Distribution Evolution

The distribution terrain underwent a few sizeable rumbles last year, not to mention the major quake of the AMS bankruptcy that sent PGW flying to Perseus after a tussle with NBN, resulting in Perseus’ coopting of the indie publisher distribution biz. As the dust settles, smaller distributors are poised to grab the trickle down of clients and staff that didn’t make it through, says Davida Breier of Biblio, whose sister company NBN is “going after those clients more aggressively than we are.”

But there might not be too many “leftovers” to grab. Estimating that PGW lost about 40 clients in the migration, Eric Kettunen, VP of Marketing says many of them were inactive anyway though “some of the bigger ones that were hard to see leave include Berrett-Kohler and Amber Allen.” (Ingram snapped up the former and Amber Allen moved to Hay House).

Other shifts in the distribution landscape come as a result of the robust competition among the players, both distributors and publisher-distributors. Comments from distribution insiders throughout the business show that competition is such that distributors of independent presses must create economies of scale and drastically cut expenses which could be as high as a 25% reduction of staff as at pre-Perseus PGW.
However, less staffing means an erosion of services for clients. Consolidation of the industry and major competition from publishers have resulted in rate wars that have driven down value for the independent publishers—great for them—but make margin the real challenge. Any services out of the ordinary must be billed separately or simply won’t happen. This makes distributor versus publisher distribution/fulfillment even more competitive.

For distributors, the market focuses on the smaller publisher which requires more services—the larger the client publisher, the fewer options they require as they take on different components of the sales process themselves. Large publisher-distributors all have services in place for their own publishing process, so they’re more likely to offer back office (albeit at highly competitive rates) and not get involved in selling. On the other hand, distributors have to work on formulas of price point, average return rate and number of copies generated on top of freight costs in and out. As independent publishers grow, distribution becomes a battlefield.

Notwithstanding the competition, small to mid-size distributors are beefing up ancillary services and feeling bullish about what’s ahead. “We’ve hired a top marketing assistant to work on things like jacket design, sell sheets, and other things we’ve not been typically well-known for in the past,” says Eric Kampmann of Midpoint. They’ve also overhauled management infrastructure, defining the roles of executives and setting up a telemarketing department in Michigan. Hoping to become “the second largest distributor in the industry by the end of the year,” Mark Suchomel of IPG says they’ve added more than 100 gift reps since acquiring Trafalgar Square.

Ingram forged ahead in client acquisition adding an impressive 35 new publishers and counting in the past year, many from across the Atlantic. Heeding the digital knell sounded by Random House’s Chris Hart at BISG’s annual meeting last month, Karen Cross says that by the end of 2007, “[we] should be in a position to provide unique digital content solutions.” Pumping up POD capabilities with the expertise of its parent company, Ingram is also exploring more specialty markets. (Also looking with “great interest” toward digital distribution is Consortium, reports Julie Schaper.)

And many others look with “great interest” to what’s happening at the newly joined PDS, PGW, and Consortium. Each company is keeping its individual client service offerings and own national account reps, but Perseus and PGW now share field, special sales, and ID sales while Consortium retains its current force. “We’re working with Perseus in the area of mass merchandise and special sales, both areas that they have strong expertise in,” says Schaper. The back office for all three moved under one roof in Jackson. Perseus gave PGW a vote of confidence when CEO David Steinberger named Susan Reich (president of Avalon and former PGW honcha) president.

Other big back office moves to note were Disney/Hyperion’s transition to HarperCollins, with Chronicle and the new Weinstein Co.’s list picking up some of that slack at Hachette. Donnelley has taken over Banta’s distribution business, and Antique Collectors’ Club moved its fulfillment to NBN, (and D.A.P. moved to Perseus) as well causing Dan Farrell to breathe a sigh of relief as he can now concentrate on newly acquired Hudson Hills Press.

Biblio, for its part, is scaling back its street lit/urban fiction distribution now that the genre has outgrown its one to two title publishers and some of the bigger houses are developing imprints with more established authors. Taking advantage of their role as a distributor that has “the maneuverability of a small boat in comparison to the larger distributors,” according to Breier, they’ve instead picked up a few graphic novel clients including Zenoscope and Action Philosophers.