The Book Publishing Industry

Citation preview

The Book Publishing Industry Second Edition

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The Book Publishing Industry Second Edition

Albert N. Greco Fordham University

2005

LAWRENCE ERLBAUM ASSOCIATES, PUBLISHERS Mahwah, New Jersey London

Copyright © 2005 by Lawrence Erlbaum Associates, Inc. All rights reserved. No part of this book may be reproduced in any form, by photostat, microform, retrieval system, or any other means, without prior written permission of the publisher. Lawrence Erlbaum Associates, Inc., Publishers 10 Industrial Avenue Mahwah, New Jersey 07430 Cover design by Kathryn Houghtaling Lacey Pearson Education, Inc. previously published this book. Library of Congress Cataloging-in-Publication Data Greco, Albert N., 1945­ The book publishing industry / Albert N. Greco. — 2nd ed. p. cm. Previous ed.: Boston : Allyn & Bacon, c1997 Includes bibliographical references and index. ISBN 0-8058-4852-5 (cloth) — ISBN 0-8058-4853-3 (pbk.) 1. Publishers and publishing—United States. I. Title. Z471.G742004b 070.5'0973—dc22 2003069607 CIP Books published by Lawrence Erlbaum Associates are printed on acidfree paper, and their bindings are chosen for strength and durability. Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

Contents Preface

vii

1

Consumer Book Publishing

2

Book Title Output, Categories, Sales, Returns, and the Channels of Distribution

26

3

The Development of Modern Book Publishing Companies

51

4

Business Operations

88

5

The Editorial Process

123

6

Editors, Book Acquisitions, and Production

150

7

Marketing Books

177

8

Consumer Book Purchasing Trends

208

9

The First Amendment, Copyrights, and Libel

256

Publishing Confronts the Twenty-First Century

278

Glossary of Book Industry Terms

300

Selected Bibliography

306

The Book Publishing Industry Historical Statistical Appendix

335

Author Index

371

Subject Index

377

10

3

v

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Preface What is the structure of the book publishing industry in the United States? What do publishers and editors do in the publishing value chain? Are net publishers' reve­ nues and profit margins unimpressive? Are consumers reading fewer books, trig­ gering declines in net publishers' unit sales? Will Internet book-selling sites undermine, and ultimately drive out of business, traditional chain and independent bookstores? Can authors make a living writing books? Will print-on-demand books replace traditionally printed books? Will print-on-demand kiosks replace book­ stores and other retail establishments as the primary source of books? In essence, is the econometric state of publishing as bleak as some individuals have speculated? Clearly, there are concerns about the well-being of this pivotal industry. Anyone familiar with book publishing knows all too well that the economics of publishing are harsh and unforgiving, prompting some analysts to insist that publishing is in disarray because of: (1) consolidation, steep returns, stark sales figures, and a fickle and price-sensitive consumer base; (2) the impact of chains, superstores, and price clubs (and the concomitant decline of independent book stores); (3) a population more interested in watching television than reading books; (4) paper-thin profits; (5) staggering technological challenges; and (6) some author advances that dumb­ founded even seasoned industry veterans. Publishing is unquestionably at a crossroads, on the cusp of great opportunities. This industry has vitality and spirit, the ability to find and develop new talent. Of course publishing houses open and close, as do bookstores, and old, well-mined lit­ erary niches become a bit frayed over the years. Yet this industry has the ability, an almost mystical one, to reinvent itself, to shrug off disasters, and to remain a formi­ dable influence helping people, from young children to immigrants, learn about their past, understand their present, and ponder their future. Book publishing will survive in its current, print-oriented format for at least 20 years and, ultimately, in an electronic format, for centuries to come. This industry's great traditions, and its unyielding, and at times undisciplined, quest for perfection, enables it to handle effectively depressions, recessions, techno­ logical convergence, war, and social upheavals. After all, books matter and en­ dure in the short run, and more likely in the long run, far more than insubstantial vii

viii

PREFACE

television situation comedies, trendy motion pictures, and long-forgotten mag­ azine or newspaper articles. This revised edition of The Book Publishing Industry updates a significant por­ tion of the text as well as all statistical datasets through 2002 (in many cases with projections through 2007). In addition, a new appendix was added containing rarely seen historical data on the industry (basically data from 1946 to the end of the cen­ tury). The selective bibliography was updated to include the latest literature, espe­ cially major works in marketing and economics that have a direct relationship with this changing industry. Although consumer books (i.e., adult, juvenile, and massmarket paperbacks) remain the central focus of the book, all of the major book cate­ gories are reviewed to insure that readers gain an overview of this eclectic business. ACKNOWLEDGMENTS

This book became a reality because of the continued support of a number of indi­ viduals in and out of the publishing industry. My wife Elaine provided me with the encouragement (as well as keen editorial advice) to complete this task. Numerous discussions with my sons Albert and Tim­ othy (both in sales and marketing departments at Random House) filled in many gaps about what really happens in the sales and marketing "trenches." My other sons, John and Robert, constantly asked me questions about the industry, prodding me to develop realistic answers about a complex maze of issues, a fact Teresa ob­ served firsthand as the wife of a sales manager. Some day Gabrielle, Olivia, and Nicolette will also wonder about this often-contradictory cultural and commercial endeavor. Probing, candid talks with Bob Wharton, Sharon Smith, and Arthur Kover pro­ vided insight into the human condition, ethics, and managerial ideas. Discussions about media economics with Robert Picard broadened my under­ standing of this vital field. Linda Bathgate and her colleagues at Lawrence Erlbaum Associates were a source of ideas, inspiration, and exceptionally useful editorial advice. I must also thank a number of book publishing academics and professionals who offered comments and assistance. The Book Industry Study Group, Inc. and the Association of Research Libraries were kind enough to allow me to use some of their statistical data in this book, as did Leo Kivijarv, R.R. Bowker, Veronis Suhler Stevenson, Stephanie Oda at Subtext, Dave Bogart from The Bowker An­ nual, and Gary Ink at Publishers Weekly Philip G. Altbach (Boston College) and Edith S. Hoshino allowed me to use some of my material on book industry merg­ ers and acquisitions that originally appeared in International Book Publishing: An Encyclopedia. The exceptional staff at the Fordham University Library and the Bergenfield, New Jersey, Public Library helped me gather innumerable books and articles about publishing, libraries, and the information industries. They demonstrated why li­ braries must be supported in this nation.

PREFACE

ix

I must also thank John Sterling and Michael Kay for their insightful comments about another business that rivals book publishing in its majestic scale and dramatic flair. As always, I must thank that small group of people in the Bronx (at 161st and River Avenue) who inspire many of us to try harder whatever the obstacles, espe­ cially on those chilly nights in October. We also remember those brave people who died on September 11,2001, in a ter­ rorist attack on the Pentagon and in that field in Pennsylvania. All of us working in New York City on September 11th will never forget the thousands of people killed at the World Trade Center and, especially, the efforts of our mayor and the heroic members of the NYPD, the FDNY, and the PAPD. On that day in New York City, all gave some; some gave all.

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The Book Publishing Industry Second Edition

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CHAPTER ONE

Consumer Book Publishing

AN INTRODUCTION A review of the published literature on the U.S. book industry reveals an intriguing dichotomy regarding the diverse and often contradictory cultural and commercial mission of book publishers.1 Is book publishing solely an intellectual and cultural endeavor? Or is it intrinsically a business enterprise? This debate has splintered the U.S. book community ever since the first book appeared in this nation more than 360 years ago.2 If questioned, many readers (and perhaps a clear majority) would maintain that the book is a cultural object, the means by which knowledge is passed from author to reader, from one generation to the next. Books played a pivotal role and, in many instances, a crucial one in the intellectual, cultural, and educational life of the United States, and they are not perceived as a commodity the way coffee, orange juice, and television sets are. Following this line of thought, books are deemed to be "special" because they al­ low the reader to deal intimately with a complex array of ideas and issues, from the highly charged "beauty and truth" variety that frequently fragments the academic community to vital information about business or home life. Books also respond to the eclectic entertainment needs of the U.S. population. Louis A. Coser, Charles Kadushin, and Walter W. Powell, Books: The Culture and Commerce of Publishing (Chicago: University of Chicago Press, 1985), pp. 13-26, 362-374; John Tebbel, Between Covers: The Rise and Transformation of Book Publishing in America (New York: Oxford University Press, 1987), pp. 3-18. Also see John Tebbel, A History of Book Publishing in the United States, Vol. I, The Creation of an Industry 1630–1865 (New York: R. R. Bowker, 1972); Cathy N. Davidson, "Books in the 'Good Old Days': A Portrait of the Early American Book Industry," Book Research Quarterly 2(Winter 1986–1987): pp. 32–64; and Kenneth C. Davis, Two-Bit Culture: The Paperbacking of Amer­ ica (Boston, MA: Houghton Mifflin Company, 1984). 2 Andre Schriffrin, The Business of Books (New York: Verso, 2000), pp. 1-14; Jason Epstein, Pub­ lishingPast, Present, and Future (New York: W.W.Norton, 2001), pp. 1-28; Ted Solotaroff, "The Literary-Industrial Complex," New Republic, 8 June 1987, pp. 28, 30–42, 44–45; Jason Epstein, "The Decline and Rise of Publishing," The New York Review of Books, 1 March 1990, pp. 8-12; Ben Bagdikian, The Media Monopoly (Boston: Beacon Press, 2000), pp. xxxvi-24, 228.

3

4

CHAPTER 1

Defenders of the "cultural mission" theory maintain strenuously that society has an obligation, often bordering on the "sacred," to ensure that books are published and preserved.3 Books and information must be made available to all citizens through the existing channels of distribution (i.e., bookstores, the mail, book racks at convenience stores and terminals, etc.) and the highly prized library system. A small minority of individuals have insisted that books and all forms of infor­ mation should be free (or at least sold at inexpensive prices) and readily available, especially to individuals in developing or emerging nations (often called "newly in­ dustrializing countries; NICs") adversely affected by the direct or indirect poisons of prejudice and cultural, educational, or information "colonialism." Anthony Smith pointed out that: The Third World has accused the West of cultural domination through its control of the major news-collecting resources of the world, through the unstinted flow of its cultural products across the world, and through the financial power of its advertising agencies.... The swamping effect of this vast machinery has transformed the social fabric of the Third World as it repressed its traditional cultures.4

The cultural mission school of thought perceives publishers and editors as gate­ keepers, ascertaining what is important enough to see the light of day as a book and legitimizing ideas and theories. Publishers and editors "anoint" individuals with a mystical "holy oil" that transforms writers into published authors. This role is noble and should be (perhaps must be) free from the binding, and often ignorant, con­ straints of the world of commerce. All of these sentiments are inherently true, although somewhat romantic. No one can deny the significance of an idea (perhaps capitalism or democracy) or a book. Yet should books and information be "free" (or available at subsidized or below-market prices) while oil, computers, and finished clothing garments (many of which are produced in NICs) are available at prices determined by Adam Smith's "invisible hand" of the marketplace? Although publishers and editors are deeply involved in the transmission of knowledge and perform invaluable gatekeeping functions, publishing has been, is, and is likely to remain a business, albeit a business that supplies readers with printed or electronic books that educate, inform, and entertain. Publishers and edi­ tors have a fiduciary responsibility to the owner(s) of the publishing house and to their readers and society. A publisher or editor who neglects any of these three dis­ tinct constituencies fails his or her responsibilities. After all, the bottom line is that there is a bottom line. 3 Ted Solotaroff, A Few Good Voices in My Head: Occasional Pieces on Writing (New York: Harper & Row, 1987), pp. 8-29. Also see Robert Giroux, The Education of an Editor (New York: R. R. Bowker, 1982), pp. 17-50; Barbara F. Reskin, "Culture, Commerce, and Gender: The Feminization of Book Editing," in Barbara F. Reskin and Patricia A. Roos (Eds.), Job Queues, Gender Queues: Explaining Women's Inroads into Male Occupations (Philadelphia: Temple University Press, 1990), pp. 93–110. 4 Anthony Smith, The Geopolitics of Information: How Western Culture Dominates The World (New York: Oxford University Press, 1980), p. 14.

