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Recession and the book trade

16 March 2009

How is the economic slowdown affecting books? We've managed to stay off the subject of the recession for over two months, so now is the time to have another look at how it is affecting the book business.

The first thing to say is that things look bleaker in the US than they do in the UK, although no-one is having a particularly comfortable time. The big American publishing corporations acted sooner in the face of falling sales. On 3 December, a day christened 'Black Wednesday' by American publishing insiders, lay-offs were announced at Houghton Mifflin, Thomas Nelson and McGraw-Hill, with a reorganisation at Random House. Further rounds of job cuts have followed, with Simon and Schuster, Oxford University Press and McGraw-Hill in the forefront.

In the UK sales have held up better, but Random House and HarperCollins have both recently announced job cuts of 5%. Both companies have taken the view that it would be prudent to act now, as the recession deepens and its end is not in sight, but their fundamental health is not in doubt. Large companies are particularly vulnerable to recession because of their high cost base, but small publishers are also vulnerable as they may not be able to borrow the money they need to invest and sustain their activities.

Collateral damage from the recession may be anticipated falls in attendance at the big book fairs coming up soon, particularly the London Book Fair and Bologna Children's Book Fair. BookExpo Canada has been cancelled for this year. The longstanding editor-in-chief of Publishers' Weekly, Sara Nelson, and two of her colleagues lost their jobs, whilst in the UK the much-lamented Publishing News was closed down last year, due to lack of advertising revenue from publishers.

A fundamental difference between the US and the UK is in the bookselling environment. In the US Borders is extremely exposed by its lack of liquidity and the biggest US bookselling chain Barnes and Noble made 100 redundancies in January, for the first time in its history. Its CEO said: 'never in all my years as a bookseller have I seen a retail climate as poor as the one we are in, nothing even close.'

But according to Nielsen BookscanUK bibliographic organisation, describing itself as 'the definitive retail monitoring service for books', which shows UK bestseller lists on its website. figures US book sales fell only .02% in 2008, compared to 2007, so it is the anxiety about the future that is the big factor.

In the UK, Waterstone's chief Gerry Johnson admitted at last week's Independent Publishers Group conference that: 'the recession is affecting business' and said that: 'the first rule is to survive'. But on the publishing side both Penguin (buoyed by the high dollar exchange rate) and Hachette (helped on both sides of the Atlantic by Stephenie Mayer's phenomenal sales) announced good results. Latest figures suggest that in the UK books are outperforming the wider economy.

In the midst of a very tough retail environment the optimists who predicted that books would weather the recession better than other retail sectors may be proved right. It all depends how deep the recession becomes and how widely people are affected. In both countries, if you still have your job you may feel better off, as mortgage rates are at historic lows and inflation is down. Books are still a cheap form of entertainment, an inexpensive treat and for many heavy readers a necessity.

But what about readers? A comforting statistic comes from the US, where the US Census Bureau reports that adult readers last year went over 50% of the population. It's a loose definition of readers, but it's good to know that male readers have increased from 37.6% to 41.9% since 2002, whilst female readers went up from 5.1% to 58%. We shouldn't write off the book trade just yet.