Two Studies See Healthy Book Market Ahead
Jim Milliot -- 9/18/00
Electronic publishing should have a significant impact on
all segments of the book publishing by 2004

A study of the growth prospects for the entertainment and media industries conducted by the management consulting firm PricewaterhouseCoopers sees electronic publishing having a significant impact on all segments of the book publishing market by 2004. The study projects that by '04 electronic books (defined as e-books, print on-demand titles and materials downloaded from the Internet) will comprise 26% of all unit sales, and that consumer spending will hit $5.4 billion, up from a projected $367 million in spending in 2000.

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Spending on print titles is forecast to fall 13.7%, to $25.9 billion, in 2004 from $30.0 billion this year. Total spending on p-books and e-books is projected to increase 3%, to $31.3 million, in 2004 from $30.4 billion this year.

Protecting MarginsDespite the minor increase in consumer spending, PricewaterhouseCoopers predicts that publishers' earnings will not be affected; lower distribution and production costs will allow publishers to price electronic materials lower than their print counterparts, thereby protecting margins. This is particularly true in the consumer book area, where the study said that e-books will sell well if priced at a substantial discount to print books. Indeed, the study forecasts that spending on e-publishing products in the trade area will jump from an estimated $53 million this year to $2.7 billion in 2004.

Mike Kelley, a partner at PricewaterhouseCoopers's entertainment and media practice, told PW that a major factor in the explosion in spending on e-publishing products will be "the advancement of technology," which will dramatically increase the number of devices necessary for reading electronic materials. In recognition of the time it will take for the player population to grow, the study forecasts that the most significant gains in spending on e-products in the trade category will take place in the second half of the forecast period, with spending jumping from $719 million in 2002 to $2.7 billion in '04. (Spending on printed trade books is expected to fall during the same time span, from $17.9 billion to $15.7 billion).

E-Spending to DoubleSpending on e-products in the professional segment is forecast to increase from $858 million in 2002 to $1.68 billion in 2004, while spending on college e-materials is expected to jump from $288 million in 2002 to $813 million in 2004. Electronic publishing is expected to have the least impact on the elhi segment, where spending on e-products is forecast to reach only $218 million in 2004.

Kelley said that the migration of spending from print to electronic materials d s not necessarily mean that current players in today's industry--publishers, wholesalers and bookstores--will disappear, but he d s think that they will need to adapt to new roles. Kelley maintained that many companies are already repositioning themselves within the industry and observed that "the losers will be those who don't reinvent themselves."

The report notes that publishers will become "service providers, offering self-publishing services to midlist and new authors, and marketing and promotional support to leading authors." And printed books will still be bought through bookstores: "Bookstores have become experiences that are attractive to readers. Superstores serve as meeting places and coffee shops and a venue to browse and learn about new titles," the report states.

Veronis More CautiousThe PricewaterhouseCoopers study is much more bullish on the electronic publishing market over the next five years than the recently released Communications Industry Forecast report prepared by the investment banking firm Veronis Suhler, especially in terms of the trade book segment. The VS study predicts that spending on consumer titles will increase at a 4.3% compound annual growth rate over the next five years, with spending reaching $21.5 billion for printed books by 2004. Unit sales are projected to rise at a 2.0% annual rate.

The biggest impact of the Internet on sales of consumer titles is predicted to be the role played by e-retailers, with consumers projected to spend $2.9 billion on books through e-retailers by 2004. The study also states that technology will assist publishers in keeping costs down, helping to keep price increases in check while improving the bottom line of publishers. But sales of e-products in the consumer segment are not expected to grow dramatically through 2004.

Professional ProspectsIn the professional and educational areas, the Veronis Suhler study forecasts that spending on various electronic products will rise at a compound annual growth rate of 9.7% through 2004, to $1.08 billion in the professional book segment, while spending on print materials will increase at a 1.7% compounded rate, to $2.58 billion. The study d s not break out electronic spending from print spending in the college and elhi segments. The report predicts that spending on all college materials will increase at a 8.0% compounded growth rate through 2004, to $5.35 billion. Spending on elhi materials is forecast to increase at a 8.3% compound annual rate, to $4.94 billion by 2004.