Hills publishing segments. The companys profit margin is expected to grow through 2017 as e-book sales increase and the company further streamlines operations.
Other Companies
Bertelsmann AG
Estimated market share: 4.7% Bertelsmann is publishing arm of Random House and may undergo a merger with Pearsons 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.
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 companys 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.
Education Media and PublishingGroup Ltd.
Estimated market share: 4.4% Houghton Mifflin Riverdeep Group PLC formed Education Media and Publishing Group (EMPG) after it purchased Reed Elseviers Harcourt book publishing divisions. EMPG is privately owned by several holding companies predominantly based in Ireland. EMPGs original book publishing business, Houghton Mifflin Harcourt, is
Estimated market share: 4.2% Scholastic is the worlds largest publisher and distributor of childrens books. The companys major operating segments include childrens 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 Childrens Book Publishing and Distribution segment. During the past five years, the company has sold or discontinued a few
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Major Companies
Other Companies continued
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, Scholastics top-selling book was the final Harry Potter book, which contributed more revenue in 2008 than any other book.
News Corporation
Estimated 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 Corporations 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 bookrelated childrens applications for Apple products like the iPad and iPhone, which will possibly boost sales.
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Operating Conditions
Capital Intensity
Level The level 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.
Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Capital units per labor unit 0.5 0.4 0.3 0.2 0.1 0.0 Economy Information Book Publishing
Capital intensity
of capital intensity is Low
Dotted line shows a high level of capital intensity

ToolsoftheTrade:GrowthStrategiesforSuccess
NewAgeEconomy Recreation,PersonalServices, HealthandEducation. Firms benefit from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation. InvestmentEconomy Information,Communications, Mining,FinanceandReal Estate.To increase revenue firms need superior debt management, a stable macroeconomic environment and a sound investment plan.
CapitalIntensive
LaborIntensive
BookPublishing
TraditionalServiceEconomy WholesaleandRetail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore firms must use new technology or improve staff training to increase revenue growth.
PaperMills BookStores Book,Magazine&NewspaperWholesaling
OldEconomy AgricultureandManufacturing. Traded goods can be produced using cheap labor abroad. To expand firms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.
ChangeinShareoftheEconomy
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Technology & Systems

Level The level
of Technology Change is Medium
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.
Revenue Volatility
Level The level
of Volatility is Medium
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
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 firm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.
information. Nevertheless, this industry is subject to fads and trends that cause some volatility, especially in the trade book market, and economic conditions
VolatilityvsGrowth
1000
Hazardous
Rollercoaster
Revenuevolatility*(%)
100 10
BookPublishing
1 0.1
Stagnant
30 10 10 30 50
BlueChip
70
Fiveyearannualizedrevenuegrowth(%)
* Axis is in logarithmic scale
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Revenue Volatility continued
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.
Regulation & Policy

