Book Market in Russia 2011, Half Year Review and Forcast

August 1, 2011

By the end of 2011 it is most probable that the Russian book market will decline by 7.2% dropping to $2.7 billion. It has been hit, like most industries, by the global economic downturn and problems specific only to the Russian book industry. Possibly, this negative trend will continue into 2012 which may show a further 5% decline in both value and number of copies sold.

Book market revenue and unit sales (%) for 2009 – 2010 and 2011 – 2012 F

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Source: “Book Industry” research

The beginning of 2011 indicates most distinctly a direct correlation between book price and sales volume. As prices went up so sales went down although it should be noted that the graph was different for various publishing segments. While price elasticity for entertainment genre is close to 0 (romance, hobbies, food, pets, etc), in the educational and professional sectors it is higher.

On average a book buyer in the regions is prepared to pay about 300-350 Roubles for a book, but there has been a down turn over the first six months of 2011. Irrespective of its genre, books with a higher cover price will not sell and will be left on the shelf.

Price corridor for books

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Source:  “Book Industry” research 

The difference in book prices for the “ТОП-100” books between Moscow and the regions ranges from 80% (professional and business books) to 198 % (education and STM). It is interesting to note that Self-help and How-to books can cost 5 times as much in Moscow than in the regions.

Educational and STM literature remains the healthiest market segment; its share shows steady growth together with its sub-categories.

Market share of the major book categories (%, volume) for 2011

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Source: «Book Industry» database and research

According to official State statistics from the Russian Book Chamber, the publishing business showed an increase in the number of titles produced by 5.6% about 86% are new titles in the first half of 2011 compared to the same period of 2010.

In the face of an overall fall in readership, book publishers closely monitored first print runs as well as reprints. Whilst the number of titles produced during the first 6 months of 2011 rose, the average print run continued to fall.

Production data clearly reflect the monopolization of the overall book trade. Currently, and with a total market share of 46,8% (value), top-5 publishers are «AST», «Eksmo», «Prosveschenie», «Balass», and «Drofa». 

Market share of major book publishing companies for January- June of 2011

Production of titles

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Total number of copies

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Source: Russian Book Chamber

Market share of major book publishing companies (revenue) for January- June of 2011

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Source: «Book Industry» database and research

By the end of 2010 the book trade faced a significant drop in both shop visitors and book buyers (conversion rate). As a result the shelf life of books increased to 6-8 months on average; whereas unit sales in trade channels declined by 10%.

This negative trend continued for the first six months of 2011. The majority of retailers reported that their sales dropped by some 8-10%, although in some stores there was an increase amounting to 7%.

The average amount of year on year purchase remained constant for the first half of 2011. The price of a book somehow optimized itself to an acceptable consumer level and pricing ceased to be an instrument of market growth.

As of February, 2011 Book Industry poll showed that majority of retailers (46.2%) planned to freeze book prices in order to maintain the 2010 sales level, while 38.5% believed that books should be at least 15% cheaper. Monthly discounting was therefore widely employed by book retailers in 2011, with about 10% of stock was discounted from 10% to over 40%.

Although in the short term discounting helps to slow down the decline in unit sales, from a long-term point of view serious operational problems can arise to major businesses; projected increase in expenses such as housing and public utilities, transport and salaries, being examples.

About 80% of booksellers have shifted their product mix to include non-book products, calendars, diaries, board games, toys etc. Professional and business sections suffer the most and are the first to be cut. According to polls taken, non-book products can occupy about 25-50% of floor space to maintain profitability, in comparison to 25–30 % during 2010.

Non-book products in the book stores

Products

Rating of cost-effectiveness (max – 5)

March 2010

December 2010

August 2011

Stationary for schools and offices

4,3

5,0

4,8

Toys, board games

4,5

3,4

4,2

Postcards, posters, calendars

4,0

4,8

4,0

Gifts

2,6

1,0

2,4

Media (DVD, CD)

2,3

2,0

1,2

Press

2,6

0,8

1,2

Source: «Book Industry»poll

Dramatic changes were undertaken at the beginning of 2011 in the Russian book distribution system. Collapse of the biggest independent book chain “Top-kniga”, increase in libraries budgeting and drop in average household income resulted in a shift in trade channels.

Forecasts indicate that by the end of 2011 book chains will lose about 3% of the market, the same as independent bookstores, worse then book clubs (-1%) and newsstands (-1%). On the contrary, libraries (+3%), supermarkets (+3%), and internet trade (+1%) will show stronger performance.

Retail distribution channels in 2011 F (% turnover)

7.JPGSource: «Book Industry» database and research

According to the Russian Public Opinion Research Center (WCIOM), as of the first half of 2011, paper books are still the most popular among the readers (89%). While 28% of respondents read electronic books, 33% do not know what they are. The least popular format is audio: only 11% listen to books and 59% know nothing about them all.

Number of books read over the last 3 months; May, 2011

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Source: WCIOM, polls

e-reading

The legal e-book market in Russia is estimated to be about $ 2 million, which is only about 10% of all e-books downloads. Piracy is a big issue that has currently got special attention from the Government.

About one million dedicated devices for e-book reading were sold in Russia in 2010. It will triple by the end of 2011 according to the forecast.