CONSUMER BOOK PUBLISHING

5

What is the focus of this book? Although all of the various book categories are investigated in some detail, the major emphasis is on consumer books (i.e., adult, juvenile, mass-market paperbacks, religious, book clubs, and mail order) because they are the largest components of the U.S. book publishing industry, accounting for $8.66 billion in net publishers' revenues (and 33.21 % of the entire U.S. market), as well as 1.37 billion in net publishers' units (and 55.17% of all sales). Book Publishing Industry Theories Publishing studies is an interdisciplinary field, a marvelous blend of theories devel­ oped by historians, literary critics, economists, sociologists, and a small but grow­ ing number of individuals interested in "the history of the book." Two economists, whose primary task was an econometric study of the motion picture industry, crafted an exceptionally important theory that also enriches our understanding about publishing. DeVany and Walls, in "Bose-Einstein Dynamic and Adaptive Contracting in the Motion Picture Industry," analyzed films; however, they real­ ized that: Even though the motion picture industry exhibits profoundly the properties we have modeled, there are many other industries for which the model and statistical meth­ ods would seem to be appropriate: other entertainment industries such as television, music, and book publishing might be usefully modeled in the framework we de­ velop here.5

Taking the basic concepts and theories of De Vany and Walls and applying them to book publishing is not an easy task. Yet their essential theses are as follows. Consumer book publishing is a complex, adaptive, semichaotic industry with Bose-Einstein distribution dynamics, dual-sided uncertainty, and Pareto power law characteristics. Publishing is a business, and its business is the publication of con­ tent that entertains, educates, and informs. The business's basic goal is to satisfy the wants and needs of readers, end-users to our colleagues in economics. If these goals are fulfilled, ideas circulate in the market­ 5 Arthur De Vany and W. David Walls, "Bose-Einstein Dynamics and Adaptive Contracting in the Motion Picture Industry." The Economic Journal 106 (November 1996): pp. 1493-1514. Also see Eu­ gene Fama, "Efficient Capital Markets: A Review and Empirical Work," Journal of Finance, 25,2(May 1970): pp. 383–4178; Burton G. Malkiel, A Random Walk Down Wall Street (New York: W. W. Norton, 1966), pp. 17-166; Burton G. Malkiel, "The Market Can Police Itself," The Wall Street Journal, 28 June 2002, p. A12; John Sutton, Marshall's Tendencies: What Can Economists Know? (Cambridge: MIT Press, 2000), pp. 3–64; Thomas A. Bass, The Predictors: How A Band of Maverick Physicists Used Chaos Theory to Trade Their Way to a Fortune on Wall Street (New York: Henry Holt, 1999), pp. 23–159; Roger Lowenstein, When Genius Failed: The Rise and Fall of Long-Term Capital Management (New York: Random House, 2000), pp. 15-147; Simon Benninga, Financial Modelling (Cambridge: MIT Press, 1997), pp. 11–44; Tapan Biswas, Decision-Making Under Uncertainty (London: Macmillan, 1997); 32-59; Harold L. Vogel, Entertainment Industry Economics: A Guide for Financial Analysis (New York: Cambridge University Press, 2001), pp. 1-29, 41–63; Reuven Brenner, The Force of Fi­ nance (New York: Texere, 2002), pp. 31–38.

6

CHAPTER 1

place of ideas, profits are made, taxes are rendered, and editors and publishers (and indeed everyone else in this rather complex value chain) are paid a decent wage. Books are fragile products. Although some titles have an exceptionally long backlist life, far too many books have lives that are unpredictable and brief. The As­ sociation of American Publishers (AAP) collects monthly and annual data on book returns. Their datasets for 2002 revealed that return rates were abominably high: adult trade hardbound, 39.1%; adult trade paperbacks, 22%; and mass-market pa­ perbacks, 51.4%. These books failed to find an audience, and, in all likelihood, they were returned to the publisher to be pulped. Star authors and big-budget marketing campaigns guarantee only that a front-list book will be placed in a significant number of bookstores, perhaps in window dis­ plays, on tables, on end-caps, and hopefully face out (rather than spine out) on a shelf. From that point onward, a new book's life is like a parachute jump: If the book does not generate sales quickly, it is dead, pulled from the shelves in perhaps 6 weeks. There is stark uncertainty in the book business. Every book is in a tournament fighting for sales and attention against every other new and backlist book. So book publishing is geared to adapt, and adapt rather quickly. If a title falters, if excep­ tional efforts fail to trigger the sought-after "buzz," then it is likely that another book garners the attention of sales representatives and marketing executives, and in this business there is a veritable flood of new books. In 1999,119,357 new books were published in the United States. The following year, the total increased 2.3% to 122,108. In 2001, 141,000 new books were pub­ lished, and in 2002, 150,000 were released (+6.4% over 2001). This meant that 17.12 new books saw the light of day every hour of the day, including Saturdays, Sundays, and all holidays. Every book is a new product. Readers discover their preferences and spread in­ formation, both positive and negative, via the "information cascade." There is dual-sided uncertainty about every book. An author or editor does not know with any real precision prior to the publication date whether readers will find and enjoy a specific book, and readers do not know in advance whether they will enjoy a spe­ cific book. This means that editors and publishers gamble on whether a book will succeed in a busy market. This process produces complex dynamics. A successful book generates reve­ nues for booksellers, publishers, and authors. An unsuccessful title is returned, per­ haps remaindered, perhaps destroyed. De Vany and Walls insisted that this dynamic path was so multifaceted that the Bose-Einstein gas molecule distribution model had to be employed to understand these complexities. De Vany and Walls argued that consumers tend to behave the way the gas molecules act when released into a sealed container: At some point in time, and no one knows when, and at some loca­ tion, and no one knows where, the molecules cluster. A clustering process takes place among readers, and groups of people will all buy the same book, but no one knows for sure when and why this occurs. It just happens because of the impact of the information cascade, fashion, style, trends, taste, etc. In essence, authors, book­ sellers, editors, and marketers do not know with any precision how this process works (and of course consumer research is exceptionally rare in book publishing).

CONSUMER BOOK PUBLISHING

7

Amazon.com carefully tracks this clustering phenomenon on both the state and local levels. For example, on July 11,2003, Amazon.com reported that the top ten best selling books in Upland, California were: The Things They Carried: A Work of Fiction; Heart of Darkness', The Authoritative Guide to the Glycemic Index—The Dietary Solution for Lifelong Health; Harry Potter and the Order of the Phoenix; The King of Torts; Dr. Atkins' New Diet Revolution; 500 Low-Carb Recipes: 500 Recipes from Snacks to Dessert That the Whole Family Will Love; The Lovely Bones; The Power of Now: A Guide to Spiritual Enlightenment; and Prey: A Novel. On the same day, Amazon.com reported an entirely different cluster of best-selling books in Trenton, New Jersey: Lidia 's Italian-American Kitchen; To The Nines: A Stephanie Plum Novel; Common Sense; Visions of Sugar Plums; Dating Game; Falling Angels; Kitchen Privileges: A Memoir; Curves: Permanent Results Without Permanent Dieting; Useful Idiots: How Liberals Got It Wrong in the Cold War and Still Blame America First; and Harry Potter and the Order of the Phoenix. The im­ mensely popular Stephanie Plum novels (To The Nines: A Stephanie Plum Novel and Visions of Sugar Plums), are written by best-selling author Janet Evanovich and involve a bounty hunter living in Trenton. In essence, De Vany and Walls posited, following the lead of William Goldman, that no one knows anything, and anything can happen, and it usually does.6 The end result is that a small number of books (perhaps 20%) dominate sales (accounting for perhaps 80% of all sales), resulting in the so-called "power law" (known to econo­ mists at the "Pareto Distribution"). This means that unit book sales and revenues do not follow a normal bell curve, market shares change constantly, and success in the past is no guarantee of success in the future—rather unsettling thoughts. The Publishing Cycle

The Bible tells us that in the beginning was the Word; and in a sense that is also true for book publishing, inasmuch as it all starts when a writer inscribes his or her thoughts on paper (or more likely onto a computer screen). The author's goal in writing a book is to educate, entertain, or spark a debate. Yet there is another objective. Samuel Johnson wrote that only a blockhead does not write for money, so for some authors the paramount goal is to make money or to seek fame and glory (or more likely all three). Yet whatever the motive, the stark reality of writing means that the author toils alone, for writing is a singular, hard profession. Once the book is complete, the writer terminates this solitary activity and seeks to get his or her manuscript published. Now the author's objective changes. He or she needs a publisher willing to tender a contract to have the novel, biography, or monograph edited, printed, reviewed, publicized, distributed, and, hopefully, read by as many people as possible. This means entering the complex, sometimes myste­ rious book publishing industry. Again, the Bible tells us that many are called but few are chosen, which aptly describes the perils most authors confront. 6William Goldman, "The Screenwriter," in The Movie Business Book, ed. Jason E. Squire (New York: Simon & Schuster, 1992), p. 86.

8

CHAPTER 1

A book is published because an editor believes the manuscript has great liter­ ary merit, makes a convincing argument, has commercial potential, or "needs to be published." In a market economy, the objectives of most publishers are rather modest: to sell enough copies to pay the publishing house's employees, taxes, and other expenses while making a contribution to the world of letters. Hopefully, a profit can be made and a royalty paid to the author. Among university press pub­ lishers, the goal is somewhat different; their mission is to make a contribution to scholarship while trying to pay the bills.7 Hope springs eternal, especially among publishers. Novice writers often assume that book publishing is a neat, symmetrical world filled with editors, marketers, graphic designers, booksellers, distributors, typeset­ ters, printers, agents, book reviewers, and countless other professionals eager to ad­ vance the author's reputation, support good literature, and further the pursuit of knowledge. In reality, this is rarely the case. Book publishing in the United States in the 21st century is a frenetic, fast-paced world of thousands of publishing compa­ nies employing more than 90,000 individuals, issuing more than 150,000 new titles annually, keeping over 3.5 million distinct titles in print, and generating approxi­ mately $26 billion annually in net publishers' revenues. The book industry is a big business. A publishing house performs a number of discrete functions. They are: 1. Content acquisition: acquiring a manuscript from an author. 2. Content development: developing and enhancing the manuscript via the editorial process. 3. Book design: creating the look of the book's cover and pages. 4. Management of the production cycle: creating cost analysis documents and production cycle estimates. 5. Prepress, printing, and binding: preparing the finished product. 6. Marketing: determining the suggested retail price, crafting a campaign to market and promote the book. 7. Sales: selling the book in the channels of distribution. 8. Fulfillment: managing the warehouse and distribution of books into channels of distribution; supervising all book returns. 9. Customer service: handling all inquiries and orders from customers be­ fore, during, and in the after-sale period for new titles as well as for all backlist titles. 10. Other revenue stream: supervising all sub rights, foreign rights, foreign sales licensing activities, special sales, etc. This chapter analyzes some of this industry's characteristics. The aim is to pro­ vide the reader with insight into the complex structure of book publishing in the United States. 7

Richard Abel and Lyman W. Newlin,Scholarly Publishing: Books, Journals, Publishers (New York: Wiley, 2002), pp. 17-35.

CONSUMER BOOK PUBLISHING

9

THE U.S. BOOK INDUSTRY What are the characteristics of the book industry in the United States? How many book establishments exist in this nation? How many individuals were employed by these corporations? How much were they paid? What was the value of shipments of these houses? Did book publishing experience any periods of economic instability? The U.S. book industry grew at a rapid, striking rate between 1967 and 1997 in spite of recessions and a period of enfeebling "stagflation." According to the U.S. De­ partment of Commerce's Bureau of the Census, there were 2,684 book-publishing es­ tablishments in this nation in 1997 (the last year Commerce released data), up 162.62% (jumping from 1,022) in the total number of establishments tracked by the Department between 1967 and 1997. The R. R. Bowker Company, publisher of The Literary Market Place and Books in Print, regularly tracks approximately 53,000 book publishers in this country. Why is there a discrepancy between the U.S. Government's tallies and Bowker's? To be counted by the Commerce Department, a publisher had to meet a mini­ mum level of business activity, which included: (1) at least one paid employee dur­ ing the year; (2) an employer identification number; and (3) book publishing as its primary business function. The net result was that about 50,000 "book publishers" in this nation could not meet these standards. To be consistent, Commerce's figures are used here, even though data on many small but functioning book publishers will be excluded. The total number of book industry employees increased from 52,000 in 1967 to 89,898 in 1997 (up 72.88%). This growth reflected a surge in title output and con­ sumption, strong increases in critically important library purchases, and a dramatic expansion in paperback demand in and after the 1970s. Did payrolls keep pace with this rise in employment? The Commerce Department's data indicated that the book industry's payroll increased 833.85%, growing from $390 million in 1967 to $3.64 billion in 1997. Traditionally, the average annual wage in the industry has lagged behind other components of the communications in­ dustry, especially periodicals (because of revenue streams from paid circulation, newsstand sales, and advertising space income). Frequently, magazines realized profits from the sale of mailing lists, the administration of merchandise programs, and, notably among business magazines, the management of trade shows. Starting with a book industry average wage of $7,498 in 1967, the industry in­ creased compensation levels, topping $26,531 in 1987 (+253.84%) but declining to $24,683 in 1997, a sign of some instability in this industry. Did book industry shipments keep pace with wage increases and inflation? The Department of Commerce revealed that the total value of book product shipments, which excludes all nonbook products (e.g., audio cassettes) or merchandise (i.e., games and puzzles) grew 444.73%, increasing from $2.13 billion in 1967 to over $11.6 billion in 1987; by 1997 it topped $22.65 billion. New capital expenditures (a barometer of current and future production) sustained a 740% rate of growth. Many book publishers purchased new office equipment, including much-needed com­ puter systems for editing, data management, accounting, royalties, and payroll.

