UK Books and Publishing Industry Analysis

Published Date: 13 Sep 2016 Last Modified: 15 Jan 2018

 

Table of Contents

1. Introduction5

1.1 Objective5

1.2 Reasons for Choosing the UK Books

and Publishing Industry6

2. Industry Overview9

2.1 Market Size and Attraction10

2.2 Market Sectors10

2.2.2 Paperback11

2.2.3 Electronic11

2.2.4 Fiction11

2.2.5 Non-fiction11

2.3 Industry Target Markets12

2.4 Market Sales, Performance and Activities14

2.4.1 Domestic Market14

2.4.2 Export Sales15

2.4.3 Imports16

2.5 Publishing Companies17

2.6 Employment19

2.7 Distribution20

2.8 Major Trends and Developments21

2.8.1 Emerging Book Formats21

2.8.2 Emerging Distribution Channels and Markets22

2.8.3 Developments in Technology and

Concerns in Copyright and Production23

3. Industry Analysis – PESTEL24

3.1 Using the PESTEL Analysis24

3.2 Political Factors24

3.2.1 Taxation24

3.2.2 Pricing24

3.3 Economic Factors25

3.3.1 Global Economic Factors25

3.3.2 UK Economic Trends25

3.4 Social Factors26

3.4.1 Consumer Preferences26

3.4.2 The Internet and Technology26

3.4.3 Reading Habits27

3.5 Technological Factors27

3.5.1 The Digital Age27

3.6 Legislative27

3.6.1 Copyright and Intellectual Property27

3.6.2 Market Regulations for New Entries28

3.7 Environmental 28

3.7.1 The Issue of Paper28

3.7.2 Other conservation measures29

4. Industry Analysis – Porter’s Five Forces Model29

4.1 About Porter’s Five Forces Model29

4.2 Rivalry29

4.3 Supplier Power29

4.4 Buyer Power30

4.5 Threats of Substitutes30

4.6 Barriers to Entry30

5. Conclusion31

References34

List of Tables

Time Spent of Main Activities, by Sex, 20058

Total Book Sales 1998-200210

Projected Book Sales: 2002-200710

Unit Book Sales by Format: 1998-200211

Projected Book Sales by Format: 2002/200712

Value Book Sales by Target Market: 1998-200213

Projected Book Sales by Target Market: 2002/200713

Publishers’ Export Sales: 1998-200116

Book Imports: 1998-200117

Leading Publishers Ranked by Total Retail Sales 2001/200218

Total Employment in the Publishing Industry 1998-200220

Retail Distribution21

The UK Books and Publishing Industry Analysis

1. Introduction

According to the Encyclopaedia of Global Industries (‘Book Publishing’, 2007), global spending on books increased from US$85.3 billion in 2000 to US$104.6 billion in 2005. This is despite the fact that the global demand for books had significantly dropped for a number of reasons. One of the major reasons cited for this drop was the September 11 terrorist attacks in the United States. In contrast, the United Kingdom (UK) is currently one of the world’s leading players in the world of publishing. However, it remains behind to major global producers the United States, Japan and Germany. UK is followed by another European major publisher, France In 2002, the UK book and publishing industry reached the value of ₤2.5 billion (‘Books and Publishing – United Kingdom’, 2003) and continues to be the major location of European publishing’s central operations and the U.S. publishing’s gateway across the Atlantic.

1.1 Objectives

The UK books and publishing industry is one of the UK’s distinct industries. As stated above, UK ranks among the world’s major book and publication producers. Readers across the globe are familiar with the UK’s contribution to the publishing world . UK writers have long been one of the more famous sets of writers in the classic and modern histories. Ranging from William Shakespeare to J.K. Rowling’s Harry Potter franchise, the UK books and publishing industry continues to play a significant role, especially among the English-language readers across the globe. However, the new media forms that have been emerging lately such as electronic and online forms of publishing currently challenge the publication preferences of the consumers today and UK print media too has got impacted.

The present study is an attempt to analyse the UK books and publishing industry. The objectives of this industry analysis are as follows:

• Provide an overview of the UK books and publishing industry, its current status and projected directions.
• Analyse the factors that influence the current and future operations of the industry by using the tool of PESTEL analyses.
• Assess the books and publishing industry and its impact and performance in the market by using market analysis tools of Porter’s Five Forces.
• Determine the critical factors that can determine the future of the UK books and publishing industry.

1.2 Reasons for Choosing the UK Books and Publishing Industry

The UK remains to have a healthy and dynamic book and publishing market; not only does the UK contain one of the significant market shares in the global book market, it boasts of a number of in-demand authors. Books and publishing in the UK highlights the society’s inherent love for books .

