Toward a New Vision of Sustainable Print Book Publishing
March 5, 2012 § 2 Comments
If print book publishing is to survive in a rapidly digitizing world, traditional models for decision-making around print must evolve into models that better fit the times. Print book publishing has been driven by the vision of continuous growth in volume–which generally translated into selling more copies of more titles and (thus more printing). This older vision of growth–and the fear of unfilled demand (which jeopardizes growth)– translated into a business model that sought profit primarily in economies of scale. Ever increasing print volume led to a focus on reducing the unit cost of each print book, driving up print quantities, which further drove efficiencies in offset printing, high volume finishing (i.e., jacketing, binding, etc) and mass logistics and distribution.The reality is that print book sales in the US peaked in 2007. The pinnacle was reached by the final Harry Potter title, and sales of print books have declined significantly each year since. At this point in the 21st century, preserving a model driven by print book volume growth is folly. Instead, a new vision through ensuring a sustainable eco-system around printed books should be the goal. Central to this new vision is a rethink of traditional print quantity decisions.
Fortunately, the conceptual model needed to replace the unit cost model is readily available for adaptation: “total cost of ownership” or TCO. Rather than using unit cost as the primary determinant of print quantity and profitability, TCO introduces additional inventory related carrying costs that act to constrain the attractiveness of lower unit costs that stem from higher print quantities.
What print decision-making strategies complement a TCO model? The most fundamental is that “less is more.” Printing fewer copies more frequently is the basic premise. To do this involves finding a new balance between simple p & l cost analysis (unit cost is a key driver), and a more inclusive review of the implications of purchasing inventory (TCO). Reducing the size of inventory investment occurs transaction by transaction. TCO is an approach that requires consistency and discipline, as well as timely access to relevant demand and inventory data. Book publishers need to realign metrics, accounting, and incentives to reinforce the TCO vision.
The drawing below shows the extent of inventory carrying costs that are in addition to unit cost. As the shift to digital accelerates, capital, service, risk, and storage costs need to be considered with greater rigor rather than be treated as “external” to a print quantity decision (as was the case too often in the growth era). Of all of the cost factors shown below, the inventory risk costs, primarily the risk of obsolescence, are huge in a disrupted environment. Customer demand for print is rapidly changing, and is much less predictable than before.
non-unit cost inventory costs
Depending on the level of activity for the title, reducing print quantities typically triggers the need for short-run digital print solutions. Book printers need to increase their capabilities/capacity to make economical digital print books. Publishers and their printing partners need to utilize distributed print networks to enable printing closer to where the book is needed, saving shipping time and cost. As more print titles move towards being considered “long tail”, print on demand services (combined with direct fulfillment) will comprise a larger piece of the pie. TCO also calls for better demand forecasting for titles where inventory must be held. The forecasts should be based on updated market models that reflect the new realities of the print book marketplace.
Additionally, given shrinking print revenues for the foreseeable future, publishers are also challenged to financially support the staff and systems required to manage the print side of the business. This could open the door to investments supporting more automated, streamlined print transactions. Pressure to reduce staff costs could lead to mutually advantageous transfer of staff and functional duties from publishers to printers or other 3rd parties. Whether this takes the form of limited business process outsourcing or more comprehensive vendor managed inventory programs, it’s clear that there are many opportunities for creative solutions to the challenge of sustaining the print book ecosystem.
(Part 1 of a multi-part series)
From the Whiteboard 
Really interesting topic, Tim. Thank you. Looking forward to future posts on this.
The dynamics of reduced print runs represents a real pressure point on costs that you may not be taking full account of. If you take a 300 standard paperback book, it might cost anywhere from $1.20 to $4.50 to print, depending on the size of the run. While the savings gained from reduced cost-of-goods-not sold; the cost-of-goods sold that short-run and POD currently requires could represent a profound risk for publishers as a significant bulk of sales go to digital. The other implication of limiting print run size, has to do with the desire to get more books into more places so there’s a greater likelihood of discover. The risk is there, in the form of returns and wasted supply-chain costs, but the opportunity to drive awareness and sales is very seductive.
Thanks for your interest and comments Peter. I understand the points you are making as I’ve encountered them repeatedly in my 25+ years in book publishing. However, printing more books upfront does not necessarily lead to financial success in controlling overall costs (see TCO), or even shipping more copies out the door.
I agree with your description that producing inventory can be “very seductive”. But without a structured process to plan and assess customer demand and a coordinated sales effort, that seductive feeling can lead to a painful hangover.