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Demise of Borders highlights vanishing print infrastructure
November 30, 2011 | 11:14 pm
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By Chris Meadows
Joseph Esposito of Scholarly Kitchen has a post looking at the demise of Borders and what it means for the publishing industry. Yes, I know, we’ve posted plenty of those looks before, closer to the time the demise actually happened, but this one brings a perspective I hadn’t thought so much about before.
When we think of Borders going away, a lot of people tend just to think of 10% of the print book market evaporating, as if the number of books sold is all that matters. But Esposito points out that the closure points to a matter that could be even more important for the publishing industry: an important segment of print publishing infrastructure vanishing.
It’s sort of the opposite of what’s happened with the Kindle—prices falling from $400 to $80 as the infrastructure for making them developed. But as fewer print books are published, the need for the infrastructure to support them evaporates, potentially making them more expensive to bring to print.
There is a vicious cycle when it comes to declining utilization of a legacy business. For example, by some reports, the growth of ebooks plus the decline of physical bookstores has led book publishers to reduce the print runs of trade paperback titles by 30%. This means that the unit cost of each copy rises because of the loss of scale. Higher manufacturing costs lead to higher retail prices, which lead to more defections to ebooks, which lead to reduced print runs, and so on. This would not be so bad if it were not for the fact that Amazon’s giant maw is thus positioned to gobble up even more market share — which will put pressure on publishers’ margins, making them less competitive to bid for first-rate authors — a bidding war that now includes Amazon. I have never before seen any company as brilliantly positioned as Amazon. It’s as though Atlas held the world on his shoulders and decided to tip it in the direction of Seattle.
Esposito encourages publishers to think seriously about their current trading partners and what they will do if those partners are no longer around in a few years—and what will happen if Amazon, Google, Apple, and Barnes & Noble become the only games left in town. He points out that a lot of businesses he’s worked with have been using their print ventures as “venture capital” to invest in their electronic ventures, planning against a mainly digital future.
I hadn’t really thought about what would happen to the print side of things as the need for it declines. Hopefully print-on-demand will prove ready to take up the slack if larger printing ventures go under.
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I am just back from the International Book Fair in Guadalajara. This is an annual exposition of over 500 Spanish language publishers. This publishing sector is still print dominated. Various factors other than outright conservatism are at work.
As regards infrastructure agility electrostatic printing is extending the reach of off-set printing. This print-on-demand is extending to retail installations with Espresso and similar gear. Here the Hispanic world is different as banks, corporations and restaurant chains are significant publishers. There is also a very modern Mexican paper making industry specializing in copier papers.
I did encounter e-book developments with dedicated devices and utilities. These and Spanish e-listings elsewhere may also have a backside with walk-in print-out.
As a generalization, Hispanic culture is intensively visual and book work is dominated by high design and color printing. There is a grounding of the book as a physical work. It is unclear how such traditions will convey to the screen.
He makes a valid point about the infrastructure vanishing, but I think his focus on *downstream* infrastructure—distribution and retailing—neglects the bigger dangers of the unavoidable *upstream* changes now starting to appear.
eBooks *are* starting to cannibalize print sales.
From here on out, ebook growth will mirror and cause print book volume declines and with the vanishing sales volume of print will come added pressures on the profitability of the various print formats, leading to a tipping point where, for some gennres, entire formats will just go away as there won’t be enough profit to justify their existence.
But the effects of the changes in the economics go beyond steadily increasing production costs and matching retail price hikes. Because the changing economics of print, coupled with the *downward* pressure on ebook prices that we’re already seeing will force traditional publishers to choose between maintaining high ebook prices, surrendering market share to ebook-only publishers, or allow the pricing gap between e- and p- to grow ever broader, further reducing the demand for print editions. A pick your poison scenario lies ahead.
A good example comes from the american comic book industry that has seen prices increase 15-fold in the last 40 years as their typical run sizes have dropped by 90%. Concurrent with the drop in runs, they have migrated to higher-quality paper and printing processes as well as narrowed their primary customer focus from younger readers to older readers and collectors.
In the mainstream pbook business we already see this; ebooks are seriously eating into paperback sales volume in several categories and even into hardcover sales. Over time, the economics of the print business will favor the more expensive hardcovers against the cheaper formats and we’ll likely see publishers resort to premium Limited Edition releases with higher-quality paper, leather covers, slip-cases, custom bookmarks, and other price justifiers such as story-inspired book-ends and action figures.
(Well, maybe not the action figures.)
Just take a look at high-profile releases in other industries (Lord of the Rings in DVDs, Halo and Gears of War, in console gaming) for the kinds of things that are coming to pbook publishing as volumes drop and the attendant price hikes shifts the customer base more towards the more affluent luddites, collectors, and smell fetishists willing to pay north of US$50 for a NYT “Bestseller” instead of $10 for the ebook release.
There are lessons to be learned from other industries and how they have adapted (or failed to adapt) to technology-driven disruption but the first lesson is that once an industry is disrupted, *everything* is in play; you can’t blythely assume that just because, yes “there will always be room for print books”, that there will always be *profit* in providing those print books. And that if the profit isn’t there, some or even all the elements in the supply chain will go away, maybe even before market itself is ready to see them go.
Simply put: There is no guarantee that the print book industry can *profitably* scale down *all* the links in the supply chain to adapt to the lower volumes to come.
A thought: has anybody looked at the utilization rates and margins of the major printing facilities? How’s their profitability these days?
Bookshops are doomed. Hopefully publishers will move into supplying print on demand for those books you just have to own a physical copy of.
Alan – They are. It’s absolutely no loss. And I am sure they will.