Are Penguins Baked Beans?
Imaginatively titled London paper, The London Paper, yesterday ran an article listing 10 types of company deemed to be recession proof (baked beans manufacturers, dating websites…) and the 3 worst hit (estate agents…). Publishers didn’t appear on either, and we’re not about to diversify into baked beans as far as I know. So, with terrifying words such as recession and credit-crunch everywhere, what happens to the UK book industry? And what questions are we asking ourselves?
There are two schools of thoughts, easily labeled optimistic and pessimistic. I like the first - most at Penguin Towers would agree - we’re a sunny bunch. Penguin surely ought to be well prepared, we’re certainly well connected – our cousin apparently knows lots about this sort of thing. The optimism comes from the same logic as The London Paper used in arriving at the good news for Messrs Heinz and Branston. Books are broadly speaking cheaper than the alternatives, in this case the wider entertainment industry. Book prices to the consumer are fairly stable over the last few years – any upward inflationary pressure being neutered by the attractive customer offers particularly from supermarkets and online retailers. So we should be fine yes? Our entertainment offer is well priced compared to alternatives, people will go out less – books will keep selling. We should bury our heads in the sand (not a Penguin trait) and carry on.
Certainly this was true last time the UK was in recession, I’m assured by those with more Penguin years in the bag that we came through reasonably unscathed. But is it my imagination or are CD prices falling, cinema tickets getting cheaper if you have the right mobile phone and DVDs going from £20 to £5 within weeks of release into stores? Add to that the fact that many people have about 800 more TV channels to choose from than they did during the last recession and we might start worrying.
And we are. Books are getting more expensive to manufacture. The best way to bring down the cost of an individual book is to print a higher quantity, spreading set-up costs over a larger volume. But if people do actually buy less this will lead to a warehouse full of unsold books, never a good thing. We have a product which is heavy in bulk and - with rising oil prices - our transport and distribution costs are going to rise rapidly. Very generally speaking, we can print more cheaply in Asia than closer to home, especially when colour is involved, but the rising cost of bringing them all back here is reversing this. Our wonderful Penguin production team have gone a little pale but they keep coming up with brilliant ideas around paper and format – the more we stick to a few standard formats the better price we can obtain. There’s a new kind of creativity emerging – finding a way to keep our books looking and feeling as good as ever, but within a few new economic constraints
If we can’t keep our costs stable then we start thinking about other levers. And the biggest one is the cover price of the book, we certainly wouldn’t be the first or only industry to be putting prices up right now. Publishers everywhere must be feeling the same. We want our books everywhere, we want them to reach as many people as possible, but we need a profit as well. The trick is to be brave with prices but sensitive to market sectors. It’s easier to be brave when you have a premium product or brand than when you are competing for shelf space in a competitive area like women’s fiction where an extra £1 can mean a bookseller will choose to stock a similar substitute.
So we’re all thinking harder. Our editorial, marketing and design teams are still the creative hub. But there’s new creativity springing up all over the place in response to the challenge. Production have their thinking caps firmly on, the sales team are finding new ways to differentiate our offer and yes, even my colleagues and I in finance are bracing ourselves to plot a course for this old bird to get through any storm.
Mark the Bean Counter
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