Traditional Publishing Enjoys Its Best Sales in a Decade—Despite Supply Chain Problems

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Recently you may have heard about book publishing’s printing problems from outlets such as the New York Times and Publishers Weekly. In the US and UK, spring and summer titles were delayed until fall, making for a crowded season. Not only is it challenging to get media attention for new releases right now, but it’s also leading to a “printer jam”—a tight printing market.

Meanwhile, a surge in print book sales during the pandemic, with a volume increase of about 12 percent over the summer, has made things worse. In fact, for the year print book sales are up by nearly 6 percent versus 2019; traditional publishing is expected to have its strongest performing year since 2010. But it has come at a cost: reprints that normally take two weeks now sometimes take more than a month. Some publishers have now pushed back release dates to 2021 as a result of low printing capacity.

So what’s caused this tight print market?

Printing delays are problematic—but the problem has little to do with the health of book publishing.

Book publishing is just a fraction of the overall printing and paper business in the US, and it will continue to be at the mercy of bigger marketplace changes. The printing market has been tight since at least 2018 for various reasons, all complicated by issues such as tariffs on paper. Even pre-pandemic, there wasn’t any slack in the system.

We talked to industry veteran Bo Sacks about the current environment and how we reached this point. Sacks has observed the evolution, growth, and decline of printers for the last 50 years. “They’re in serious debt, which is part of the problem,” he said. That’s because of the long, ongoing battle between the two largest printers in the United States—LSC Communications and Quad—to buy up market share. Sacks says sometimes the printers would buy a company just to get the clients, then shut down plants. Quad, in fact, only entered the book-printing business in 2010, and through just that type of scenario. But these decisions were made in another era, Sacks said: “2010 seems a lot longer than 10 years ago. The difference from that moment until now is unbelievable.”

Sacks said that Quad built the company on the expectation that long-run magazines would go on forever. (Long-run magazines are titles that get printed in extremely high quantities.) But that’s not a business model that works today. “The long-run [magazine] titles are diminishing and dying left and right,” Sacks said. “So what they’ve done in the last decade is buy plants that focus on short-run printing.” He says that getting quality workers—productivity—has also been part of the problem. And indeed, at the Book Industry Study Group annual meeting this year, an industry expert on book manufacturing said that a tight labor market is one of the industry’s biggest problems, and perhaps only automation can solve it.

Because they were increasingly in financial trouble, the two biggest US printers, LSC and Quad, announced a potential merger in 2018. But the Department of Justice filed an antitrust suit to block the deal. Soon, Quad and LSC terminated their merger plan rather than fight the suit, and Quad announced in 2019 it was exiting the book business entirely. That may sound dramatic—and it is, for book publishers—but Quad won’t miss the revenue. Quad’s annual net sales are around $4 billion, of which $200 million is book printing. Quad has already sold part of its book printing division to CJK Group.

Meanwhile, LSC has filed for bankruptcy; its assets are being sold to a private equity group that has other manufacturing businesses, including paper. A recent earnings report blamed LSC’s decline on digital disruption in magazine and catalog printing as well as fewer educational book sales. Last year they closed two printing plants—one of them a Gideon Bible printer, the other a printer of retail inserts and Sunday magazines.

Ingram is helping publishers (of all sizes) meet increased demand for books as the supply chain gets tighter and uncertain.

Due to the pandemic and current events (see: political books related to the US election), some books are more in demand than ever, exacerbating the supply problem and creating order backups.

Industry vet Mike Shatzkin wrote about how publishers’ ability to keep fulfilling orders during the pandemic has relied heavily on Ingram’s Guaranteed Availability Program, which uses print-on-demand to ship books to accounts within 24 hours. This program makes it possible to deliver “just about any quantity of books to just about any account in the world. With just about any return address you want on the package,” Shatzkin writes.

Indeed, Ingram is critical in the US market as the biggest wholesaler and distributor of print books; its operations include Lightning Source, a print-on-demand printer used by small and Big Five publishers alike, as well as IngramSpark, its self-publishing arm. Turnaround times for print-on-demand through Ingram have become significant: 22 business days, not counting shipping. Before the pandemic, typical turnaround time was a few days.