10

CHAPTER 1

Some constructed modern, computerized warehouse facilities to expedite the deliv­ ery of books. Other firms invested heavily in enterprise software, able to monitor all aspects of a firm's operations from the receipt of a manuscript to the payment of roy­ alty fees. Table 1.1 outlines the industry's expansion during the years 1967-1997. Did inflation bloat the industry's numbers? Comparing the data in Table 1.1 with the Consumer Price Index (the CPI) for all urban consumers (issued monthly by the U.S. Bureau of Labor Statistics; this index measures inflation in this nation), the book industry's pattern of growth for product shipments between 1987 and 1997 topped 94.74%; the CPI increased 41.29% during those years, indicating real and not inflated progress. Growth Since 1996 An analysis of data released by the Book Industry Study Group, Inc. (BISG; a New York-based research organization representing a cross section of the book commu­ nity) revealed that books posted a 29.38% growth in net publishers' revenues be­ tween 1996 and 2002. Total amounts increased from $20.15 billion in 1996 to over $26 billion by 2002. The BISG's projections for 2003-2007 indicate a positive period of expansion of 18.33%, reaching $30.8 billion in 2007. Table 1.2 lists data for net publishers' revenues for 1993 through 2007. Book Publishing Establishments Since 1639 book publishinghas been clustered primarily on the east coast (mainly in the port cities of New York, Boston, and Philadelphia) and in Chicago. New York City became the center of the industry in the 19th century. Yet the United TABLE 1.1 The Book Industry in the United States: 1967-1997 (Millions of Dollars) Category

1967 1967

1977 1977

1987 1987

1997 1997

Establishments Employees

1,022

1,745 59,500

13,952 3,262

2,298 70,100 1,860 26,531 9,111

2,684 89,898 3,642 24,683 16,627

Value added by manufacturing

$ $

52,000 390 7,498 1,457

Value of product shipments

$

2,135

5,008

11,630

22,648

New capital expenditures

$

55

80

240

462

Payroll Annual payroll per employee

$

830

Source: U.S. Department of Commerce, Bureau of the Census, 7997 Censusof Manufacturers: Newspapers, Periodicals, Books, and Miscellaneous Publishing (Washington, DC: USGPO, 1999), p. 27A-6.

CONSUMER BOOK PUBLISHING

11

TABLE 1.2 The Book Industry 1988-2007 (Millions of Dollars) Year

Value of shipments

Employment

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003* 2004* 2005* 2006* 2007*

17,394 18,178 19,485 20,148 20,973 22,341 23,759 24,577 24,564 26,068 26,781 27,695 28,744 29,783 30,845

76,000 77,000 N/A N/A 89,898 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Sources: U.S. Department of Commerce, International Trade Administration, U.S. Industrial Outlook 1994 (Washington, DC: USGPO, 1994), pp. 24–11;Book Industry Trends 1995 (New York: Book Indus­ try Study Group, Inc., 1995), pp. 2–4. Book Industry Trends 2003 (New York: Book Industry Study Group, Inc., 2003), p. 32. *An Asterisk indicates a BISG Projection.

States witnessed a rather dramatic population migration away from eastern and midwestern urban centers after World War II, and the pace of this movement accel­ erated in the 1960s as individuals moved westward and southward. Did New York continue to hold its hegemony over the industry? Was there a change in the regional distribution of book establishments in this country? According to the 1997 Census of Manufacturers, more book publishers (380) called California home than any other state in the country, followed by New York, Illinois, Texas, and Massachusetts. However, New York was home to the largest book publishers generating the majority of all revenues. California was the largest book publishing state, with an impressive 375 corpo­ rations. The other principal states were Illinois, New Jersey, Massachusetts, and Florida. Pennsylvania was a distinct seventh. Table 1.3 outlines the growth in the number of book publishing establishments during these years.

TABLE 1.3 Book Publishing in the United States: Regional Market Share of Establishments 1987-1997

1997

Percent of total

Percent change 1987-1997

—

17

Region

1987

Percent of total

All States

2,298

—

2,684

Arizona California

61

2.27

375

16.32

380

14.16

Colorado Connecticut

69 72

2.57 2.68

District of Columbia Florida

18

0.67

86

3.74

3.80

Georgia Illinois

102 39

135

5.87

148 34

5.51 1.27

22

0.82

18

0.67

Louisiana

13

0.48

Maine

25

0.93

115 62

4.28

Indiana Iowa Kentucky

Massachusetts Michigan Missouri Nebraska New Hampshire New Jersey

91

112

New York

398

3.96

69 100

19

1.45 10

26

9

2.31 1.75 0.34

20

0.75

4.87

97

3.61

-13

17.32

329 70

12.26

-17

68

2.53

24

0.89 1.79

47

North Carolina Ohio Oklahoma Oregon Pennsylvania Tennessee Texas

1

3

4.32

48 80

2.61

2.98

43

1.60

141

5.25

41 (continued)

12

CONSUMER BOOK PUBLISHING

13

TABLE 1.3

Region

1987

Percent of total

(continued)

1997

Percent of total

Utah

34

1.27

Virginia

54

2.01

81 411

3.02

Washington Wisconsin

Percent change 1987-1997

1.53

Sources: U.S. Department of Commerce, Bureau of the Census, 7987 Census of Manufacturers: News­ papers, Periodicals, Books, and Miscellaneous Publishing (Washington, DC: GPO, 1989), pp. 27A-12 through 27A-13; U.S. Department of Commerce, Bureau of Census. 7997 Census of Manufacturers: Newspapers, Periodicals, Books and Miscellaneous Publishing (Washington, DC: GPO, 1999), p. 7.

Payroll

What were the payroll patterns? New York, long known for its high cost of doing business, traditionally paces the nation with the highest salary scales in almost ev­ ery industry. In 1987, New York paid out 33.77% of all book publishing wages in the nation; California was a distant third. New York's employment sails were trimmed, somewhat, by 1997 to only a 26.6 share. California also sustained a de­ crease. Table 1.4 outlines these trends. CASE STUDY: THE TITLE OUTPUT OF UNIVERSITY PRESSES AND COMMERCIAL ACADEMIC PUBLISHERS IN

2001

What types of new scholarly books are published in the United States? How many new books are released in specific book categories? What is the suggested retail price for these titles? Yankee Book Peddler (YBP) generates one of the best complete datasets for new title output. YBP supplies academic books to academic and public libraries, so their bibliographical tallies are exceptionally accurate. Please note that YBP utilized the Library of Congress (LC) book classification system as well as U.S. dollars in their reports. A review of their totals for academic books sheds light on the types of books publishers and editors at both university presses (e.g., Stanford, Northwestern, and Temple) and commercial academic publishers (e.g., W. W. Norton, Lawrence Erlbaum Associates, and Blackwell) published in 2001.

TABLE 1.4 Book Publishing in the United States: Regional Market Share of Annual Payroll (Millions of Dollars) 1987-1997

Region All States

1987 1,859.8

Percent of total —

Arizona California

164.3

8.83

1997

Percent of total

Percent change 1987-1997

3,643.0

—

96

12.4

0.34

306.4

8.41 2.22

Colorado

80.8

Connecticut

50.4

1.38

6.2

0.17

75.5

2.07

District of Columbia Florida

14.1

0.39

225.0

6.18

Indiana

68.4

1.88

Iowa

37.0

1.02

Kentucky

12.6

0.35

Louisiana

3.3

0.09

Maine

3.7

0.10

265.4

7.29

Georgia Illinois

Massachusetts

171.0

109.0

9.19

5.86

Michigan

38.7

1.06

Missouri

136.7

3.75

Nebraska

7.1

0.19

New Hampshire

5.1

0.14

86

32

143

New Jersey

116.2

6.25

235.9

6.48

103

New York

628.1

33.77

969.1

26.60

54

32.8

0.90

North Carolina

127.9

3.51

Oklahoma

13.7

0.38

Oregon

17.7

0.49

Ohio

Pennsylvania

44.6

2.4

157.7 34.4

4.33 0.94

36.2

4.32

163.8

4.50

Tennessee Texas

352 (continued)

14

CONSUMER BOOK PUBLISHING TABLE 1.4

Region

1987

Percent of total

15 (continued)

1997

Percent of total

Utah Virginia

5.6

0.15

43.5

1.19

Washington

19.0

0.52

Wisconsin

32.3

0.89

Percent change 1987-1997

Sources: U.S. Department of Commerce, Bureau of Census. 7987 Census of Manufacturers: Newspa­ pers, Periodicals, Books and Miscellaneous Publishing (Washington, DC: USGPO, 1987), pp. 27 A-10 through 27 A-11; U.S. Department of Commerce, Bureau of Census. 1997 Census of Manu­ facturers: Newspapers, Periodicals, Books and Miscellaneous Publishing (Washington, DC: GPO, 1999), pp. 13-15.

University Press Books Among all university presses, the average suggested retail price in 2001 was $46.21 for the 10,130 titles released by these presses. The largest LC subcategory in 2001 was the eclectic "language and literature," representing 22.87% of all university press output. The two largest areas in "language and literature" were American lit­ erature books (637 titles; average suggested price of $30.45) and English literature (505; $43.12). The other major subcategories included "social science-businesssociology" (1,357 new titles; $45.33 average suggested retail price; 13.4% of the total output), "philosophy and religion" (1,105; $43.78; 10.91%), and history (862; $50.01; 8.51%). University presses were also active in a number of highly esoteric book catego­ ries, including "manners and customs" (37 titles; average suggested retail price of $44.67), animal culture (47; $67.58), and pathology (11; $111.07). Many college and university faculty members (especially in the humanities and certain areas in the social sciences) seek out university presses for their research be­ cause of the pressing need to publish scholarly works at these presses in order to get hired, to receive tenure or a promotion, and to obtain salary merit increases. Some deans and academic vice presidents view university presses more "positively" than commercial publishers in the rigorous tenure process. Overall, university presses tend to issue fewer titles, have smaller print runs (often under 1,500), and pay lower advances (against royalties) and royalties than commer­ cial publishers. The primary trade-off for faculty members is unequivocally more at­ tention and hopefully a better final product versus the potential for more money. A related benefit centers on the fact that some universities "prefer" books published by a university press when evaluating a faculty member for tenure and promotion.