What is interesting in the UK book and publishing industry can be seen in the following factors:

(1) UK has had a significant role in the publishing world especially among English-language readers across the globe; however, in terms of industry size, UK remains behind book producing giants the United States, Japan and Germany. These three countries have a competitive production advantage:

• the United States has strong media and entertainment industry which has also influenced its publishing sector;
• Japan is known for its graphic novel and books publication, as driven by the strong manga culture and demand;
• Germany’s media corporate giant, Bertelsmann, has managed to own and merge with large publishers, which makes this German company a significant player in the global industry (‘Book Publishing’, 2007).

(2) New forms of media, electronic publishing and the Internet, have emerged which have challenged the conventional publishing forms. Electronic publishing and the Internet has become a challenge in a number of areas including the redefinition of publication format (electronic or published through the Internet) and publication access (self-publishing has become popular online). This also influences the amount of interest the public continues to have in books especially when more recreational forms have evolved which may be preferred over picking up a magazine or a book. Besides, recent times have also witnessed a rise of online / virtual schools and other forms of virtual reality which has now given way to emergence of digital versions of these books or e-books.

(3) Emerging markets brought by globalisation also affect the expansion of UK publishers to other parts of the world. This is in addition to the increasing demand for English-language learning courses in non-English speaking nations can encourage the publication of books. Regional authors too can increase the interest of the global readers, and it is interesting to see how the UK publishing industry has responded to these new opportunities.

In addition to this, it is interesting to evaluate the performance of this huge industry that reaches different global markets and at the same time, is serving a more particular sector of the people’s reading habits. Based on a survey on leisure activities in 2005 by the National Statistics Office’s, reading has been cited as constituting a negligible part of how people spend their time every day. Reading, on an average, only accounts for 23 minutes among men and 26 minutes among women. The following table illustrates how this industry has been catering to a fraction of people’s average daily activities:

Time Spent of Main Activities, by Sex, 2005

(‘Time Use Survey’, 2006)

As can be seen in the table, reading has taken a backseat as compared to the time people spend watching television or having a “social life”. A similar survey conducted in 2001 among full-time workers on how they spend their free time, reading emerged as the third highest activity whereas games/hobbies/computing came in close behind (‘Lifestyles’, 2004). Evidently, in the previously cited more recent survey, games/hobbies/computing activities have overtaken reading. However, this peculiar development holds true among males who spend an average of 37 minutes in playing games, indulging in hobbies or working on computers whereas women tend to be ardent readers, thereby spending more time reading than other hobbies. It should also be noted that reading does not only limit itself to the products of the book and publishing industry as the Internet has also become a significant source for information.

2. Industry Overview

2.1 Market Size and Attraction

According to the Confederation of British Industry, the book sector has been one of the significant drivers in the overall UK retail sales growth, along with furniture and groceries (‘Books and Publishing – United Kingdom’, 2003). This shows that books are among the main purchases that people make in a combined demand in the leisure and educational sectors.

The UK books and publishing industry reached the ₤2.5 billion mark in 2002, making this industry having a positive overall outlook. Volume and value gains were seen rising from 2001 to 2002 at 12.1% and 16.8% respectively. The 12.1% volume increase reflected the 323.8 million units sold by 2002, which contributed to the compounded annual growth rate (CAGR) of 2.9%. Positive developments were also experienced, which started from the late 1990s up to the beginning of the millennium, with strong value gains eventually contributing to the 4% CAGR since the surge in sales in 1999 (‘Books and Publishing – United Kingdom’, 2003).

Total Book Sales 1998-2002

( Euromonitor International: Country Market Insight)

Projected Book Sales: 2002-2007

( Euromonitor International: Country Market Insight)

According to the Publishing Industry Market Review 2006, the total publishing market was worth 18.63bn in 2005, having increased by 7.6% across the review period (2001 to 2005). The Publishing Industry is defined by Newspapers, Magazines as well as Book publishing. Newspaper publishing accounts for the largest share of the market's total value, followed by magazine publishing and book publishing.

Within the books and publishing industry in 2004, retail book sales were £3.98bn which represents a 3.2% increase on 2003.( UK Publishing Industry 2005,) Since 1999, the market has grown by a total of 16% and around 67% of the market's value is consumer books. The UK Publishing Industry 2004 report indicates that the UK publishing market is expected to grow by 12.9% between 2004 and 2008. Magazine revenues are likely to rise by 17.3%, newspaper revenues by 15.2% and book publishing by 14.7%. (UK Publishing Industry 2004,).

2.2 Market Sectors

The commercial publishing industry extends far beyond books and journals. Products are available in electronic as well as print form.

