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The Market Demand for Books in the U.S.: 2006-2011 Albert N. Greco Professor of Marketing Fordham University Graduate School of Business Administration.

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Presentation on theme: "The Market Demand for Books in the U.S.: 2006-2011 Albert N. Greco Professor of Marketing Fordham University Graduate School of Business Administration."— Presentation transcript:

1 The Market Demand for Books in the U.S.: 2006-2011 Albert N. Greco Professor of Marketing Fordham University Graduate School of Business Administration New York City and The Institute for Publishing Research, Inc. 201-439-1839 agreco@fordham.edu November 2008

2 Areas of Research Book Publishing Industry Publishers (Editorial; Sales/marketing; Intellectual property issues; Exports and imports; Market/consumer demand issues) Retailers (B & N; Borders; BAMM; Mass merchants; Price clubs; etc.) Distributors (B & T; Ingram; Hudson News; etc) Libraries (Public; School; College/university; Special libraries) Scholarly Journals Publishing Scholarly Communications Marketing Entertainment (Industries) Newspapers and Magazines Motion Picture Industry Broadway and the Performing Arts Toys, Games, and Theme Parks

3 Market Demand Research Methodology U.S. Department of CommerceBureau of the Census U.S. Department of EducationU.S. Department of Labor The Congressional Budget OfficeNational Endowment For the Arts International Trade AdministrationB.E.A. The Federal Reserve BankS.E.C. Reports Quarterly ReportsAnnual Reports Conference CallsInterviews/Visits Wall Street Analysts’ ReportsPublishers Weekly SubtextThe Wall Street Journal The Financial TimesThe L.A. Times The Washington PostCNBC The New York TimesBloomberg Detailed Data Since 1982ARIMA Models

4 Marketing Data: Major Trade Book Publishers FY 20007-2008 ($ Millions) U.S.% of U.S.WorldU.S. % SalesMarketSalesWorld ShareSales Random House $1,26613.2% $2,38853% Penguin 1,01510.61,69260 HarperCollins 97010.21,38870 Simon & Schuster 7307.6 88682 Hachette 5155.4 515100 Wiley 3904.1 46983 Scholastic 3904.1 42292 Holtzbrinck 2252.4 35064 HM/Harcourt 1801.9 19791 Rodale 1932.0 193100 Thomas Nelson 1902.0 190100 Sterling 1501.6 150100

5 Marketing Data: Juvenile Book Publishers (Net Publishers’ Revenues; $ Million) 20072006 % Change Scholastic$432$22691.1% Random House 320 322-6.2% HarperCollins 228 2251.3% Penguin 224 2230.4% Simon & Schuster 160 163-1.8% Disney 80 84-4.8% Candlewick Press 65 608.3% Little, Brown 52 4710.6% Houghton Mifflin* 50 53-5.6% Holtzbrinck 27 258.0% Harcourt* 20 23-13.0% TOTAL $1,658 $1,45114.2% *Merged in 2008

6 Market Demand Data Forecasts Determine “Top Line” Forecasts for Books in the U.S. RevenuesProjectionsProjections Release EstimatesRelease DateDate: U.S. Department of Commerce 2004AG: Jan. 2004Com. Dept. Dec. 2005 2005AG: Jan. 2005 Com. Dept. Dec. 2006 2006AG: Jan. 2006 Com. Dept. Dec. 2007 2007AG: Jan. 2007 Com. Dept. Dec. 2008 2004-98.4% of 2006Commerce’s data

7 The Law of Supply and Demand* Supply and demand are the forces that make market economies work. Law of Supply: A microecnomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers increases or decreases. Law of Demand: A microecnomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa. * There are exceptions; e.g. gas used in cars, etc.

8 Supply A fundamental economic concept that describes the total amount of a specific good or service that is available to consumers. Supply can relate to the amount available at a specific price or the amount available across a range of prices. Each product will have its own supply and demand patterns based on price, utility, or personal preference. If consumers demand more of a product and are willing to pay more for it, then producers will add to the supply. As the supply increases, the price will fall given the same level of demand.

9 Demand An economic principle that describes a consumer’s desire and willingness to pay a price for a specific good or service. Holding all other factors constant, the price of a good or service increases as the demand increases, and vice versa. Companies spend money to determine the amount of demand that the public has for its products and services. Incorrect estimates will either result in money left on the table if it underestimates demand OR looses money if it overestimates demand.

