They're not exactly swinging from the rafters, but British publishers have begun the year with a hint of optimism—optimism that was not in evidence at the start, or even in the middle, of 2007. A better-than-expected Christmas, a turn in the direction of prices and the merest sense that retailers are beginning to choose value over volume have combined to raise the industry's spirits ever so slightly.
Unlike previous years, in 2007 the value of sales grew faster than the number of books sold—a welcome sign. This was a Harry Potter year, which always skews the figures, but there was higher value growth (just) both with and without the little wizard. So total consumer market (TCM) unit sales sans Potter rose by 3.9%, to 232.9 million, according to Nielsen BookScan, while value was up 4.1%, to £1.76 billion. Harry Potter and the Deathly Hallows, the seventh and last in J.K. Rowling's series, was the year's top-selling book by a long chalk, selling some four million copies in the U.K. If it is included, TCM volume rose by 5.8%, to 237.8 million, and value by 6.4%, to £1.8 billion.
So a little color is returning to the industry's cheeks, even as it braces itself for a consumer downturn in 2008. As those figures suggest, average selling prices rose for the first time in years, for the market as a whole, in adult fiction and in children's, young adult and educational books. They continued to fall, however, in the highly competitive and potentially big-bucks world of adult nonfiction.
Though you wouldn't sense it by visiting a bookstore, even the process of polarization—more sales of fewer titles—seems to be slowing down. The year's top 10 sellers enjoyed a market share of 3.8% by volume and 4.1% by value, down from 5.5% and 5.0% in 2005, the last Harry Potter year.
Yet for many publishers, 2007 was also a year of rising returns, hand in hand with the rise of the (unpredictable) mass market. Publishers and major retailers are now discussing the possibility of nonreturnable sales of backlist titles. Waterstone's, lord of the High Street, hopes to cut returns by 30% when its Burton upon Trent central distribution warehouse comes onstream later this year.
On the High Street itself, Waterstone's continues to close space, as supermarkets and the Internet eat into its share of the bookselling market. Shifting sales patterns at HarperCollins illustrate exactly what is happening. Four years ago, the High Street (which includes the WH Smith chain and independent booksellers) took 48% of its sales, supermarkets 12% and online 4%. By last year, the High Street had shrunk to 40%, while supermarkets took 20% and online 11%. Actual figures may vary for its competitors, depending on their lists—online tends to sell more literary fiction and serious nonfiction, for example—but the trend is the same.
The mass market itself is a recurring theme in publishing discussion. Is it real? Is it sustainable? While the Internet stocks everything, it attracts more regular readers and benefits from what one publisher calls “media moments”—when a book gets a media mention, people tend to reach immediately for their computers. Supermarkets, on the other hand, are extending their ranges from top bestsellers only (often hardback nonfiction) to include other genres like more literary fiction.
“Supermarkets are reaching people who don't go into bookshops,” points out Clare Alexander, joint managing director of agents Aitken Alexander Associates. “That's the mass market.” But at a recent Royal Society of Literature debate on the bestseller business, it was observed that on the Internet, in the supermarkets and in the High Street, the bestselling titles tend to be the same ones. “The key to the mass market is television, which can drive people into all these outlets,” Alexander says.
What remains to be seen is how the mass market survives a falloff in consumer spending, though book-buying has traditionally been resilient in U.K. recessions. But recession, if it's coming, ain't here yet. A good Christmas season (total sales up 5%) allowed most publishers to end the year feeling cheerful, particularly as retailers began to raise prices in the final week. It has dawned on them that last-minute Christmas shopping is “distressed” rather than “discretionary.” And many publishers report that 2008 has begun well.
The Rankings
Hachette was the undoubted belle of the 2007 ball, retaining its number one slot with 16.6% of the market after 5.1% revenue growth (according to Nielsen Bookscan). After some difficult earlier months, it scored at Christmastime, with seven of the top 10 seasonal hardback nonfiction titles and five of the top 10 hardback fiction titles. Hachette's system, with four separate adult trade sales forces, seems to be working well. “It's worth the cost,” declares CEO Tim Hely Hutchinson, “because each sales force concentrates on a finite number of books. With only one sales force, there would be too much prioritizing.” The group would like to do more educational business, he adds, through acquisition as well as organic growth.
