I noticed that my annual gathering of book sales data was up to ten years, so I thought it would be a good time to draw a graph. It represents the brick-and-mortar book store sales as reported to the government, including only those stores which derive over 50% of their income from books. That means it covers book store chains, independents, religious book stores and college book stores, but not supermarkets, Walmart or drug store chains. What makes the curve interesting is that I adjusted it first for inflation and then for bookflation. I chose to show the results in 2011 dollars, which is why the adjusted curves fall to meet the unadjusted curve.
The red inflation adjusted curve uses the basic CPI (Consumer Price Index), the government’s general inflation gauge. But then I wanted to adjust specifically for bookflation, the year to year change in the average cover price for books, and that’s where the trouble began. The book industry is famous for publishing voluminous data that doesn’t mean anything because the inputs and methodology change on a regular basis. I would have loved to use the School Library Journal annual reports, but they changed horses a couple times along the way so their year-on-year numbers are apples to oranges.
The best I could come up with was to use Baker & Taylor’s YBP Library Services annual reports of titles they acquire for libraries, which track the raw cover price data for new titles each year. I was curious enough to find out what YBP stood for that I finally phoned them, it was formerly Yankee Book Peddler. But the calculated average cover price data they present each year is unweighted, ie, they just add up the average cover price for each publisher and divide by the number of publishers, which means the niche professional and textbooks pulled the average price way up.
So I picked five general trade publishers, shying away from textbooks: Random House, Penguin, Scribner, Viking and William Morrow. For each year from 2002 to 2011, I added up their average cover prices and divided by five. Believe it or not, it turns out that general trade title cover prices are lagging inflation! The CPI rose 25% from 2002 to 2011, but the average calculated trade cover price only rose 9%, from $22.22 in 2002 to $24.73 in 2011. This means if you ran a book store and sold as many books last year as you did ten years ago, your gross income in inflation adjusted terms would have fallen by double digits. Like merchants in Japan, you’d be getting squeezed by deflation.
Next I picked five publishers of textbooks and professional texts: Prentice Hall PTR, Palgrave/McMillan, McGraw-Hill, Springer and John Wiley. Not surprisingly, the prices gains here outpaced inflation by a long shot, starting at an average of $70.12 in 2002 and ending at an average of 97.58 in 2011. It cost students and professionals $1.39 in 2011 to buy what a dollar would have paid for in 2002.
I estimate that one third of the sales reported in 2002 came from college book stores, religious book stores, and professional book stores, and two thirds came from general bookstores. In order to adjust that number for the tremendous growth in college enrollment (30% to 40% in the last decade according to all the sources I found) I weighted the average book price a little more to the textbook/professional/religious category each year. This was strictly a fudge factor, I went with 2.5% per year for the ten years. Then I used average cover price inflation from that computed series to adjust the original BLS data for the top graph, giving the brown bookflation curve. The graph below shows the cover price inputs each year for determining bookflation.
We all know that bookstores and distributors have had a hard decade of it but the large publishers have mainly hung in there, so what happened to all those bookflation adjusted sales that aren’t going through the bookstores and distributors? For the graph below, I added Amazon North American media sales (includes music and movies) to the BLS book store sales without bothering to adjust for inflation, just to give an indication of where those expected sales dollars have gone.
A few caveats to all of this. First of all, I chose to show the inflation and bookflation adjustments in 2011 dollars, meaning that those curves show what historical book sales volumes meant in 2011 dollars, rather than showing what 2011 sales would have looked like in 2002 dollars. I think it’s less depressing this way, but you decide. Second, the YBP cover prices overrepresent hardcovers, which libraries prefer, and they are based on new titles as opposed to the average title price in the market. That makes them more of a leading indicator of bookflation than a measure, but I didn’t have any other complete data sets available.
My goal here is to tempt somebody with better data to step forward and blow me out of the water. It’s not the textbook approach to gaining knowledge, it’s what we used to call the learning process. Any takers?
Just looking at the retail price data: it makes sense that the price of trade books would have dropped in this period because the cost of manufacture dropped by an even larger percentage. Printing prices dropped because printing is more efficient because of newer and more productive printing presses (from Komori and Heidelberg) with better closed-loop control systems. At the same time North American underutilized capacity increased, which increases price pressure, at the same time that offshore printers (mostly China) have increased market share.
Typesetting costs dropped also because of new technologies and the success of suppliers from India in introducing improved workflows and knocking 50%+ off composition prices.
Publisher retail pricing was never based on demand elasticity analysis; always on cost plus (that’s why I was blindsided when I saw that there was in fact significant price elasticity, as demonstrated by the uptake in ebooks at lower retail prices).
Thad,
I agree that printing costs are dropping, not so convinced on typesetting, but neither would explain why textbook prices are up 40%.
The only business models I’ve ever seen that operates on cost plus (with caveats) are government contracting and regulated industries, like insurance. In both of those cases, the business mainly consists in driving up the costs in order to drive up the plus:-)
Book pricing is a more traditional combination of competition and what the market will bear. And that applies to the authors, editors and production staff working for the publisher, as well as to the final price. I’ve never heard of any publishers lowering their cover prices because they were concerned that their profts were too high or growing too rapidly.
Morris