Bantam

I stumbled across a Sarah Weinman post from a few months ago that posits the notion that the chain bookstore (by which it would appear she means the superstores of the past 20 years, not the chain bookstores in malls that grew up in the prior 20 years) perhaps had a natural life cycle which is now coming to an end. She points out that the investment by Wall Street in the concept of massive destination bookstores enabled their creation, but ultimately resulted in great excess: too many stores with too many square feet to fill and too many books in them that don’t sell.

This is a really good and thoughtful post and I think the observation that the availability of capital built the excess which is now partly responsible for dragging down the structure is correct. But it triggered some additional thoughts that make me want to again trace the history (which I believe has called for smaller bookstores for several years) from before the 1990s when Sarah’s post picks it up and to look at bookstore history through the lens of tech development, which I think both enabled the massive bookstores and is now bringing about their demise.

The core challenge of bookselling — in the past, present, and future, online and in stores, for printed books or digital ones — is curation. How does the bookseller help the reader sort through all of the possible reading choices, of which there are, literally, millions, to find the reader’s next purchase?

In a shop, that curation begins with with what the store management puts on the shop shelves. The overwheming majority of customers in a brick bookstore who buy something choose from what is in the store.

The second line of curation in a shop is in the details of the shelving itself. Is the book face out or spined? Is it at eye-level or ankle-level? Is it on a front table in a stack? Is it displayed in more than one section of the store, which would increase the likelihood it will be seen?

And the third line of curation in a brick bookstore is what the sales personnel know and tell the customers.

In the period right after World War II, there was virtually no technology to help booksellers with curation at all. Sales reps would call (or not) and show catalogs of forthcoming books from which the bookseller would order. There were hundreds of publishers any full-line bookstore would have to do business with. But there weren’t very many full-line bookstores then. Departments stores and small regional chains (Burrows Brothers in Cleveland, Kroch’s & Brentano’s in Chicago) were the principal accounts.

Frankly, what was stocked in most stores then had a huge randomness component. This was the world my father, Leonard Shazkin, encountered when he became Director of Research at Doubleday in 1954 and, a few years later, created the Doubleday Merchandising Plan. By offering the service of tracking the sales in stores, using reps to take physical inventories in the days before computers could track it, Doubleday took the order book out of the bookstore’s hands for the reordering of Doubleday backlist titles. That solved the problem of breaching the first line of curation. And the reps, now freed of the enormously time-consuming task of selling the buyer on backlist reorders title by title, had more time to affect the second and third lines of curation: the display of the books in the stores and the knowledge the store personnel had about Doubleday books. Sales of Doubleday books exploded, approximately quadrupling for the backlist.

In the early 1960s, Len saw the impact of increased selection from the bookstore’s side of the table. He had moved from Doubleday to Crowell-Collier/Macmillan, which owned the Brentano’s chain. He was put in charge. At first, Brentano’s weakest store was its outlet in Short Hills, New Jersey. They doubled the selection of books and, almost instantly, Short Hills became the best-performing store in the chain.

It took until the late 1960s, when shopping centers were springing up across the country, for the first two national book chains, Walden and B. Dalton, to develop and become a serious force in the industry. And in the early 1970s, Ingram and Baker & Taylor became the first national book wholesalers to cover the country with a wide selection of titles. Dalton and Ingram became industry leaders and both were boosted by technology breakthroughs.

Dalton installed smart cash registers that enabled them to key in a number for each book, telling them what had sold. They didn’t use ISBNs, which were in their infancy; Dalton assigned their own SKU (stock-keeping unit) numbers which were stickered onto the books. The system was far from perfect, but it was revolutionary. For the first time, a bookseller and its publisher suppliers knew some real sales data in a timely fashion (Dalton’s numbers were tallied weekly). And the system also enabled Dalton to keep books that were selling in stock through automated means as well.

Ingram was the first wholesaler to employ microfiche technology to tell booksellers what was available right now in their warehouse. The weekly microfiches were, of course, primitive signals of availability compared to today’s instantaneous online capabilities, but this was also a revolutionary breakthrough. It enabled rapid resupply for all stores, including the chains, of the books they sold each day..