Random House came next, with 14.6% of the market, despite a 2.5% fall in revenues. While its CCV division had a sparkling year, there were lower full-year sales at recent acquisitions BBC Books and Virgin Books. “We performed better than we thought, given that the whole Dan Brown backlist has tailed off,” says CEO Gail Rebuck. This year the CHA division published its first James Patterson title, 7th Heaven (Century), and the group is about to relaunch the Bodley Head as a serious nonfiction imprint.
Random House raised the advances bar by paying a reported £2.2 million for the autobiography of comedienne Dawn French (to be published by Century). “Two years ago, you would hope to get a potential Christmas bestseller for £500,000,” says Penguin managing director Helen Fraser. “Last year it was £1 million, and now it's £2 million for one worth taking seriously.”
Penguin's excellent 2006 proved hard to equal and its market share slipped to 9.8% on the back of a marginal fall in sales. A “big focus” on profit, however, has improved margins, Fraser says. The group had a paperback rather than a hardback year, including Kim Edwards's The Memory Keeper's Daughter (Penguin) and Marian Keyes's Anybody Out There? (Penguin).
HarperCollins was the only Big Four member apart from Hachette to raise its sales—by 0.6%—though its share slid to 7.9%. It, too, had a strong 2006 to beat. “We're focusing on growing our mass market publishing,” says CEO Victoria Barnsley. “Supermarkets will become increasingly important to publishers, because it's where people shop.” HarperCollins unveiled a special signed edition of J.R.R. Tolkein's The Children of Húrin during the year, priced at £350. “We sold around 200 with virtually no effort,” Barnsley reports. “We believe there's a real market for customized limited editions.”
Thanks to Harry and a sales uplift of 140%, Bloomsbury led the middleweights, with 4.2% market share. Former Macmillan chief Richard Charkin joined the company to take charge of trade publishing and to help chart a post-Potter course. He hints that future initiatives may take the company more into the business-to-business, professional and academic markets. “There will be a strong electronic element,” Charkin predicts. “We've got the cash. It's a great company, with great people, and there are opportunities to grow.”
Pan Macmillan had a much improved year, with sales up by 12% and market share of 3.4%. Its big trade hit was the Richard and Judy—nominated The House at Riverton by Kate Morton (Pan). Simon & Schuster also pulled out the stops, raising revenues by 12.1%—it has 1.5% of the market. Here, as elsewhere, its big seller was The Secret.
Close behind, with 1.4% of the market, was children's specialist Egmont, celebrating its first year among the top 10 publishers with increased sales of 8.9%, despite the lack of a new Lemony Snicket. Sir Charlie Stinky Socks and the Really Big Adventure by Kristina Stephenson was one of its surprise hits.
Children's publishing in general continued to be hard work, beset by the same retail difficulties as the adult business. It is similarly susceptible to the influence of TV and cinema. The year's biggest seller apart from Harry Potter was Penguin's Doctor Who annual, based on the TV series of the same name. Parragon did well with its High School Musical series. Anthony Horowitz's Snakehead (Walker) led the children's fiction list.
“It's increasingly a paperback market—especially in picture books, but increasingly in fiction as well,” says Puffin managing director Francesca Dowe. “You build an author in paperback, then take them to hardback when you reach a level you know you can sustain.”
Competition is so brisk that books have to look more and more eye-catching, which eats into margins. Puffin's latest Young Bond, Charlie Higson's Hurricane Gold, caused a sensation with an all-gold cover. “It definitely helped sales,” Dowe says.
Most publishers tend to lose children's market share in a Harry Potter year, at least when measured by value, and 2007 was no different. A shining exception was Scholastic, which grew by value and volume, aided by the success of the Philip Pullman movie tie-in to The Golden Compass.
Children's and adult publishers alike have been cheered since the decline in independent bookshop numbers finally went into reverse in 2007. “There is a gap where Ottakar's and Waterstone's used to be and which no one is filling except Amazon,” says Martin Neild, chief executive of Hodder & Stoughton. “Buying local is a bit of a zeitgeist thing, so there's a possibility that independent booksellers could resurge.”
