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Betting With Your Head
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Savvy Commentators Ponder the Fallout from Another Year
in Publishing
FROM PUBLISHING
TRENDS (JANUARY 2003)
As
we surveyed the smoking turf from another twelve months
in the book business, it struck us that this year’s
pinnacles and pratfalls were decidedly in the eye of
the beholder. We asked a number of savvy publishing
personalities to offer their take on the ever-shifting
corporate landscape of trade publishing. Here’s what
they saw.
Sara
Nelson, Senior Contributing Editor, Glamour,
and New York Observer publishing columnist:
Call me contrary, but I don’t happen to believe
that the book business is going to hell in the proverbial
handbasket, thanks in large part to some publishers’
realization that they need to use smaller handbaskets.
In a year when “big” blockbusters like Michael Crichton’s
Prey and Stephen King’s View From a Buick 8 performed
— no matter what their publishers say — disappointingly,
such so-called sleepers as The Lovely Bones and Koufax
have broken the bank. (The former boasts 2.5 million
copies in print, the latter a more modest, but impressive
quarter-million.) The secret: betting with your head,
not over it. Both books were bought for decent advances
in the $100-200K range; both have more than earned out,
and their writers and houses (and agents) have filled
their pockets, but as a reward, not an incentive, for
work well done. Does that mean Riverhead will
take a bath on Kurt Cobain’s Journals, for which
it paid a reported $4 million? Not necessarily, but
only time, the Christmas rush, and foreign receipts
will tell. Meanwhile, Little, Brown and HarperCollins
are laughing all the way to the bank.
Michael
Cader, Book Packager and Publishers Lunch
founder:
For years media conglomerates and their publishing
divisions have simply gotten bigger and bigger. But
with Vivendi’s blow-up, AOL’s troubles,
and some thoughtful sniping from the sidelines by New
York media columnist Michael Wolff (who will
expound more on the fall of the Titans in his book for
Harper next year), this year you heard lots of people
wondering if the mighty could grow no more. There was
even speculation — or wishful thinking — that trade
publishing could see a mild return to the romanticized
days in which leading publishers were privately held
enterprises, focused more on building lists and companies
than making next quarter’s number.
What’s certain is that privately-owned publishers are
showing the ability to attain meaningful scale, and
the trend is likely to continue. The behemoths may have
swallowed as many imprints as they can (and gotten so
big that who knows if they could find buyers if they
want to sell), but the back-end nuts and bolts of distribution
and fulfillment look like the area headed for even further
consolidation, and one path to the kind of margins and
growth that investors look for.
Take Frank Pearl. He seemed like just another
dilettante investor looking for glamour when he started
the Perseus Books Group in the mid-’90s. With
this year’s purchase of Running Press, the
company has become a true mini-major and seems intent
on further expansion. Interestingly, after completing
the merger, Pearl and Jack McKeown decided to
forgo the Running Press model of self-distributing,
giving up that company’s warehouse in favor of renewing
their agreement with Harper for distribution and fulfillment
(minus the sales component). In another privately-held
success story, Andrews McMeel closed its Kansas
warehouse, shifting back-end operations to Simon
& Schuster. Meanwhile S&S and Harper regularly
note the positive impact of these back-end relationships
(Harper is buoyed by a similar relationship with Scholastic).
PGW,
on the other hand, was considered the “best of breed”
independent distributor, growing so successfully that
the company probably went as far as it could on its
own. It turns out the unit is a perfect fit for public
AMS as the company continues to expand dramatically,
while maintaining a profitable division publishing specifically
for the accounts they sell. Notably, PGW co-founder
Charlie Winton set off on a Pearl-esque course,
buying back the Avalon Publishing Group as part
of the AMS deal after (like Pearl) realizing that he
had transformed relatively modest publishing assets
into a substantial company. Following the Perseus model,
Avalon will leave its distribution with PGW, and has
agreed to a joint venture imprint with Jack Shoemaker.
