By some measures, such as the lack of a breakout hit and no major controversy, 2016 was a quiet year in publishing. Yet there were a number of developments that took place that will continue to impact the industry into 2017 and beyond.
Ron Boire, a former head of Sears Canada who took over as Barnes & Noble CEO in September 2015, led a two-hour presentation of Barnes & Noble’s future plans for investors on June 23. Two months later, the company announced that it had dismissed Boire, noting only that he was “not a good fit for the organization.” To replace Boire, B&N founder Len Riggio, who had announced plans to retire in the fall, said that he was postponing his retirement and would serve as interim CEO until a permanent replacement for Boire could be found.
Meanwhile, B&N’s financial results continued to be mixed. The company made progress on reducing its losses in its Nook division in the year, but struggled to grow revenue from its physical stores as well as to improve comparable-store sales. Store sales fell 6.1% in the quarter ended July 30, 2016, compared to the same period a year ago. In reporting those results, B&N gave a hint regarding what led to Boire’s ouster. Although weak store traffic and a lack of big hits were factors in declining store sales, Riggio said that B&N “[shot itself] in the foot somewhat by making unprecedented inventory reductions” as well as by “cutting expenses in the worst areas, mainly retail-floor personnel.” Those mistakes, Riggio added, were being corrected.
This March, 18 months after the collapse of a similar deal with the same principals, Perseus Books Group signed agreements to sell its publishing business to Hachette Book Group and its distribution arm to Ingram Content Group. When the deals were completed in the spring, HBG took ownership of all nine Perseus imprints, which the company placed under Susan Weinberg, a longtime Perseus executive who had served as senior v-p and group publisher. The Perseus imprints published about 500 new titles annually and had revenue of approximately $100 million.
Ingram’s purchase of Perseus’s distribution arm involved the acquisition of the PGW, Consortium, Perseus Distribution Services, and Legato Publishers Group units, which had client sales of about $300 million. The purchase included Perseus’s Jackson, Tenn., warehouse and its Constellation digital asset management and distribution service. Ingram moved the Perseus groups to Ingram’s distribution network, which already supports the clients of the Ingram Publisher Services group. The combination of IPS and the Perseus distribution group will handle distribution for more than 600 clients.
In a deal that consolidated the publishing industry’s wholesaling segment, Follett Corp. acquired Baker & Taylor in April for an undisclosed price. The combined company has sales of $3.6 billion and distributes physical and digital content to public and school libraries. B&T continues to be based in Charlotte, N.C., under the direction of George Coe, B&T CEO and president, reporting to Ray Griffith, president and CEO of Follett.
Although some industry members expressed concern about further consolidation in the wholesale business, others were hopeful that as part of Follett, B&T will have the resources it needs to improve its operations—and to pay its bills on time. The company, which had been owned by the private equity firm Castle Harlan for about 10 years, had been dogged by complaints from independent publishers about slow payment. In a prepared statement at the time of the acquisition, Coe said, “With Follett’s commitment to education and strong financial ability to invest in Baker & Taylor, we expect to build on our long-term vision for content distribution and expand the flow of innovative products, programs, and services for all of our customers worldwide.” Indeed, there are indications that its payment process to publishers has improved.
There was little question that e-book sales fell in 2015 compared to 2014 and that the decline continued into 2016. According to the AAP, e-book sales of trade books dropped about 11% in 2015 and were off 20% in the first six months of 2016. Moreover, most all major trade houses reported that e-book sales were down in the first half of the year. What has been less clear is the reason for the decline. In June, a survey by the research firm Codex Group offered an explanation that seemed to resonate with many industry members: digital fatigue. According to Codex president Peter Hildick-Smith, a spring survey found that though book buyers stated that they spent almost five hours of daily personal time on screens, 25% of book buyers, including 37% of those 18–24 years old, want to spend less time on their digital devices. Given this digital fatigue, consumers are taking advantage of the option to return to reading books in physical formats. That return to print is spurred in part by changes in device ownership. Consumers who own dedicated e-reading devices historically have been the biggest e-book buyers, but the number of people using dedicated e-book readers has been slipping and owners of tablets and smartphones have not picked up the slack in terms of using their devices for reading e-books. Unless the e-reader-device market is recharged with lower-price, higher-quality options, Hildick-Smith predicts that consumers tiring of their digital-device experience will have further digital fatigue, leading to continued e-book sales erosion.
Bookstores sales rose 2.5% in 2015, marking the first time since 2007 that sales in the sector were up. According to figures released by the U.S. Census Bureau, total bookstore sales in 2015 hit $11.17 billion, up from $10.89 billion in 2014. The improvement in bookstore sales was largely due to a steady increase in the number of independent bookstores, sales at which helped to offset some softness at the chains. According to the American Booksellers Association, sales in 2015 rose by more than 10% over 2014. The rebound in bookstore sales continued well into 2016. The Census Bureau reported that through October, bookstore sales were up 3.5% over the same period in 2015, hitting $9.77 billion. ABA CEO Oren Teicher said that through the first part of December, sales at independent bookstores were up about 5% over the same period a year ago. “The positive numbers of 2016 are particularly gratifying given the intense focus on the recent election, which resulted in a far softer fall season,” Teicher said, adding that holiday trends have been encouraging since Thanksgiving weekend.