16

CHAPTER 1

Commercial Academic Publishers

Commercial academic publishers released 80.19% of all academic books pub­ lished in the United States and Canada (41,016; average suggested retail price: $60.99). These presses tend to be big, have access to larger sums of capital for new product development, royalties, and new capital expenses ("capital deepening" to our colleagues in economics), spend more time (and funds) to market new titles (es­ pecially at scholarly conferences), have dedicated field sales representatives (uni­ versity presses tend to rely on commissioned sales reps who work for many publishers), advertise rather extensively in key scholarly journals, and utilize broadly based direct marketing campaigns. Because of their large title output, these presses tend to dominate more book subcategories than university presses in the United States. Some of the largest subcategories include: economics, business, sociology, and the social sciences (6,034; $59.22 average suggested retail price; 14.71% of all new titles); mathe­ matics and the sciences (5,111; $87.95; 12.46%); medical-dental (3,769; $75.38; 9.19%); philosophy and religion (3,370; $49.52; 8.22%); and history (2124; $50.44; 5.18%). These commercial academic publishers have the ability to perform a number of substantive services for their authors and readers. Overall, the best publishers con­ stantly gather information about new changes in theories and technologies and the needs of the marketplace. They deal closely with academics and buyers at the large chains to insure that changes in the marketing environment are observed and scruti­ nized. They monitor effectively their competitors' products, manage brands (and brand extensions), design global marketing plans, and generally have rather sophis­ ticated online marketing services. Their sales representatives call frequently on fac­ ulty members and bookstore buyers. As for new technology, many of these houses have been at the forefront of adopting enterprise software to monitor completely the flow of a book, from manuscript to royalty payments. Their ability to target "slow payers," penetrate a market with superb products (sometimes but not always at competitive prices), and purchase paper in bulk separates them from the majority of university presses. They post profits often in the 18% to 22% range, but some houses often exceed that range. They are efficient, ubiquitous, and stiff competitors for authors and manuscripts. CASE STUDY: THE ACADEMIC LIBRARY MARKET FOR BOOKS

Libraries buy a significant number of books each year, and their percentage of net publishers' revenues remained relatively constant between 1996 and 2001: 1996, 8.89%; 1997, 8.91%; 1998, 8.88%; 1999, 8.89%; 2000, 8.87%; and 2001, 8.83%. By 2002, it declined to only 8.24%. However, a review of BISG data on total library budgets also revealed slippage, and in some years sharp slippage, in the budgetary allocations for books: 1996,48.43% of all materials expenditures went for books;

CONSUMER BOOK PUBLISHING

17

1997,47.73%; 1998,47.41%; 1999,47.1%; 2000,46.65%; and 2001,46.27%. By 2002, the tally sank to 45.9%.8 Libraries have been adversely affected by draconian increases in serials costs (i.e., the subscription costs for scholarly journals and periodicals). As the cost for serials surged (a phenomenon called the "serials crisis" by librarians and publish­ ers), fewer dollars were available for scholarly books (generally called "mono­ graphs"). The BISG data revealed that whereas "all library" (i.e., public, school, university, and special libraries) spending for materials (i.e., nonbooks) increased more than 4.8% between 2000 and 2002, the percentage of funds allocated for books lagged (+4%). This gap is projected by BISG to remain essentially intact through 2007 in the "all library" category.9 This problem is acute in the college and university library market, which has tra­ ditionally accounted for more than one out of every four dollars spent by libraries on books. By 2002, this figure dropped to about 23%. Compounding this situation is the inevitable need of libraries to acquire and main­ tain sophisticated computer hardware and software to automate check-out and overdue-book charging systems, replace card catalog systems, and provide computer databases for patrons. Training costs associated with existing and upgraded computer systems subtracted additional dollars away from books in already tight budgets. A review of data released by the Association of Research Libraries (ARL) for their 46 members revealed the seriousness of this "serials crisis" for book publish­ ers (please note that ARL was unable to gather annual data for all 46 members in ev­ ery category). Between 2000 and 2001, the average ARL member had a base budgetary increase of 5.8%. Table 1.5 outlines this trend. The increase for elec­ tronic expenditures was a 13.5% between 2000 and 2001, with the University of Ar­ izona, Johns Hopkins, and the University of Texas at Austin all posting increases beyond the 20% mark. Table 1.6 outlines these trends. A review of serials and book allocations illuminates the severity of this problem. Academic libraries are spending fewer dollars for books. The ARL average budget was split 62.2% for serials and only 33.5% for scholarly books; rather small amounts were budgeted for binding costs. However, a number of libraries exceeded this "62-33" ratio, including Arizona State University (75.8% for serials), the Uni­ versity of British Columbia (73%), Rutgers University (73%), and the University of Washington (76.4%). Table 1.7 outlines these trends. The end result for U.S. book publishers was unsettling. Fewer library book dollars meant fewer book sales. Some industry experts estimate that the worldwide market for the average scholarly book is only 300 units. Inasmuch as the BISG estimates for 2003 through 2007 indicate additional slippage in academic library book allocations, it is likely that many publishers will be compelled to reevaluate (perhaps downward) book title output,a development that could have a catastrophic impact on scholarship, the financial health of some U.S. publishers, and the reading population. Book Industry Study Group, Inc., Book Industry Trends 2003 (New York: Book Industry Study Group, Inc., 2003), pp. 229-234. 9Ibid.

TABLE 1.5

00

Library Budget Survey for Institutions, 2000–2001 Institution name

2000 Library expenses

2001 Base increase

2007 Budget

2007 Budget one

$17,736,178 17,534,845 20,070,847

0.0% 1.0%

$8,043,400 6,218,464

5.9%

7,599,770

33,657,000

4.0%

0

11.7%

California, Los Angeles Chicago

16,086,769 33,317,933 22,315,487

11,106,000 500,400

7.8%

11,334,593

8.7%

11,334,593

2,244,639 337,141

Columbia Cornell

37,134,503

6.0%

10,235,367

0

Duke

17,330,930

4.6%

6,650,460

240,000

2,798,982

9.6%

10,287,886

1,552,984

Indiana

23,450,135

8.9%

Iowa

17,791,096

5.0%

7,308,285 7,683,982

Arizona Arizona State British Columbia California, Berkeley California, Davis

$300,000 1,007,616 0

Florida Georgia Harvard Illinois, Urbana

2001 Budget

2001 Budget one

Institution name

2000 Library expenses

Johns Hopkins

24,302,865

5.8%

9,762,045

Kansas

12,322,110

7.2%

5,152,488

234,102

Michigan

35,866,956

6.5%

14,251,312

0

28,694,958

7.0%

0

Northwestern

16,212,253

5.2%

6,211,740

501,188

Ohio State

20,706,001

5.7%

8,484,722

641,705

Pennsylvania

37,923,952

5.8%

9,277,741

Pennsylvania State

32,217,056

2001 Base increase

Michigan State Minnesota New York North Carolina

10,393,892

200,000

6,140,703

1,081,500

Pittsburgh Princeton Rutgers

23,084,234

1.6%

Southern California Stanford SUNY-Buffalo so

(continued)

TABLE 1.5 Institution name Texas

2000 Library expenses

(continued)

2001 Base increase

2001 Budget

2007 Budget one 2,150,000

21,026,857

4.0%

8,274,486

14,588,450

NA

7,567,213

Wisconsin

25,465,127

6.8%

6,473,766

Yale

47,251,520

Texas A&M Toronto Virginia Washington

Center for Research Libraries Library of Congress National Agricultural Library National Library of Medicine

34,978,000

5.0%

New York Public Library

47,913,722

5.0%

10,673,816

26,173,621

5.8%

8,632,153

Smithsonian Institution Average

Source: Association of Research Libraries, Washington, DC.

TABLE 1.6 Library Budget Survey for Institutions, Electronic Budgets, 2000–2001 Institution Name

2000 Electronic expenditures

% of budget

2001 E-Budget allocation

$1,879,533

23.3%

$1,284,398

Arizona State

1,343,877

18.4%

1,261,673

British Columbia

1,351,743

17.5%

1,209,036

California, Berkeley

525,619

5.0%

600,000

California, Davis

197,413

3.4%

206,389

1,183,947

12.4%

1,283,000

Cornell

1,329,551

12.0%

Duke

1,046,601

15.3%

776,775

887,506

8.7%

577,131

Arizona

California, Los Angeles Chicago Columbia

Florida Georgia Harvard Illinois, Urbana Indiana 2

(continued)

22 Institution Name

TABLE 1.6 2000 Electronic expenditures

(continued) % of budget

2001 E-Budget allocation

Iowa

1,104,934

16.0%

Johns Hopkins

2,007,479

21.0%

568,848

11.8%

810,423

2,000,926

14.5%

2,159,657

890,397

15.0%

251,126 970,000

Kansas Michigan Michigan State Minnesota New York

911,000

North Carolina Northwestern

764,998

10.0%

Pennsylvania

1,311,979

14.8%

Pennsylvania State

1,307,022

15.0%

1,819,317

1,019,978

13.8%

2,300,000

Ohio State

Pittsburgh Princeton Rutgers Southern California (continued)

Institution Name

2000 Electronic expenditures

% of budget

2001 E-Budget allocation

Stanford SUNY-Buffalo Texas

1,905,585

21.6%

1,500,000

1,270,354

15.0%

NA

909,064

13.3%

Texas A&M Toronto Virginia Washington Wisconsin Yale

1,370,000

Center for Research Libraries Library of Congress National Agricultural Library National Library of Medicine New York Public Library

718,857

3.0%

825,000

1,018,197

9.0%

1,020,000

1,163,100

13.5%

1,098,051

Smithsonian Institution Average

2 3

Source: Association of Research Libraries, Washington DC.

TABLE 1.7 Library Budget Survey for Institutions, Percent of Budget By Type, 2001 Institution name

Serials

Mono

Binding

Arizona

41.0%

29.0%

2.1%

Arizona State

75.8%

37.9%

2.9%

British Columbia

73.0%

27.0%

0.0%

California, Berkeley

52.0%

48.0%

7.0%

California, Davis

60.6%

34.7%

4.7%

California, Los Angeles

56.3%

38.1%

5.6%

Chicago

64.3%

35.7%

Cornell

54.0%

34.0%

1.0%

Duke

63.1%

33.5%

3.5%

Illinois, Urbana

62.0%

31.0%

4.0%

Columbia

Florida Georgia Harvard Indiana

63.0%

37.0%

3.5%

Iowa

65.0%

32.0%

3.0%

Johns Hopkins

65.0%

35.0%

Kansas

64.6%

32.5%

2.9%

Michigan

59.3%

38.2%

2.6%

53.0%

33.0%

5.0%

Northwestern

57.5%

39.9%

2.6%

Ohio State

67.7%

32.3%

0.0%

Pennsylvania

63.1%

36.6%

Pennsylvania State

58.0%

22.0%

4.0%

73.0%

27.0%

2.6% (continued)

Michigan State Minnesota New York North Carolina

Pittsburgh Princeton Rutgers

24

CONSUMER BOOK PUBLISHING

25

TABLE 1.7 Institution name

(continued)

Serials

Mono

Binding

76.4%

21.5%

3.1%

62.2%

33.5%

3.2%

Southern California Stanford SUNY–Buffalo Texas Texas A&M Toronto Virginia Washington Wisconsin Yale Center for Research Libraries Library of Congress National Agricultural Library National Library of Medicine New York Public Library Smithsonian Institution Average

Source: Association of Research Libraries, Washington, DC.

CHAPTER TWO

Book Title Output, Categories, Sales, Returns, and the Channels of Distribution How many books are published in the United States? How many book categories are there? How many titles are returned by booksellers and distributors? Why are there book returns? What are the major channels of book distribution in the United States? TITLE OUTPUT: 1880–2002 Jean Peters explored the United States frontlist (i.e., a new title) output in Book In­ dustry Statistics From the R. R. Bowker Company. Backlist titles were excluded; a backlist book is an old title (generally more than 9 months old) that remains in print and continues to sell months and possibly years (and sometimes decades) after its original publication. There are more than 3.5 million distinct titles in print accord­ ing to Bowker's definitive Books In Print. Peters revealed that more than 1.8 million new titles were issued between 1880 and 1989. Of that total, nearly half (49.56%; 913,197 books) were issued by U.S. book publishers between 1970 and 1989: 1970–1979, 402,911 books; and 1980–1989,510,286. As for the 1990s, title output surged, exceeding the 700,000 mark and setting new records. Between 1997 and 2001, title output averaged almost 120,000 titles annually, and in 2002 the total number gushed to almost 150,000.1 'jean Peters, "Book Industry Statistics From the R. R. Bowker Company," Publishing Research Quarterly 8(Fall 1992): p. 18; and Andrew Grabois, "Book Title Output and Average Prices: 2001 Final and 2002 preliminary Figures," in The Bowker Annual: Library and Book Trade Almanac 2003, 48th edition, Dave Bogart (Ed.) (Medford, NJ: Information Today, Inc., 2003), pp. 512–517. For a response to Peters' research study, see John P. Dessauer, "The Growing Gap in Book Industry Statistics," Publishing Research Quarterly 9(Summer 1993): pp. 68–71. Also see Brian Bergman, "Publish and Perish," Maclean's, 17 October 1994, p. 50; John P. Dessauer, "U.S. Retail Book Sales by Subject," Book Re­ search Quarterly, 2(Winter 1986–1987): pp. 15-17.

