December 07, 2010
If you’re reading this, you probably care about books and you’re likely to care passionately. Books will do that to a person.
Not just books, of course. Movies and paintings and music will stir passions, as well, and for similar reasons: because, when they rise to the level of art, they evoke empathy. Which is to say, they connect us to the world in a way we hadn’t been connected before we experienced them.
Oh, my. So we love not just the feelings they give us but the fact that they enable us to feel. It’s a form of intimacy that they evoke in us, isn’t it? And for this reason many people just can’t stand the idea that book publishing is a business.
But it is a business. Grown-up authors and readers don’t allow themselves to fret about that — at least not too often — because you might as well fret about the sun coming up. When goods have to find their way across the earth, business arises to carry the freight.
If, as part of this process, your work one day gets “put in the back in the discount rack like another can of beans,” there isn’t much to be done about it but write a song like Billy Joel did…or read or write another book.
Yet it’s worth noting that those practices that surround the necessary business of publishing books weren’t handed down by God. (If they had been, it would have been Apollo — no? — in charge of beauty, music and poetry.) They were created by fallible man.
We had our reasons, of course. We always have our reasons. But they’re not necessarily good reasons, in retrospect, or reasons that stand the test of time the way, say, Hamlet has.
To be or not to be a viable business? That is the question.
As usual, I don’t claim to have a monopoly on the answers. But there are changes afoot in the book industry, as everyone knows. While we’re all considering how to play it, why not also reflect, in no particular order, upon:
The 10 Craziest Business Practices of the Book World
1. Selling returnable.
When I was an agent I represented a book called Pour Your Heart Into It by Howard Schultz (published by Hyperion). Wherever you stand on the competition between Starbucks and your local barista, one must admit that Howard is a business genius by any measure. I’ll never forget walking down the streets of Manhattan with him past a Chock Full o’ Nuts. “They could have done what I did,” he said, at a time when Starbucks “only” had — if I recall correctly — a few hundred stores. “Now it’s too late.”
Over lunch, Howard asked me to explain the book business to him. “The first thing you have to understand,” I said, “is that books are sold returnable.”
The business genius looked at me dumfounded and — I swear — said: “What do you mean?”
I explained it patiently in more detail.
He remained incredulous. “How do you run a profitable business that way?”
Every major manufacturer in the world must eat crow now and then and pull merchandise from its distributors. None of them does it on the entire product line, with no reasonable expiration, and as a general business practice.
There are historical reasons why books are sold returnable. So what?
The record business used to do this (although, even then, not in such an open-ended fashion) and we all know how that’s ending. Newspapers and magazines do it, with significant time limits, but they really have nothing in common with books besides words and paper.
Taking returns on your entire inventory every day is the business equivalent of low self-esteem. People who run a business this way shouldn’t be in business. They should be in therapy.
2. Co-op dollars.
This practice isn’t as crazy as taking returns (nothing is), but it’s not great, either. The way this works, on the simplest level, is that publishers pay chain retailers to put certain books on the front table, in the window or on end-caps.
The grocery business calls this a “slotting allowance.” But in the case of a grocery store, that bribe is being paid to get a brand established on the shelf — a brand that might live forever. In the book business, the bribe is being paid to create visibility for, at best, a few weeks.
Might this money be better spent — say on marketing to likely purchasers of that book? Honestly, I don’t know. But the co-op system seems a little zany.
3. Suggested retail prices.
Books aren’t the only things in the world with a suggested retail price. But they’re one of the few where the suggested retail price has been permanently imprinted on the product. This is just crazy. It disadvantages independent booksellers by enabling the big chains and Amazon to trumpet discounts — as in, 40% OFF THE COVER PRICE! More important, it takes critical decision-making power from those closest to the end user.
Most businesses that make things allow retailers to price them however they wish. This way, the entity closest to the consumer can respond to the demands of the marketplace. So why the heck is some guy in New York telling an independent bookstore in Denver what to charge its customers?
4. E-book royalty splits.
Publishers have been treating e-books as incremental business since their invention, yet those same publishers structure e-book royalties as if they’re actively marketing this format. They’re not actively marketing them, though, not in the way they push paper books. So the (typical) 25% royalty on net e-book proceeds is a little like telling an author that the publisher is taking 75 cents from that dollar the author just found on the floor.
I won’t go into the technicalities of royalties, which would bore everyone to tears. But the splits aren’t fair, and in a world where barriers to entry are falling rapidly, authors treated unfairly will be tempted to find new business partners. Rip-off e-book royalties are a very shortsighted strategy for those publishers who want to be in business ten years from now.
5. Paying big advances to unproven talent.
The only people who like big advances are the few authors and agents who get to cash the checks — or those who think they’ll become those authors or agents one day.
