Publishing collapse

Author: Koichi Kobayashi
Publisher:
Publish Date: 2004-04-01
Features: Why has the Japanese publishing industry been in decline? Why is the Japanese distribution and circulation chain so chaotic? Why has the Japanese printing industry suddenly risen? How has the IT revolution impacted the Japanese publishing industry? Why is the entire publishing order facing a full-scale collapse? Why is the future of the Japanese publishing industry uncertain? In a seven-year "fight to the death" in the spirit of Japanese warriors, the Japanese publishing industry, like the Titanic, has not stopped its downward trend. Thinking carefully about these six "whys" may lead to insights for sustainable development. By carefully reading this book, readers will not only gain a book but also receive many thought-provoking questions and lessons for the publishing industry in our country. This book provides a detailed introduction and review of the collapse of the Japanese book industry that began in the late 20th century. Some situations are quite different from China, such as the "book trading companies," which act as intermediaries between publishers and bookstores and are rarely seen in China. Many publishing bubbles were indeed related to them. However, many situations are similar to those in China, such as excessive book production, mountains of unsold returns, large bookstores squeezing out small ones, and so on. A stone from another mountain can polish jade—Japan's publishing crisis should serve as a warning to us.
Publishing too much but selling it again too little
After World War II, Japan's publishing industry, despite many setbacks, can be said to have been in a period of growth. However, in the second half of the 1990s, the sales of the publishing industry began to decline sharply. From 1997, sales decreased for four consecutive years. This decline was not just a temporary downturn. The entire publishing industry faced the risk of collapse. Even large publishers like Kodansha and Shogakukan were on the brink of bankruptcy. The comic book magazine sales, which were the economic backbone of the Japanese publishing industry, plummeted, magazine sales continued to fall without a bottom, and advertising revenue also sharply declined. This danger was not solely due to the IT revolution but also to other reasons: publishers (publishers), book trading companies, and bookstores all followed an expansionary path in the 1990s without discrimination, ultimately losing their way and walking down a dead-end street. Among them, the bubble path of publishers was reflected in the excessive publication of books. First, let's look at the number of new book publications in the past. In the 1970s, the average number of new books published each year was around 20,000. By 1995, it had surpassed 60,000, three times the number in the 1970s! Today, the number of new books published each year exceeds 65,000, and nearly 200 new magazines are published daily. Adding new books and magazines together, the average is 250 publications per day. Although Japan's population is much smaller than that of the United States, the number of books and magazines distributed is not much less. With declining sales, the industry continued to publish even books with return rates as high as 80% or 90%, resulting in mountains of returns! Broadly speaking, the annual distribution of books and magazines totals 6 billion copies, of which 2 billion are returned as unsold inventory. Most of these returns are processed into pulp, causing significant waste of resources. Even with such high return rates, the industry continued to advance along its bubble path, driven by the unique publishing distribution "mechanism" to be discussed later. Most publishers believed that in book trading, the first party they dealt with was the book trading company. Even if bookstores went bankrupt, the book trading company's payments served as a guarantee. However, once all three parties—publishers, book trading companies, and bookstores—ran into trouble and began to default on each other, publishers started selling themselves. The bubble path of bookstores was the rapid development of large bookstores. In the 1990s, nearly 10,000 bookstores in Japan went bankrupt. One major reason was the rapid expansion of large bookstores, which led to an oversupply of general bookstores and squeezed out small and medium-sized ones. However, despite the closure of nearly 10,000 bookstores, the total retail space of bookstores in Japan actually expanded several times compared to the early 1970s. Previously, a bookstore with an area of about 100 tsubo (1 tsubo is approximately 36 square feet) was considered large. Now, super-large bookstores with areas of 800 tsubo or even 1,000 tsubo have emerged, along with massive bookstores that open dozens or hundreds of branches. As a result, the retail space of bookstores expanded, and new books and magazines were continuously supplied. However, with no increase in purchasing power, returns surged. Sales volume remained almost unchanged over 20 years, but sales revenue only increased by three to four times due to price hikes for books and magazines. Consequently, many bookstores with insufficient financial strength went bankrupt, which was inevitable.
Book trading companies, caught in the bubble paths of both publishers and bookstores, were also forced to pursue a bubble path of market share expansion. In the 1990s, when book sales growth stagnated, only the number of new book titles surged sharply. Since 1997, sales have been declining year after year compared to the previous year, even as the growth of new book titles began to slow. This new book bubble, this book surplus, is not a sign of industry prosperity but rather a manifestation of industry crisis. With declining sales for every book, new books were published one after another to cover losses. No matter how many new books were published, they simply did not sell, resulting in ever-increasing returns from bookstores. Let's look at the changes in book sales. Compared to the 1970s, book sales increased by only 70%, but the number of new book titles doubled to 2.7 times. During this period, the average price of books increased from 841 yen in 1979 to 1,000 yen after 1994. Although book sales increased by 70% compared to the 1970s, a significant portion of this increase was due to price hikes. Let's also look at the changes in the number of copies sold. In 1979, sales were 758 million copies, and even at their peak in 1996, they only increased to 915 million copies. Over 20 years, the increase was only 20%. By 1998, sales had dropped to 810 million copies. If we take this number as a baseline, compared to 20 years ago, there has been little change. Sales volume has not increased, but new books continue to be published. What is frightening is that this situation repeats year after year, like loading an already sinking ship with countless goods—making its sinking only a matter of time.