The overall book and publishing industry (‘Books and Publishing – United Kingdom’, 2003) can be classified on the basis of format and category

Format:

2.2.1 Hardbacks

Hardback formats are hardbound books. This format can be commonly found among books for children, new releases, and non-fiction books.

2.2.2 Paperback

Paperback or softback is the most common format . This dominantly makes up the books targeted for commercial and educational purposes.

2.2.3 Electronic

The electronic formats are the non-paper based products available on CD-ROM, or as audio books, e-books etc.

Category:

2.2.4 Fiction

The fiction category includes children’s books, novels across genres (crime, Western, thriller), historical, romance, etc.

2.2.5 Non-fiction

The non-fiction category includes educational, academic and professional books, reference books, travel guides, DIY, etc.

The performances of these different sectors (by format) are illustrated in the following table (‘Books and Publishing – United Kingdom’, 2003):

Unit Book Sales by Format: 1998-2002

(Euromonitor International: Country Market Insight)

Projected Book Sales by Format: 2002/2007

(Euromonitor International: Country Market Insight)

Based on the performance of the two main categories, fiction and non-fiction, the latter continues to dominate the book sales and continues to grow (‘Books and Publishing – United Kingdom’, 2003):

2.3 Industry Target Markets

Books can also be classified on the basis of the target market: consumer and institutional (‘Books and Publishing – United Kingdom’, 2003). The consumer market is the mainstream book market which includes regular readers and individual buyers. The institutional market for books is defined by institutions or organisations that buy books for specific purposes such as libraries. It also includes the books bought by the education sector.

There is a potential confusion as to the identification of the consumer and the institutional market as the consumer market also includes publications for academic and professional purposes. However, institutional books are mostly identified by means of prevailing theme and the market segment, such as in the case of libraries and field-specific institutions (i.e. law books collection) whereas the consumer market’s main source of distribution channel are bookshops, online stores, etc. In terms of performance, the consumer market has a significant market share over the institutional market. The total sales brought by he consumer market in 2002 was at ₤2.0 billion, thereby having 80.3% of the overall book market share. Average growth was cited at 17.4%, with the surge of sales throughout the year usually picking up during the last quarter (‘Books and Publishing – United Kingdom’, 2003).

The institutional market has been also experiencing positive growth at 14.3%, with its sales reaching ₤490.6 million and comprising 19.7% of the overall market sales. Educational sales continue to dominate the institutional sales at 63.4% whereas contributions from the library sector continue to fluctuate. As can be observed from the table given below, there was a significant drop in library sales from ₤114 million to ₤101

million from 1998 to 1999, with this particular sector experiencing fluctuations until 2002 (‘Books and Publishing – United Kingdom’, 2003).

Value Book Sales by Target Market: 1998-2002

(Euromonitor International: Country Market Insight)

Projected Book Sales by Target Market: 2002/2007

(Euromonitor International: Country Market Insight)

2.4 Market Sales, Performance and Activities

The UK books and publishing industry relies on various market forces in order to maintain its dynamism; this can be attributed to its performance mainly on domestic sales, and then through the export and import volume and sales.

2.4.1 Domestic Market

As previously mentioned, the consumer market mainly comprise of the industry’s domestic sales. Strong performance has been seen across sectors and categories, with positive developments in fiction as well as non-fiction books. Sales in fiction category experienced an average increase of 56% from 1998 to 2001, although non-fiction remains to have the significant market share (‘Books and Publishing – United Kingdom’, 2003).

A number of market strategies have emerged in order to have the publishers improve their performance. It has been noted that UK has even adopted an American market strategy framework which includes book tours and taking advantage of the different media channels to increase exposure and promotion such as online book ordering promotions and book superstores (‘Book Publishing’, 2007).

It can be observed that this has been apparent in the franchising sector in which UK fictional giant, the Harry Potter franchise, have further ventured into film and consumer products. In a way, books have established a force to create a peripheral market sector which relates the books to other relevant industries. However, the opposite takes place when classic British books such as J.R.R. Tolkiens’ The Lord of the Rings and C.S. Lewis’ The Chronicles of Narnia were made into movies, and because of the success of this channel, book sales for these works have also experienced a significant increase as this has become a promotional means in order to sell more books. Such strategy is not only felt in the UK domestic sector but also in other global sales as well.