In the late 1970s, scanning technology had developed so that the Dalton key-in-the-SKU system could be leapfrogged by Walden using ISBNs at the register, which could often be scanned into the computer record. Also being developed at that time were various methods for automated order processing between publishers and their customers. By the middle of the 1980s, just before the period when Sarah’s narrative begins, bookstores were growing rapidly. The cost of putting the books on the shelves was dropping in relation to sales and the ability to put the right books on the shelves at the right time was enhanced for everybody. Good curation became much cheaper and much easier and, not surprisingly, sales of books grew dramatically.

Paradoxically, the decline of mass-market paperback distribution created new opportunities for the biggest publishers in hardcover. Mass-market grew on the illusory efficiency of forced distribution. For the first two decades after World War II, the rack-sized paperbacks would show up in the pockets at your local drug store or five and dime without a local buyer having to make a selection. That, combined with a much smaller share of margin going to the retailer, paid for the inherent inefficiencies of ham-handed curation. (And, let’s remember, only the covers had to be sent back for “returns”.)

But as paperbacks became more important and more mainstream, the biggest customers of the local wholesalers who racked them wanted better margins and more control. And the sales volumes had built to the point that many of them could now afford a buyer to deal directly with a number of mass market publishers, so the best accounts started shifting to direct. This weakened the original distribution network, but it opened up the opportunity for publishers to put books other than the rack-sized paperbacks into what had been rack-only accounts.

The first probes with larger trade paperbacks were with romance authors like Rosemary Rogers. The mass channels were more comfortable trying an experiment with format and price with authors they already knew.

The first great exploitation of mass distribution for what was really a trade book was by Peter Mayer (the boss) and Bill Shinker (the marketer) at Avon with the book “The People’s Pharmacy” in about 1975. Avon, a paperback house that published a lot of romance titles, had been one of the pioneers putting the larger books into the mass channel.

Bantam then used the technique for hardcovers, again starting with authors the mass channel already knew like Louis L’Amour and Clive Cussler, before hitting a massive all-channels mass-market home run with “Iacocca” in 1985. (And thanks to Jack Romanos, who was running things there then, for helping me get my recollections straight.)

The increased efficiency of distribution through technology and disintermediation in turn enabled discounting. Crown Books built a chain in the 1980s which mostly sold remainders and bargain books but carried a good selection of current titles with bestsellers deeply discounted. This fueled a further increase in unit sales.

Meanwhile, independent bookstores beginning to use primitive computerized inventory management systems were proving repeatedly what Brentano’s had demonstrated to Len Shatzkin in 1963: a big selection of books attracts a very substantial clientele. So technologically-driven efficiency lent a hand to delivering a more attractive selection (curation) by making it a bigger selection.

And in the late 1980s, these two things — the Crown discounting attraction and the independents large selection attraction — were combined by entrepreneurs in Austin, Texas, who created a store called Bookstop that provided both. Bookstop became the prototype “super” bookstore and, before long, Wall Street money was financing Barnes & Noble (which had bought Dalton) and Borders (which had bought Walden) to roll out these bookselling behemoths nationwide.

Which is where Sarah’s post kicks in. But in the context of what came before, I’d add one element she didn’t to the analytical mix. It created a paradigm shift in curation using technology. It’s called Amazon dot com.

While even the largest bookstore had shelf space limiting its title selection, Amazon did not. Through good luck (licensing the Baker & Taylor database which contained a lot of out-of-print titles), good thinking (providing a clear “promise date” for the available books and assisting people’s search efforts by telling them explicitly if a book was not available), and brilliant execution (Amazon’s hallmark from its first moment until the present day), Amazon completely shifted the psychology of book shopping.

Until Amazon, if you wanted any particular book or if you didn’t know exactly what you wanted, your best strategy was to go to the shop with the biggest selection to try to find it. Once Amazon happened, the magnet of in-store selection lost its power for many customers. If you knew what you wanted and you didn’t need it right this minute, the most efficient way to buy it would be to go to Amazon and order it. Customers who would have been browsing store aisles and, if necessary, placing special orders with their bookstore, now just shopped online.

