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Number of publishers going bust jumps 42% in one year

By CreditMan Tuesday, November 5, 2013

The number of publishers becoming insolvent has jumped 42% over the last year. 98 publishers went bust in the last year,* up from 69 the year before, according to research by Wilkins Kennedy, the Top-25 accountancy firm.

Wilkins Kennedy explains that publishers’ business models have been undermined by the strategy of discount sellers – such as Amazon and the supermarkets – forcing publishers to cut their margins so that they can sell books at much lower prices.

Amazon’s highly organised marketplace for second hand books also makes it far easier for consumers to get hold of recent hardbacks, textbooks and other usually expensive books at a vastly reduced cost.

As a result of this, the number of insolvencies amongst publishers has increased year by year.

Comments Anthony Cork, Partner of Wilkins Kennedy: 'The growth of the internet has accelerated a dynamic that started with the end of the ‘Net Book Agreement.’ The rise of Amazon and other ‘discount’ sellers with massive buying power means the pressure on publishers’ margins is now immense.'

'While publishers might be able to sustain relatively small margins on a best-seller, it is much harder for niche publishers.'

'At the same time, the arrival of Amazon has transformed the second-hand book trade from a fairly minor nuisance to a serious threat. Where once you had to trawl the second hand bookshops if you wanted to get hold of a cheap hardback or academic book, you can now be fairly certain of getting hold of what you want at the click of a button, and the publisher will not make a penny.'

Wilkins Kennedy adds that the growing popularity of electronic books has been detrimental to some traditional publishers, and poses major challenges for the industry.

While physical book sales still outweigh e-book sales in terms of volume, e-books are growing at a rapid pace. According to research by the Publishers Association, e-book sales soared 134% to £216m in 2012, while physical book sales dipped by 1% at £2.9bn. As well as typically selling for less than paper books, e-books are also subject to fierce price competition.

Additionally, as e-books grow in popularity, so too does the piracy of e-books. A recent study by NetNames, an online security company, found that 76% of the 50 most popular textbooks could be downloaded for free on a pirate website.

Anthony Cork says: 'The e-book market is gaining a lot of momentum and publishers who are willing to and can afford to make the transition can really capitalise on this, as there are savings to be made in areas such as binding, printing, storage, warehouse and shipping costs.'

'However, the e-book market is now itself subject to fierce price competition and as with the music and film industries and the arrival of downloads, piracy is a serious threat. Academic text books are amongst the most vulnerable to piracy as today's students are simply accustomed to accessing the content they want on the Internet for free.'

Recent publisher administrations include:

# Evans Brothers Limited mainly focused on the publication of teacher training journals and periodicals, but was originally famous for publishing books by children's writer Enid Blyton. It became insolvent in September 2012

# Panos London was a publisher in the field of international development issues, especially health. The Panos office in London closed in April 2013 after 26 years.

# Reel Art Press, was a leading independent publishers of 20th Century entertainment and popular culture photographic books which were sold through prestigious retailers such as Net-a-Porter’s Mr Porter’s website.

*Year ending August 31