10 Market Demand: Media Usage (Hours Per Person per Year Above the Age of 18; Selected List) 200620072008200920102011 Consumer Books110109109108108108 Magazines 125125126124124122 Newspapers178171164159155152 Videogames (+12)7685101116125131 Broadcast TV (Net/Ind.) 650639639642643644 Cable TV (Basic/Prem.)962973964964964958 Internet(+12)182189193195197197 Mobile (Downloads)121519242932 Box Office121212121212 Total media3,4993,4963,4933,4933,5093,502 Source: The Statistical Abstract of the U.S.

11 Market Demand: Media Expenditures (Dollars Per Person per Year Above the Age of 18; Selected List) 200620072008200820102011 Consumer Books $99.56103.60105.52107.96110.75114.03 Magazines44.4644.3544.4243.9744.3143.10 Newspapers49.2347.7445.7844.6143.8544.20 Video Games33.9143.9155.7767.6075.3680.76 Cable TV (Basic/Prem.)306.60330.93354.51378.15400.78422.82 Internet54.0655.4559.5363.8867.4270.65 Mobile12.3315.6619.423.4227.2230.70 Box Office36.3638.0138.1637.6638.8039.29 Total all media813.19851.57903.30950.64998.071,038.70 Source: The Statistical Abstract of the U.S.

12 Market Segmentation Refers to the aggregation of prospective buyers into clearly defined groups (i.e., market segments) that have common wants and needs and will respond similarly to a marketing “action”.

13 Market Demand Shock And Market Anomaly A sudden surprise event (sometimes called a “Black Swan”) that increases or decreases demand for goods or services and has an impact on prices. A positive shock increases demand. A negative shock will decrease demand

14 Market Equilibrium The state in which market supply and market demand balance each other and, as a result, prices become stable. Generally, when there is too much supply for goods or services, the price does down, which results in higher demand. The balancing effect of supply and demand results in a state of equilibrium (which is often not achieved).

15 Market Equilibrium The equilibrium price is where the supply of goods and services matches demand. Is there “market equilibrium” in the U.S. book industry?

16 Supply: U.S. New Book Title Output 20032004200520062007 Agriculture1,5351,5011,4831,4261,298 Arts8,4318,7798,7629,2019,423 Biography9,8379,7658,90411,27110,615 Business7,6147,9057,8858,7197,651 Computers8,9556,9286,0925,4725,709 Cookery 2,5902,8573,0622,7052,673 Education7,5627,1356,9516,4497,335 Fiction24,66638,83234,92742,77750,071 General Works2,1954,2662,0172,0782,346 History13,19214,19112,68615,24114,764 Source: R.R. Bowker

17 Supply: U.S. New Book Title Output 20032004200520062007 Home Economics1,6281,7601,6341,7551,682 Juveniles33,46937,97632,11230,39530,063 Language6,8996,0885,6695,1344,846 Law4,6754,5095,4685,3595,380 Literature6,4937,9726,2978,2279,796 Medicine10,55211,83411,68810,93110,720 Music3,7404,8594,0763,5453,407 Personal Finance402552542582538 Philosophy/Psych.10,04011,41010,55612,96112,635 Poetry/Drama7,0079,8919,41410,70010,258 Source: R.R. Bowker

18 Supply: U.S. New Book Title Output 20032004200520062007 Religion14,51721,66916,78519,85418,956 Science12,96212,63912,62612,65512,872 Sociology/Economics23,53023,22223,75027,67524,596 Sports/recreation6,3236,1966,4386,6666,363 Technology7,1427,7537,1387,2626,858 Travel4,1725,3044,9415,3765,793 Subtotal240,098275,793251,903274,416276,649 POD/Short Run/Misc.26,22419,73030,59721,936134,773 Total266,322295,523282,500296,352411,422 Annual % Change--+11% -4.4%+4.9%+38.8% Source: R.R. Bowker

19 Supply: U.S. New Book Title Output: 2007 New Annual Titles:411,422 Net Title Published Every Day: 1,127.18 (365 Days) New Title Published Every Hour:46.97 New Fiction Title Published Every Hour: 5.72 New Juvenile Title Published Every Hour: 3.43 New Religious Title Published Every Hour: 2.16 New Sociology/Econ. Title Pub. Every Hour: 2.81

