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Books in 2022 will rise in price by 20%. Dmitry Utrobin, General Director of the MIF publishing house, talks about how problems with paper and materials are changing business and why the demand for non-fiction is falling.
About the expert: Dmitry Utrobin, CEO of the MIF publishing house (Mann, Ivanov and Ferber), student of the EMBA program at the Skolkovo School of Management. He has been CEO since February 2021, previously worked at MIF as Executive Director.
The publishing house was founded in 2005 and specializes in business and children’s literature. In 2021, it began releasing fiction, which now occupies about 2% of the portfolio in terms of revenue.
Hold on partners and escape from reality
— What difficulties has your business faced in the last two or three months?
— The state of uncertainty has increased and the planning horizon has shortened. A new crisis has superimposed on those problems that were associated with the COVID-19 pandemic. He touched printing houses, there was a shortage of capacities. There were also problems with copyright holders. At the same time, there are no problems with previously concluded deals, but it is unclear what will happen to future contracts. Rights holders from America, England and the EU are now putting relations with us on hold and it is not known how long this will last.
— Did they stop working with you?
– Not stopped, but put on pause. Including major publishing houses such as Penguin Random House, Brockman, Simon & Schuster, Wiley. There is an assumption that in autumn the situation may change, but I think it will simply be a stage of greater certainty.
How is the situation with book sales? Have they gone up or down lately?
— The current crisis has its own characteristics. This is the first crisis where non-fiction sales are not growing. In past crises, our entrepreneurs were looking for opportunities to win market share, to get out of the situation with a big profit, and therefore they bought books that can help in this. But now there is a decrease in sales in the non-fiction segment, both in paper books and in electronic ones.
– What is the reason?
– Many readers of business literature are employees and managers of companies that have stopped or temporarily suspended their business in our country. Or people from those companies that served the suspended business. This affected the level of demand.
What happens to the rest of the segments? There was news that because of the crisis, the demand for books on psychology, thinning, and esotericism is growing.
– Yes, that is right. Fiction gives readers the opportunity to escape from what is happening outside the window. Esoteric, perhaps, can create a sense of control over the situation. Literature on psychology – to give internal support and support. Therefore, I think such segments are now growing. But fiction, of course, is significantly ahead of other areas.
White ribbons and expensive paper
— Did you have any problems related to the supply of printing materials and logistics?
— We publish and print books in our country, printing houses are our partners. And when the printers we work with experience difficulties, it affects our business.
Problems with paints and paper can be solved with the help of supplies from China. Problems with equipment, its repair and replacement are more serious. Of course, printing houses will somehow solve them, but it is still unknown how exactly and how long it will take.
— Has it happened that you had to postpone or freeze the project due to difficulties with materials and printing?
– No, because of the difficulties with the materials, the projects were not stopped. But there were difficulties with the replacement of imported components. For example, in our books there is a thin ribbon bookmark – a lace. It is very convenient to use it when reading, when you want to return to the place where you left off. We definitely add such ribbons to all our books, it is part of our brand code.
Previously, we always used colored ribbons to match the color of the endpapers and the cover. But colored laces are imported material. In order to quickly get out of the situation, we switched to white laces, it is much easier to find them on the market. The functionality remains, but the appearance is slightly different. Roughly the same thing happens with paper and other materials used on covers.
— How much has the price of paper risen lately?
– The rise in price began during the pandemic, now the process has escalated. If you look year on year, then for paper, the price increase was from 15% to 30%, for printing services – from 30% to 50%, depending on the print, whether it is color or black and white.
— Have you already raised prices for your products or are you just planning to raise them?
– It’s a double-edged sword. On the one hand, we, like all publishers, always try to keep prices down, because during a crisis, our readers’ opportunities fall, and demand decreases. On the other hand, the cost continues to rise.
As a publishing house, we are doing everything so that prices for our readers do not increase, but we still have to increase. The entire market expects prices to increase by at least 15-20% this year, including us. Otherwise, we will not be able to continue our work.
Troubled autumn and plans for aggressive growth
— Did your internship at the Skolkovo School of Management help you?
– Oh sure. Skolkovo gives you the opportunity to communicate with different people from different business areas. This allows you to make decisions not only on the basis of understanding within your segment or the market in which you work. You can see the whole picture. Understand what practices exist in neighboring segments, how you can build a strategy based on a broader view.
In addition, you feel mutual support, mutual assistance of the business environment. And there is confidence that we can cope with this situation.
– In your opinion, is the position of your business now stable?
— Yes, the business is in a stable position. The question is how we will close this year. Initially, there were plans for fairly aggressive growth, but now we will see what we can face in the second half of the year.
– Have you corrected the forecasts yet?
— We will revise plans in the middle of the year. In fact, the main phase of the crisis has not yet arrived, it is expected closer to autumn. The crisis will be structural, but what it will consist of is still very difficult to predict.
– Will it be possible to save the team in a crisis? Are you planning layoffs?
“This is not our first crisis, and we have never fired people because of an unstable external environment. We, as always, will care about people, product and profit. It’s in that order. In my opinion, this is the correct sequence. Only by starting with people, caring about the quality of the product and what our readers get, can we maximize our profits.
– How do you generally assess the prospects for the development of the publishing industry in our country in the new conditions?
In any crisis, the fittest survive. And in any industry there are companies that will definitely survive it, come out with new opportunities and solutions. I believe that we will be among them. According to the results of this year, the market is likely to sink by 10-20%, time will show more precisely.
If we talk about the future, then the book market will inevitably grow, because reading is the most ancient tool for personal development, self-improvement that mankind has. We simply cannot get away from it.
— What challenge do you consider the main one for your market?
– In fact, the main difficulty is not with paper and materials. We will solve these problems. But how to reach the reader is a very real challenge for the market. For example, we had a lot of traffic from social networks, which are now banned.
Fiction is often a spontaneous purchase. But non-fiction is always a very smart choice. The value of such a book needs to be explained. And for this you need advertising platforms. Moreover, readers should have high confidence in the sites and time to read the material. This, in my opinion, is the main problem that the market will solve.
– You will not have to rebuild the model and move, for example, from non-fiction to esotericism?
— Let’s rather move towards the artist. We are a flexible company and are ready to adjust the model in accordance with what is happening in the market. But we will definitely not refuse to publish books on business, self-development, psychology, children’s non-fiction. That is, we will continue to work in all niches where we feel good and confident.
— What advice would you give to entrepreneurs who work in conditions of uncertainty?
— Do not lose energy, faith in yourself. And be very sensitive to the changes that are taking place here and now.