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Working in Children's Books and the Recession of 2008-09
The Purple Crayon Blog January 2009 / Revised June 2009
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For more than a year the attention of everyone working in the U.S. children's books publishing industry has been focused on the economy. And though 2009 began with some reasonably good news about retail book sales in 2008, and early information for 2009 suggested only modest declines, we still feel uncertain about the future of our industry. I've followed the news and write these comments to put what's been happening in context, to share my thoughts about what could happen in the coming months, and to suggest how we should respond.
Keep in mind that publishing generally does not move in synch with the economy as a whole, and children's book publishing does not always move in synch with publishing as a whole. One major cause of the lack of synchronicity is the impact of school and library funding, changes in which take time to take effect. I'll come back to that....
Buyouts, Salary Freezes, Layoffs--and Ultra-pasteurized Milk
In late summer/early fall of 2008, the major economic news was simply bad, as Wall Street struggled, credit froze, housing prices fell, and big companies announced layoffs. In contrast, publishing seemed to have been relatively unaffected. Some of the news was unsettling, but none of it was particularly dire. A few major publishers took early action to cut spending: Scholastic announced a hiring freeze, and 110 employees accepted voluntary buy-out offers; Random House announced it would no longer offer a pension plan to new employees; and HarperCollins quietly reorganized and laid off some staff over the course of the year. Some cost-cutting moves seemed almost trivial: one global publisher announced to its staff that it would no longer provide quarts of fresh milk and half-and-half in staff kitchens for coffee, but would instead provide miniature plastic containers of ultra-pasteurized milk. Some companies took no action at all, and the staff at the Hachette Book Group received a special bonus of one week’s salary as a reward for particularly good results.
By the late fall, things started to look more serious, as several publishers announced company-wide salary freezes, Houghton Mifflin Harcourt had actual layoffs, Random House not only froze salaries but reorganized their imprints and pushed out a couple of executives (with no impact on children's books), Simon and Schuster laid off 2% of staff throughout the company and axed two top executives in the children's group, and Macmillan (the re-named Holtzbrinck) consolidated their children's imprints into one group and laid off some staff. HarperCollins waited until early 2009 to act. I tracked these moves on my Who's Moving Where page: go there for more details. These actions were devastating to those directly affected by them, but for the publishers, these were modest moves, enough to get them through the downturn if it didn't get too bad, without compromising the company's ability to get moving again when things turned around.
The news about retail book sales in 2008 was even somewhat encouraging. The PW Daily email reported the following numbers from Bookscan: "Unit book sales were virtually flat in 2008, slipping 0.2%, to 756.1 million units, according to Nielsen BookScan which tracks about 70% of all book sales. Units rose 5% in 2007. Most of the unit gains were supplied by the juvenile segment which had a 6.2% increase." Numbers like these led to such jokes as "flat is the new up."
By early 2009, most of the larger publishers had acted, and so I was a bit startled when two large children's publishers did more in the late spring. In retrospect, I shouldn't have been surprised. One was Simon and Schuster, which laid off three experienced editors from managerial positions; not surprising because the company laid the groundwork for this with their earlier layoffs and a new president of the children's division brought in from the outside. They've changed the structure of the division in a way that will reduce the independence of the imprints--it's a deliberate if drastic change in strategy. The other publisher to act was Scholastic, which laid off staff; they had made some reductions through buyouts in 2008, but it's not surprising, as the economy worsened, that they found they had to do more.
What Comes Next? The Children's Books Double Whammy
At this point, the cutbacks are still modest compared to the mid-1970's, and perhaps comparable to what happened in the late 1980's to early 1990's, when the industry had a big wave of mergers and consolidations.
Since the bigger picture does not look good, however, further staff cuts could still happen. As you know from the news, unemployment may end up in the 9 to 10% range. Housing prices continue to fall. We are in a severe recession, which looks to be the worst since the Great Depression. Many manufacturing, retail, and service companies have already announced or made cuts that are far deeper than in publishing generally or in children's publishing in particular. Though economists predicted in May that the economy will start to recover or at least stop declining in the second half of the year, that will not have an immediate impact on children's publishing. Hiring will not pick up until some time in 2010 and consumer spending will also take time to recover.
A second wave is gathering that could also hit our business, because bookstores are just one part of the children's publishing market. Schools and libraries buy many children's books. Almost every state has had to cut their budget to bring it into balance, and so too have the cities and school districts. State revenues are declining, states are struggling to balance their budgets (with California one prominent example), and so budget cuts are continuing throughout 2009. Children's publishing is less dependent on this "institutional market" than it used to be, but it provides a decent amount of the sales of even the larger and more commercial publishers, in percentages that vary from one imprint to another. It may be half or even more of the market for more library-oriented publishers, and all of the market for some nonfiction series publishers. If a publisher makes 60% of its sales in the institutional market, and book-buying budgets across the country are cut by an average of 20%, that works out to a 12% decline in sales, which would have severe consequences for some companies. Will those budgets be cut that much? They have been in some places, and the cutting isn't over.
What Can We Learn from History?
What will happen in children's publishing is hard to predict, and I wondered if history could be any guide as to what we can expect. Looking back at the Great Depression is frightening. Title output, at a time when there were many fewer children's books being published, was cut almost in half, from 873 to 466, according to Minders of Make-Believe by Leonard Marcus (a great source of information about the history of our business). Some publishers closed their then relatively new children's divisions, or cut them drastically. The 1970's are no more encouraging. The former Macmillan cut staff in their children's and adult imprints in half, and Harcourt laid off Margaret McElderry.