As Shatzkin notes, five of the top 10 New York Times nonfiction bestsellers in June 2020—related to social justice and antiracism—were supplied by Ingram’s Lightning Source division and benefited from the GAP program. If publishers had waited even two or three weeks for supply, those sales would’ve been completely lost.

However, one group is not so happy with Ingram: authors using IngramSpark. Print turnaround times for self-publishing authors using the service have been 22 to 24 business days (plus shipping time) since May. Author Andrew Shaffer said, “I’ve been working on a new self-published book, and a five–six week turnaround to get a single proof copy is unworkable. Then when I make a change to the cover or whatever, I have to wait five–six more weeks to see how it prints.”

Ingram announced earlier this year they’re investing in their print-on-demand operations across the globe and will hire hundreds of new employees to run new equipment now being installed. In an August 12 presentation, Ingram representatives spoke directly to publishers’ concerns about managing inventory and making books available as buying patterns keep shifting. Matt Mullin, senior key accounts sales manager at Ingram Content Group, advocated that publishers move as many backlist titles as possible to print-on-demand and consider using Ingram programs like GAP, which keep titles available via print-on-demand if conventional supply runs out.

While Mullin said it’s made sense in the past for publishers to watch and manage their own print runs to replenish inventory as needed, this only works when demand is knowable, and not so much when demand is “crazy,” as he described it. “Anyone managing a P&L right now knows you can’t have your cash caught up in inventory that can’t sell. That’s what sets 2020 apart from 2018, when we saw similar constraints in supply.”

Publishers haven’t been great at predicting which books or categories will spike in demand. In February and March, book publishers realized the scope of the pandemic and made the decision to stock up on pandemic and dystopian literature, Mullin said. But people don’t, in fact, want to read about the end of the world while stuck at home. In fact, one UK study found such literature rated at the bottom of what consumers’ stated preferences are. Of course, we now know what did sell and continues to sell: home-education materials. While some trends might be predictable, like gardening in summer, “What’s amazing is how widespread the [sales] uncertainty is. It really goes across every category,” Mullin said.

In a Publishing Trends article looking at the recent increase of digital and POD printing, Lorraine Shanley writes, “The old model of looking at the unit cost of a manufactured book has morphed into looking at the cost per unit sold. And, as printers close and consolidate, … flexibility becomes more important, forcing publishers to look at ‘total cost of ownership.’ How do the advantages of having inventory on hand in your own warehouse weigh against the carrying costs—or the possibility that the warehouse closes or the inventory can’t get to the end user?” That is the calculation that publishers must make during the pandemic, and it’s the kind of uncertainty that will carry through 2020, and into much of 2021.

The biggest book publisher in the US has been shoring up its infrastructure.

The New York Times recently profiled Madeline McIntosh, the CEO of Penguin Random House in the United States. Reporter Alexandra Alter writes: “The company has grown even more dominant in recent months in part because Ms. McIntosh, who took over two and a half years ago, and other leaders foresaw a future in which online book sales would vastly outstrip physical retail, but print books would continue to be a popular and lucrative format.

“For years, the company had been investing in infrastructure, spending $100 million on expanding and upgrading its warehouses. With four distribution centers and warehouses on both coasts and in the Midwest, it is the only publisher that ships books seven days a week. That supply-chain advantage enables Penguin Random House to quickly react to upticks in demand for particular titles, which has not only increased sales but cut down on returns of unsold books by 30 percent.”

Behemoths like Penguin Random House—which may eventually acquire Simon & Schuster—are well positioned to maximize their scale for greater efficiencies and better profits. Ingram is another such behemoth, a longstanding industry firm that has gobbled up other book wholesalers and distributors over the years. It is positioned for even greater growth due to its wise investment, years ago, in print-on-demand. The pandemic may be stressing the supply chain, but book publishing is also a recession-proof industry, and the big companies that were strong going into 2020 will likely pull through even stronger by the end. The weaker ones? They may become acquisition targets.

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