SIC 2731 Book Publishing

SIC 2731

This category includes establishments primarily engaged in publishing, or in publishing and printing, books and pamphlets. Establishments primarily engaged in printing or in printing and binding (but not publishing) books and pamphlets are classified in SIC 2732: Book Printing.

NAICS CODE(S)

511130

Book Publishing

512230

Music Publishing

INDUSTRY SNAPSHOT

The book publishing industry experienced extraordinary growth since 1963, when annual book sales were $1.68 billion. According to the Book Industry Study Group, book sales totaled $35.7 billion in 2006.

Books sales are driven by a number of factors. Favorable demographics have contributed to sales growth in such categories as adult trade and education texts and materials. Publishers have found support in a growing literate population with high disposable personal incomes. Demand for adult trade and hardbound books reflects strong best-seller lists.

As the wildly successful Harry Potter series concluded in mid-2007, publishers began looking to other prospects for growth. Religious titles, which had achieved popularity in the early 2000s, were expected to remain the strongest growth segment into the next decade.

E-books are no longer the only embodiment of digital publishing technology. New technologies emerged in the mid-2000s to provide full-text access to books around the world, including those out of print. Google launched an ambitious program to scan every book in the world, making their contents available to Internet users. Meanwhile, On Demand Books LLC invented a paperback printing machine that enables consumers to print an entire book in mere minutes.

ORGANIZATION AND STRUCTURE

Products within the book publishing industry can be divided into six major categories: adult trade; juvenile trade; mass market; professional, technical, and reference; university press; and religious books. Trade books, representing the largest share of the book market, encompassed all general-interest publications, including adult and juvenile fiction, nonfiction, advice, and how- to books. In 2006 the trade category had net dollar sales of more than $8.27 billion, according to the Association of American Publishers. In the mass market paperback category, publishers' net dollar sales were $1.1 billion in 2006. The expansion of large chain bookstores and the population growth among school-age children and high-income adults were among the factors that contributed to the growth of these sales.

The handful of large, multi-billion dollar publishers consolidated many of their smaller imprints in the 1990s in order to cut costs and reposition themselves for the onset of electronic publishing. According to Malcolm Jones of Publishers Weekly, most of these companies considered themselves to operate within "the publishing aspect of the communications industry." However, this concentration of power among relatively few publishers led to criticism regarding the quality and diversity of materials published. Industry observers saw an increasing role for small presses to publish works of literary quality that did not necessarily have enormous sales potential. Because of the proliferation of smaller publishers, the book publishing industry is not highly concentrated compared to other industries. In many categories there are relatively few barriers to entry.

The book publishing process is fairly similar across these product categories. Most books originate as a concept or idea, which is either submitted by an outside author or generated internally by the publisher. The concept is usually refined using market analysis, and the final decision to proceed results from a comparison of the product's expected costs and potential revenues. Such decisions are increasingly made by committee consensus versus the decree of one individual editor. Next comes the actual compilation of the book's content, followed by editorial work to ensure its quality and tailor it specifically to a target market. Meanwhile, the marketing and art departments design the finished product, including type style, page size and layout, presentation of graphics, and appearance of the cover. Then the book is typeset (set in final, camera-ready form for printing), either by an outside vendor or with an in-house desktop publishing system. Finally, the book is transformed into plates, printed, and bound, usually by an outside vendor or affiliated company rather than the publishing house.

Volume, or the size of a book's print run, is an important factor in achieving profitability. Non-educational publishers normally hold first hardcover runs to a range between 5,000 and 50,000 copies, while new books by best-selling authors may merit first runs of more than 300,000 copies. Per-unit fixed costs are a function directly related to the size of the print run. The American Association of Publishers indicated that the typical manufacturing cost for a mass-market paperback is less than 10 percent of gross sales, while the average for all books is approximately 25 percent.

Returned books represent a substantial cost to publishers. The cost of returns includes "handling, processing, and disposal," and, according to Standard & Poor's, such costs have cut heavily into publishers' pretax profit margins in recent years. In an August 1996 article, the New York Times labeled returns "the most significant barometer of the financial success of a book, a measurement more critical than a ranking on a best-seller list because rejects cut directly into profits. Historically, publishers have agreed to take back returns and absorb the loss to entice bookstores to stock their titles."

Book publishers sell their products to the following primary markets: chain and independent retail bookstores; college bookstores; elementary and high schools; and libraries, universities, and other institutions. Among these markets, large chain bookstores proliferated and gained importance in the early 1990s—making book-buying into a form of entertainment and siphoning sales away from mail order and book clubs. In addition, the library market, though small, is considered crucial in that it guarantees publishers a minimum number of sales and, traditionally, requires comparatively little in terms of marketing attention. Online bookselling, the newest and fastest growing retail format, provides consumers with relatively quick access to millions of titles purchasable via the Internet.

BACKGROUND AND DEVELOPMENT

The U.S. book publishing industry grew after the Civil War, as the country moved from an agrarian to an industrial society and people increasingly sought information about emerging technology. World War I increased demand for engineering manuals, especially with regard to radio communication, aviation, construction, and aerial photography. During World War II, training manuals gained importance as factories had to hire untrained people to replace soldiers. Publishers who could provide this information quickly received special allocations of paper, which was scarce during wartime.

Beginning in the mid-1800s, publishing houses provided gathering places for literary talent of the time, especially in London and New York City. Most writers formed relationships with particular editors—who often became well-known public figures in their own right—and followed them from one publishing house to another. Several publishing houses became prominent in the fight against censorship in the early twentieth century. One celebrated case occurred in the 1930s when Bennett Cerf, one of the founders of Random House, intentionally notified U.S. Customs about the arrival from Paris of James Joyce's allegedly obscene novel Ulysses. Cerf wanted Customs to confiscate the book so that he could fight the censorship in court. Publishing houses that supported freedom of speech often attracted the top literary and editorial talent.

Paperback books first appeared in the United States in the 1770s, but they did not gain a wide audience until Simon & Schuster introduced its line of Pocket Books in 1939. These early soft-cover editions sold...

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