26

THE CHANNELS OF DISTRIBUTION

27

NET PUBLISHERS' REVENUES AND NET PUBLISHERS' UNITS

Book Industry Trends 2003 (published by the Book Industry Study Group; BISG) revealed that $162.43 billion worth of books, representing 17.03 billion copies, were sold by U.S. publishers between 1996 and 2002. BISG utilized net publishers' revenues (i.e., gross dollar sales minus book returns equals net pub­ lishers' revenues) and net publishers' units (i.e., gross unit sales minus returns equals net publishers' units in calculating these totals; subscription reference books were included in these tallies in Book Industry Trends 2003).2 Table 2.1 outlines these trends covering the years 1996-2002 (with historical data for 1989 through 1995). BOOK CATEGORIES

Book Industry Trends 2003 utilized nine distinct book categories: trade (adult and juvenile, fiction and nonfiction; both issued in hardcover and paperback versions); mass-market paperback (fiction and nonfiction); book clubs (fiction and nonfiction; hardcover and paperback); mail order books (fiction and non­ fiction; hardcover and paperback); religious (mainly nonfiction; hardcover and paperback); professional (business, law, scientific, technical, and medical; all nonfiction; hardcover and paperback); university press (almost entirely nonfic­ tion; hardcover and paperback); Elhi (elementary and high school textbooks, re­ lated readers, etc.; fiction and nonfiction; hardcover and paperback); and college (textbooks, related readers, etc.; fiction and nonfiction; hardcover and paperback). Trade Books

Most Americans read trade books and bestsellers. In 1996, trade books held the largest market share in both dollar ($5.64 billion, representing 29.03% of all book sales in this country; subscription reference books were excluded in all of the fol­ lowing calculations; all numbers were rounded off) and unit sales (845 million units; 35.55% of all units sold). Adult trade book sales exceeded the $4.2 billion mark (slightly more than a 21.5% market share), with hardcovers capturing more than $2.57 billion and paperbacks in the $1.6 billion range. This is also the most vis­ ible book niche as fiction and nonfiction bestsellers traditionally come from this

Book Industry Study Group, Book Industry Trends 2003 (New York: Book Industry Study Group, 2003), p. 32; also see Rajeev K. Tyagi, "Cost Leadership and Pricing," Economic Letters, 72,2(August 2001), pp. 189-193; Lindsay Meredith and Dennis Maki, "Product Cannibalization and the Role of Prices," Applied Economics, 33, 14(2000), pp. 1785-1793.

28

CHAPTER 2

TABLE 2.1 Total Book Sales: 1989-2007 (Millions of Dollars; Millions of Units)

Year

Net dollar sales

Percent change from previous year

Net unit sales

Percent change from previous year

1989

14,110.8

+11.18

2,142.0

+6.92

1990

14,855.2

5.28

2,144.3

0.11

1991

15,568.7

4.80

2,181.0

1.71

1992

16,329.1

4.88

2,192.3

0.52

1993

17,394.4

6.52

2,221.9

1.35

1994

18,178.1

4.51

2,274.4

2.36

1995

19,485.0

7.19

2,337.6

2.78

1996

20,147.7

3.40

2,378.3

1.74

1997

20,972.7

4.09

2,335.4

-1.80

1998

22,340.6

6.52

2,413.5

3.34

1999

23,758.6

6.35

2,504.9

3.79

2000

24,577.2

3.45

2,493.2

–0.47

2001

24,564.0

–0.05

2,411.3

-3.28

2002

26,068.0

6.12

2,488.3

3.19

2003*

26,781.0

2.74

2,475.0

–0.53

2004*

27,695.0

3.41

2,493.0

0.73

2005*

28,744.0

3.79

2,503.0

0.40

2006*

29,783.0

3.61

2,528.0

0.96

2007*

30,845.0

3.57

2,577.4

1.94

Source: Book Industry Trends 1995 (New York: Book Industry Study Group, 1995), pp. 2-4 through 2-9; Book Industry Trends 2003 (New York: Book Industry Study Group, 2003), pp. 32-36. *Indicatesa BISG projection.

group. Trade titles almost always include a cluster of "celebrity books" (i.e., a title by or about a well-known personality). Juvenile titles comprise the second part of the trade list. Juvenile hardcover and paperback sale tallies declined steadily in the mid-1990s, revealing a glut of titles on the market. BISG reported that $ 1.45 billion (7.45% share) and 379 million units

29

THE CHANNELS OF DISTRIBUTION

were sold in 1996.3 Hardcover totals stood at $867.7 million with paperbacks at $579.9 million. Table 2.2 outlines these trends. By 2002, trade books jumped to $6.9 billion (+22.8% since 1996). Adult trade was up 21.43%, and juvenile surged 26.66% (triggered by the phenomenal success of the Harry Potter series). BISG's estimates for 2003-2007 in the trade sector are rather consistent. Modest growth trends are projected in 2003 for trade, adult, and juvenile; as for 2004–2007, relatively small gains are anticipated. Table 2.3 outlines these trends. Mass-Market Paperbacks

Mass-market paperbacks are popular, ubiquitous, and relatively inexpensive. In 1996 they accounted for $1.55 billion in sales (an 8% market share) but 527.2 milTABLE 2.2 Publisher's Net Dollar Sales 1996-2002 (In Millions) Categories

7996

1997

1998

7999

2000

2001

2002

Trade total Adult trade

5,643.0 4,195.4

5,774.1

6,792.1

6,540.8

Juvenile trade 1,447.6

1,378.8

4,586.6 1,954.2

Mass market PB

1,555.1

1,433.8

1,489.1 1,514.1

5,083.9 1,708.2

6,369.9 4,553.7

6,929.80

4,395.3

6,148.9 4,659.8

1,552.0

Book clubs

1,091.8 579.5 1,093.4 3,985.0 390.0

1,143.1

1,209.4

521.0 1,132.7 4,156.4 400.0

470.5 1,178.0 4,418.7 430.0

1,272.0 412.8 1,216.9 4,720.4

2,618.0 2,485.8

3,005.4 2,669.7

3,315.0 2,888.6

Mail order Religious Professional University press Elhi College

1,816.2

5,096.30 1,833.50

1,559.2

1,546.6

1,726.80

1,291.6

1,463.30 333.50

450.0

431.8 1,246.9 5,129.5 450.0

1,334.5 353.9 1,305.1 4,739.1 443.0

1,262.20 5,140.10 444.00

3,424.7 3,128.8

3,881.2 3,237.1

4,183.6 3,468.9

4,073.30 3,898.20

Source: Book Industry Trends 2003 (New York: Book Industry Study Group, 2003), p. 32.

Susan B. Neuman, Donna C. Celano, Albert N. Greco, and Pamela Shue, Access for All: Closing the Book Gap for Children in Early Education (Newark, DE: International Reading Association, 2001), pp. 12–21; Richard F. Abrahamson and Betty Carter, "What We Know about Nonfiction and Young Adult Readers and What We Need to Do About It," Publishing Research Quarterly 8(Spring 1992), pp. 41–54; Richard C. Anderson and Linda G. Fielding, "Children's Book Reading Habits: A New Criterion for Lit­ eracy," Book Research Quarterly 2(Fall 1986), pp. 72-86; and Susan B. Neuman, "Television and Children's Reading Behavior," Book Research Quarterly 1(Spring 1985), pp. 63–67.

30

CHAPTER 2

TABLE 2.3 Publisher's Net Dollar Sales Estimates 2003-2007 (In Millions) Categories

2003

2004

2005

2006

2007

Trade total

7,098.1

7,276.6

7,398.4

7,607.3

7,785.1

Adult trade

5,237.6

5,229.3

5,361.1

5,541.6

5,676.1

Juvenile trade

1,860.5

2,047.3

2,037.3

2,065.7

2,109.0

Mass market PB

1,728.4

1,767.4

1,812.5

1,858.6

1,905.8

Book clubs

1,517.0

1,548.7

1,585.7

1,623.7

1,662.8

Mail order

270.8

235.5

176.9

130.7

71.3

Religious

1,300.6

1,333.3

1,370.4

1,408.3

1,447.0

Professional

5,224.0

5,355.0

5,504.2

5,656.7

5,812.6

458.3

471.5

486.2

501.0

516.1

Elhi

4,114.0

4,261.1

4,599.5

4,845.3

5,171.5

College

4,247.9

4,602.2

4,942.7

5,259.1

5,554.5

University press

Source: Book Industry Trends 2002 (New York: Book Industry Study Group, 2002), p. 36.

lion units (a hefty 22.18% of all U.S. unit sales). The basic mass-market paperback marketing strategy has not changed since the days of Ian Ballantine: low prices (with suggested retail prices often in the $4.99 to $6.99 price range); high volume; high returns; and a "no guts, no glory" selling concept. The mass-market sector posted exceptionally striking results between 1996 and 2001, and net publishers' sales jumped to $1.73 billion (+11.04%). The prognosis through 2007 is upbeat. Sales should reach the $1.91 billion mark. This is a hit-or-miss book category, but its share of the market should hold firm between 2003 and 2007, assuming a steady flow of new titles and reprinted hardcover titles and reasonable prices. Table 2.4 outlines unit sales between 1996 and 2001, reveal­ ing modest growth patterns in the trade book category. Book Clubs Growing from a solid sales revenue base in the early 1990s, tallies for the late 1990s were positive in spite of stiff competition from superstores, discount stores, price clubs, and the Internet. Dollar sales were strong in 1996 ($1.1 billion), and unit sales hovered near the $135 million mark. By 2002, sales reached $1.46 billion (+34.03%). Projections for the rest of the decade (2003 through 2007) are somewhat mod­ est, with 2003 expected to reach $1.51 billion and $1.66 billion in 2007. These projected trends indicate that the highly visible consolidation in the book club

THE CHANNELS OF DISTRIBUTION

31

world (and concomitant marketing and distribution efficiencies) might not be able to handle the increasingly stiff competition from superstores, price clubs, and discount stores. Mail Order Books The mail order book market was in a state of free fall by the mid-1990s, a clear indi­ cation its traditional market was being challenged seriously by superstores, dis­ count stores, and price clubs. Annual dollar sales declined steadily between 1996 ($579.5 million) and 2002 ($333.5 million; –42.5%). Projections through 2007 were at best bleak. Dollar sales were pegged to decline sharply between 2003 ($270.8 million) and 2007 ($71.9 million). This category's share of the market will be barely visibly by 2007. If these projections materialize, it is possible that both the AAP and BISG will stop monitoring this category. Religious Publishing Religious publishing was rather active in the years after 1996. Dollar sales in­ creased between 1996 ($1.1 billion) and 2002 ($1.26 billion; +15.44%). This niche has two distinct categories: (1) bibles, testaments, and so on; and (2) other religious publications. In the bible/testament group, dollar sales topped $294.8 million in 1996 and reached $304.7 million in 2002 (+3.36%). The "other religious" category (inspirational works, biographies, autobiogra­ phies, histories, etc.) outperformed the bible sector, reaching $957.5 million in 2002. The 5-year projection (through 2007) is moderately optimistic for revenues ($1.44 billion; +14.63% since 2002). There will be no substantive change in religion's share of the market. Professional Publishing Professional titles are grouped by BISG into four categories: business; law; medi­ cal; and technical, scientific, and other; however, many industry analysts combine scientific, medical, and technical into one pool (called STM). These are not text­ books; they are titles used by professionals in a business, perhaps loan officers at fi­ nancial service institutions, marketers, or accountants seeking the latest information about changes in generally accepted accounting principles (GAAP). One might assume that most professional titles are issued in hardbound format; the opposite is the case. Of the 163.9 million professional books sold in the United States in 1996,38.87% were hardbound and 61.13% were paperback. By 2002, the totals stood at 38.66% cloth and 61.34% paperback. In 1996, dollar revenues came predominantly from hardback sales ($2.9 billion, representing 72.82% of total revenues of $3.96 billion); paperbacks totaled $1.1 billion. By 2002, cloth totals stood at $3.74 billion (for a 72.8% share of the mar­ ket), whereas paperbacks generated almost $1.4billion in net sales (a27.2% share).

32

CHAPTER 2

TABLE 2.4 Publishers' Total Units, 1996–2001 (Millions of Books) Categories

7996

1997

1998

1999

2000

2001

Trade total

845.0

818.8

860.3

934.7

903.9

845.7

Adult trade

465.1

476.5

496.6

529.0

457.1

442.1

Juvenile trade

379.9

342.3

363.7

405.7

446.8

403.6

Mass market PB

527.2

473.2

483.7

485.1

471.3

454.9

Book clubs

135.5

137.4

141.6

145.7

143.1

143.5

Mail order

96.4

85.7

78.1

65.5

65.3

52.0

Religious

162.8

166.6

170.5

173.7

170.8

174.0

Professional

163.9

165.2

170.3

177.8

186.7

168.1

26.8

28.3

29.7

32.0

31.0

29.5

Elhi

256.9

290.8

302.2

305.4

333.6

348.6

College

162.6

168.2

175.9

183.8

186.3

193.8

University press

Source: Book Industry Trends 2002 (New York: Book Industry Study Group, 2002), p. 40.