I first saw what is clearly the impact of this through some work I did with Barnes & Noble sales data for university presses about a decade ago. In the recent years before that work, starting in the late 1990s, Barnes & Noble had tried to expand its selection of university press titles. This was applying a time-honored understanding of curation to improve the store selection.

But the results were beyond disappointing. Sales were not rising for the university presses; returns were. What became increasingly clear was that professors, the biggest market for university press books, were a leading edge demographic shifting their buying online. Makes sense, really, considering that they were often finding out about the books they wanted to order through something that had occurred online!

It was at that time — about 2002 or 2003 — that the late Steve Clark, then sales rep for Cambridge University Press and one of the publishers I was working with, told me that Amazon was a bigger account for his company than all other US retailers combined.

This was a big “aha” for me. I had grown up with the Brentano’s “selection” story and had seen it demonstrated over and over again throughout my career that increasing the title selection in a location increased the traffic and increased the sales. Technology had changed the reality. The magnetic power of a physical space full of books to bring in shoppers had been weakened. The surest way to find something that wasn’t as ubiquitous as a current bestseller remained a visit the store with the most selection. But that store was no longer in a building. It was in your computer.

And, ultimately, that is the single most powerful force bringing the era of the super bookstore to an end.

Of course, massive selection is only the first aspect of curation and the other parts are not nearly so well done online. Or, at least, they haven’t been yet. This is a major conundrum for the industry as bookstores fade and it’s the reason three big publishers have financed the startup Bookish. The stores depend on the publishers’ metadata to do this work and the publishers’ depend on the stores’ systems and merchandising creativity. Perhaps partly because the necessary collaboration hasn’t occurred, an effective online equivalent to in-store browsing hasn’t yet been developed.

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The ebook revolution is really beginning to remind me of the mass-market papeback revolution.

The mass paperback was really “invented” by Sir Allan Lane when he created Penguin in Britain before World War II. (Wikipedia credits a German publisher with the first cheap paperbacks a few years earlier, but Lane was certainly the first in English and deserving of some extra credit because the company he started continues in the same business to the present day.) Pocket Books in the US was also born just before the war. During World War II, historian and polymath Philip Van Doren Stern (who wrote, among other things, the New Yorker short story on which the movie classic  “It’s A Wonderful Life” was based) ran a program for the US military by which inexpensive paperbacks were made available to the troops.

After the war ended, mass market publishing really grew. Many houses — Ballantine, Bantam, Signet, Avon — were launched immediately following the war. The key to mass-market publishing was that it achieved distribution through the network of wholesalers that put magazines on newsstands and in local stores (often drugstroes) nationwide. Unlike trade books, which required an agreement between publisher and bookseller to get a copy of any book on a retail shelf, mass markets were “allocated” by the publisher to the wholesaler and in turn pushed out by the wholesaler to the racks they controlled.

The advantage of this distribution technique was that it enabled lots of copies to be pushed out to lots of places with much lower sales and distribution costs. The disadvantage was that it really only worked if books were treated like magazines, with “on sale dates” when they went out and “off sale dates” when they were pulled back and, like magazines, had their guts pulped while only the covers were returned for credit.

The paperbacks were typically priced at 25 cents when hardcover books were $2 or $3. (Compare that 8-to-1 or 12-to-1 pricing ratio to what exists today. It doesn’t.) And mass-markets were available in tens of thousands of locations nationwide, perhaps more than a hundred thousand, when bookstores were few, department stores tended to have only one location, and trade books were typically available in hundreds of locations, or at most a couple of thousand.

The much more widespread availability of these titles combined with their much lower prices created legions of new readers. And, in the beginning, most mass-markets titles tended to fit into “genres”. Westerns were a really big one fifty years ago. Bantam’s perennial bestselling author of westerns, Louis L’Amour, may still be the biggest-selling author in unit sales in (what is now) Random House history. Crime and science fiction lines were also popular as were raunchy books. I’m not sure that romance lines existed in the way they do now (although I’ll bet that among the readers of this blog are people who will tell me that answer); at that time there were lots of magazines peddling romance stories (as there were for other genres.)

