PT’s Savvy Commentators Ponder the Fallout from Another Year in Publishing
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?