Level & Trend he level of T
There are no industry-specific policies or regulations; however, the industry is subject to waste-management, antitrust, fair-pricing and copyright regulations.
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. 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.
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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) 32,480.2 7,293.6 31,699.1 7,176.5 30,369.3 7,168.1 30,733.8 7,536.9 30,297.8 8,084.4 29,127.3 6,480.7 28,769.2 6,112.6 27,539.2 6,209.8 27,383.7 6,275.6 26,058.0 6,075.4 26,786.0 6,362.3 27,909.0 6,753.0 28,240.0 6,932.1 29,344.0 7,308.1 29,863.9 7,520.0 16/86 24/86 316/1190 386/1190 Establishments 3,377 3,359 3,335 3,321 3,097 3,038 3,017 3,072 3,144 3,077 3,199 3,371 3,449 3,624 3,730 24/86 523/1189 Enterprises Employment 3,087 84,997 3,066 83,555 3,042 83,504 3,052 87,016 2,761 95,192 2,672 83,744 2,641 80,098 2,678 78,978 2,728 78,657 2,658 77,977 2,750 78,639 2,885 80,387 2,938 79,638 3,073 81,019 3,149 80,729 22/86 18/86 485/1189 386/1190 Exports ($m) 2,110.5 2,223.5 2,215.7 2,359.9 2,363.8 2,126.4 2,032.6 1,962.7 1,863.0 1,698.9 1,634.0 1,570.6 1,532.6 1,518.4 1,462.1 4/11 130/418 Imports ($m) 2,345.6 2,378.4 2,416.1 2,521.4 2,392.7 1,868.3 1,858.9 1,792.6 1,795.5 1,719.3 1,783.9 1,856.7 1,857.3 1,891.6 1,856.1 2/11 164/419 Wages ($m) 5,604.6 5,464.8 5,680.0 5,908.1 6,478.6 5,723.5 5,738.6 5,576.4 5,628.7 5,443.3 5,686.5 6,021.3 6,191.8 6,538.5 6,762.6 16/86 253/1190 Domestic Demand ($m) 32,715.3 31,854.0 30,569.7 30,895.3 30,326.7 28,869.2 28,595.5 27,369.1 27,316.2 26,078.4 26,935.9 28,195.1 28,564.7 29,717.2 30,257.9 3/11 91/418 Domestic E-book Revenue ($m) 24.3 41.0 52.2 158.2 435.2 888.1 1,683.7 4,223.1 5,799.1 6,830.2 7,363.5 8,349.0 9,063.4 9,325.1 9,810.0 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 (%) (%) (%) -2.4 -1.6 -0.5 -4.2 -0.1 -0.7 1.2 5.1 -0.4 -1.4 7.3 -6.7 -3.9 -19.8 -1.9 -1.2 -5.7 -0.7 -4.3 1.6 1.8 -0.6 1.1 2.3 -4.8 -3.2 -2.1 2.8 4.7 4.0 4.2 6.1 5.4 1.2 2.7 2.3 3.9 5.4 5.1 1.8 2.9 2.9 83/86 81/86 70/86 1171/1190 1135/1190 1080/1189
Enterprises Employment (%) (%) -0.7 -1.7 -0.8 -0.1 0.3 4.2 -9.5 9.4 -3.2 -12.0 -1.2 -4.4 1.4 -1.4 1.9 -0.4 -2.6 -0.9 3.5 0.8 4.9 2.2 1.8 -0.9 4.6 1.7 2.5 -0.4 73/86 62/86 1071/1189 1005/1190
Exports (%) 5.4 -0.4 6.5 0.2 -10.0 -4.4 -3.4 -5.1 -8.8 -3.8 -3.9 -2.4 -0.9 -3.7 11/11 412/418
Imports (%) 1.4 1.6 4.4 -5.1 -21.9 -0.5 -3.6 0.2 -4.2 3.8 4.1 0.0 1.8 -1.9 8/11 400/419
Wages (%) -2.5 3.9 4.0 9.7 -11.7 0.3 -2.8 0.9 -3.3 4.5 5.9 2.8 5.6 3.4 78/86 1147/1190
Domestic Demand (%) -2.6 -4.0 1.1 -1.8 -4.8 -0.9 -4.3 -0.2 -4.5 3.3 4.7 1.3 4.0 1.8 10/11 407/418
Domestic E-book Revenue (%) 68.7 27.3 203.1 175.1 104.1 89.6 150.8 37.3 17.8 7.8 13.4 8.6 2.9 5.2 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 (%) 22.46 22.64 23.60 24.52 26.68 22.25 21.25 22.55 22.92 23.31 23.75 24.20 24.55 24.90 25.18 81/86 854/1190
Imports/ Demand (%) 7.17 7.47 7.90 8.16 7.89 6.47 6.50 6.55 6.57 6.59 6.62 6.59 6.50 6.37 6.13 4/11 321/418
Exports/Revenue (%) 6.50 7.01 7.30 7.68 7.80 7.30 7.07 7.13 6.80 6.52 6.10 5.63 5.43 5.17 4.90 11/11 334/418
Revenue per Employee ($000) 382.13 379.38 363.69 353.20 318.28 347.81 359.18 348.69 348.14 334.18 340.62 347.18 354.60 362.19 369.93 36/86 477/1190
Wages/Revenue (%) 17.26 17.24 18.70 19.22 21.38 19.65 19.95 20.25 20.55 20.89 21.23 21.57 21.93 22.28 22.64 50/86 481/1190
Employees per Est. 25.17 24.87 25.04 26.20 30.74 27.57 26.55 25.71 25.02 25.34 24.58 23.85 23.09 22.36 21.64 31/86 425/1189
Average Wage ($) 65,938.80 65,403.63 68,020.69 67,896.71 68,058.24 68,345.19 71,644.74 70,607.00 71,560.06 69,806.48 72,311.45 74,903.90 77,749.32 80,703.29 83,769.15 48/86 226/1190
Share of the Economy (%) 0.06 0.06 0.06 0.06 0.06 0.05 0.05 0.05 0.05 0.04 0.04 0.05 0.05 0.05 0.05 24/86 386/1190
Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.
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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. 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 universitylevel 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.
IBISWorld 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 IBISWorlds 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 industrys 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 industrys 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 industrys products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.
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Jargon & Glossary
IBISWorld Glossary continued
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 companys 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.
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Book Publishing in the US February 2013 1