Could things get that bad? I don't think so. For one thing, we are not facing another Great Depression. Unemployment then rose to 25%, and bad conditions persisted for years, right up the Second World War. Not even the most pessimistic economist expects that to happen this time.
For another, the U.S. economy is a very different animal than it used to be, less dependent on manufacturing, and bolstered by the programs that FDR and later presidents enacted. Publishing itself has also changed. Many formerly independent and not very large companies are now part of larger conglomerates that do business in different markets and have operations in many countries. This means that while children's imprints may be asked to make cutbacks along with the rest of the company, they will also be supported by the resources of that corporation. Children's book imprints are generally reliably profitable, and companies do not want to damage those profit centers if they can avoid it. And children's publishing, itself, has changed. In the 1930's, and still to a considerable extent in the 1970's, it was dependent on the library market. As I noted above, children's books sell into two markets, and those markets do not cycle together.
History, then, isn't much help. On the whole, I don't expect drastic drops in sales for children's publishers, but I do expect further declines, and more cutbacks. After all, even the most optimistic forecasts assume that conditions will get worse before they get better. As often happens in recessions, the companies that are already not in great condition are likely to be the most affected. So I'm concerned about Houghton Mifflin Harcourt, which is carrying huge amounts of debt due to recent mergers and acquisitions, making them particularly vulnerable to falling sales. Other than that point, though, I think there are too many uncertainties to make any predictions.
We are going to have to wait and watch.
Children's Ebooks: a Coming Boom or a Sideshow?
Several people have asked if ebooks could make an impact, since sales of them are actually growing. I doubt it, because ebooks are actually not a very large part of the trade market, and are not likely to be in the immediate future. In spite of all their growth, sales of ebooks in 2008 amounted to about 1/3 of the sales of audiobooks—something over $100 million compared to something over $300 million. Another way to gauge size of the ebook market is to look in annual reports from the large publishers, who generally reported that ebook sales made up less than 1% of their total sales in 2008. The ebook market will continue to grow, and is already larger in other areas (such as with professional books) but the exponential growth seems to be over. One prediction I’ve seen is for 10% growth in 2009.
So the size of the market is smaller than one might think, and certain factors limit its potential. To read a physical book, you only need to buy the book. To read an ebook, you need a reader, which is either a computer or smart phone or some other device used for another purpose, or a dedicated ebook reader, like the Amazon Kindle. Many people don’t own smart phones or don’t want to spend hundreds of dollars on a reader device, which is why a computer is still the most commonly used device for reading ebooks, according to 2008 figures. There are natural niches for ebooks, just as there were for CD-ROMs (which were similarly predicted to “replace” physical books) but ebooks are not a simple replacement for physical books.
No one breaks out the figures for children’s ebooks, but it’s reasonable to assume that they are an even smaller part of our market than they are for books generally, for two reasons. Few children own the readers needed, and handling color and large-size pages are still not features of many readers (including the Kindle, which is black and white only and does not preserve page layout, as you would want it to do for picture books).
Will a new company in the ebooks area come along and create a new business approach? Someone certainly could have an idea that no one has had yet and start a business based upon it. It’s happened before. There’s just no telling if it will in this situation or not, and I see no potential candidates. Given the dominance of Amazon, Google, and the big publishers it wouldn’t be easy, and the recession so far hasn’t been bad enough that any publishers have gone under—which might create some room within which a new company could flourish.
Look to the Long Term
So, things aren't as bad as they might have been, but they could still get worse. Given all the uncertainty, what should you do, if you write or illustrate or edit or design or do any of the other jobs that keep our business running? I don't think you should necessarily do anything different, other than find ways to work smarter, so long as you are sure you are in the right business in the first place. None of us got into this field for money or stability, after all. If we wanted either of those, we'd be in another business. The recession does make our lives a little bit more difficult than they already are, but our industry at least is not in as dire straits as some. So I see no reason to bail out unless you were already planning to do so before the recession.
As Patricia Wiles said to me a few months ago: ""I believe that, for authors, the situation really won't change much. Cutbacks in the numbers of books may make the field a bit more competitive, but the best works and most intriguing stories will still get published. We can't be lax in learning the markets, following proper protocols, or editing and revising. As for those who believe it's easy to write for children or see it as a path to riches, well, they'll be just as frustrated by rejection as they would have been when times were good."
Also, even though history doesn't teach us much about what to expect in the short term, it does have a lesson about the long term. The business recovered from the Great Depression--and renowned companies like Holiday House got their start in the midst of it. The business recovered from the 1970's downturn--and Greenwillow Books, the respected imprint founded by Susan Hirschman, rose from the ashes of the Macmillan layoffs. I don't know whether something similar will happen this time, of course, but I won't be surprised if it does. From turmoil comes opportunity. And after recessions, eventually, come recoveries.
The recovery may take a year or two or three, but it will come. And in the meantime, books will continue to be published.
- Publishers Weekly -- A good place to follow the publishing news.
- Minders of Make-Believe -- I mentioned this book above, and I'm mentioning it again, because it tells the story of American children's book publishing from the beginning to the 1990's.
- Resources: Trends in Children's Book Publishing: A page of links to web sites, news articles, and opinion pieces, covering the industry generally and news of 2008/2009.
- Publishing articles -- The index page for articles related to children's publishing on my site.
Comments are welcome.
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