If this is ringing some bells for an observer of the ebook transition who didn’t know paperback history, it is entirely intended to. Let’s ring a few more.

The hardcover publishers were very snobby about the paperback houses. Over time it developed that the mass-marketers were able to create enormous additional revenues from books previously published as hardcovers. (This did require the mass-market publishers to keep some titles on sale for longer than a normal cycle, which was not simple, but worth the trouble for books that sold really well.)

The name recognition of successful books, along with the ability to put words which said “established bestseller” on the cover, could be converted into huge sales given the much lower prices and much wider distribution mass-market could achieve. Over time this led to rapidly rising paperback license payments from paperback publishers to hardcover publishers. These were, by traditional contract, shared 50-50 with the authors. They provided a substantial, if temporary, bonanza for the trade houses in the 1950s, 1960s, and 1970s.

But the new marketplace also led to the growth of genre authors whose audiences were established for low-priced paperbacks. It was often difficult for those authors to move “up” to more expensive hardcover publication. Their audiences didn’t want to pay the higher prices, but they also didn’t necessarily shop in the bookstores and book departments where those books were found; they were used to buying their books at newsstands and in drugstores.

When I was first coming into New York from the suburbs as a kid in the late 1950s and early 1960s, there was a fabulous selection of paperbacks at a drug store that occupied the corner location in the Grand Central building at 42nd Street and Vanderbilt Avenue. I found a series of baseball biographies there published by Sport Magazine. I remember a book about 1001 things you could get for free by writing away for them. And, of course, the public domain classics were all there. And I got some great trash like “I Sell Love” and a book about airline stewardesses whose title now escapes me but which was great naughty reading for an early teenager.

Then in the summer of 1962, when I was 15, I worked a 2-month stint at the very classy Brentano’s Bookstore on 5th Avenue and 47th Street. My assignment was downstairs in the brand new, just-opened, paperback department. The center of the basement contained the “trade” paperbacks, mostly academic, on shelves. Around the outside were the mass-markets in racks. The mass-markets were on racks arranged by publisher, because the publishers’ reps serviced them on a weekly basis.

Scribners Bookstore, across the street, didn’t deign to stock paperbacks for some years thereafter.

My dad, Leonard Shatzkin, told a story about the legendary Jason Epstein’s Anchor line of paperbacks at Doubleday (perhaps the first line of quality, or trade, paperbacks, but almost certainly the first such line to come from a mainstream trade house). Dad’s responsibilities as Director of Research extended to the sales force and he ran the sales conferences. At one such conference when Anchor Books (and Jason) were very young, Dad told me that Sid Gross, the head of merchandise for the company’s Doubleday Book Stores, tore into the whole concept of the cheap paperback. He hated them. From his perspective, it was bad for a book retailer to be selling 25 cent items instead of $3 items! Many other booksellers back then felt the same way.

My father’s reaction, pretty typical for him, was to support the contrarian and revolutionary view. He pushed the reps to make Anchor Books a success and, a few years later when Epstein had moved on to Random House, Dad created the Dolphin Books line of quality paperbacks to complement Anchor, whose title selection was pretty highbrow, with public domain and more popular current titles.

That anti-paperback snobbery was widespread and the separation between trade and mass-market publishing persisted for a long time. For at least a couple of decades, paperback houses didn’t do hardcovers and didn’t try to put their titles directly into bookstores (as bookstores started to carry mass-markets, at first they bought them from the wholesalers who racked them) and the trade publishers didn’t try to access the mass-market distribution system. This changed in the 1970s. First Peter Mayer and Bill Shinker pioneered the use of mass-market techniques for oversized trade paperbacks published by a mass-market house (Avon). Then a few years later, Bantam starting publishing hardcovers with distribution to mass accounts.