This niche will post respectable revenue increases between 2003 ($5.22 billion; $3.8 billion cloth and $1.42 billion paper) and 2007 ($5.8 billion; $4.2 billion cloth and about $1.58 billion in paper), although unit increases will be marginal. Market share will vary slightly between 2003 (19.51%) and 2007 (18.84%). Professional titles have been issued in both print and electronic formats since the 1970s, and the electronic distribution of professional titles in the late 1990s cut into unit and dollar sales. Additional inroads, and perhaps significant ones, will occur by 2007. Interest in business issues and books has grown steadily since 1996 due to a combination of factors: uncertainty about the economy after the Internet bubble burst in April 2000; the recession of March 2001; the impact of the terrorist attack on September 11,2001; concerns about the impact of mergers, acquisitions, and fi­ nancial irregularities (triggered by a number of major accounting scandals) on busi­ ness; and a surge in the total number of students registered in business degree programs and courses. However, this interest translated into increased business book unit sales. Revenues stood at $721 million in 1996, escalating to $1.01 billion in 2002 (+41.07% since 1996). Revenues should top $1.27 billion by 2007. While many editorial writers quibbled over the state of the legal profession in this nation in the mid-1990s, sales of professional law books exploded, jumping from $1.4 billion in 1996 to $2 billion in 2002 (+42.86% since 1996). By 2007, dol­ lar revenues should top $2.4 billion (+20% since 2002).

THE CHANNELS OF DISTRIBUTION

33

Professional medical publishing also grew because of the information explosion in the scientific-technical-medical (STM) field. Unfortunately, much of the growth took place in the electronic (nonprint) arena. Print revenues increased from a healthy $815.8 million in 1996 to $961.2 million in 2002 (+17.82% since 1996). Sales deterioration was evident in this niche, and the prognosis for the future is un­ impressive, ranging between $924.6 million in 2003 to only $970.7 million in 2007. Medical publishing will continue to undergo a metamorphosis as more products are released electronically, cutting deeply into print unit sales. The last component is the eclectic technical, scientific, and other (TSO) area. As long as English remains the primary international language in this field, the sale of American TSO products shoulld post positive (if unspectacular) growth rates be­ cause this niche has been affected by the electronic distribution of TSO content. Results for 1996 ($1 billion) through 2002 ($1.16 billion; + 16%) were barely acceptable. The projected sales through between 2003 ($1.12) and 2007 ($1.19 bil­ lion) will be tiny. Table 2.5 outlines these trends. University Presses University presses publish serious nonfiction titles in a wide array of disciplines from economics to film studies to literature. Twenty-five presses issue titles in orig­ inal fiction (e.g., Southern Methodist and Arkansas) and 28 publish poetry (e.g., Il­ linois and Carnegie-Mellon). The goal of a university press is to transmit TABLE 2.5 Publishers' Total Units, 2003-2007 (Millions of Units) Categories

2003

2004

2005

2006

2007

Trade total

880.8

888.9

881.9

886.9

890.7

Adult trade

485.0

471.1

474.4

481.9

485.1

Juvenile trade

395.9

417.8

407.5

405.0

405.6

Mass market PB

480.1

477.7

477.0

476.6

488.7

Book clubs

154.8

154.9

154.0

154.6

155.4

Mail order

38.1

32.3

23.6

17.2

9.3

Religious

164.6

164.6

165.1

165.7

166.3

Professional

175.3

175.6

175.9

177.3

180.0

28.5

28.6

28.8

29.0

29.2

Elhi

326.5

330.3

345.8

358.9

377.5

College

224.8

238.5

249.6

260.4

268.3

University press

Source: Book Industry Trends 2003 (New York: Book Industry Study Group, 2003), p. 35.

34

CHAPTER 2

knowledge and extend the classroom into the community. Although small in num­ ber (approximately 121 presses belong to the Association of American University Presses; AAUP) and output, their reach is felt in the publishing community because of cutting edge research. BISG relied on AAUP (and not AAP) calculations for their historical data; AAUP annually conducts a complete census of its members, and their totals are considered highly reliable. Total sales were $390 million in 1996; by 1999, this tally topped the $450 mil­ lion mark. Unfortunately, anemic results were posted for 2000 ($450 million), 2001 ($443 million), and 2002 ($444 million). Projections in 2003 ($458.3 million) through 2007 ($516.1 million; +12.61% between 2003 and 2007) are modest. Their net publishers' revenue market share in 2002 was a 1.7% share, and it will hover near that mark through 2007. Unit data also peaked in 1998 (32 million), slipping to 28.5 million in 2002. Unit sales will remain in the 28 million range between 2003 (28.5 million) and 2007 (29.2 million). Table 2.6 outlines unit trends. Elhi

The elementary and high school (Elhi) textbook, reference book, and related mate­ rials market is a big business, accounting for 13.47% of the national dollar sales ($2.6 billion). By 2002, Elhi revenues reached $4.1 billion (and a 15.63% share). TABLE 2.6 Domestic Consumer Expenditures, 1996–2001 (Millions of Dollars) Categories

7996

1997

1998

1999

2000

2001

Trade total

9,502.1

9,700.9

10,349.5

10,787.9

11,514.4

11,051.6

Adult trade

7,002.0

7,339.3

7,791.3

8,141.5

8,690.7

8,448.3

Juvenile trade

2,500.1

2,361.6

2,558.2

2,646.4

2,823.7

2,603.3

Mass market PB

2,408.3

2,220.4

2,348.0

2,456.7

2,622.2

2,602.0

Book clubs

1,061.4

1,111.5

1,176.0

1,233.1

1,316.2

1,368.9

Mail order

598.6

538.7

486.5

553.1

590.3

551.4

Religious

1,890.4

1,958.3

2,037.0

2,150.5

2,295.4

2,413.4

Professional

4,277.3

4,464.7

4,750.9

4,958.6

5,292.7

4,869.9

439.8

451.0

484.8

507.2

507.1

499.4

Elhi

2,531.7

2,910.7

3,215.6

3,294.4

3,516.3

3,797.6

College

2,920.0

3,110.2

3,365.0

3,483.1

3,717.8

4,019.8

University press

Source: Book Industry Trends 2002 (New York: Book Industry Study Group, 2002), p. 44.

THE CHANNELS OF DISTRIBUTION

35

Some media critics insist that electronic publishing products will make substan­ tial inroads into the printed Elhi market. In light of the precarious state of education in this nation, tight budgets, a changing student population in many urban centers, and a national average of 15 students per classroom computer, it seems difficult to believe that a radical transformation from print to electronic will occur by 2007. Another mitigating factor relates to the need of Elhi students to use printed work­ books and textbooks in order to perform homework assignments. Lastly, educators who seek to rely on adopting electronic publications in a nation that is not 100% computerized will create electronic "haves and have-nots," hardly an acceptable formula from an ethical or legal point of view. For the foreseeable future, the Elhi market is a print market. In all likelihood, BISG's printed book estimates for 2007 sales figures ($5.2 bil­ lion) and unit sales (377.5 million) should be realized (as will its estimated market share totals) because this niche is not ready to go electronic from a technology, eco­ nomic, or public policy point of view. College Textbooks

How can a market survive when the price of textbooks has become astronomical? For example, one of the best marketing textbooks on the market is Kotler's Mar­ keting Management, retailing at $105 (hardcover). Are textbooks pricing publish­ ers out of the market? Will used textbooks cannibalize this market? College professors select texts and other assigned readings, not the consumers who must purchase the item. As long as instructors are not sensitive enough to price issues, the marketplace will determine the retail cost of new (and used) textbooks. Yet the used textbook market, along with other practices (students sharing or copy­ ing textbooks), have made serious inroads into what is a lucrative publishing niche. Electronic published works will penetrate the college textbooks market. A siz­ able number of colleges invested substantial amounts in fiber optic lines and com­ puter centers. A small number of schools insist that every entering student purchase a computer. Textbook publishers wait for the day when they can sell a textbook online rather than printing copies on speculation; although that day will come, the outlook for the rest of the years 2003 to 2007 is certainly optimistic for the defenders of print. As for the past few years, revenues reached $2.49 billion in 1996 and $3.9 billion in 2002, up 56.63%. The BISG outlook for 2003 is $4.3 billion and $5.6 billion in 2007 (+30.76% between 2003 and 2007). Domestic Consumer Expenditures

Net publishers' data records the revenues and unit sales of publishers from all of the channels of distribution (including individuals and institutions). Aggregated do­ mestic consumer expenditures data, on the other hand, reveal consumer purchasing expenditures (and ultimately their decisions).

36

CHAPTER 2

In 1996, domestic consumer expenditures (DCEs) totaled slightly more than $25.6 billion. Trade books accounted for the bulk of all DCEs, reaching $9.5 billion (and a 37.07% share of the entire book market). Adult books topped $7 billion; and the highly mercurial juvenile market stood at $2.5 billion. Professional DCE was in second place with about $4.3 billion (and a 16.69% share). Educational publishing posted strong results: Elhi's $2.5 billion (9.88% share) and college's $2.9 billion (11.39%) indicated great strength in this section. Mass-market followed with $2.4 billion (9.4%). Overall, DCEs increased steadily in the last few years of the 20th century: 1997, $27 billion, +5.48%; 1998, $28.8 billion, +6.67%; and 1999, $30 billion, +4.17%. By 2000, another record was achieved ($32 billion, +6.67%). However, a down­ ward trend began in 2001 when DCEs fell 0.63% to only $31.8 billion because of the impact of the recession and a reduction in discretionary income purchases by consumers. Fortunately, there was a rebound in 2002, reaching $36.6 billion. Table 2.6 outlines these trends. Whereas total DCEs increased 42.85% between 1996 and 2002, more modest increases are projected for 2003 ($37.6 billion, +2.76%) and 2007 ($42.9 billion, +17.47% since 2002). Table 2.7 outlines these trends. U.S. BOOK RETURNS

Can the domestic U.S. book market absorb this outpouring of titles? Even with the emergence of superstores, price clubs, viable global markets, and ubiquitous TABLE 2.7 Domestic Consumer Expenditures, 2003-2007 (Millions of Dollars) Categories

2002

2003

2004

2005

2006

Trade total

12,449.0

12,761.5

12,974.6

13,340.5

13,652.7

Adult trade

9,364.6

9,349.7

9,585.3

9,908.3

10,149.1

Juvenile trade

3,259.2

3,586.4

3,568.9

3,618.5

3,694.5

Mass market PB

2,956.0

3,002.8

3,099.9

3,178.7

3,259.4

Book clubs

2,427.7

2,498.1

2,557.8

2,619.2

2,682.3

Mail order

322.7

280.4

2,374.6

2,434.2

161.9 2,571.2

88.3

Religious

210.6 2,501.9

2,641.9

Professional

5,861.2

6,008.3

6,176.0

6,347.0

6,522.2

540.3

555.9

573.3

592.3

611.1

Elhi

4,522.8

4,681.1

5,027.7

5,323.0

5,681.0

College

5,127.8

5,555.5

5,966.6

6,348.5

6,705.3

University press

Source: Book Industry Trends 2002 (New York: Book Industry Study Group, 2002), p. 44.

THE CHANNELS OF DISTRIBUTION

37

Internet bookselling sites, one must wonder about the elasticity of the marketplace to consume this plethora of new books.4 Between 1995 and 2002, the U.S. book industry drowned in a sea of returns. This meant that a staggering percentage of all books published during those years were returned to America's publishers for full credit, a sad waste of financial and natural resources. This massive return of books seriously undermined the stability of the book indus­ try, causing many publishers to question the efficacy of a system that failed to operate successfully during a period of exceptionally stable business conditions. This was a period, after all, free from high rates of interest or inflation; and, the impact of the 2001 recession or the war against terrorism was felt only in mid- to late 2001. The Publishers' Monthly Domestic Sales reports, issued by the Association of American Publishers (AAP), provided detailed information on gross sales, total re­ turns, and net sales in 12 key market segments. These reports are based on the voluntary submission of confidential information by (approximately) 80 to 90 AAP members each month. These firms, overall, represent a cross section of the entire publishing community, but they account for upwards of 80% of all books sold in this nation. Between 1996 and 2002, the mass-market paperback segment withstood the greatest onslaught of returns, ranging from an unacceptable 42.3% rate in 1995 to a Herculean 50% pace in 2001. The data is clear and unequivocal; this is a hit-driven, "crapshoot" business with staggering title output and equally staggering returns. The adult segment was almost as bad. Hardbound books were returned almost as fast as they were shipped, holding steady with an entrenched return rate in the low to high 30% range. Paperbacks were not quite as disconcerting. Their rates were only in the 20% range. Again, this is a hit-driven business, dependent on hot Hollywood star biogra­ phies and autobiographies, tell-all books, new and established novelists, humor books, and, based on return data, a plethora of forgettable titles. 4 Cross River Publishing Consultants, Inc., "Book Industry Returns: An Analysis of the Problem; A Fo­ cus on Smaller Publishers; and Opportunities for Improvement," A Publishers Marketing Association White Paper; May 25,2000; pp. 1-27; Robert E. Litan and Alice M. Rivlin, "Projecting the Economic Im­ pact of the Internet," American Economic Review, 91,2(May 2001): pp. 313–317; Rachael E. Kranton and Deborah F. Minehart, "A Theory of Buyer-Seller Networks," American Economic Review, 91, 3(June 2001), pp. 485-508; Maarten C. W. Janssen and Rob van der Noll, "Electronic Commerce and Retail Channel Substitution," Tinbergen Institute Discussion Paper; TI 2002-042/1; 2002; pp. 1-39; Rajiv Dewan, Bing Jing, and Abraham Seidmann, "Product Customization and Price Competition on the Internet," University of Rochester, William E. Simon Graduate School of Business Administration; Com­ puter and Information Systems Working Paper #CIS 01 -03; July 2000; pp. 1–11;Yannis Bakos, "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, 43,12(1997), pp. 1676–1692; Maria Arbatskaya, "Can Low Price Guarantees Deter Entry?" InternationalJournal of Indus– trial Organization, 19,9(November2001),pp. 1387–1406; Ziv Carmon and Dan Ariely, "Focusing on the Foregone: Why Value Can Appear So Different to Buyers and Sellers," Journal of Consumer Research, 27(December 2000), pp. 360–670; J. Alba, J. Lynch, B. Weitz, C. Janiszewski, R. Lutz, A Sawyer, and S. Wood, "Interactive Home Shopping: Consumer, Retailer, and Manufacturer Incentives to Participate in Electronic Marketplaces," Journal of Marketing, 61(1997), pp. 38-53; L. Anglada and N. Cornelias, "What's Fair? Pricing Models in the Electronic Era," Library Management, 23, 4(April 2002), pp. 227-233; and Barry L. Bayus and William P. Putsis, Jr., "Product Proliferation: An Empirical Analysis of Product Line Determination and Market Outcomes," Marketing Science 18, 2(1999), pp. 137-153.