2.4.2 Export Sales

UK books are exported throughout the world and a cited increase of 4.4% was seen from 1998 to 2002. As per a Department of Trade and Industry (DTI) report, the export market is worth approximately £1.4bn a year. However, UK’s main export competition comes from the United States, which also produces English-language books. Some exporting strategy can be also seen through the industry (‘Books and Publishing – United Kingdom’, 2003, p. 19):

Although the worldwide Harry Potter phenomenon had a strong impact on exports, particularly over the 1999/2000 period, non-consumer publishing book sales were also a mainstay of export performance. English is the world language for titles in the scientific/technical/medical category and as such, the UK dominates the field internationally in terms of sales. For publishers of these kinds of texts exports can account for up to 60.0% of sales, particularly to the US, and it can be of great advantage for a publisher to have an American arm or to be part of an American-controlled group in terms of securing US rights of publication.

In this case, despite the stiff competition with the US titles, UK books have also been performing fairly well in the United States; the UK mainly exports to the United States. In fact, UK has been the largest exporter of books to the United States books market. The performance of the UK publishers’ export sales are as follows (‘Books and Publishing – United Kingdom’, 2003):

Publishers’ Export Sales: 1998-2001

(Euromonitor International: Country Market Insight)

2.4.3 Imports

The UK also imports books from overseas markets such as the United States. Interestingly, Asian markets have been contributing significantly to UK book imports. The second largest imports, after the United States, come from Hong Kong, and the fourth largest market is Singapore; China too is also among the top sources, gaining the eighth import source position in 2001 (‘Books and Publishing – United Kingdom’, 2003).

Interestingly, UK imports increases industry competition, with its value rising at 16.6% within the period 1998-2001. The following table shows the import value during this time period (‘Books and Publishing – United Kingdom’, 2003):

Book Imports: 1998-2001

(Euromonitor International: Country Market Insight)

2.5 Publishing Companies

Each of the three sectors of publishing in UK-newspapers, magazines and books- is dominated by around a dozen companies. Only a few companies are active in more than one sector. In fact, only Pearson PLC is involved in all three markets in a significant way. News Corporation, which publishes newspapers and which owns the book publisher Harper Collins too has entered the magazine market early in 2006. The UK publishing industry is still primarily UK owned. However, in the magazine market, there are several foreign-owned companies. These include the following:

• The Conde Nast Publications Ltd
• Hachette Filipacchi (UK) Ltd
• IPC Media Ltd
• The National Magazine Company Ltd
• The Readers Digest Association Ltd and VNU Business Publications Ltd.

As indicated in Books and Publishing – United Kingdom 2003

The UK is not the home base of any major media player, such as Bertelsmann, Vivendi or AOL Time Warner. The regulations on media ownership make it easier for new entrants from abroad to establish a presence in the UK than for UK companies to substantially enlarge market share. Most of the major players in the book industry

are owned by international multimedia publishing concerns, and therefore the most helpful form of comparison is to analyse leading publishing houses, and the results of the consolidated groups which own them.

(‘Books and Publishing – United Kingdom’, 2003, p. 23)

Thus, the books and publishing industry in the UK is characterised by a handful of global conglomerates or international companies, such as Reed Elsevier Group PLC, Pearson PLC, The Random House Group Ltd and Harper Collins Publishers Ltd. The leading publisher in the UK, HarperCollins, is a merger of British publisher William Collins Sons and Co Ltd. and the American publisher Harper & Row. Today, HarperCollins is owned by the American media conglomerate, News Corp., although HarperCollins UK is the UK’s leading publishing house (Books and Publishing – United Kingdom’, 2003; ‘Harper Collins’, 2007).

In the recent years, many other companies have been acquired and merged. For instance, in 2004 a major development was the acquisition of Hodder Headline from WH Smith by the French publisher Hachette Filipacchi in 2004. This merely added to further internationalisation of UK publishing. Hachette already owned Orion which further owned Weidenfeld & Nicholson. This has lead it to become the UK's second-largest consumer book publisher. Macmillan and Random House are both owned by German companies. These main drivers of these developments have been the business strategies applied by these corporations. These strategies can be observed to be influenced by forces such as globalisation and certain deregulations when it comes to foreign operations. Besides these, other major publishers are Blackwell and the university presses of Oxford and Cambridge.

The following table shows the leading publishers in the UK according to sales (Books and Publishing – United Kingdom’, 2003):

Leading Publishers Ranked by Total Retail Sales 2001/2002

(Euromonitor International: Country Market Insight)

2.6 Employment

By 2002, the books and publishing workforce, which also include employees in the printing sectors, were recorded at 352,000; according to the National Statistics, this figure was at 366,000 in 2001 (Books and Publishing – United Kingdom’, 2003; ‘Harper Collins’, 2007). In 2004, approximately 280,000 people were employed nationally and about 15% work part time.