In the end, mass-market distribution was dismantled by a number of forces. The best retail accounts started buying direct from publishers rather than through the local wholesalers. The number of titles grew so that the “allocation” methods wouldn’t work anymore; there were too many publishers and too many titles for a diminishing number of pockets to handle, so the more expensive negotation method became required.

Patterns are being replicated now with inexpensive and widely-available ebooks. New authors are being spawned. Genre fiction works best. Books that were previously successful in more expensive formats can find new audiences as their prices come down and they go where new customers are shopping. And traditional publishers are sure that their “quality” protects them from low-brow competition, even while that competition is taking millions of customer dollars and countless hours of customer mindshare off the table.

But here’s how that old story ended. Mostly, the mass-market publishers won. Penguin bought Viking. Bantam bought Doubleday and then Random House. Simon & Schuster survived largely because they merged very early with Pocket Books. What is now Hachette is largely called Little, Brown, which was a hardcover house, but it really developed over the last two decades of the 20th century as Warner Books, a mass-market house. Really, only HarperCollins and Macmillan of the current Big Six are true descendents of the trade publishers that were dominant when mass-market publishing arose.

There are a slew of differences between the transitions; ebook publishing has a title glut to deal with just like mass-market did, but the challenges are not the same when you don’t have printed books to manufacture and ship around and your distribution isn’t limited by shelf space or pockets to display them. And authors couldn’t do it themselves in the mass-market era the way they can today. But there is a very basic lesson I think publishers better take on board from this history.

Much-less-expensive editions, combined with access to audiences for authors that couldn’t get past the gatekeepers in the established houses, can create millions of new readers that weren’t available to the legacy products at the legacy prices.

And that can lead to economic power that can ultimately swallow up large chunks of the legacy publishing establishment.

I posted more than six months ago that I had read my first self-published ebook, a history of the 1962 New York Mets called “A Year in Mudville”. Then I had an exchange in the comments string of my last post with Joe Konrath, who used to be published by NY publishers but is now finding it much more lucrative to do it himself, and a reader named Chris. They urged me to read a self-published ebook bestseller, “Wish List” by John Locke. It was fabulous, sort of a cross between contemporary bestselling author Carl Hiaasen and a relic of the early mass-market days, Jim Thompson: bold, caustic, and funny with characters you like who suddenly do outrageously anti-social things. Locke has apparently come out of nowhere with just his talent to help him and is selling shedloads of ebooks. (He’ll certainly sell another one or two to me!) I am not price-sensitive about my reading and I haven’t ever shopped the 99 cent pile, but Locke is certainly evidence that there is stuff in there that is the equal of anything the big publishers are doing at major multiples of that price point. It will be an interesting challenge to see if any major publisher can deliver enough added value to make a deal with Locke or Amanda Hocking, another writer who has found a huge market without any help from the establishment.

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I have gotten some requests, in comments and off-the-blog, to write what I was going to say to the AGM of the PA in an appearance I was supposed to make there on Wednesday, April 28. I felt terrible about having to cancel an engagement that was booked many months ago but it was tied into a trip to the London Book Fair which was cancelled due to the Iceland volcano. Since I was really prepared for the talk, updating the “Stay Ahead of the Shift” speech from last year’s Book Expo and adding some thoughts about the immediate future in the US market that I think British publishers should take on board, the suggestion is one I can readily respond to.

The premise underlying this piece (and really much of my work) is that all of us, to function, must have a view of how we think things in publishing will change. Change has been a constant in publishing forever, of course. In my lifetime, in the US, mass-market paperbacks and mall stores have risen and fallen; wholesalers have gone from local warehouses that replenish bestsellers to national operations that can provide hundreds of thousands, if not millions, of titles to any store in 24 hours; general trade publishing has consolidated from tens of real competitors to a Big Six; and, in the past 20 years or so, the superstore, usually run by a chain, with over 100,000 titles has became about the only brick-and-mortar formula that seemed sustainable. (NB: On that last point, I think more focused, smaller stores would actually work better, but it would take a large player with a real supply chain to try them to find out.) When I started in the 1970s, the big national accounts were less than 20% of a publisher’s sales and the field reps were responsible for much more than half the business. It would be inflating the importance of the field now to say that those numbers have reversed.