38

CHAPTER 2

The juvenile hardbound sector was a bit more stable, helped by library sales, the growing interest of parents and grandparents in reading, and the Potter books. The paperbound segment was far more capricious, dependent on reprints of hardcover titles, school book fair sales, school book clubs, and pricing factors. University press books sustained some deep returns; experts were not sure why, although the used book market and declines in class adoptions were frequently mentioned in 2000 and 2002. However, although these two root causes were indeed contributing to returns, another far more dangerous trend centered on the use of "electronic reserves." Instead of ordering (adopting) a book for a class, perhaps a history of World War II, some faculty members placed chapters (and in some in­ stances entire books) on "electronic reserves" (i.e., the content was scanned into a library computer system, and students could access, read, download, and print this content from a computer in the library, in a dorm, or at home). Library reserves ex­ isted for centuries, but electronic capabilities (especially downloading and print­ ing) enhanced this process and, ultimately, cut into the sale of books, especially university press titles in the 2000-2002 years. Clearly, "electronic reserves" pose a potential threat to both professional and college texts as well as trade books. Eventually textbook houses will be compelled to consider adopting shorter revision cycles (e.g., issuing a textbook every 2 rather than 3 years), a strategy that so far has proven to be ineffective. "Print-on-demand" textbooks (a process whereby an instructor selects chapters from various books in an order he or she deems to be appropriate) offer some hope. The "electronic distri­ bution of content" (probably online) might address effectively what has emerged as a nightmare to publishers and authors. Librarians have defended strenuously electronic reserves; and it remains to be seen if the publishing community can develop some contractual language that would provide a revenue stream from this type of copying of content. Table 2.8 out­ lines these trends. Overall, this data revealed wildly uneven sales patterns in most of the market segments. It appears that some (perhaps many) publishers, editors, and book sales personnel failed to grasp what the market could absorb and overordered print runs or responded to unrealistic sales quotas by convincing bookstore managers that "this title cannot miss." The bottom line was a disaster. What patterns emerged in the net sales of books? The AAP data revealed a lack of stable business cycles. Overall, two of the largest niches (specifically mass-market pa­ perbacks and trade books) posted lamentable numbers between 1995 and 2002. How­ ever, when all of these niches were analyzed, using annual percentage changes, an alarming phenomenon was evident. All 12 segments recorded erratic patterns and steep negative declines, a sign the industry was skating on thin ice. How severe was the glut of book returns? Not one niche was in single digits between 1996 and 2002. The Causes of Book Returns Book printers, binders, and freight companies make a good living because of the overprinting of titles and their returns; publishers and bookstores do not profit be­

THE CHANNELS OF DISTRIBUTION

39

TABLE 2.8 Book Returns as a Percent of Gross Sales, 1995–2002 Categories

7995

1996

1997

1998

1999

2000

2001

2002

Adult trade hardbound

32.2

35.1

36.3

31.5

30.8

34.3

37.5

32.6

Adult trade paperbound

23.5

25.0

23.6

23.6

22.7

23.1

21.9

19.0

Juvenile trade hardbound

17.1

18.7

17.3

16.9

15.6

12.6

17.4

24.9

Juvenile trade paperbound

15.0

18.9

26.4

21.1

24.5

19.8

19.6

26.4

Book clubs

21.8

20.7

25.2

24.7

26.4

27.1

Mail order

19.6

20.0

19.6

205.0

19.7

Religious

— 7.7

10.9

13.6

—

—

—

— — —

— — —

Professional

15.1

17.2

15.5

15.1

16.2

20.5

18.4

19.0

University press hardbound

16.8

19.1

17.6

16.8

18.5

20.6

21.1

25.2

University press paperbound

19.5

22.9

20.3

21.4

20.9

26.4

16.5

25.3

College

21.6

23.1

23.2

23.6

22.8

24.7

15.3

21.9

Note: Data for other book categories not available. Data was unavailable for book clubs, mail order, and re­ ligious for every year. This table is based on the actual experience of the publishers reporting to the AAP Monthly Sales Program. While the publishers may vary slightly from year to year, the reporting is gener­ ally stable; and such reporting variances should not have a major impact on this data. The data are as re­ ported, unweighted, and cannot be added in the form shown here to produce category or industry totals. Source: Book Industry Trends 2002 (New York: Book Industry Study Group, 2002), p. 251.

cause it costs them a significant amount of time and money to pay for books that fail. Authors also abhor the return system because every return represents a lost op­ portunity to reach a reader. If returns are a drag on the economic stability of retailers and publishers and the livelihoods of authors, why do they exist? The bookselling market demands a return policy because bookstore owners are reluctant to buy books by unknown authors, works of serious fiction, and poetry. After all, they posit, why tie up capital, scarce shelf space, and other resources on books that probably will not sell? If you stick to known commodities (the Mary Higgins Clarks of the world) and steady-selling backlist titles, you can make a living. Book publishers are compelled to discount ti­

40

CHAPTER 2

ties and offer a full refund to the bookseller if the book does not "turn" (i.e., inven­ tory turnover). The paperback revolution, which began after World War II, was dependent on the mass distribution of hundreds of new and reprinted titles every month. Some of the early leaders in the "paperbacking" of America were originally in the periodical or newspaper industries; they drew upon their own extensive business experiences to fashion an effective distribution system.5 Magazine distributors were asked to stock book racks in drugstores, bus and train terminals, and five-and-ten-cent stores, the precursors of the Wai-Marts, 7-Elevens, airline terminals, and supermar­ kets of today. Because newspapers and magazines could be returned for full credit, mass-market paperback publishers had to adopt this policy. Do other industries uti­ lize this type of system? In reality very few do, and they are mainly in the perishable food industry. Solutions to Book Returns?

Over the years, many "solutions" have been offered to curb massive returns. Some of them include: (1) increase the discount rate and refuse to accept any returns; (2) keep the current discount structure and refuse to accept any returns; (3) develop in­ centive policies that penalize wholesalers with high return rates; (4) reduce the number of copies printed; (5) control the number of new titles (especially in the lit­ erary fiction category) issued each year; (6) stop or curtail the publication of midlist books; (7) increase the development of attractive, innovative titles well (e.g., cook­ books, etc.); (8) convince book retailers to adopt rational ordering procedures; and (9) curb the puffy rhetoric and aggressive tactics of sales personnel. Perhaps all of these scenarios have merit and will end the return nightmare; per­ haps none of them will work; perhaps it is time to think about adopting and modify­ ing those marketing ideas and practices that do seem to work rather effectively for other industries in this nation. Publishers have never adopted sophisticated marketing theories or research. In fact, publishers conduct very little first-rate marketing research in this business. It just might be time for some of them to read the business books they publish. BOOK SALES BY CHANNELS OF DISTRIBUTION

Book publishers rely on a variety of channels to distribute books in this nation. Many industry analysts have been critical about the entire distribution system, which often adversely affected sales and the ability of consumers to find titles in stock at local bookstores. Overall, the system seems to work because of the prolifer­ 5John Tebbel, Between Covers: The Rise and Transformation of American Book Publishing (New York: Oxford University Press, 1987), pp. 421–438. Also see Leonard Shatzkin, In Cold Type: Over­ coming the Book Crisis (Boston: Houghton Mifflin, 1982), pp. 97-122; and Ronald J. Zboray, "Book Distribution and American Culture: A 150-Year Perspective," Book Research Quarterly 3(Fall 1987): pp.37-59.

THE CHANNELS OF DISTRIBUTION

41

ation of superstores and price clubs, the development of regional and national book distribution firms, and the advent of innovative marketing opportunities (including "800" numbers, the Internet, and Web sites). Supplementing this network is a vast library system able to supply titles to local patrons. Nevertheless, the distribution of books could stand some creative procedures to maximize the availability of more titles to more people. General Retailers The United States is the land of retailing, ranging from small "mom and pop" establish­ ments to national giants (Wal-Mart, Costco, K-Mart, etc.). This vast network of estab­ lishments forms the firm bedrock of one the world's most sophisticated merchandising systems, infrastructure that book publishers cultivated in the last four decades. Traditionally, the retail channel is the largest, most important domestic channel of book distribution in this nation. In 1996, it accounted for $6.8 billion in net publish­ ers' revenues (representing 33.83% of all revenues) and 1.15 billion units (48.78%). By 2002, general retailers accounted for $8.3 billion (34.4% of the market). Barring unforeseen economic downturns, BISG anticipates general retailers to sustain an increase of 122.32% to almost $10.2 billion in 2007. There has been a dramatic shift in book retailing in this nation: independents sustained a draconian erosion in sales, and nonbookstore retail establishments (discount stores, price clubs, and the appealing Internet sector) captured more book sales between 1996 and 2002. The College Market Starting in the 1960s, many college bookstores became general trade bookstores (as well as "general stores" selling computers, music CDs, and clothing). So it is not surprising that book sales to college stores in 1996 topped the $3.1 billion level (276.6 million units), reaching almost $4.2 billion in 2002 (and 304.5 million units). The outlook for 2003-2007 is certainly upbeat, with projected sales of about $4.9 billion and an increase to 407.9 million units in 2007. Libraries and Institutions In spite of declines in book purchases, libraries and institutions remain an excep­ tionally important component of the book distribution system. In 1996, they pur­ chased 4.36% of all books sold in this nation, representing 96.7 million units and $1.78 billion in sales dollars (8.89% of net publishers' revenues). By 2002, they reached the $2.3 billion plateau and 105.2 million units. However, future growth in this market will be sluggish. Libraries have been at the vanguard of the electronic revolution, moving rather quickly at the direct expense of books. This trend will continue unabated through at least 2010, although reliable projections are only available through 2007 from BISG.

