Publishing and the Current Economic Environment

Once a quarter, we compile a list of leading economic indicators that affect our industry and our business. I thought I would start sharing the report here. (Click on the chart below for a larger view. If you want a PDF version of the file that you can print out, click
here.)

Leadingindicators-1

I think the business environment is analogous to a river’s current. Our performance as a company is analogous to how the boat moves through that current. Sometimes, you move faster than the current, sometimes you row against it, and sometimes you just drift with it.

I think it’s safe to say that we’ve been rowing against the current this year. The economy has been tough.

On the positive side, gas prices in the fourth calendar quarter came down 6.4%. Consumer confidence was up 15.7%, but this sometimes doesn’t affect the quarter in which it is measured. It often represents consumers’ intent going forward. Still, consumer spending rose 5.2% in the fourth quarter and that’s a positive thing. Unfortunately, interest rates rose 18.5% from the same quarter a year ago. That doesn’t help consumers or businesses.

In the retail sector, the top 80 retail chains experienced modest average growth of 2.9%. Wal-Mart was basically flat to last year (a 0.7% rise) and Costco, which caters to a higher-end consumer, saw sales growth of 6.0% for the quarter.

In the book segment of retail, the Association of American Publishers (AAP) reported that book sales for all categories was up by 5.5% for the quarter. These numbers reflect “sell-in” of product from their 82 reporting publishers, including Thomas Nelson. Book sales for just the religion category were down 4.9% for the quarter. (Book sales for the entire 2006 year in the religion category were down 10.2%.)

In terms of retail book sales, none of the six big retailers have yet reported on the December quarter. However, all of them have reported on their holiday sales for the nine weeks ending December 30. Amazon.com was the clear winner, growing a whopping 34% over the same period last year. Traditional brick-and-mortar stores didn’t fair so well. Barnes & Noble reported the best results. Their same-store sales were essentially flat with a slight decline of 0.1%. (This caused one industry insider I heard at a trade show to remark, “flat is the new up.”)

B. Dalton and Walden faired the worst with declines of 7.6% and 6.3% respectively. Obviously, this retail concept isn’t working as well as it once did. Traffic appears to be moving to the superstores and, quite noticeably, to Amazon.com. This shift began a few years ago and appears to be accelerating.

Nielsen BookScan measures “sell-through” of books through general market retailers. For the quarter, they reported a slight decline of 0.7%. STATs measures sell-through through Christian specialty retailers. They reported a 10.7% decline.

At best, I think that the environment presents a “mixed bag” of economic indicators. At worst, it’s a challenging—even dangerous—environment. I suspect that a lot of smaller publishers—particularly those with a modest backlist—will struggle to stay in business.

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  • Deborah Finnamore

    Mike, what is your take on these results relative to digital publishing? I'm sure there will always be books (or I hope there will be!) but I'm worried that some in our industry may just "rush" to digitize content w/o proper consideration of ramifications. I'd love to know your take on it.

    Deborah

  • http://www.lusobraz.com Kent

    I'm fascinated by your leading indicators (although technically I don't think sales figures can be leading indicators — perhaps trailing indicators?) and I have a couple questions.

    1. Gasoline Prices? Are they really a leading indicator for the economy? I don't think I've seen them included elsewhere as indicators (but then I'm not exactly looking carefully at these things).

    2. How does this informaton help you make decisions? Do you delay or rush book launches because of better or worse economic data? Or do you use it to make financial forecasts and investment decisions?

  • http://www.ecpa.org Michael Covington

    The AAP number you cite is one that we need to work on. I think one of the issues we face as a unique "industry within an industry" is a consistent reporting pattern among Christian publishers. Because there is not always a consistent # of houses reporting, or different houses from month to month, it's difficult to truly evaluate this stat. Additionally, ECPA is hopeful that its member publishers will report their sales collectively through the association so that we can help to manage this issue. One of the challenges we have had is that Christian publishers are sometimes not reporting all of their titles as "religious", when in fact 98% of them could be classified as such. If this were done across the board I think we would end up with a much more accurate picture of how Christian books are selling from the publishers.

  • http://www.parable.com Steve Potratz

    The Amazon number includeds electronics. They don't break out books, just media (I assume this includes DVD’s, Music, etc.)

    Media year to year was up 18% in North America and 19% overall.

    For the 4th Quarter it was 25% growth for Media and 34% overall including electronics.

    For comparison BN.com was down 2.4%

  • Manmohan

    Need the information regarding the environment

    Regards
    Manmohan