But the changes we’ve been experiencing in the last ten years have been much more dramatic. The combination of used books and the Long Tail enabled by print-on-demand, all delivered by Internet retailing, has eaten relentlessly, if invisibly, into the market for publishers’ new offerings and estabished backlist. The growth of Internet ordering has sapped the viability of the brick-and-mortar network and in the past decade we’ve seen shelf space shrink following relentless growth since the end of World War II.

And, at the same time, even before the recent growth in ebook sales provoked a new digital consciousness, marketing opportunities have been shifting from the print and broadcast world to online.

Publishers have adapted to these changes by changing their sales force deployments, discovering the virtues of social network marketing, and, more recently, going to XML-based origination procedures that make it easier to deliver a book’s content in a variety of ways (the principal ones being as a book, as an ebook, and as a web page.) Publishers who saw the future coming were able to prepare for it. Cambridge University Press, for example, had tens of thousands of old backlist titles set up for print-on-demand long before other publishers did and they reaped a harvest of sales and profits in the past decade as a result. Last year, Simon & Schuster shifted resources from field reps to telemarketers. In an age when Skype allows free face-to-face phone calls and gas prices do nothing but rise, one can’t help feeling they are also getting ahead of a curve by doing that.

Changes of this kind make it clear that a publisher is required to have a view about where things are likely to be going  to plan their business intelligently. It is our purpose to explore that: first with a long view, looking perhaps 20 to 25 years out, and then with a more immediate one thinking about changes that are literally “coming right up.” Because it’s what I know best, this view is US-centric, but because the US is the largest English-speaking market in the world and the view from where I sit (intellectually, not geographically) is that the world is now any and every publisher’s market, these thoughts should be relevant to a UK publisher even if they aren’t primarily centered on the UK market.

I hope we can agree on two things before we start, though. One is that increasingly profound change is inevitable. And the other is that all future planning, just as inevitably, depends on one’s view of what that change will be.

So, with that as preamble, I want to try to envision two futures: one long-term — which we will call “the next 20 years” — and one short-term, looking ahead just two or three years.

Before tackling the 20 year vision, which will be disturbingly dissimilar to where we are now, I want to remind you from recent history how much can change in 20 years. Once again, I cite US-based examples, but I think these will probably be reminiscent of some aspect of local history for every market in the world.

In 1968, television in the United States was dominated by three over-the-air networks that divided pretty much 100% of the national audience, approximately in thirds on average, but it was not uncommon for a single show to have half the national audience. Major cities had a few local stations available in addition; most of the country did not.

By 1988, cable television penetration had reached well over half US households, delivering a choice of many dozens of channels and network TV’s share of the audience had plunged. Today there are five national TV networks in the US and they share substantially less than half the total audience. Top-rated shows fight for the attention of 15% of the country, not fifty.

In 1982, record companies were on the verge of explosive growth. The Sony Walkman and other portable cassette players were joining cassette players in cars, creating an incentive for maturing boomers to re-buy music they’d purchased 10 or 20 years before on records. A very few years later, the same phenomenon repeated with CDs. Back catalog in new formats became a gold mine for established companies.

But by 2002, the CD sales had turned into a curse. They were gold masters, easily ripped by any computer into the new digital formats which ultimately meant iTunes and iPod for the most part. The transition from analog to digital, which stripped the record companies of the power they had which was based on their ability to put product on store shelves, was accelerated by the CDs that all consumers had by then. The fuel for the final burst of record company profitability in the 1990s resulted in the fire that burned them up.

Newspapers in the US had their biggest year yet for advertising sales in 1989. Things got even better in the early 1990s, with growth in classified ads leading the way.

But then along came the Web. Classified advertising moved to Craig’s List, in some ways to eBay, and to many niche sites for camera buffs and auto aficionados and a host of online real estate communities. Google and Yahoo and the web itself disaggregated and reaggregated the content newspapers produced. Both the advertising model and the circulation that drove the advertising were challenged. Twenty years later, many newspapers have died and those that survive are hanging on by their fingernails and desperately grasping for a formula that will allow them to sustain their business online.

