As the world is coming to terms with the widespread impact of the financial crisis, every company in the industry is playing cautious. Leading publishers of STM and educational content have been performing well at an average growth of 5-6% over the last few years compared to the newspaper publishers that have been grappling with survival issues. How will the global publishing industry fare in an economically challenging environment? And how will their difficulties impact offshoring?

The most prominent global publishers are Reed Elsevier, Pearson, Scholastic, John Wiley and McGraw Hill.

                                            Revenue and market capitalization of leading publishers

Source: ValueNotes Research

These publishers operate in the STM, Educational, Legal and Business publishing segments.

Exercising Caution

While the revenues and operating profits of the leading publishers demonstrate a history of overall positive growth, this may not be clearly indicative of the current scenario. Though results for the period ended Dec 2008 are not yet available, margins are likely to show a decline. The first half of 2009 could be even worse. As a result, publishers are tightening their belts and have taken some steps towards cost rationalization.

• McGraw-Hill has already lowered its full-year 2008 earnings guidance. The company expects financial services segment revenue to drop between 11% and 12% and the education segment revenue to decline by 1% to 2%.
• Pearson plans to give an annual base salary increase for 2009 to only those earning less than £30,000 (or local currency equivalents). For other employees, salaries will remain at 2008 levels. The company is also offering voluntary redundancy/reduction in the work week. Pearson's division - The Financial Times (FT) is set to reduce its staff by 60. Most of the jobs will be cut in the commercial departments.
• Houghton Mifflin Harcourt has frozen the acquisition of new titles in its trade division and is restructuring its K-12 textbook division. An estimated 100-200 job cuts out of a total 5,300 full-time employees are expected.
• Scholastic has eliminated about 300 jobs in 2008, and carried out a pay freeze for employees earning over $60,000. The company has eliminated management bonuses and has reiterated its commitment to reducing costs further.
• Reed Elsevier plans to reduce more than 1,000 jobs as part of restructuring plan. Most of the job cuts are expected to take place outside Britain thereby reducing annual costs by £100m.
• Among other publishers, Random House has announced a massive consolidation that will result in layoffs, Simon & Schuster has cut 35 jobs and Thomas Nelson Publishers has laid off 54 employees. Independent News and Media (INM) plans to reduce the workforce by 90 from the present 430 employees by January 2009. The move is part of the restructuring plan to save more than £10m.

How will offshoring fare?

We believe that publishing offshoring is relatively more immune to the economic downturn compared to other knowledge segments. While there will be some impact on the publishing industry as a result of decrease in US state funding for education or libraries, offshoring will be impacted in the form of increased pricing pressures rather than reduction of work.

Overall, while the current economic environment will push publishers towards greater austerity measures for cost control, offshoring will emerge as a stronger option in the long term. Providing cost effective services along with innovation in processes, technologies and products will enable publishing BPOs to graduate from 'vendors' to becoming stakeholders in transforming the global publishing business.

The above article is an excerpt from the Research Paper, "Impact of economic downturn on publishing industry and offshoring ." For more details, please contact Rakhi at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it