It has been cited that the books and publishing industry has not offered a very promising development to its workforce in terms of pay and employment confidence (Books and Publishing – United Kingdom’, 2003, p. 22):

… In a recent survey by Bookcareers.com, 66% of employees in the industry said that they had lost colleagues to redundancy. There is widespread discontent in the industry, particularly over the issue of pay. Levels of pay, especially for starting salaries, are notoriously low, particularly bearing in mind the level of education required for publishing work, and starting salaries can be as little as £15,000 a year. Pay is a factor in most employees’ lives,

particularly because most of UK publishing centres around London and the South East, where house prices are

simply unaffordable for people earning average salaries in the industry.

In addition to this, professional development does not sound as promising in this industry due to the lack of training initiatives and specific professional skills. Professionals in this industry are mostly managerial in nature. Hence, in terms of skills development, the demand has not been as impressive in this sector. It is therefore not as surprising that the number of employees in the industry has been discouraging in terms of rate, and employment has been also bleak due to redundancies.

Total Employment in the Publishing Industry 1998-2002

(Euromonitor International: Country Market Insight)

2.7 Distribution

In the past consumers were buying books through a variety of distribution channels such as large chain bookstores book clubs and independent and small chain bookstores, mass merchandisers, mail order, food and drug stores, discount stores, used books etc. The traditional bookshops have been losing their influence and as a result such booksellers have been also starting to fold up. The Internet is becoming one of the most active distribution channels for books and publications. Although the Internet does not have as much distribution share at this point, it continues to contribute significantly in this area as it also continues to increase as a highly-used distribution channel.

Book retailers continue to dominate the product distribution; these retailers include chained retailers and independent bookshops. As compared to independent bookshops, in recent times, , bookshop chains are starting to increase its market grasp and influence (Books and Publishing – United Kingdom’, 2003).

Another distribution source is through book clubs. The UK’s leading book club, BCA, combines to book club concept and its mail-to-order scheme, in addition to smaller subdivision of smaller book clubs.

The book retail distribution trends have been presented in the following table: (Books and Publishing – United Kingdom’, 2003):

Retail Distribution

(Euromonitor International: Country Market Insight)

It can be observed that there has been significant increase in sale through Internet and multiple (chained) booksellers whereas there has been a decrease in distribution through independent booksellers and book clubs/mail-to-order.

2.8 Major Trends and Developments

The dynamism of the books and publishing industry in the UK can be determined by the key trends and developments that can eventually affect how the industry operates and performs.

2.8.1 Emerging Book Formats

As previously mentioned, new formats such as e-books, CD-ROMs and audio books have now entered the market. Among the three, e-books have been creating a stir due to a number of reasons: it is in digital format that can be easily downloaded.

What also works well with the emergence of e-books is the emergence of technologies.. For example, PDAs have now developed into small, handheld computers that can carry a substantial amount of data; e-books, which are usually in the PDF can be easily downloaded in PDAs and accessed through PDF reader (Microsoft Reader and Adobe Acrobat). Hence, people do not have to carry large books around as they can easily access them through their devices. As per the statistics from an online download source for public domain books, manybooks.net, PDF downloads have reached almost 140,000, not including the other electronic book formats such as eReader and RTF, and downloadable text in HTML format (Nagle, 2007). In any case, the number of downloads can reach hundreds of thousands, and this only includes books from one website and works within the public domain.

Another popular source of free e-books is Project Gutenberg (Project Gutenberg, http://www.gutenberg.org/wiki/Main_Page) which claims to have over 2 million downloads every month.

2.8.2 Emerging Distribution Channels and Markets

As discussed in the distribution channel section, the Internet is becoming to impress its influence among UK consumers; book sales online experienced an 11% growth in 2001 and continues to be significant till date. Although some online start-ups wanted to take advantage of the UK market, most of them were adversely affected by the dotcom bubble in the 1990s. Expectedly, Amazon.co.uk is the top online seller of books in the UK (Books and Publishing – United Kingdom’, 2003).

2.8.3 Developments in Technology and Concerns in Copyright and Production

Technological developments have largely affected the books and publishing industry. As previously mentioned, technology has allowed the emergence of new book formats, and as a result, some companies have responded to this by expanding publishing rights and including having digital formats. Books have also been also digitized for online libraries. Even though most online libraries require subscription, there is a growing problem of the issue of copyright; Digital books can be copied and transferred to another user for free; hence, there have also been cases in which e-books have been pirated.

Developments in the production methods have also affected the industry in a sense that print-on-demand technology has also caused the emergence of self-publishing (‘Books and Publishing – United Kingdom’, 2003). Although self-publishing is still limited when it comes to quantity, getting published is no longer a huge problem since anyone can get himself or herself published through these means. Another increasingly popular form of getting published is through online; blogs have allowed Web publishing, and self-publishing online company, Lulu.com, has made publishing possible for striving authors (see Lulu, www.lulu.com).

