The 2016 publishing sales data shared by Earnings at Digital Book World reminded me of all the times I have been the sad-sack tasked with managing the “death squeeze.” I went through it in the consumer photo business, the paper atlas business, and then the CD-ROM mapping software business. Each of these industries relied heavily on brick-and-mortar retail channels, which eventually failed or could no longer carry these declining products in their mix.
The death squeeze is the term I use to describe what happens when markets are changing dramatically, moving from long-time established interests to new upstarts. The game is always the same: the established interests cling to denial in seeing only what they want to see, while the upstarts are free to roam and start anew. Key to this denial is the money the established interests pay to their industry association, who in turn typically provides comforting data that helps justify the death squeeze as it plays out. In the photo industry that watchdog was the Photo Marketing Association, which only measured the paying members; in consumer software it was NPD, which measured 90% of sell-through, but only at retail. And publishing has the AAP.
The first challenge in looking at data is the apples and oranges problem, most commonly concerning units versus dollars. One puts dollars in the bank, not units. But healthy unit growth is typically the leading indicator of emerging sustainable business. So the established interests managing the death squeeze start talking more about dollars and less about units, while the upstarts talk mostly about units and Web traffic. I noticed in the Earnings stats that most deal with unit projections, not dollars.
In the death squeeze, the market is shrinking, which we know to be the case for reading for pleasure, as reported by the NEA, which sadly itself may be shrinking soon as well. The NEA reported last year that reading anything for pleasure hit its lowest measured point going back to 1982 when they first began reporting. One can choose to see this as a threat or an opportunity. The established interests clearly see it as a threat while the upstarts sense an opportunity. Lower prices, more units, easier ways to shop and read are opportunities for businesses that choose to see it that way. Put another way, one man’s threat is another man’s opportunity.
Earnings estimates that 70% of all adult fiction units, when including self-publishing and not just traditional publishing, were purchased as digital books in 2016. Yet, we have been hearing all year from traditional publishing that bookstore sales and print sales have stabilized, as ebooks decline. These numbers confirm the death squeeze is in full force. If 70% of all units sold in the adult fiction category were digital, then suppressing ebook sales to support print books is a classic telltale. The fact that a core historical pillar of the book industry is trending flat—reading fiction in print— is reason for great alarm. Selling magazines, toys, and coloring books in print is not the reason most people want to get into publishing and book retailing as a profession.
When operating in a shrinking market, the death squeeze forces you to cut costs while also increasing prices, which is exactly what has been happening in Big Publishing. A new hardcover novel at $27.95 seems like a very tough sell to anyone other than the most avid customer. Worse yet is the $14.95 ebook. You are squeezing as much as you can out of what is left to squeeze, which in turn hastens the decline in units.
All fiction purchased across the total market may have amounted to 70% digital, but my hunch is the all-important dollars were more like 50/50. But this is bound to get worse as Amazon puts the Big Hurt into Barnes & Noble, Walmart, and other Big Print Book Retailers, who are not differentiated enough to compete the way local independent bookstores can.
No one knows when the next recession will hit. It’s been eight years now, longer than the average cycle. There is a lot of euphoria out there at the moment, which typically means we are getting up to the top of this latest Ferris wheel ride. But when the next recession comes, the weakened death-squeeze industries are likely to be weeded out. I expect that to mean Barnes & Noble and a handful of publishers whose overheads will become too steep for the new smaller market realities.
And as the old fades, the new will rise. In the death squeeze, you must hope you can make it over the line to retirement. If you are younger, you need to keep yourself open to change coming from the outside. Better yet, become a key part of driving that change.