Publishers are reshaping themselves
It was reported last week that Hyperion plans to sell off its “backlist” to focus its attention on new titles it will develop in conjunction with its corporate cousins at Disney and ABC. This follows Wiley’s selling a lot of the most bookstore-dependent parts of its list, including the sale of Frommer’s Guides to Google, in 2012.
I believe these transactions are the front end of a trend I first anticipated in a post about four years ago.
Publishers are going to find it increasingly compelling to reconfigure their inventory of title offerings around their most current thinking about their marketplace. Both Wiley and Hyperion are moving away from a “general” trade model. They’re moving away from publishing books for which their primary revenue dependence would be on bookstores and their primary marketing dependence on the book review media.
Wiley is actually returning to its professional roots. I did a lot of consulting at Wiley in the late 1980s when they were building out their trade presence. Although they were very disciplined about sticking to specific subjects where they had special marketing capabilities or subject expertise, they became increasingly “trade-y” over time. They built a powerful organization to sell to the book trade which reduced the need for them to be as focused on core subjects as they were when they were first building their trade capabilities. But the core of the company — its heart and soul and its DNA — always remained primarily professional. (Wiley also has a college textbook list, but it is a much smaller part of their business than professional books and journals.)
That means that Wiley would view the diminution of bookstore shelf space with more equanimity than a straight trade house, like one of the Big Six (soon to be Big Five) would. They would see themselves readily able to move away from a shrinking business segment that was never “core” for them anyway.
Hyperion is a straight trade house. Unlike Wiley, they don’t have a direct-to-user business or the big library revenue that a professional publisher does. But what Hyperion does have is a close relationship with sister companies Disney and ABC. Those relationships make possible partnerships which don’t change the sales and distribution challenge, but have a huge impact on the marketing opportunities. Hyperion is increasingly able to publish titles that have a strong public awareness component built on the back of TV or movies.
But Hyperion is a straight trade house without a lot of fixed overheads. They have outsourced the heavy requirements of sales and distribution, currently to Hachette. So they can sell off their backlist, even if it amounts to a substantial chunk of their sales, without having to worry about reorganizing their sales force or underutilizing their physical plant. They have apparently decided to become a different, more focused, kind of publishing house, not so much committed to “publishing books” that can make money from whatever source as they are to being the book publishing arm responsible for building out the brands and franchises their corporation invests in for movies and TV.
Both Hyperion and Wiley are showing us what the publisher of the near future is going to look like. They will be more focused. They will be shedding overheads so they can expand or shrink their offerings more readily to respond to opportunities and circumstances. They will be less dependant on the trade bookstore and book review trade networks. And Hyperion’s decision says something more about the future that Wiley’s doesn’t: book publishing will increasingly be an activity operating in tandem with or in service of other objectives of the owning organization. (There is a parallel here in retailing, where Amazon and Google and Apple fit this description, and Kobo and Barnes & Noble do not.)
There may also be a message here about the relative importance of backlist. When digital first started to happen, it seemed like the backlist might be the biggest beneficiary. After all, stores had limited shelf space and online merchants can “carry” all the books they want, particularly if there is no pre-purchased inventory required. (There isn’t for ebooks and there increasingly isn’t for printed books either, which can be purchased from wholesalers for next day delivery, even if they are printed on demand!)
But it turns out that the current state-of-the-art for merchandising and presentation of books online is not very helpful to backlist. Most retailers return a limited number of books (10 or 20) per screen to any query. Customers have limited patience for refreshing screens, so the number of titles an online purchaser “browses through” is far fewer than the number that would catch the same eyes in an equivalent amount of time in a store. This appears to be pushing sales more and more to newer books and books on bestseller lists.
This problem of concentration will probably just get worse as mobile devices become more ubiquitous and the shopping takes places on ever-smaller screens.
It isn’t clear yet to what extent publishers’ marketing practices could be responsible for the consumers’ bent to purchase from the top titles or whether changes in how publishers market could ameliorate it. But it does mean that marketing backlist is its own challenge and not sufficiently addressed, as it was in years past, by sales reps or store systems just keeping in stock what has been selling.
It is now necessary for publishers to communicate directly with consumer audiences to be effective marketers. At the same time, it is now possible for publishers to do the core work of reaching the trade without big fixed overheads. The combination of those two things will motivate changes in how publishers view the value of both their backlists and their publishing programs. What Wiley and Hyperion have done shows what kind of conclusions publishing today allows them to come to.
Should be great times coming for the small number of players in trade publishing’s M&A world.