Rising production costs pile pressure on publishers

Rising paper prices and the currency effects of a weaker pound are continuing to push publishers' production costs up, with the Publishers Association's c.e.o. Stephen Lotinga describing the development as "obviously concerning".

Wordsworth Editions director Derek Wright told The Bookseller: “We have already had notification of a rise in our production costs this year; this results purely from the rise in paper prices being passed on by our printers. Although a weaker pound is one factor, we understand that the reducing number of European papermills after recent business failures is another, coupled with a rising demand for wood pulp from other industries.
 
“These increases have been something we have handled in recent years largely by absorbing them and reducing our profit margins, but over the last two years these have been coupled with substantial rises in distribution costs, both immediate and in the pipeline, so we have been forced to partially offset these by putting up some of our prices, while still retaining our reputation for offering the best value in the market that we operate in."
 
He added: “We have limited options to reduce costs elsewhere: with the company comprising of three directors and two part-time clerical staff operating out of a small office in Ware, we’re about as lean as we can get on that front.”

Galley Beggar co-founder Sam Jordison said since the EU referendum his Norwich-based indie has “really struggled” with rising costs with limited editions now costing more than £4 a unit, compared to £1.92 in 2015 and the cost of paperback editions nearly doubling in three years. 

Jordison said: “We saw an increase in print costs almost right away (these things tend to hit us small publishers sooner because we have shorter lead times and printers enjoy passing on their own cost increases to us first) - and it's been getting steadily worse. For our paperback editions, over the past three years we've seen an increase of around 70p per copy (so not quite double, but nearing it.) This is quite something, when you take into account the continued push for higher discounts and returns: in some cases, it means that when we sell into chain bookshops in particular, we make a loss on every book sold. (What would be terrific is if booksellers consider this, when they lump everyone in the same boat and ask for the same discount from tiny micro presses as they do, say, Macmillan.)” 

The indie has looked into using different materials, “but it makes such a qualitative difference to the material book that we haven't so far gone down that road,” said Jordison. “Our designs are series-based - they are very simple, and are only going to work with specific papers and finishes. We also want to present readers with a beautiful object which is a physical pleasure, as well as a literary one.”

He added machinery is also costing more, saying: “It isn't just production prices either. We've had to buy a new computer recently - and oh boy... Likewise, printers aren't just dealing with paper costs - I'm sure all their machinery and etc is costing more too. We're also terrified about what's going to happen when it comes to importing printed materials from Europe and etc.” 

Christopher Hamilton-Emery, publishing director at Norfolk-based indie Salt, said that with the cost of paper increasing the “biggest pressure is maintaining prices for books that haven't increased for many years.”

He added: “The trade hasn't revisited these price points for decades – we looked at £8.99 for paperbacks a couple of years back when the first signs of Brexit contraction seemed to appear, and repriced the frontlist at £9.99. But I think the whole discounting structure within the trade needs overhauling. And perhaps this kind of reality check provoked by increases in materials costs (and a static or declining eBook market) does point the way to more open discussions on the double squeeze publishers now experience: on the one hand lending money to authors that never gets repaid, especially when combined with deeper and deeper discounts to retailers – and on the other hand being artificially constrained by product prices while enduring annual materials cost increases. At some point you collapse in the middle. Or do something to combat the pressures. I say this while recognising that booksellers face quite ridiculous rent and rates increases before they even begin to look at publishers' lists for stock to sell.”

According to Bloomberg, “Eighty-two per cent of the 3.8 million tonnes of graphic paper used annually by publishers of newspapers, books and stationery comes from abroad, with European Union member countries accounting for two-thirds of the supply" with UK publishers “the world’s most reliant on imports of paper”.

Clays Printers has seen an increase in paper costs. Sales director Vicky Ellis said: “We have received multiple increases in paper prices over the last 18 months driven by the exchange rates and the cost of pulp rising. We have also seen consumables across the board increase due to the exchange rate and an impact of Brexit.” 

The issue of rising production costs was raised in The Bookseller’s c.e.o. predictions earlier this month. In his prediction for the year ahead, Anthony Forbes Watson, Pan Macmillan managing director, said: “In a domestic market squeezed by rising costs and price resistance, with only so many ways of dividing up the cake, international markets will continue to grow in importance as the risk of being severed from some of them increases.”

Waterstones children’s buyer Florentyna Martin has also picked out costs as an issue for children's books in the coming year, saying: "Colour print titles across all age ranges may experience some challenges, with the younger market particularly impacted. It will be very interesting to see how each publisher handles their respective lists and responds to the potential rise in costs, hopefully keeping the end customer and reader in mind at all times.”

Publishers Association chief executive Stephen Lotinga has said the "substantial" rises in production costs seen by some publishers in recent months is "obviously concerning", reiterating the point that the government must avoid a no-deal Brexit to escape the threat of further uncertainty to the trade.