In 1975, the mass market paperback business in the United States was the tail wagging the hardcover dog. Agents and authors were balking at the idea that the hardcover house would get 50% of the subsequent paperback income, even though it had always been that way. In 1979, Crown Publishing sold the paperback rights for the long-forgotten novel “Princess Daisy” to Bantam for $3.1 million, a number that still stands as the record for a mass market licensing deal. As my father predicted in his seminal book, In Cold Type, published in 1982, the distribution model for mass markets was inherently inefficient and couldn’t last for trade-type books. It didn’t. By 1995, mass market publishing was a genre business, which was how it started after World War II and what it is, for the most part, today.

Twenty years ago, we went online through very slow modems to very limited and klunky online portals: Prodigy, Compuserve, and the seemingly-modern America Online. The World Wide Web hadn’t yet been invented!

Today we carry the world’s information in the palm of our hand and we’re annoyed if we can’t get a connection, 24/7/365.

And twenty years ago, the book business was on the verge of its last great boom. In the US, Wall Street was just discovering that very large free-standing bookstores, offering consumers 100,000 titles or more under one roof, were cash-generating machines. They opened the vaults for Barnes & Noble and Borders to open hundreds of such stores across the United States. In the mid-1990s, Amazon.com was founded, enabling sales even deeper into the backlist.

But, although it wasn’t as dramatic as the record companies’ distribution of CDs, there were the seeds of old publishing’s destruction sown. Amazon also enabled the sales of used books and the Long Tail, books that had — before Amazon and Ingram’s Lightning Print made the idea of “out of print” an anachronism — stopped competing with the new offerings of publishers. Now they were alive again. That alone would have made things much more difficult. In addition, the impact of growing online sales steadily weaken bookstores and consequently undermine the primary USP  publishers always had: that they could put books on retail shelves. These factors have made establishment publishing an increasingly difficult proposition every day of the past decade.

This admitted stage-setter is the first of what will be a four-part post. The next installment will spell out a vision of the world of communication into which publishing will fit 20 years from now. The third piece will suggest what a publisher will look like then. And the fourth will cover some changes we can expect over the next three years which, among other things, might call for some recalibration of the competition between UK-based publishers and US-based ones. I’ll publish one each day that I don’t have something else until all four are up. And I’ll have added links to the subsequent pieces in this postscript as they’re made available.

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The NY Times Book Review published a piece on advances online today to which I was first pointed by Twitter early this morning. I couldn’t tell whether author Michael Meyer was “for ‘em or agin’ ‘em”. On the one hand, he seemed to suggest that publishers are inclined to overpay, and he cites Public Affairs head Peter Osnos very forcefully saying that it just isn’t necessary for publishers to get sucked into a high advance by market pressures. On the other hand, Meyer demonstrates through author testimony how little even a $100,000 advance is in relation to the time and effort required to write a book. 

Advances against royalties paid by publishers to authors, like returns (one of last week’s topics), are often misunderstood and subject to flawed analysis. Here are a few general thoughts about them.

1. It is critical to understand that an “unearned advance” (that is: a book on which the advance paid by the publisher exceeds the royalties earned by the author) is not equivalent to an “unprofitable book.” Author royalties of 15% of retail (the top “standard” hardcover royalty for a book of narrative writing) amounts to about 27-32% of the publisher’s receipts after trade discounts. Since unit manufacturing cost is about 15-20% of receipts, and the publisher has other direct costs that aren’t based in units sold (design and the 21st century equivalent of “typesetting”, book jacket creation, marketing expenses, and returns and overstock), it is roughly true that the author shares profits with the publisher 50-50. So if the author’s advance ends up delivering a royalty of 17% or 20% or even 25% of receipts, which is the net effect of an unearned advance, the publisher might well still have made money.