When you’re an author whose books consistently sell lots of copies, that big check is really what it calls itself — an advance against future earning, which is to say, a non-recourse loan. But paying $1 million advances to unproven talent is nuts. The main reason it happens, as indie publisher Richard Nash points out, is that — by the strange logic of Manhattan — it confers status on the editor who signed up the book.
How about paying more reasonable advances to more first-time authors and finding another way to confer status on editors, say with a medal ceremony every Christmas? Just asking.
6. Making authors write the marketing plan.
Near my home there’s a small company that makes lots of stuff. You may have heard of it: DuPont. Say you’re a chemist at DuPont and you give it your all in the lab and — lo and behold! — invent Teflon. So the CEO calls you into his office and says, “Nice work. Now come up with a marketing plan.”
Make sense? No, it doesn’t. Why not? Because the characteristics of a good chemist aren’t necessarily the same as the characteristics of a good marketer. Yet here we have the book business increasingly ceding the field of marketing to its authors. “Hey, nice job writing that romance, kid. How we gonna sell it?” Puh-lease!
I’m not suggesting, by the way, publishers not putting the author out there as the “face” of the book, the person who goes on Oprah, etc. But, think about it: in any sane world is the spokesman generally the guy who came up with the plan? Don’t these tasks generally require different skill sets?
7. Rarely selling direct to consumer.
An interesting thing happened on the way to Jeff Bezos’ fortune. Many people may not recall that his original plan was to pass orders along to publishers and have the publishers ship books directly to customers from their warehouses. Pretty soon Bezos realized that putting another entity between you and your customer is bad business. A year or two in, he dropped that plan like a hot potato and started building his own distribution facilities.
Yet putting others between themselves and their customers is what most book publishers have reduced themselves to. They’re so dependent on the selling channel that half the time they don’t even know who their end user is. This has all kinds of implications, some of them good for booksellers and many of them bad for publishers. Having ceded the field, now, whenever publishers do try to sell direct to consumers, the bookstores accuse them of competing with their own customers — i.e. their “channel partners,” the bookstores. But when those channel partners get into trouble — as many have — where’s Plan B for the publisher?
8. Not adding value on the highest priced merchandise.
If publishes could dictate to the marketplace, they would decree that books should be hardcover all of the time, because that’s where they get the most revenue and margin. Likewise, no doubt, Mercedes would like everyone to buy its biggest sedan, thank you very much.
In the marketplace, however, people must be induced to “pay up.” When you buy the biggest Mercedes you don’t only get more space, you get more bells and whistles. The price is higher, but so is the perceived value.
Publishers, in fairness, have finally begun to experiment with adding bells and whistles — sometimes quite literally — to higher-priced e-books, but so far with only a handful of titles.
Meanwhile, what does the purchaser of most hardcovers get versus the purchaser of the same book in paperback or e-book? Well, er, she gets hardcovers. Hard covers. So what! Unless I’m a book collector — maybe five percent of the market — where is the VALUE proposition? Thinking you can consistently charge more for something just because you really need the money is a little crazy.
9. Keeping the New York Times Bestseller Lists so scarce.
If the Lords of Marketing held a competition for Most Underutilized Brand, would the New York Times Bestseller List not make the Top Ten? Here is one of the most recognized brands in America: the editors give it a few pages in the Book Review once a week and a small spot in the Business section. How do you take a brand like that and not leverage it more throughout the newspaper?
The New York Times should publish a hundred lists a week — every book genre in every book format — and plaster them all over the paper and all over the Web. It would be good for the newspaper and good for the business of publishing. Why? Because people need filters and they like to read things they know are already popular.
Not leveraging one of the greatest brands in the history of books is just nuts.
10. Barring advertising from books.
Most book contracts have specific clauses saying the publisher won’t run paid advertising inside the book. Understandably, authors don’t want publishers to generate income from their work without compensation. Also, there is posterity to take into account.
This brings to mind the Woody Allen routine where he gets a phone call one day from someone asking him to do a commercial. If I recall his response correctly, it is, “No. I’m an artist. I don’t endorse products. And if I did, I wouldn’t endorse your product.”
The person on the other end of the line says, “That’s too bad. The photo shoot only takes half a day and it pays $100,000.”
“Hold on,” the Wood Man replies. “I’ll put Mr. Allen on the phone.”
Do you think that publishers might persuade authors to change their position by offering something radical like, I dunno, money?
Sergei Brin and Larry Page will be selling ads next to Google e-books before long and pocketing the change. Brin and Page could already buy the entire publishing industry with a year’s worth of GoogleAds revenue. Not seriously considering paid advertising in books isn’t just crazy. It’s foolish.