Of course, the biggest newly private publisher may not
stay that way for long. Once-public Houghton Mifflin
is in the hands of private vulture capitalists,
having shed over $500 million in value from the year
before, and drawing only one bidding consortium willing
to come close to Vivendi’s fire-sale price. The new
owners insist they’ll keep Houghton whole, at least
for now. But if there’s a logic to the year’s major
transactions, they’ll need to either add to the modest
trade unit, sell it, or at least farm out the back-end.
Mike
Shatzkin, Publishing Consultant, Idea
Logical Company:
For a few years, several major publishers — notably
Random House, HarperCollins, and Simon &
Schuster — have been managing data warehouses to help
them analyze the supply chain. In some cases employing
BookScan data, and in some cases building what
amounts to an in-house substitute, publishers have been
able to boost the productivity of the books they manufacture.
Now, thanks largely to data feeds offered by Barnes
& Noble and Borders through BookScan, this
effort is spreading. Even publishers who don’t avail
themselves of the full BookScan service, which aggregates
point-of-sale data (but not inventory) from an estimated
70% of the cash registers ringing up books, go to the
FTP site to get detailed chain-level information. The
number of publishers getting BookScan data now tops
300.
The chain data allow those publishers to compute stock
turn by title and by store section, giving them an effective
tool to persuade buyers to raise inventory levels on
some titles (and signalling that others should be sold
down or returned, of course). One of the major wholesalers
in the trade is looking at providing data to “employ”
their publisher-vendors in the same way. As publishers
use sales data to improve their own understanding of
the profitability of their inventory in their customers’
stores and warehouses, the interaction in the supply
chain will become more collaborative. In 2003, we can
expect to see more effort by publishers’ customers to
supply helpful data, with the reciprocal expectation
that publishers will apply effort to “turn data into
information” in ways that reduce returns to everybody’s
benefit.
Karen
Jenkins Holt, Managing Editor, Book Publishing
Report:
The Houghton Mifflin deal aside, this was a year
without any of those mega-acquisitions that we’d seen
in previous years. But there were surprising combinations.
One of those was the $760 million Reader’s Digest
acquisition of Reiman Publications, a profitable
company that was off the radar screen of the usual media
and business types. The Wisconsin-based direct marketer
publishes enthusiast magazines and books that are inexpensive
to produce — people send in their own recipes, for example
— and came to the table with a database of 32 million
names, 19 million of which Reader’s Digest did not have
in its database. You put those two together and you’re
talking about tens of millions of people who have expressed
interest in these topics. As Reader’s Digest’s problems
in its Books and Home Entertainment division have been
well documented, it will be interesting to see how the
acquisition of Reiman can help them out. [Holt’s survey
of the year in M&A activity will appear in next
week’s BP Report.]
Joe
Spieler, The Spieler Agency:
Of course the sky is
falling, of course retail sales of books are off (and
for some titles punishingly so); yes, publishers seem
to be tightening up; yes, there are fewer publishers,
and their imprints nest like Russian dolls (even as
I write this, I have a direct line-of-sight to Bertelsmann’s
new American colonial HQ, finished in dark cladding
that entirely fails to obscure its banal architecture).
Yes, editors’ lunch budgets (I don’t concern myself
with their travel funds) are being cut, though I still
seem to be eating out quite decently on the cuffs of
others; yes, editors collectively seem to be doing less
editing and more ushering; yes, publishers are still
cutting back on vital staff.
On the other hand: how wonderful that Pat Strachan
is at Little, Brown; how extraordinary that Jack
Shoemaker gets to live another of his nine publishing
incarnations at Shoemaker & Hoard; how reassuring
that most everyone I speak to is either publishing or
has sold to a trade house an “obviously” uncommercial
book that is dear to his or her heart (self-serving
Spieler Agency pick: The Afterword by Mike Bryan,
Pantheon, March 2003); how wondrous that young
editors classified as “interns” can still somehow survive
on $18,000 a year (without benefits) and that even if
they don’t know the novels of Sir Walter Scott,
they’re still onto stuff that most of us who are into
their fourth decade (and beyond) are not. And don’t
we continue to feel just a tad smug that we can say
of our work with books that it involves the ideas, the
imagination, the creativity, and the very lives of writers?
©2003
Publishing Trends
