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Publishing in the knowledge economy The industry today home is likely to settle at penetration rates of 40-50% in the next two years. If, though, the digital divide is reduced, penetration rates could be much higher – 70 to 80%. 3.6.2 Reducing wastage Wastage is a major problem in the newspaper, magazine and book publishing sectors. The drive to reduce waste is prompted both by the financial costs to the publisher and other elements in the supply chain, as well as the environmental cost to society as a whole. Targets have already been agreed with the newspaper industry, and the book supply chain has been the focus of a major report and a series of subsequent industry initiatives. The newspaper and magazine publishers and supply chain organisations meet together in the Joint Industry Group (JIG) and there are also a number of separate initiatives. The sections dealing with books and magazines in Part 1 give more information on the levels of returns and wastage. Although we discuss wastage essentially from the point of view of its impact on competitiveness, it is clear that the measures we outline in Part 2 of the report to improve the efficiency of the supply chain and to find alternative routes to reaching the customer will also have environmental benefits. 20
Publishing in the knowledge economy The industry today CHAPTER 4 Size and performance of the industry 4.1 Turnover Figures 4.1 and 4.2 show the turnover of the industry, according to the official definition, SIC 22.1 (revised 1992). Changes in the ABI mean there are two overlapping sets of data that are not strictly comparable with each other. Research by ONS indicates that the post-1997 data collection is more reliable than pre-1997. Both are given in Figure 4.2 to show as much of a trend as possible. This shows a picture of sustained and rapid growth apart from a slight dip in 1997. Taking the two runs of data separately, the industry grew by an annual average rate of 7.4% in the period 1993-97 and then slowed to an annual average of just under 4.8% over the period 1995-99. An alternative set of data, shown in Table 4.1, drawn from unofficial sources, yielded a higher turnover figure for 1999 of £18.5bn, which has tended to become the most widely quoted figure for the size of the industry. Table 4.1 Publishing turnover, based on unofficial statistics, 1999, £m Newspapers 7797 Magazines 6211 Books and journals 4476 Total 18,484 Sources The Advertising Association, Publishers’ Association, Periodical Publishers’ Association Neither of these data sets is ideal. The official data has the merit of providing a relatively long run of data from a single source, and being comparable with international data (see section on international comparisons, below). The ABI gives a total for journals and periodicals in 1999 of £6.153bn, which appears to under-represent the revenue from magazines, particularly business-to-business publishing activities, which other evidence suggests have been among the fastest growing areas of the industry. Data on journals is particularly difficult to obtain anyway, so it is impossible to say what the figure for ‘periodicals’ alone might be (see Gap Analysis). The unofficial data – at least as represented in the constituent elements of the £18.5bn figure – over-represents the revenue from newspapers by using total expenditure rather than net revenue (i.e. gross of advertising and distribution expenses which accrue to other elements of the value chain). For business magazines, no net revenue figures are available. The data in Figure 4.3 is the sum of net revenues for newspapers, conventional (i.e. not contract or customer magazines) consumer magazines and sales of books (invoiced at warehouse prices). Adding in revenues from customer magazines of £227m in 1999 and £10.78bn of revenue from business-to-business activities (drawn from the special study Connecting Business, which excludes some categories such as business TV and credit reference agencies) gives a total turnover of £22.33bn. Unfortunately, the B2B data is from a one-off study. This means that the best we can do is arrive at a number of inconclusive ‘sizes’ for the industry. What these different data have in common, however, is that they all depict very healthy growth. 4.1.1 Revenues from licensing and rights sales One of the most serious gaps in data is information on the revenues publishers derive from the licensing and sale of rights (see Table 4.2). Clearly, this is mainly in the area of book and journal publishing, but magazine companies also engage in the sale and purchase of formats, often internationally, and license the use of their brands. Business information companies also license information to third parties for redistribution. Some of this information is in the public domain from annual reports. A separate research exercise simply on this topic would be worthwhile, though it might reveal an unwillingness to divulge information. One of the main opportunities for publishing companies in the future is likely to be the use of their core assets across many more platforms and channels, not all of which will be under the direct control of publishing companies. Therefore, having data on this area will be vital to understanding the total picture. 22
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