The Bookseller.com

8th January 2009

Andrew Crawford is managing director of The Book Depository

Don't get depressed

05.09.08

When our esteemed chancellor Alistair Darling warns us that world economic conditions "are arguably the worst they've been in 60 years", we need to stop and think about what this means to us.

Many argue that books are counter-recessionary, being relatively inexpensive and providing lasting pleasure. This is true, but haven't we been losing ground to television, video games and the internet even during the good times?

More importantly, have recessions in recent memory been on the scale predicted for the downturn to come? It seems hard to believe consumers will still be buying books regularly if winter fuel bills rise by 20–30%. True, book buyers are relatively affluent, but food and petrol prices and credit repayments are putting pressure on everyone.

In the Great Depression, which started in 1929, US publishers were slaughtered when sales dropped from $182m to $82m in four years. Nearly 40% of publishers closed. Obviously, booksellers were hit hard too.

In Japan, the book industry has been in contraction since 1996, with sales falling by 15%. It is clear that books are not recession-proof. Interestingly, sales in Japan did not decline when the housing bubble burst, but later on, during the country's economic decline—so perhaps we will be last into the recession and last out.

A final thing to consider is that the world economy is in bad shape and a third of all UK publisher revenues come from overseas.

Could booksellers or publishers survive a 10–20% downturn in business—and how? Do we batten down the hatches or come out with all guns blazing, capitalising on reduced advertising costs and competitor inactivity?

Who is going to be hit the hardest? If Darling's predictions are correct, the larger, more inflexible companies will suffer most as they will find it harder to reduce their cost base. We will see more redundancies and firms in administration, and perhaps a few major publishers or booksellers will tumble. Indeed, if booksellers have been struggling in the longest sustained growth for years, what will happen in a recession?

After every forest fire new seedlings grow. Going back to the Great Depression, we see that a number of small publishers, such as Simon & Schuster (established in 1924), Random House (1927), Scholastic (1925) and Viking (1925) managed to survive and then thrive, and even Penguin was founded at the height of the Depression in 1933. Are they lean enough 80 years later? However it pans out, it is going to be interesting.