This article serves as foundational reading in anticipation of John J. McAdam’s three-part presentation at AAUP 2016, entitled “Reimagining the University Press from Scratch.” Watch a webinar replay of Part 1 and make sure to attend Part 2 and Part 3, debuting in Philadelphia.
By John J. McAdam
At the Association of American University Presses‘ Annual Meeting on June 18, 2016, I will be facilitating an industry mastermind discussion on strengths, weaknesses, opportunities, and threats (SWOT) in scholarly publishing from a start-up business perspective. In particular, we’ll explore: “How has the publishing industry performed over time and in particular the scholarly/university press publishing segment?” By way of background, I thought it might be helpful to provide some of that data regarding the broader publishing industry in advance of the meeting to get the conversation started.
For tax and economic reporting purposes, the US government utilizes the North America Industry Classification System (NAICS) to segment industries within the US economy. Entering the keyword search term “publishing” at www.naics.com, three key horizontal industry segments in publishing stand out:
|NAICS Code||NAICS Title||NAICS Description||Notes & Questions|
|511130||Book Publishers – except exclusive Internet publishers||Organizations that design, edit, and market, and distribute books||Why separate Internet publishing?|
|511120||Periodical Publishers – except exclusive Internet publishers||Magazine, journal, or other periodical publishers||Do these publishers support professors adequately?|
|519130||Internet Publishers||Publishers that provide text, audio, and/or video content on the Internet exclusively||Notes:
1) Publishing and/or broadcasting content on the internet exclusively or
2) Operating websites
Why does NAICS carve out exclusively Internet publishers? Following the logic of the NAICS, exclusive Internet publishing has grown to warrant its own industry classification. In fact, Exclusive Internet Publishers is three times the revenue of both Book and Periodical Publishing and employs twice as many people.
The aforementioned NAICS “industry” codes contain five digits and represent a horizontal view of the publishing industry. Next, let’s review the publishing industry both vertically and more broadly using only two and three-digit NAICS codes. The NAICS categorizes publishing into three segments. The first is the industry sector Information (NAICS code 51). The second subsector is literally Publishing (NAICS code 511). The third is Book Publishers (NAICS code 51130) which is the best fit for most university presses. Now that we have data from these three market segments, let’s analyze the data points using Compounded Annual Growth Rates (CAGRs). What does the CAGR analysis tell us?
- The number of firms is flat for Book Publishers, decreasing in Publishing, and increasing in Information—by the same amount, respectively.
- Revenue in Information is growing 4.5 times as fast as that of Book Publishing.
- Payroll expense is growing by double digits across all Information and Publishing
- Workloads have increased per employee as evidenced by increasing payroll per employee.
- Book publishers need to understand for what information customers are willing to pay.
If you are feeling overworked in Book Publishing, then the data confirm this feeling. If you feel underpaid, the data suggest otherwise (sorry). Payroll is growing at 9.1 percent and revenue is growing at 4.2 percent while total employment is declining at 5 percent compounded annually. Furthermore, revenue per employee increased to 9.7 percent annually which means employees are becoming productive (more revenue per employee) and being paid more per employee.
The revenue trends across Information, Publishing, and Book Publishing tell a clear story, as we can see in the chart below:
Clearly, people have been buying more from the parent Information sector and at a higher growth rate over the last 15 years, than either the Book Publishing or Publishing subsets, which have remained relatively flat. As we view this revenue trend chart, we should wonder what’s happening in the Information industry that is generating such consistent annual growth. When we break down the subsectors and compare revenue trends, here’s what we see:
- Recordings had flat growth.
- Telecommunications had slow growth.
- Broadcasting, Data Processing, and Data Hosting had fast growth.
- Other Information Services had exponential growth.
Anecdotally, within Other Information Services, revenue in the Libraries and Archive industry is in fact growing. Of course, as will be no surprise to anyone, the Internet Publishing, Broadcasting, and Web Search Portals have the fastest growth. Look for more industry segmentation here when the NAICS updates economic activities next for 2017.
As we prepare for our SWOT analysis mastermind industry discussion, we should be curious about what is growing and why. Economic activities data inform us that information in nontraditional forms present opportunities for growth. If the university press continues to provide information in traditional ways, such as books and periodicals, then it should not expect growth. Why is growth necessary even for small, mission-driven nonprofit organizations? First, to ensure that revenue grows sufficiently to match growth in expenses such as pay raises. Second, in this case, publishing industry data reveal that book revenues are flat and people are demanding information in forms other than books. Your strategic business plan to keep your university press sought-after by and relevant to your stakeholders should account for these trends even if growth is not the objective in and of itself. Eventually change will be unavoidable. Whether growth or adaptation is the objective, let’s discuss what valuable information a university press might offer that people need. My intention is to facilitate a constructive discussion that will benefit both you and your university press. I’ll see you in Philadelphia.
John J. McAdam is the author of The One-Hour Business Plan (Wiley), an instructor in Strategic Business Planning at The Wharton Small Business Development Center, an association workshop speaker, and business advisor. For more information, visit John on Twitter, LinkedIn, his website, or contact him via email.