VOL.78/2025.01

Publishing Industry

 

Korean Publishing Industry's Crisis and Its Future

 

2022.01.03

 

The Korean publishing industry seems to be facing one of its biggest crises as the new year 2022 approaches. Last year, Korea's 2nd largest book wholesale distributor, Interpark Songin, proceeded with insolvency, and the 3rd largest bookstore Bandi & Luni's (Seoul Book Center), is to be under corporate rehabilitation. Seoul Book Center was expected to go through the procedure considering its unhealthy financial status. Nevertheless, the expectation being realized brought chaos to many partnered publishing companies. From a macro view, how should we interpret the situation faced by the publishing industry? Before we think about the current situation, let's see how big players Interpark Songin and Seoul Book Center came to crumble.

 

 

June 2020, Korea's 2nd largest book wholesale distributor, Interpark Songin, applied for court receivership to Seoul Bankruptcy Court as it stopped its business operation. In January 2017, Songin went bankrupt due to a growing operating loss and was acquired by Interpark after the creditor's committee filed for court receivership. After the M&A was complete, Interpark changed its company name to Interpark Songin and reopened the business operation in 2018 as a separate corporation from Interpark. Nevertheless, the company filed for corporate rehabilitation again only three years after it restarted its business. While the parent company faced a serious challenge due to its primary business of ticketing and tourism being struck by COVID-19, Interpark Songin came to follow the same path as Songin as it had not been generating much profit for Interpark. After all, Interpark even had to sell off its key business.
I worked in the creditor's committee when Songin went bankrupt in 2017. It was challenging to acquire Songin, considering its debt structure and business operation. However, the committee had no choice but to file for court receivership and seek an acquirer to minimize Songin's bankruptcy's negative impact on the publishing industry. In the end, Interpark acquired Songin in 2018, but the hardship was foreshadowed as many of Korea's representative publishing companies decided not to work with Interpark Songin. The revenue increased as Interpark injected funds and normalized Interpark Songin's business operation, but COVID-19 came unexpectedly, worsening the situation. Interpark Songin stopped issuing bills, had neither bond nor contingent liability except for the debt paid by its parent company Interpark instead of Songin. Interpark Songin could have normalized its business from 2021 had it not been for COVID-19 in 2020. Interpark and the committee tried to run M&A while minimizing its impact on publishers but failed and went bankrupt.

 

 

Seoul Book Center became insolvent in June 2021. A year after Interpark Songin filed for court receivership, the 3rd largest bookstore in Korea followed suit. Its bankruptcy was only a matter of time as everyone in the industry saw this happening sometime in the future. People have known that Seoul Book Center's financial health has been bad for the past few years. It was also evident that the company was trying to stay afloat by aggressively closing its branches. Therefore, when I heard the news that Seoul Book Center got loans while putting revenue generated from credit cards as collateral, I figured that Seoul Book Center was soon to see its demise. The financial debt volume of Seoul Book Center was far more significant than that of the company's balance. Therefore, no publishing company would have acquired Seoul Book Center even if much of its debt disappeared. When Interpark merged with Songin, the publishers decided not to convert much of their equity, but the company still went bankrupt soon again. Therefore, the acquisition was not likely to happen unless the acquirer spent a considerable amount of money to acquire with conditions that the publishing industry does not collect Seoul Book Center's debt.

 

 

As we saw the fall of Interpark Songin and Seoul Book Center, it is high time that we think about its impact on the industry. The absolute number of books the publishers could distribute as new books decreased. When Interpark Songin and Seoul Book Center were still in the market, publishing companies had an alternative, namely Interpark Songin, to Korea's largest book wholesale company Booxen if they could not distribute as much as needed. Except for Kyobo Book Center, publishers who do not trade with Youngpoong Bookstore used to send new editions to Seoul Book Center, which is no longer an option. Kyobo Book Center started its business as a wholesale distributor, but other general publishers could not find local book retailers to deliver new books as most are members of Kyobo Book Center. Once a publisher releases new books, it commonly concludes a credit contract with the bookseller engaging in the trade. However, Kyobo Book Center pays retailers in cash. Thus, publishers cannot find partners to trade with as they cannot rotate cash as Kyobo does. There are more than 1,500 bookstores around Korea, but the only place publishers can sell their new books now is Booxen. It became challenging to distribute books to offline stores nationwide unless the publisher directly sold a newly released book. Furthermore, the publishing company's trade conditions are likely to get only worse. New publishers that recently entered the market will see more trade conditions that are hard to meet. It will be harder to introduce books unless they are best sellers.
Local offline bookstores seem to have stabilized their business since Fixed Book Price took effect. As of now, offline bookstores are benefitting from the low distribution fee deriving from competition between Booxen and Kyobo Book Center, which recently jumped into the wholesale market after Interpark Songin was out of the market. Nevertheless, what would happen once Booxen or Kyobo Book Center wins over its competitor? The situation is clear to see. If Kyobo Book Center dominates even wholesale distribution, local bookstores would have to be distributed from large offline retailers. When we look at Taiwan's case, which has a similar distribution structure after being ruled by Japan, there is no wholesale distributor there because a large book retailer Eslite Bookstore took over the offline book market. As a result, old local bookstores are disappearing, and branches of Eslite Bookstore are replacing them in Taiwan.

 

 

Online store Coupang has been showing stellar growth since the outbreak of COVID-19 last year. Unlike other countries, Korea's domestic Internet bookstores, such as Yes24, Aladdin, and Internet Kyobo, were competing against each other, and Amazon was not in the picture. But the recent rise of Coupang seems to have startled the market. Of course, most of Coupang's customers buy books while purchasing daily necessities. For example, children's books show a steep increase in Coupang's revenue. Moreover, Coupang has its logistical process and does not follow conventional trade conditions of the publishing industry. Only publishers who can meet Coupang's requirements with the distribution system are trading with Coupang. The market was in a similar situation when Interpark entered the market, but we would have to wait and see how Coupang would impact the domestic online book market. I bet no one predicted Coupang to work as a variable to change Korea's Online book market, not Amazon.

 

 

Korea's domestic book market will continue to change. Losing a major distributor with okay financial health, such as Interpark Songin, will affect the industry and bookstores. Also, large publishers that only seek more benefit than the goodwill stir the book distribution market. Large bookstores can fall anytime without unique features like Seoul Book Center did if the company only focuses on expanding business.
Except for Western countries, Korea seems to be going through the most drastic changes in its book distribution market since companies started selling books online. In the midst of the 2002 World Cup, Jongno Books went bankrupt and offline stores that amounted to 6,000 decreased to 1,500. If it were not for the current Fixed Book Price, much more offline stores would have closed their business. Aside from bookstores, the bigger problem for the industry is that people do not read books as much as they used to before. It is because there are so many alternatives to books, including smartphones, OTT, and games, which take time away from reading books. In other words, the absolute amount of time people who like reading books spent reading reduced. Publishers have to write and publish diverse types of books under various themes to meet the change in the readers. The younger generation would have to be trained to find joy in reading books, and bookstores will have to find ways to keep readers interested in reading books. Publishers and books stores have to diversify partners to respond to long-term changes in the market and against sudden changes.
I believe that books will be eternal text contents. Since people started writing, much of the information was recorded and understood in text. The most commonly viewed contents on smartphones are text contents. Korea's book market started to produce various literary works and branch out overseas in the recent ten years. K-Wave, driven by K-POP, K-Drama, and K-movie, is a major global trend now. I hope that readers do not forget that the foundation of K-Wave lies in Korean publishing companies.

 

 

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Written by Do Jin-Ho (President of Jino Press)