Publishing Collapse: What is currently happening is what will still happen next

Author: (Japanese) Kazuyoshi Kobayashi
Publisher:
Publish Date: 2004-06-01
Features: This book provides a detailed introduction and commentary on the collapse of the Japanese publishing industry that began in the late 20th century. Some situations differ greatly from China, such as the "book trading companies," which serve as economic intermediaries between publishers and bookstores and are rarely seen in China. Many instances of publishing bubbles were closely related to them. However, many situations are similar to ours, such as excessive book production, mountains of unsold returns, and large bookstores squeezing out small ones, and so on. A lesson from other countries can be applied to our own. The publishing crisis in Japan should serve as a wake-up call for us.
Publishing too much and selling it again
The post-World War II Japanese publishing industry, despite facing many setbacks, can be said to have been in a period of growth. However, in the second half of the 1990s, sales in the publishing industry began to decline sharply. Starting in 1997, sales decreased for four consecutive years. This decline was not a temporary downturn but a sign of the entire industry facing collapse. Even large publishers like Kodansha and Shogakukan were on the brink of bankruptcy. The sales of comic books, which were once 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 brought by the IT revolution but also by other factors: publishers (publishers), book trading companies, and bookstores all followed an expansionist path in the 1990s without distinction, ultimately losing their way and heading down a dead end.
The bubble path of publishers
The bubble path of publishers was reflected in the excessive number of books published. 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 published is not much less. With declining sales, the industry continued to publish large quantities, even books with return rates as high as 80% or 90% still saw new releases. Naturally, mountains of returns piled up!
In broad terms, 6 billion books and magazines are published annually, of which 2 billion are returned as unsold copies. Most of these returns are processed into pulp, resulting in significant resource waste. Despite such high return rates, the industry continued to push forward along its bubble path, driven by a unique publishing distribution "mechanism" to be discussed later. Most publishers believed that in book trading, the first party they dealt with was book trading companies. Even if bookstores went bankrupt, the book trading companies' payments served as a guarantee. However, when all three—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 growth 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. Yet, 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 a floor area of around 100 tsubo (approximately 36 square feet) was considered large. Now, super-large bookstores with 800 or 1,000 tsubo, or even those larger than 1,000 tsubo, have emerged. Additionally, large bookstores with hundreds or even thousands of chain stores have also appeared. 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 30% to 40% due to price hikes for books and magazines. Consequently, many bookstores lacking financial strength went bankrupt, which was inevitable.
Book trading companies, linking publishers and bookstores on their bubble paths, were also forced to follow the bubble path of pursuing market share. In the 1990s, when book sales stagnated, only the number of new book titles surged sharply. Since 1997, sales have been declining year after year compared to the previous year, despite a slight slowdown in the growth of new book titles. This new book bubble, this flood of books, is not a sign of industry prosperity but a manifestation of its crisis. With the sales of every book declining, new books were published one after another to cover losses. No matter how many new books were published, they simply did not sell, leading to 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 more than doubled. 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.
Now, let's look at the changes in the number of books sold. In 1979, 758 million copies were sold, and even at its peak in 1996, it only increased to 915 million copies. Over 20 years, the increase was only 20%. By 1998, it had dropped to 810 million copies. If we take this number as a baseline for comparison, it is actually at the same level as 20 years ago. Sales volume did not rise, but new books continued to appear. What is frightening is that this situation repeated 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 keep publishing books that don’t sell? Here is a brief explanation. From the perspective of some major publishers, if book trading companies pay for books, then even if the books don’t sell, sales revenue is practically "prepaid." Once a book becomes a return, it must be replaced with new books to cover the losses. This cycle leads to an endless publication of new books. This is linked 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 function of book trading companies, small-capital publishing groups, and even major publishers have been supported in the past, 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 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 "commissioned goods" for the manufacturer (publisher), with the freedom to return them, unlike other retail products. This commissioned sales system has always operated consistently with bookstores adhering to the resale price maintenance system—selling at the prices set by the publisher. From publishers to book trading companies and then to bookstores, books can only be sold at "fixed prices," preventing price competition among bookstores. There is no need for competition, and competition is impossible, so unsold books cannot be discounted or sold off at large discounts. This has led to returns for 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 thrive everywhere.
The crisis is shifted 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. Thus, 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 strict with bookstores but also offer "sweeteners" to ensure smooth repayment, such as "early payment bonuses." These bonuses are refunds based on the ratio (full or partial) or amount of early payment, essentially acting as a reward for "good behavior."
As resale goods, books are sold at the same fixed price in both large and small bookstores. The purchase price (wholesale price) may vary slightly, but it is generally stable (only publishers can determine the wholesale price based on book prices). Therefore, large bookstores cannot achieve large-scale growth solely through purchase prices. However, "early payment bonuses" and "early payment rebates" sometimes become means to lower wholesale prices and improve efficiency. But small bookstores have low sales, so their early payment rebates are 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 repayment, forcing them to borrow money, only to see the interest from the loans offset the bonuses. Thus, for small bookstores, the burden of payments is far heavier than the profit from early payment bonuses. "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 tolerate the early payment demands "shifted" by large publishers and book trading companies to bookstores.
"Used-and-new bookstores" accelerate the collapse
In recent years, "used-and-new bookstores" like "Book Leisure" 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, distinguishing themselves from traditional second-hand bookstores. These stores have greatly changed in terms of store layout, bookshelf design, book selection, procurement methods (buying from others), and sales prices, leveraging these new business models to rapidly expand their store networks through franchising, 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, while some begin with rental services. The business model of used-and-new bookstores reflects the fact that modern society is one of mass consumption, where books are "read and thrown away." This model reduces books to mere recycling and reselling, with no consideration for their added value, cultural significance, or uniqueness. Traditional second-hand bookstores carefully select books, set prices based on their interest, rarity, reference value, and cultural significance, and require expertise in identifying and understanding the market for second-hand books. In contrast, used-and-new bookstores ignore "added value" and focus solely on the content and appearance of books—whether they are relatively new and undamaged.
The largest used-and-new bookstore in Japan, "Book Leisure," 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, sealed with a sticker indicating half the original price, and then put on sale. Unsold books are usually moved to a "100-yen-all" shelf three months later. A traditional second-hand bookstore would not compete with new bookstores. However, these new used-and-new bookstores are not content to stay out of the way; they actively enter the saturated market already struggling with new bookstores. By selling the new products of new bookstores at "low prices," they drag both publishers and bookstores into friction and competition.