20 200620072008200920102011 Publishers Net Dollar Sales Millions USD $35,685.937,264.138,298.639,371.040,653.7 42,009.9 % Change4.42.82.83.33.3 Publishers Net Units Millions3,100.23,126.83,106.33,107.03,116.43,132.2 % Change0.9-0.70.00.30.5 Domestic Consumer Expenditures Millions USD $54,244.056,625.158,128.859,739.361,574.7 63,525.0 % Change4.42.72.83.13.2 All Books (Excl. Stand. Tests)

21 200620072008200920102011 Publishers Net Dollar Sales Millions USD $9,180.49,576.99,750.29,988.110,256.1 10,511.6 % Change4.31.82.42.72.5 Publishers Net Units Millions824.3838.8835.8839.6841.7844.2 % Change1.8-0.40.50.30.3 Domestic Consumer Expenditures Millions USD $16,133.516,842.617,140.417,561.417,989.0 18,416.6 % Change4.41.82.52.42.4 Adult Trade Books (Total)

22 200620072008200920102011 Publishers Net Dollar Sales Millions USD $3,399.93,656.63,658.93,752.03,842.23,931.2 % Change7.50.12.52.42.3 Publishers Net Units Millions873.4900.9888.3886.9887.4888.2 % Change3.1-1.4-0.20.10.1 Domestic Consumer Expenditures Millions USD $5,995.96,423.86,436.66,585.16,737.06,893.0 % Change7.10.22.32.32.3 Juvenile Trade Books (Total)

23 Juvenile Trade Book Categories 20062007 Fiction/YA/Fantasy$ 529.9*$ 736.9 Picture Books1,355.61,369.2 Chapter Books 457.5 462.6 Readers: Early Beginners 305.8 324.7 Workbooks/Activity Books 452.0 457.1 Religion 58.7 59.6 Reference 129.7 132.3 Novelty/Film Tie-Ins/”Other” 110.7 114.2 *Net Publishers’ Revenues

24 Juvenile Trade Books: Hardbound Best Sellers How Many Copies Do You Have to Sell to Make the Top Ten List? 2007H.P & The Deathly Hallows (13,114,692) 2006The End (Series of Unfortunate Events) (2,089,054) 2005H.P. & The Half-Blood Prince (13,500,000) 2004The Grim Grotto (1,404,367) 2003H.P & the Order of the Phoenix (12,193,840) 2002Carnivorous Carnival (Series of Unfort. Events) (726,543) 2001 The Prayer for Jabez for Kids (478,957) 2002 H.P. and the Goblet of Fire (7,900,000) 2000 H.P. and the Prisoner of Azkaban (3,600,000) N.B. H.P is Harry Potter

25 200620072008200920102011 Publishers Net Dollar Sales Millions USD $1,886.21,814.71,777.71,765.41,771.51,790.6 % Change-3.8-2.0-0.70.31.1 Publishers Net Units Millions575.1541.8520.8506.5495.3488.9 % Change-5.8-3.9-2.8-2.2-1.3 Domestic Consumer Expenditures Millions USD $3,242.23,125.43,069.23,047.73,054.93,081.8 % Change-3.6-1.8-0.70.20.9 Mass Market Paperback Books

26 200620072008200920102011 Publishers Net Dollar Sales Millions USD $2,422.02,575.02,719.62,864.23,021.53,190.0 % Change6.35.65.35.55.6 Publishers Net Units Millions263.4275.5284.1293.3302.7312.2 % Change4.23.53.23.23.1 Domestic Consumer Expenditures Millions USD $4,685.14,981.75,255.45,538.35,838.06,154.2 % Change6.35.55.45.45.4 Religious Books (Total)

27 200620072008200920102011 Publishers Net Dollar Sales Millions USD $8,893.09,240.99,611.59,848.410,084.9 10,363.2 % Change3.94.02.52.42.8 Publishers Net Units Millions280.9285.6287.3287.3287.7289.0 % Change1.70.60.00.10.4 Domestic Consumer Expenditures Millions USD $11,648.512,104.012,594.212,882.813,188.7 13,539.9 % Change3.94.02.32.42.7 * Print. Digital books TBA. Professional Books (Total)*

28 200620072008200920102011 Publishers Net Dollar Sales Millions USD $4,748.95,051.95,246.35,434.45,770.96,115.8 % Change6.43.83.66.26.0 Publishers Net Units Millions177.2178.4181.9185.1192.4199.8 % Change0.72.01.74.03.8 Domestic Consumer Expenditures Millions USD $5,374.85,713.45,942.16,168.16,544.46,949.4 % Change6.34.03.86.16.2 *Includes printed textbooks and supplementals. Digital TBA. K-12/Elhi [Elementary and High School] Books (Total)*