3. Industry Analysis – PESTEL

3.1 Using the PESTEL Analysis

The PESTEL analysis is an effective tool to analyse an organisation or an industry within the political, economic, social, technological, environmental and legal contexts. The analysis can give a significant snapshot of the macro-environmental factors in which the company or the organisation functions. Essentially, a number of elements can be cited to affect the books and publishing industry in these areas, which can be also considered to be influential to its current state and potential future.

3.2 Political Factors

3.2.1 Taxation

Unlike other European markets, UK books are exempt from the currently imposed 17.5% value-added tax or VAT. Because of this, UK consumers are more willing to spend on books, in addition to giving the publishers the competitive advantage. This shows the UK government’s support for education and culture, given the value that is instilled among books.

3.2.2 Pricing

Pricing has become a major issue in the book publishing sector. According to a research by Nielsen Media Research in 2003, “the volume of books being bought in the high street is rising much faster than the value of books being sold. “Price competition is high among UK publishers and sellers. Unlike in other markets where retail price is fixed, books in the UK are subject to the company’s pricing strategy. However, the Net Book Agreement (NBA), which was formulated among UK publishers, was established in which prices are fixed in order to give the retailers the margin when it comes to formulating their own pricing strategies. Hence, publishers’ prices are fixed whereas retailers have the liberty to put up some books on sale or offer them at discounted rates (‘Books and Publishing – United Kingdom’, 2003). Publishers and authors are concerned about who is profiting from the increase in the amount of books being sold. It appears that the retailers are profiting much more than the publishers and the authors.

3.3 Economic Factors

3.3.1 Global Economic Factors

The United States is the single-most important market for UK publishers. China too presents a potential opportunity for the UK publishing industry

The global trends in books have been influenced by the following factors:

• English as a growing lingua franca in a number of channels, especially in commerce.
• Growing influence of international partnerships as global media conglomerates continue to form.
• Growing demand from emerging markets.

From this perspective it can be pointed out that globalisation also affects the book and publishing industry; in addition to the business partnerships among international media companies, demand for English books have increased in emerging markets although international publishers have been also catering to a number of local language translations because of the diverse market demand.

3.3.2 UK Economic Trends

According to the National Statistics, disposable income in the UK rose by 2.1% per head per household (‘Income and Wealth’, 2006). Basically, the disposable income can also determine how consumers allocate their spending of this income; as explained (‘Books and Publishing – United Kingdom’, 2003, p. 12):

In general, consumer spending on books has to compete with a greater choice of recreational and cultural

activities, from computers and electronic games (particularly among men and boys) to television, home video

and the mass media. Magazine publishing has been a hugely burgeoning industry over the last few years, and

has generally succeeded over book publishing in the battle to win the average consumer’s reading interest.

According to Euromonitor International (‘Books and Publishing – United Kingdom’, 2003), combined expenditures on books, newspapers and stationery increased from ₤8.9 billion in 1996 to ₤10.8 billion in 2000. Hence, it can be gathered that consumers do spend on books although this still depends on the economic capacity and the allocation of the disposable income.

3.4 Social Factors

3.4.1 Consumer Preferences

It can be observed that books today have a growing number of genres catering to almost every imaginable sub-group and other demands in the areas of DIY and self-help. Some formats have been also successful such as books that are “packaged” (audio plus print plus video) for some titles. There have been also strong franchises today such as the “Dummies” and “Idiot’s Guide”, to continuous series and titles such as Harry Potter, and chick-lits that have a number of “parts” such as the UK Bridget Jones and Shopaholic franchises.

3.4.2 The Internet and Technology

Technology remains a central issue to a number of traditional books, and the books and publishing industry continues to be affected. As previously mentioned, the demand for digitised content has been increasing, especially for works within the public domain. People have been also relying on the Internet for information purposes, and books can be “condensed” through a number of websites that people can easily access for substantial information.

The world wide web is being increasingly used by established publishing companies to offer added entertainment and information. There has been a strong increase in the "just-in-time" delivery of "must-have" information over the Internet in combination with new content and services.

Even the magazine and newspaper publishing has been impacted by technology in the last decade. Most of the major magazine and newspaper publishing companies have launched internet-based publications. These have been launched either as stand-alone entities or as extensions of their print publications. Publishers are also getting into certain market niches where information is either scarce or non-existent.

