It has happened in most other industries, and now it's happening to British publishing—the wasting of the middle ground. The big are getting bigger, the small are getting on with it and the middleweights are getting crunched.
In 2006, the overall market continued to grow, though hardly in spectacular fashion. Once again, total consumer market sales set a record in 2006, rising by 2.9% to just under £1.7 billion. The number of books sold rose by 4%, to 225 million, and the average price fell—no gasps of surprise—by 7p, to £7.53. (All figures courtesy of Nielsen BookScan.)
Other numbers tell other stories. The value of "general retail market" sales—which exclude online sales—actually fell by 1.9%. The biggest-selling title of the year was the mass market paperback edition of Kate Mosse's Labyrinth (Orion). Winner of the Richard & Judy Best Read of the Year award, it sold 865,402 copies. Not far behind, with sales of 778,345, was the autobiographical Christmas hardback hit, The Sound of Laughter (Century) by stand-up comedian Peter Kay.
From those scant facts, it is easy enough to flesh out the headline trends in today's market. High street retailers continue to lose share to Amazon and to supermarkets. TV's Richard & Judy Book Club is more influential than ever. The pressure to secure the next celebrity bestseller has popped the barometer. And discounting is alive and well.
Publishers complain of bookshelf polarization, as retailers sell more copies of fewer titles. But there is also polarization among the publishing fraternity. As industry consolidation continues, the Big Four are widening the gap between themselves and the trailing pack. Top of the heap for the first time in 2006 was Hachette Livre, with 16.4% of the market, compared with 12.5% the year before. Its share was boosted by the early 2006 acquisition of Little, Brown. Former alpha-publisher Random House came next with 14.4% (14.0%). Add in full-year figures for BBC Books, acquired in mid-year, and the group is back within snatching distance of the laurel, at 15.4% (plus, Random just added Virgin Books to its portfolio).
Penguin managed a marginal increase, from 10.6% to 10.7%, while HarperCollins's share rose from 8.2% to 8.4%. There was clear blue water between the leaders and the second league, all of whom lost share. Pan Macmillan had another disappointing year, losing revenue as well as share, which fell from 3.3% to 3.1%. Bloomsbury adjusted to a year without Harry Potter, slumping to 1.8% (from 3.8%), and Simon & Schuster slipped from 1.5% to an official 1.4% (though it says its own figures show a rise to 1.6%).
The smaller publishers that make up the Independent Alliance made it all look easier. Led by Faber, the group includes Atlantic, Canongate, Icon, Portobello, Quercus and Short Books. Collectively, their sales rose by nearly a quarter. Clearly, low overheads, smart publishing decisions and their consolidated sales effort are serving them well. The middle-weights lack their nimbleness and, unlike the Big Four, the muscle to face down at least some of the discounting demands of their customers. There is no screamingly obvious candidate for takeover, but no one thinks that consolidation has run its course.
The run-up to Christmas highlighted the prevailing currents in the marketplace. The season was dominated by Amazon, which did "extremely well," according to a Big Four publishing sales director. He added that the supermarkets were strong—"again"—but that the two largest high street retailers "probably lost share overall." One publishing director says that Amazon is now among his top five biggest customers, accounting for 10% of his business, though lower for mass market fiction, where the supermarkets play a bigger role. The same publisher says that supermarkets take 15% of his sales, acknowledging that the figure might be slightly lower for other firms.
"Last year was tough, overall," admits Gail Rebuck, Random House CEO. "The market grew by 2.9%, in line with inflation, so there was not much value and we felt the effects of discounting yet again. The Internet and supermarkets had a good year, but it was tough on the high street. There's a dialogue to be had—there is too much homogeneity on the high street, too few books. They need to differentiate themselves, not just use price as a blunt instrument."
"Too few" books is symbolized by the febrile pursuit of the celebrity autobiography, with "celebrity" rather loosely defined. Large advances, sometimes in seven figures, have been flung at footballers, footballers' wives, people who spent a few weeks on reality TV—often for little return. Bloomsbury paid £400,000 for the memoir of former Home Secretary David Blunkett (one of the smallest handful of "serious' celebrity autobiographers), and sold only 2,000 copies. The publisher put out a profits warning shortly before Christmas.
While many publishers claim to have learned the lesson and say they are being more cautious, they know only too well how much the next Peter Kay can improve their fortunes in a world of slender margins. Still, one senses the industry retreating from the wilder shores of "celebrity." One publisher welcomed the return of what he called "national treasures" this Christmas—books by the likes of well-loved broadcaster Terry Wogan, TV gardener Alan Titchmarsh, ex-Python Michael Palin and favorite American Bill Bryson.
What celebrity is to hardback nonfiction, the misery memoir ("mis mem") is to paperback, and here the appetite shows little sign of fading. In 2006 Headline introduced a new sub-genre—"sports misery," or hard luck stories of forgotten football stars. Redemptive, of course.
This time last year, publishers were holding their breath for fear that Ottakars, the second-largest specialist high street retailer, would be taken over by Waterstones, the largest. It was. Few were as anxious as U.K. children's publishers, who regarded Ottakars as by far the more thoughtful and proactive stockist of the two, and particularly good in the picture book segment.
As it turns out, Waterstones has hired much of the Ottakars children's team. It has promised a new commitment to the category and a specialist children's buyer in every branch. "Amazing," says one children's publishing director. So children's publishers have something to be hopeful about, though the disappearance of Ottakars still means less choice for readers.
That's not to suggest that all is rosy in the garden. Unit volumes in the U.K. children's market grew last year by less than 4%, to 51.3 million. Average selling price plummeted by 7%, however, from £5.01 to £4.66. The upshot was that, by value, total sales fell by 3.4% to £239.2 million.
Comparisons are usually skewed by Harry Potter and, indeed, his absence made Bloomsbury the year's (understandably) big loser in children's market share—down from 14.2% to 3.0% by value, according to BookScan. Scholastic lost share as it persevered with its turnaround plans, but most of the other well-known players gained—most notably Hachette, Walker Books and Random House.
This time, however, there was a new phenomenon to skew the figures, explaining why receipts fell as volumes rose: the belated realization by the big supermarkets that there's money in children's books. "We saw a big increase in our business from the supermarkets, and when they decide to take a book, they want to offer it at a higher discount," notes Francesca Dowe, managing director of Puffin.
Online sales have also increased as Amazon sharpens its focus on children's books and treats them more seriously, though it tends to do better with expensive hardcovers than cheaper paperbacks.
The increase in volumes is welcome, as long as publishers can swallow the reduced margins. The game will be to hold out as much as possible on established authors, while taking advantage of the discount culture to promote new ones. Yet the supermarkets are less inclined to gamble on unknowns.
U.K. children's publishing faces a conundrum. On the one hand, it relies increasingly on building brands through ranges and series. On the other, the channels that stock ranges—the bookstores—are losing their dominance.
"Most parents won't buy a children's book without picking it up, skimming it, ensuring that it's appropriate, because they are the gatekeepers," says Marlene Johnson, managing director of Hachette Children's Books. "How do you do that on the Internet? Britain may end up like many European countries—just straight mass-market, with TV character tie-ins and not much else."