2. What publishers really care about (or, at least, really should care about) is how fast their cash turns over. That portion of an advance paid “on publication” might actually only be floated for a very short time. In the case of a book where a publisher has foreign rights to sell, it is even possible for the publisher to make deals that recapture the advance before it is paid. Those situations aren’t common, but they do occur. Shifting the advance payments so that they occur later make advances much easier for publishers to bear. I was involved in one deal where the advance was in quarters and the last quarter was paid on paperback publication, which occurred over a year after the hardcover publication. Some “advances” aren’t paid in “advance.”

3. The publisher quoted as being skeptical of the need to be sucked into paying outsized advances, Peter Osnos, runs a small house that is owned and distributed through a larger network. PublicAffairs doesn’t have to “feed the beast” — provide sufficient volume to cover the high fixed costs of publishing operations: warehouse, infrastructure, and the biggest part of overheads. The CEOs of the major houses have to be sure that enough volume will go through their operations each year to sustain them. That means that “guaranteed” volume is of premium value and agents, knowing that, can command a premium price. The sales coming from mega-books from mega-authors (on which mega-advances are paid) keep the big house’s doors open for everybody else. In other words, a house that pays fixed costs for its operations has a different strategic stake in big books than a house that is distributed on a fee-for-volume basis. Osnos’s advice is very sound for the many thousands of publishers who are smaller than the giants, but it would be suicide for any of the Big Six.

4. Peter Mayer gets the history right about how big money came into the game; it was led by the large advances paid by paperback houses in the late 1960s and early 1970s. That also led to the combining of what were, for more than a quarter century after World War II, two different and separate businesses: trade publishing and mass-market publishing. It isn’t mentioned in this piece, but Mayer (and his marketing director at that time, Bill Shinker) were responsible for moving full-sized books into mass market channels when they sold gazillions of copies of a trade paperback through the rack jobbers (memory unsupported by research says it was  ”The People’s Pharmacy”.) Bantam then sold the hardcover “Iacocca” the same way and, in another decade, there was no longer a distinction between “trade” and “mass.”

In 1979, Crown sold the paperback rights to Princess Daisy to Bantam for $3.1 million. That remans, today, the highest price ever paid by a paperback house for the rights to an original hardcover; it was the high water mark. So the account of the genesis of large advances is accurate, but trade houses have been on their own on this for three full decades. I see great irony in the history Peter Mayer reminds us of.  It was the sub rights departments of hardcover houses that turned this into a big money business, and the agents followed. I know that at the same time, standard practice for agents was just changing from submitting a manuscript to one house at a time, consecutively, to the multiple submissions which are a pre-requisite to competitive bidding and auctions.

So if Peter’s history is right, corporate greed drove entreprenurial greed, not the other way around. I wonder whether there were editors at publishing houses complaining to agents about this dastardly new practice of multiple submissions at the same time that the sub rights department down the hall was setting up an auction for the next big book? (No bloggers at the time to call them on it if they did!)

On much the other end of the continuum, I invented a technique on the very first book I published in 1974 which I am a bit surprised I have never seen since (which doesn’t mean nobody else has done it!) The book was “Amnesty: The Unsettled Question of Vietnam” and it was a 3-author debate (“Now”, “Never”, and “If…”) including Senator Mark Hatfield. The authors each did their part for no “advance”, but instead got a $500 guaranteed first royalty payment, giving us time to get the money from sales to pay them. As things turned out, they would have earned about $350 each on the first payment and ultimately all earned out the $500. And even though they would have earned $350, I had taken in enough to pay them the $500 from receipts. Paperback rights were never sold.

I saw notice of the TBR piece on Twitter this morning, read it, and wrote this piece. Figured it would be Monday’s post…But then an hour later I went back to Twitter and saw that my friend Evan Schnittman, who just started a new blog called Black Plastic Glasses, had already published his rant on the Times piece and it wasn’t even 2:30 on Saturday afternoon!

We have different takes. His is publisher-centric. Hey! He’s a publisher! Enjoy it.

Oh, and this is Monday’s post. It might even have to hold the prime position until Wednesday.

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