Technology is also affecting distribution of products. Various technologies make it possible for publishers to distribute their products electronically. For example, print-on-demand technology allows publishers to produce bound copies of books on demand. Digitised books free the publishers from the constraints of conventional production. Electronic distribution is becoming more popular in the technical publishing segment.

3.4.3 Reading Habits

A major driver for the publishing market is consumer spending. Clearly there is a well-established relationship between consumer spending on books and reading habits..

According to Euromonitor International, although there are less people buying books today, those who still buy books are spending more money on these items. The surveyed number of book buyers in 2000 was 46.4%, which was actually a drop from the 1998 rate of 49% (‘Books and Publishing – United Kingdom’, 2003).

Another interesting aspect is relation of gender to books; girls read more books than boys, and as previously cited, more women spend time reading than males.

3.5 Technological Factors

3.5.1 The Digital Age

As previously mentioned, the demand for digital or e-books have been increasing. In addition to this, people have accepted alternative forms of book access such as signing up for online libraries. Technology has therefore allowed the development of the book format which can now be easily uploaded online and transferred to personal gadgets such as computers and PDAs.

In addition to this, self-publishing is another interesting aspect because there is a direct-selling strategy involved. Writers only need to publish their books by using online self-publishing services and they do not need to go through the conventions of going to a publisher. Although self-publishing has yet to pick up, it is interesting to anticipate how this new technological sector will eventually perform.

3.6 Legislative

3.6.1 Copyright and Intellectual Property

The digital environment poses many challenges for copyright owners by disrupting the equilibrium between various interest groups in terms of accessing and reproducing copyright material. Although some books have been long protected by copyright and intellectual property laws, there remains to be the issue of rights and royalties. The conventional rights of the author are vested to him or her for the whole duration of the author’s life plus seventy years after death (‘Books and Publishing – United Kingdom’, 2003). Intellectual property and copyright in the UK is strongly respected which are enumerated under the Copyright, Designs and Patents Act 1988. In addition to this, there are the relevant EC directives and international treatises, and the more vulnerable protection during the “Digital Age” through the Digital Millennium Copyright Act. However, due to evolving technology, copyright disruption can occur in a number of ways:

• ease of copying and reproduction is greatly enhanced by digital technology; The increasing use of sophisticated copying machines poses new problems to the need of publishers and authors to protect their property.
• copies are the same quality as the original; and
• re-use of material is facilitated by the internet and the networked environment.

This ease of reproduction and dissemination threatens the traditional business model in the publishing industry. In the past, the number of copies that could be made from published works was limited. Digital technology means people can now distribute copyright content easily and cheaply when they have no right to do so. Further, that content, because of the quality of the reproduction, competes directly with legitimate content.

Policy makers need to balance the desire of copyright owners to control and protect their copyright works with the demands of consumers for access to those works.

Thus, copyright will be an important component to the books and publishing industry of the future.

3.6.2 Market Regulations for New Entries

The UK is highly open to market entrants, including potential businesses from foreign multimedia conglomerates (‘Books and Publishing – United Kingdom’, 2003). For example, Macmillan and Random House are both owned by German companies. Similarly in 2004 there was an acquisition of Hodder Headline from WH Smith by the French publisher Hachette Filipacchi in 2004.

3.7 Environmental

3.7.1 The Issue of Paper

One of the main environmental concerns today is the exploitation of natural resources. Paper is a prime material of books, and because of this, environmental groups such as the Greenpeace has been keeping watch as to how publishers efficiently use its paper resources. Although not all books in the UK are printed on 100% recycled paper, there have been variations and options which combine efficiency and “green publishing”. Canada and Germany have started on this green wave by printing some of their books on 100% recycled or partially recycled-partially FSC-approved materials. In the UK, one of the recent developments is that the much-anticipated final instalment of the Harry Potter series is going to be printed in the UK using certified sustainable materials (Bullough, 2007). A 6-8% rise in paper prices in 2006 due to rising energy costs will severely impact small publishers in the UK

3.7.2 Other conservation measures

In 2005, the UK has launched Book Aid International, an adaptation of the US Book Crossing. Book Aid International is an initiative to circulate books “for free” by leaving them on public places to be read by others; these people, in turn, will also leave the book for others to read. Although there is a strong cultural preservation element in this program, under Book Aid, books are preserved for more users and readers, hence, the environmental element lies in the full utilisation of the book.

4. Industry Analysis – Porter’s Five Forces Model

4.1 About Porter’s Five Forces Model

Porter’s Five Forces Model is an industry analysis model in which it assesses how a company or organisation is affected by these identified five forces: rivalry, supplier power, buyer power, threats of substitutes, and barriers to entry. Since this paper examines an industry, this model can be used to illustrate the current status of the industry and eventually, establish its future directions.