IBISWorld Industry Report 51113

Book Publishing in the US

3 Industry at a Glance 4 Industry Performance

31 Jargon & Glossary

10 Industry Life Cycle

12 Products & Markets

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Book Publishing in the US February 2013 2

About this Industry

Book Publishing in the US February 2013

Annual Growth 08-13

Annual Growth 13-18

Revenue vs. employment growth

Per capita disposable income

Pearson PLC 10.4%

Cengage Learning 6.4% The McGraw-Hill Companies Inc. 5.4%

Products and services segmentation (2013)

Key External Drivers

Demand from book stores

Adult trade books

Other books and revenue

Decline Medium Low Low Low

Light Medium Medium Medium High

Book Publishing in the US February 2013 4

Key External Drivers

Book Publishing in the US February 2013 5

Key External Drivers continued

Book Publishing in the US February 2013 6

Book Publishing in the US February 2013 7

Diversity is key continued

Pros and cons of technology

Format and financial flexibility

Book Publishing in the US February 2013 8

Format and financial flexibility continued

Industry to cut costs

Book demand expected to rise

Book Publishing in the US February 2013 9

Book demand expected to rise continued

Making the switch

Book Publishing in the US February 2013 10

Company consolidation; level of economic importance stable

Magazine&PeriodicalPublishing Book,Magazine&NewspaperWholesaling Database&DirectoryPublishing

Shrinking economic importance

Book Publishing in the US February 2013 11

Industry Life Cycle This industry is Declining

Book Publishing in the US February 2013 12

Products & Markets

KEY SELLING INDUSTRIES

Products & Services

Products and services segmentation (2013)

Adult trade books

Other books and revenue

Book Publishing in the US February 2013 13

Products & Markets

Products & Services continued

Book Publishing in the US February 2013 14

Products & Markets

Demand Determinants continued

Major market segmentation (2013)

Consumers aged 14 and younger Consumers aged 30 to 44

Consumers aged 65 and older

Magazine&PeriodicalPublishing Book,Magazine&NewspaperWholesaling Database&DirectoryPublishing

AdditionalStates(as marked on map) 1 VT

NumberofEmployeesbyRegion(%) Lessthan3% 3%tolessthan10% 10%tolessthan20% 20%ormore

Profi t Wages Purchases Depreciation Marketing Rent&Utilities Other

Revenue ($ million) 2,797.0 2,744.2 2,831.3 2,863.6 2,811.0 2,801.2

OperatingIncome ($ million) 389.8 421.1 613.2 723.0 679.7 720.2

Revenue ($ million) 379.0 856.7 1,673.3 1,738.9 1,616.8 1,717.2

OperatingIncome ($ million) 30.0 644.2 716.5 408.1 364.4 343.4

Revenue ($ million) 1,929.1 1,901.6 1,695.6 1,722.7 1,591.0 1,465.1

OperatingIncome ($ million) 285.2 231.6 196.0 257.3 209.9 192.0

PaperMills BookStores Book,Magazine&NewspaperWholesaling