29 200620072008200920102011 Publishers Net Dollar Sales Millions USD $2,396.62,672.22,928.73,165.03,422.43,658.6 % Change11.59.68.18.16.9 Standardized Tests (Total)

30 200620072008200920102011 Publishers Net Dollar Sales Millions USD $4,642.14,801.24,971.15,138.35,309.75,493.9 % Change3.43.53.43.33.5 Publishers Net Units Millions77.077.979.080.281.282.2 % Change1.21.41.51.31.2 Domestic Consumer Expenditures Millions USD $6,522.36,750.66,986.87,231.47,477.27,723.7 % Change3.53.53.53.43.3 *Includes printed textbooks. Digital TBA. College Books (Total)*

31 200620072008200920102011 Publishers Net Dollar Sales Millions USD $531.0546.9563.3580.2597.0613.7 % Change3.03.03.02.92.8 Publishers Net Units Millions29.028.729.128.227.927.7 % Change-1.01.4-3.1-1.1-0.7 Domestic Consumer Expenditures Millions USD $641.7683.6704.1724.5745.5766.4 % Change6.53.02.92.92.8 University Press Books (Total)

32 Market Demand: U.S. Books Certain book categories have or will experience declines in unit sales. Why? Problem with the “marketing mix”? Product (not what consumers want?) Price (too expensive for consumers?) Placement (books are hard to find? Promotion (publishers and retailers do not promote?) or Economic issues (discretionary expenditure?)

33 Demographic Data: Who Reads Books? Percent of U.S. Population 19822002 Read any book60.0%56.6% Read literature54.0%46.7% Literary Reading198219922002 Males48.1%47.4%37.6% Females63.0%60.3%56.1% Source: National Endowment for the Arts

34 Demographic Data: Who Reads Books? Men’s Favorite Book Categories Under 18Science Fiction & Fantasy 18-24Science Fiction & Fantasy 25-34Science Fiction & Fantasy 35-44Science Fiction & Fantasy 45-54History 55-64Mystery +65Mystery Source: Codex Group

35 Demographic Data: Who Reads Books? Women’s Favorite Book Categories Under 18Young Adult 18-24Literary Fiction 25-34Literary Fiction 35-44Romance 45-54Romance 55-64Romance +65Romance Source: Codex Group

36 Demographic Data: Who Reads Books? Literary Reading By Age 198219922002 18-2458.6%53.3%42.8% 25-3462.1%54.8%47.7% 35-4458.7%58.8%46.6% 55-6454.8%56.8%51.6% 65-7452.8%52.8%43.8% +7547.2%50.8%45.3% Source: National Endowment for the Arts

37 Demographic Data: Who Reads Books? Literary Reading By Age (Millions) 198219922002 18-2417.812.911.4 25-3424.923.117.6 35-4417.023.420.5 45-5412.715.820.1 55-6412.011.312.6 65-747.89.38.0 +754.15.05.7 Source: National Endowment for the Arts

38 Demographic Data: Who Reads Books? Literary Reading by Percentage of Population by Geographic Region: 2002 Northeast49.7% [N.E. 50.0%; Mid-Atlantic 49.7%] Midwest46.7% [West No. Cen. 49.9%; East No. Cen. 45.5%] South42.1% [South At. 43.3%; West So. Cen. 40.9% East So. Cen. 40.9%] West51.2%[Mountain 53.4%; Pacific 50.4%] Source: National Endowment for the Arts

39 Demographic Data: Who Reads Books? Literary Reading by Gender 198219922002 Males49.1%47.4%37.6% Females63.0%60.3%55.1% Overall56.4%54.2%46.7% Source: National Endowment for the Arts

40 Demographic Data: Who Reads Books? America’s Most Literate Cities Minneapolis Seattle St. Paul Denver Washington, DC St. Louis San Francisco Atlanta Pittsburgh Boston Source: Jack Miller. Based on: booksellers; educational attainment; Internet resources; library resources; newspaper circulation; and periodical publications.

