How to look at book sales reporting
I've been noticing something about how outlets report publishing sales levels that troubles me. The most frequent way a media outlet or publisher will publicly talk about sales is by comparing sales made during a certain period to the same period for the previous year. They sometimes refer to this year-over-year or YOY. Year-over-year comparisons are problematic because they don't take into account unusual circumstances or outlier activity, and can present a rosier or more negative picture of reality than is accurate.
I noticed it a few weeks ago in this Publishers Weekly article:
For the second consecutive week, unit sales of print books were down across all categories, leading to a 6.1% drop in total sales last week from the week ended July 23, 2022...It was also the second straight week in which sales fell in the adult fiction category, with comparisons to last year, when the segment was enjoying solid weekly sales, growing more difficult. In last week’s case, adult fiction sales couldn’t keep pace with the big sales numbers turned in by Where the Crawdads Sing by Delia Owens, which sold more than 123,000 copies around the release of the movie based on the novel.
At least this article acknowledged the outlier that was likely driving a major divergence in numbers, but not all of them do.
I especially noticed this last year, 2022, when many outlets were talking about how sales were down, but they were comparing 2022 sales to the 2 prior years. In 2020-2021, book publishing (and most online retail) was enjoying a "pandemic bump" in sales, driven by people who were home isolating, often with more disposable income than previously due to limited ability to spend on things like travel and dining out, and for some people, increased unemployment payments due to the crisis. Books provided a relatively inexpensive form of entertainment for people during the early phase of the pandemic.
This Publishers Weekly article about HarperCollins' recently-announced results for their most recent fiscal year does the same thing, opening the article with news that HC "saw sales drop 10% and profits fall 45% in the fiscal year ended June 30, 2023." It continues, "For the fiscal year ended in June, revenue dropped to $2.0 billion from $2.19 in fiscal 2022 and EBITDA (earnings before interest, taxes, depreciation, and amortization) fell to $167 million from $306 million a year ago."
Comparing 2022 sales levels to those prior two years of elevated sales which had been driven by conditions that were external to the industry and no longer in effect makes it it look like book sales are dropping, rather than just returning to a pre-pandemic normal. Sharing context is crucial for understanding sales stats, whether it's a huge bump in book sales due to a movie tie in or something huge impacting behavior at the societal level (like a pandemic).
The article does acknowledge this a bit in what reads like a throwaway line: "'I think the industry is finding its equilibrium, [HarperCollins CEO Brian Murray] said. He was encouraged that while industry sales are down in 2023 from last year, they are still ahead of 2019."
The only other reference to early pandemic sales levels in the article was "The overprinting by publishers and overordering by nearly all accounts to meet the surge in book-buying in the first part of the pandemic created a bubble that began to fizzle last year."
I'm not trying to call out Publishers Weekly specifically, they are just one of the media outlets that is most likely to talk about publisher revenue and profitability. This happens throughout the media, talking about book publishing and other businesses as well.
One of the biggest reasons that this type of reporting concerns me is that these articles create a narrative for how the book business is doing generally. Part of economics is a self-fulfilling prophecy, where if people believe things aren't going well and will continue to go poorly or even get worse, they make decisions based on that, decreasing spending, letting people go, and more.
For example, that same PW article uncritically reported: "To bring down costs, HC implemented a downsizing program early in the year with the goal of cutting its North American workforce by 5%. Among the actions it has taken in the year was closing its Harper Design unit as well as the YA Inkyard Press imprint."
That move makes sense in a world where revenue and profit are down from a previously stable level, and printing and other costs are rising. But taking a step back and looking at 2020-2021 as two years of windfall profitability for the industry, a few questions emerge: Had management increased employee salaries and benefits dramatically since 2019 based on the increased revenue and profitability in 2020 and 2021? The article doesn't say. It also doesn't dig into why a company that had a $167M profit this year—8.35% profit with $2 BILLION of revenue—cut staff following a year of eye-popping profitability, $306M profits, or 13.9% on $2.2B of revenue.
5% of HarperCollins' reported 4,000 employees worldwide is 200. If we imagine that each of those employees was making $100,000 and benefits and other overhead costs brought that up to $125,000 per employee cost for HarperCollins, the company saved about $25M by cutting those 200 people. (How many of your friends in book publishing are making $100K, though?) So they slashed their workforce, likely harming their effectiveness as a business and the morale of their remaining employees, in order to potentially increase their level of profits by about 15%? In a best-case scenario, where cutting those staff jobs didn't reduce revenue or profitability, that move maybe will push HarperCollins' profits from $167M to $192M? To what end?
For people in the industry who are making decisions about budgeting, hiring, layoffs, investing in books and authors, and more, having the full picture is really key! I hope that the people who are making these decisions are looking much more holistically, and further back, but choices like this one do make me wonder. And looking at staff pay and benefits as only a cost and not an investment in the current and future success of the business seems shortsighted to me.
When I make a budget for Feminist Press, I look at the prior year's sales levels and also tease apart what caused them. Before creating my first annual budget for FP, I looked at the following metrics:
Annual sales levels for the previous ten years that data was easily available. I realized that circumstances at the press further back than six years no longer made sense as a comparison point, and made an adjustment.
Annual sales levels for the previous six years, and four of the most recent six, having removed the high and low outlier years.
Total amount and percent of sales across those four and six years that were backlist versus frontlist.
Number of titles published per year, and number of titles planned for 2023.
Conservative projections for how many copies of each of our frontlist titles I anticipated selling in 2023. That wouldn't be possible for an organization as large as HarperCollins, but they could probably make similar predictions by imprint.
The amount of sales represented by a few outlier titles from the past few years. I was able to look at the behavior of the earliest very successful (for an indie press book) title to make some predictions about how sales for the others might behave into 2023.
There were a lot of other pieces of the puzzle I considered as well, but this is what I did to establish a baseline I felt somewhat confident making predictions from.
As I look at our numbers this year, I keep in mind that due to production crunches and paper shortages in 2022, our frontlist titles had to move back a few months, so we had a really lean summer last year. Since production times have returned to a pre-pandemic level and our books have come out as planned this year, it makes sense for our overall sales to be up year over year at this point, but that doesn't mean we'll be up through the end of the year.
My most important advice for anyone who wants to understand publishing finances is to look at all the information you have access to frequently enough that you start to understand what normal looks like, and when you see something that strikes you as unusual, ask why it might have happened and keep digging til you get an answer that makes sense to you. The numbers tell a story, and learning how to read that story will make you better at being able to make good choices in this field.