4.2 Rivalry

Competition is high in the books and publishing industry, with the competition existing among publishers and retailers; there is also the case of competing for talent. In this case, regulation is implemented mainly on pricing strategies, although involved parties are provided with certain margins in order to adjust their own pricing.

4.3 Supplier Power

There are two main elements that determine the supplier power of the industry: availability of resources and the labour power. In this case, there are the potential problems for the industry. Environmental concerns have led to the strong endorsement for controlled paper products. Moreover, as previously mentioned, the industry has been declining in terms of employment, in addition to the lack of professional developments and skills in the industry.

However, the industry requires new skills for the staff, from the creation of content to its manipulation in the most complex of digital environments. These new skills will need to be integrated into publishing businesses to enable them to meet customer needs and compete effectively in a global marketplace. Only suppliers having the right combination of skills will flourish. Publishers need to develop and expand the skills of their staff to cover areas previously considered to be outside the ambit of publishers.

4.4 Buyer Power

The influence of buyers to this industry is not as strong in a sense that publishers still publish talent they believe in. However, it can be observed through certain publishing trends that publishers are becoming more responsive to buyer demand. For example, when “chick-lit” became strong because of Bridget Jones’s Diary, a number of other similarly-themed books emerged in the market. Other trends include the continuous success of franchise DIY and other successful titles.

4.5 Threats of Substitutes

Book publishers compete for the leisure time of their traditional customers with cable television, VCRs, video games, multimedia products, and the Internet. The threats to this industry are mainly based on how people will spend their disposable income and their relevant habits and patterns. So far, this can be seen in the surveys as to how people spend their time, in addition to the number of people who buy books. Although sales have been positive, buyer count actually decreased, and reading as a hobby has been unstable in the past years due to other leisure activities such as television, sports/hobbies, socialising and the Internet. The Internet can also serve as a special threat as people will most likely read material uploaded online for free rather than buy a book.. In addition to this, there is also a threat from changes in technologies. Many book publishers respond to these challenges by cutting costs, streamlining operations, adopting new technologies, and investigating the marketing potential of electronic products such as CD-ROMs and online information delivery.

4.6 Barriers to Entry

Most of the major players in the book publishing market are only small parts of huge media corporations. Due to the proliferation of smaller publishers, the book publishing industry is not highly concentrated compared to other industries. In many categories there are relatively few barriers to entry. There are no definitive barriers to entry in this industry other than the strong enforcement of copyright and intellectual property practices.

5. Conclusion

To conclude, the trends and prospects of the books and publishing industry in the UK can be summarised as follows:

• The industry continues to have an optimistic outlook due to the continuous demand for books despite the lower number of people buying them.
• Cited market trends can determine the future of the industry.
• Globalisation can be considered as a growing element that can eventually determine the global success of the industry.
• Diversification when it comes to genre, market, segments, and format can be deemed critical to the future success of the industry, in addition to specific market integrations and strategies that need to be applied such as the combination with other forms of media.
• The rights of the authors need to be fully emphasised and implemented.
• The Internet and technology makes up a significant portion of the future of the industry.
• Mainstream markets are going to gain on more force such as bookstore chains and the Internet because of the strategic pricing and marketing strategies utilised by these companies.

In assessment, changes in the book and publishing industry are going to be substantial when it comes to preferences, the business framework and the shifting demands. Although book formats have been discussed, their influence does not give a full guarantee that physical books will fully vanish in the years to come. On one hand, because of printing concerns, more sustainable measures are going to be practiced, which can also give rise to the increasing demand for digital books.

In order to maintain the success of the industry, the following are the formulated recommendations:

• Diversification in products, titles and target markets – it is important for publishers to diversify its products, titles and markets because more and more people are aware of their needs and desires as a consumer. Since the Internet can provide them any information they want, books need to be responsive to these inherent social changes in which the publishing world is threatened by the “easy” access provided by technologies. In addition to this, UK publishers should not overlook the potential of the emerging markets, which can give these markets the opportunity to get exposed to UK-based books and at the same time, have the works of these markets showcased with other UK-books.
• Marketing and strategy – the industry needs to be strategic, not only in the business side of the industry but its social elements as well. Since buyers have more power when it comes to determining how they want to spend their time and where they want to spend their disposable income on, publishers should continue to market and endorse strategically the importance of reading. In effect, publishers should also make adjustments based on the consumer demands.
• Being pro-active with change – the industry needs to impose certain standards according to critical changes in the world today. This includes the utilisation of technologies and at the same time, the caring for the environment. Hence, the industry can have an industry-wide practice of sustainability, which can also positively impact the society.

References

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