Why publish so many if they don’t sell?
Why are so many books published? Why continue to publish new books that do not sell? Here, a brief explanation is needed. From the perspective of some major publishers, if book trading companies pay for books, then even if the books do not sell, the sales revenue is practically "prepaid." Once a book becomes a return, it must be replaced with new books for settlement. This cycle leads to an endless publication of new books. This is connected to another absurd idea—"regardless of whether they sell or not, book trading companies must pay for new books, and with the money, they can achieve financial turnover." Relying on the financial functions of book trading companies, small-capital publishing groups, and even major publishers have been supported in their operations, driving the publishing industry forward. This is an undeniable fact. However, it must be pointed out that this financial function has weakened the industry's fragile constitution and created numerous new book bubbles.
After seeing the above situation, it is still necessary to understand the unique distribution system. In short, the biggest feature of Japanese book distribution is the "commission system" and "fixed-price sales." Almost all books sold in bookstores are different from other retail goods in that they are "commissioned goods" for the manufacturer (publisher), with the freedom to return them. (The books of a few publishers like Iwanami Shoten are exceptions and are sold outright). This commission sales system has always operated consistently with bookstores adhering to the resale price maintenance system—selling at the prices specified by the publisher. From publishers to book trading companies and then to bookstores, bookstores can only sell at the "fixed price," preventing price competition among bookstores. There is no need for competition, and competition is impossible, so unsold books cannot be sold at a discount or clearance. This has led to returns for both book trading companies and publishers. However, the more returns there are, the more new books must be accepted to cover the losses from the money already collected. An irreversible absurdity spreads downward, and completely distorted trading practices spread everywhere.
Shifting the crisis to small bookstores
The commission period between bookstores and book trading companies is, in principle, three months, with settlement in the fourth month. However, bookstores are not bound by this period; as soon as they request books, they are required to pay for them in the second month along with the ordered items. As a result, bookstore owners often complain, "They say it's a commission, but they demand payment in the second month. This isn't a commission; it's outright purchase." To pay for some publishers, book trading companies are forced to demand early payment from bookstores. Book trading companies are not only demanding strict payment but also preparing "sweeteners" to ensure smooth collection of funds. This is the "advance payment bonus," which is a profit earned by bookstores if they pay early, based on the ratio (full or partial) or amount of payment. In other words, if they pay early, they receive a "bonus" that seems like an award. As resalable goods, books are sold at the same fixed price in both large and small bookstores. The purchase price (the so-called wholesale price) may differ slightly, but it is generally stable (only publishers can determine the wholesale price based on the book's price). Therefore, large bookstores cannot achieve large-scale development solely based on the purchase price. However, the "advance payment bonus" and "advance payment return" sometimes become means to lower the wholesale price and improve efficiency. But small bookstores have low sales, so the ratio of the "advance payment return" is also low. Despite this, book trading companies still demand monthly payments for books that have just arrived and have not yet been sold, which angers small bookstores. If the payment ratio drops, bookstores labeled "payment-deficient" are pressured for payment, forcing them to borrow money. The interest on borrowed money often offsets the profit from the advance payment bonus. Therefore, for small bookstores, the burden of payment is far heavier than the profit from the advance payment bonus. "It's no longer a commission," this phrase fully expresses the dissatisfaction of small bookstores. The closure of nearly 10,000 small bookstores can be said to be the result of their inability to bear the early payment demands "transferred" from large publishers and book trading companies to bookstores.
"Used-and-new bookstores" accelerated the collapse
In recent years, "used-and-new bookstores" like "Book Off" have been expanding vigorously. This has further intensified the market chaos due to the oversupply of bookstores. "Used-and-new bookstores" sell "used" books that are actually new. They differ from traditional secondhand bookstores. Used-and-new bookstores have significant differences in store layout, bookshelf design, book selection, procurement methods (buying other people's books), and sales prices. Leveraging these new business models, they have expanded their store networks explosively through franchise agreements, similar to how small unmanned shops or beer houses develop chains. Some used-and-new bookstores start by selling books, others by selling game software and video materials, and some by offering rental services. The business model of used-and-new bookstores reflects the characteristics of modern society as a society of mass consumption, where books are "read and thrown away." This model reduces books to mere recycling and reselling, with no consideration for added value. Traditional secondhand bookstores carefully select books, set prices, and consider factors such as the book's interest, rarity, reference value, and cultural significance. Procurement of secondhand books also requires expertise in identifying and understanding the market for rare books. In contrast, used-and-new bookstores ignore added value, focusing only on the content and appearance of the books—whether they are relatively new and undamaged. The largest used-and-new bookstore in Japan, "Book Off," buys almost all books that are relatively new and undamaged. The purchase price is about 5% to 10% of the original price. When selling, the books are polished, wrapped in a sealed sticker indicating half the original price, and then put on sale. Unsold books are usually moved to a "100 yen all books" shelf after three months. If this were a traditional secondhand bookstore, it would not compete with new bookstores. However, these used-and-new bookstores are not content to sit on the sidelines; they actively enter the saturated market of new bookstores, where competition is already fierce. Although they are "half-used," they are actually selling the new books that new bookstores compete over at low prices. This has drawn both publishers and bookstores into the fray and confrontation.