41 Marketing Information: Where Do Consumers Find Out About New Books? Under 25 55-64 Browsing in local bookstore67%74% Recommendation friends6362 Displays in local bookstore4547 Info. In author’s prior book3232 re new book Library/librarians2522 E-mail from bookseller2425 Rec. Bookstore staff1614 E-mail from author/bookseller1210 TV/radio ad67

42 Marketing Data: Favorite Authors: Under 25 Stephanie Meyer20% Kanye West7 Chuck Palahniuk6 Meg Cabot9 Dave Eggers3 Chelsea Handler2 Gregory Maguire5 Chris Paolini5

43 Marketing Data: Favorite Authors: +25 Stephen King14% Mitch Albom7 Harper Lee13 Jodi Picoult6 John Steinbeck11 Philip Roth2 Bill Bryson2 John Updike2 Daniel Silva1 Carl Hiaasen2 Janet Evanovich4 John Grisham7 Ian Fleming2 Lee Child1 Patricia Cornwell2 Ken Follett1

44 Marketing Data: Top 15 Trade Book Categories: 2007 % of Total Revenues Adult Fiction17.97% Juvenile16.26 Religion15.4 Romance6.97 Health/Diet5.22 Business4.62 Self-Help/Inspiration4.19 Gen. Ref.3.94 Computer/Tech3.42 Cooking/Home Ent.3.25 Art/Illus/Coffee Table3.17 Sci-Fi/Mystery2.74 Travel1.88 Biography1.63 Personal Finance1.37 Other/Misc.7.96

45 Marketing Data: Trade Books 2007: Where Do Consumers Purchase New Trade Books? RevenuesUnits Bookstores48.84%49.83 General Retailers25.8025.90 College Adoptions7.807.49 Libraries & Insts.8.284.43 Elhi Schools3.342.08 Direct to Consumers5.9510.29

46 Marketing Data: Juvenile Books: Where Do Consumers Purchase New Juvenile Books? RevenuesUnits Large Bks.Chain25.3%18.3% Book Clubs15.316.2 Internet11.98.3 Mass Merchants6.57.9 Indep/Sm. Book Chains9.08.6 Mail Order5.24.5 Price Clubs5.03.8 Food/Drug2.12.9 Dollar Stores2.15.7 Used Bookstores1.65.3 Books Fairs0.50.8 Other15.617.9

47 Market Demand: Will Consumers Accept Digital “E-Books”? Are you ready and willing to read a digital book? On a desktop computer? On a laptop computer? On a SONY Reader ($270)? On a Kindle ($350)? On a smart phone (Black Berry, etc.)? On a “Palm Pilot” type hand-held device?

48 Marketing Issue: Disruptive Technologies Michael Porter’s Five Forces provide a framework to analyze this question: 1.Competition in the industry 2.Potential of new entrants into the industry 3.Power of suppliers 4.Power of customers 5.Threat of substitute products

49 Market Demand: Threat of Substitutes A product or service that partly satisfies the wants and needs of consumers. For a product to be a substitute of another good, it must have a particular relationship with that good OR provide a better service. When a product’s price increases, the demand for its substitute will increase because consumers will go looking for a cheaper alternative. When a product’s price decreases, the demand for its substitute decreases.

50 Market Demand: Threat of Substitutes Switching Costs This is the cost a consumer incurs as a result of switching to another product or a supplier. The switching “cost” could be financial or psychological. Many companies try to employ marketing strategies that trigger some sort of high switching costs to dissuade consumers from switching to a competitor’s product (e.g., cell phone companies; 2 year contracts; high cancellation clauses)

51 Market Demand Would you have a “switching cost” if you decided to read your books as “digital books”? What would be the “switching cost”?

52 The Changing Marketing Landscape: E-Book Sales: 2003-2007 E-Book Wholesale Revenues: Trade Books 2003$7.34 Million 2004$9.62 Million 2005$10.83 Million 2006$20.00 Million 2007$31.80 Million

53 Marketing Data: Kindle Owners Percentage of Age Cohorts Percent of U.S. Book Buyers 18-240.2% 25-340.5 35-440.5 45-540.5 55-650.9 +650.6

54 The Changing Marketing Landscape: E-Books When will consumers switch to digital e-books? Adult trade books Juvenile trade books Mass market paperbacks Religious books Professional books College textbooks K-12 Elhi textbooks, supplementals, stand. tests University press books

55 Marketing Data: Library and Institution Sales: 2006-2012 Net Publishers’ Revenues ($ Million) 2006 $3,478.8 2010$3,975.2 20073,655.8 2011 4,091.3 20083,766.9 2012 4,213.4 20093,869.1 N.B. Includes: Public Libraries; School Libraries; College/University Libraries; and Special Libraries


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