42

CHAPTER 2

Schools The elementary and high school book market is gigantic in this nation, and it will re­ tain this position of importance for the next 5 and possibly 10 years in spite of the development of electronic products. Enrollment projections are quite positive, and Washington has committed increased financial support for the Elhi sector, espe­ cially in the reading area. In 1996, schools bought 283.1 million books (for $3 billion); by 2002 these tal­ lies jumped to 364.5 million books and $4.6 billion. The outlook for 2007 is opti­ mistic: $4.9 billion but only 335.1 million units. Direct to Consumers The "direct to consumers" is the second largest dollar channel of distribution in this nation, accounting for $3.7 billion in 1996 ($3.7 billion) and $4.5 billion in 2002. This sector exhibited impressive growth potential in the early to mid-1990s (well before the Internet emerged as a powerful electronic marketing force in society) be­ cause of the development of sophisticated direct marketing techniques (catalogs, effective "merge and purge" direct mail procedures, "800" numbers, etc.). However, the ubiquitous Internet, with some impressive bookselling sites (no­ tably Amazon.com. and, to a lesser degree, BN.com), changed the landscape.6 These two sites, with literally millions of listed titles, quick search systems, a number of appealing attributes ("people who bought this book also purchased ..."), quick and efficient ordering and paying procedures, and fast delivery (some­ times free delivery) convinced many people it was safe and easy to order books on the Internet. The emergence of other net selling sites, many offering deep discounts and used book, contributed to the success of this direct-to-consumer format. Overall, the available data indicated that the Internet accounted for about 5% of all book dollar sales in the U.S. in 2001. In a world filled with mindless Internet hype, the promised gargantuan growth rates in Internet book selling are unlikely to materialize. Some industry experts expect the Internet to reach, at best, 15% of all dollars sales in the U.S. by 2010. A solid $5.6 billion is possible by 2007 and 321 million units. As Internet sales increase, declines in other channels are projected. 6

Eric Brynjolfsson and Michael Smith, "Comparison of Internet and Conventional Retailers," Management Science, 46, 4(2000), pp. 563-585; Karen Clay, Ramaya Krishnan, and Eric Wolff, "Prices and Price Dispersion on the Web: Evidence from the Online Book Industry," Journal of Indus­ trial Economics, 49, 4(December 2001), pp. 521-539; Hugh Sibly, "Price Inflexibility in Markets with Repeat Purchasing," Macroeconomics 23, 3(Summer 2001), pp. 459–475; Rajiv Lal and Miklos Sarvary, "When and How is the Internet Likely to Decrease Price Competition?" Management Sci­ ence, 45(1999), pp. 485-503; and Yuxin Chen and K. Sudhir, "When Shopbots Meet Emails: Implica­ tions for Price Competitions on the Internet," Yale School of Management; Working Paper Series MK Marketing #10; pp. 1-15.

43

THE CHANNELS OF DISTRIBUTION Sales to Wholesalers and Jobbers

One of the most important channels is the invisible but highly significant whole­ salers and jobbers niche (supplying titles to general retailers, colleges, libraries and institutions, schools). Gross sales reached $3.1 billion in 1996 (553.6 million units) and $3.7 billion in 2002 (+19.35%). Units declined to merely 533.7 million in 2002 because of some seismic shifts and consolidations in the independent dis­ tributor sector. While dollars will grow to $4.6 billion in 2007, units are likely to top 577.3. CASE STUDY: THE CHANGING LIBRARY MARKET FOR BOOKS Libraries comprise a significant but declining niche for book sales. A review of the six sales categories tracked by BISG indicated that libraries and institutions generate consistently the highest average dollars-per-book unit. Whereas the na­ tional mean for all books sold in the United States stood at $8.49 per unit in 1996, libraries paid $18.48 per book (a differential of $9.99); this trend continued into 2002 when libraries topped the $21.90 mark (+18.51% since 1996), whereas the national median was $10.52 (a difference of $11.38 per title). Table 2.9 outlines these trends. TABLE 2.9

Publishers' Average Dollars-Per-Unit Sales by U.S. Sales Categories: 1996-2002 Categories

General retailers

1996

1997

1998

1999

6.25

6.38

6.80

6.80

7.00

7.10

12.25 19.42

13.00 20.80

13.00

14.00

20.60

13.50 21.20

21.90

11.90

11.90

12.40

12.70

14.40

14.50

15.10

15.70

5.89 11.32

11.87

2000

2001

2002

College Libraries and institutions School

18.48

18.98

10.52

10.73

Direct to

12.50

13.13

11.31 13.64

2.02

2.18

2.22

2.40

2.40

2.40

10.52

8.49

9.01

9.28

9.81

9.86

10.19

20.02

consumer Other Average total for all books

2.50

Source: Book Industry Trends 1993 (New York: Book Industry Study Group, 1993), p. 2-186; Book In­ dustry Trends 1994 (New York: Book Industry Study Group, 1994), p. 2-186; Book Industry Trends 1995 (New York: Book Industry Study Group, 1995), p. 2-184; Book Industry Trends 2003 (New York: Book Industry Study Group, 2003), p. 212.

44

CHAPTER 2

It appears that whereas consumers were able to take advantage of heavily dis­ counted books at superstores, price clubs, supermarkets, and other retail outlets, li­ braries were captives of a relatively rigid two-tier channel of distribution: buy direct from a publisher or utilize the services of a one-stop, full service distributor. BISG's estimates for 2003 through 2007 indicate that this pattern will not be abated. The dollar gap between the averages for libraries and "all books" will grow from $11.68 in 2003 to $13.40 in 2007 even though the library's overall percentage change be­ tween 1996 and 2007 will be smaller than any of the six categories tracked by BISG. Table 2.10 outlines these trends. Library material expenditures increased 135.59% between 1987 and 2002; how­ ever, book purchases grew at a 142.95% pace. The end result was that books as a percentage of total library expenditures have been shrinking steadily since 1987, when books represented 54.1% of all library expenditures. By 1993, their share barely topped the 50% mark, and it dipped to about 46% in 2002. The prognosis for 2007 is a 44.1% mark. Table 2.11 reports on this library phenomenon. Why did this occur? By the early 1980s, America was deeply immersed in the "information age," and libraries were compelled to change the way they serviced their patrons' diverse information needs.7 Most people need detailed and timely data on a variety of personal or business matters, and serials (magazines and jour­ nals) played a significant role in the efficient transmission of information. So librar­ ies shifted their emphasis from books toward serials in the late 1980s. Traditionally, college and university libraries have been one of the primary con­ sumers of serials, especially in the high visibility scientific, technical, and medical (STM) niche.8 Since 1980, total journal page output and library subscription rates 7

Nicholson Baker, Double Fold: Libraries and the Assault on Paper (New York: Random House, 2001), pp. 33-51; Nicholson Baker, "The Author vs. the Library," The New Yorker, 14 October 1996, pp. 50-62; Jerry L. Salvaggio (Ed.), The Information Society: Economic, Social, and Structural Issues (Hillsdale, NJ: Lawrence Erlbaum Associates, 1989), pp. 6–34; Dennis P. Carrigan, "Publish or Perish: The Troubled State of Scholarly Communication," Journal of Scholarly Publishing 22(April 1991): pp. 131–142; Dennis P. Carrigan, "Research Libraries' Evolving Response to the 'Serials Crisis,'" Journal of Scholarly Publishing 23(April 1992): pp. 138-151; Lawrence J. White, The Public Library in the 1980s: The Problems of Choice (Lexington, MA: Lexington Books, 1983), pp. 1-78; E. J. Josey and Kenneth D. Shearer, Politics and the Support of Libraries (New York: Neal-Schuman Publishers, 1990), pp. 23-51. Also see Richard N. Katz, "Academic Information Management at the Crossroads: Time Again to Review the Economics," Serials Review 18,1–2 (1992): pp. 41–44; Malcolm Getz, "Electronic Publishing: An Economic View," Serials Review 18,1–2 (1992): pp. 25-31;Getz's Public Libraries: An Economic View. Baltimore, MD: Johns Hopkins University Press, 1980; Fay M. Blake, "What's A Nice Librarian Like You Doing Behind a Cash Register?" In User Fees: A Practical Perspective (Ed.), Mir­ iam A. Drake. Littleton, CO: Libraries Unlimited, 1981; John Bendel, '"Looming Colossus' of the Li­ brary World," The New York Times, 11 July 1993, sec. 13 [New Jersey], pp. 1,13. 8Czeslaw Jan Grycz, "Economic Models for Networked Information," Serials Review 18,1–2 (1992): pp. 11–18. Also see Steven Hamad, "Interactive Publication: Extending the American Physical Society's Discipline-Specific Model for Electronic B Publishing," Serials Review 18, 1-2 (1992): pp. 58–61, and Karen Hunter, "The National Site License Model," Serials Review 18, 1-2 (1992): pp. 71-72. U.S ; Scott Bennett, 'The Boat That Must Stay Afloat: Academic Libraries in Hard 1991 Times," Journal of Scholarly Publishing 23(April 1992): pp. 131–137. Also see Paul Evan Peters, "Making the Market for Networked Information: An Introduction to a Proposed Program for Licensing Electronic Uses," Serials Review 18, 1–2 (1992): pp. 19–24; Jerry L. Salvaggio and Jennings Bryant (Eds.), Media Use in the Information Age: Emerging Patterns of and Adoption and Consumer Use (Hillsdale, NJ: Lawrence Erlbaum Associates, 1989).

THE CHANNELS OF DISTRIBUTION

45

TABLE 2.10 Publishers' Average Dollars-Per-Unit Sales by U.S. Sales Categories: 2003-2007 Categories General retailers College Libraries and institutions School Direct to consumer Other Average total for all books

2003

2004

2005

2006

2007

7.30

7.50

7.60

7.90

8.20

14.40

14.80

15.20

15.40

15.80

22.50

23.00

23.50

24.10

25.30

13.10

13.40

13.70

14.00

14.50

16.20

16.60

17.00

17.30

17.50

2.60 10.82

2.60 11.08

2.70

2.70

2.90

11.36

11.60

11.90

Source: Book Industry Trends 1993 (New York: Book Industry Study Group, 1993), p. 2-186; Book In­ dustry Trends 1994 (New York: Book Industry Study Group, 1994), p. 2-186; Book Industry Trends 1995 (New York: Book Industry Study Group, 1995), p. 2-184; Book Industry Trends 2003 (New York: Book Industry Study Group, 2003), p. 212.

for these items have increased dramatically, exceeding significantly the cost of any other published product. Librarians have been hard pressed to keep up with these surging levels. When the cost of a book exceeds $ 100.00, it is cause for alarm, but most STM se­ rials have library subscription prices far in excess of that amount. For example, the average annual subscription to Brain, one of the most prominent journals in its field, topped $15,000.00, a steep price for any library regardless of endowment! This situation triggered a wholesale shift in serials budgets, growing from a 54.63% share of all allocations in 1985 to slightly more than 70.6% in 2007. Although uni­ versity and research libraries are the primary customers for these specialized and critically important periodicals, many public library systems maintain extensive se­ rials subscriptions.9 Tables 2.13 outlines these trends. When queried, journal publishers respond, quite accurately, that information is expensive to collect and costly to disseminate; these economic facts dictate the high library subscription rates for journals, along with a needed and predetermined profit margin. Association-based serials (e.g., The New England Journal of Medi­ cine) tend to have lower subscription prices (because of association subsidies and a tax-exempt status) than periodicals released by profit-making companies unable to obtain subventions and compelled to pay taxes on their revenues. Stephen R. Graubard and Paul LeClerc. (Eds). Books, Bricks & Bytes: Libraries in the 21st Century (New Brunswick, NJ: Transaction Publishers, 1998): vii–xviii.

TABLE 2.11 U.S. Library Purchases: 1987-2007 (Millions of Dollars) Books as a Percent percentage of change from total library previous year budget

Year

Total library material purchases

Percent change from previous year

Book purchases

1987

1,987.5

—

1,075.3

—

53.0 53.4

54.1

1988

2,124.6

6.90

1,125.9

4.71

1989

2,358.4

11.00

1,260.4

11.95

1990 1991

2,507.8

6.33 2.31

1,321.8

4.87

52.7

2,565.7

1,322.9

0.08

1992

2,655.6

3.50

1,354.1

2.36

51.6 51.0

1993

2,808.9

5.77

1,413.7

4.40

50.3

1994

3,014.0

7.30

1,497.5

5.93

49.7

1995

3,244.7

7.65

1,586.3

5.93

48.9

1996

3,452.7

6.41

1,672.2

5.42

48.4

1997

3,669.9

6.29 5.12

1,751.5

4.74

47.7

1,828.9

4.42

47.4

1,914.8

47.1

1,986.2

4.70 3.73

1998

3,857.9

1999

4,065.7

2000

4,258.1

5.39 4.73

2001

4,464.1

4.84

2,066.5

4.04

46.3

2002

4,682.3

4.89

2,149.3

4.01

45.9

2003*

4,911.7

4.90

2,237.2

4.09

45.5

2004*

5,151.2

4.88

2,327.5

4.04

45.2

2005*

5,404.5

4.92

2,421.0

4.02

2006*

5,670.3

4.92

2,518.3

2007*

5,935.5

4.68

2,612.4

4.02 3.74

44.8 44.4

46.6

44.1

Source: Book Industry Trends 1993 (New York: Book Industry Study Group, 1993), pp. 3-28 through 3-30; Book Industry Trends 1995 (New York: Booklndustry Study Group, 1995), p. 3-28; Book Industry Trends 2003 (New York: Book Industry Study Group, 2003), p. 241. *Indicates BISG estimate.

46

TABLE 2.12

Percentage of Books and Periodical Expenditures by U.S. Libraries: 1986-2007

Year

Library expenditures for all materials

Percentage of books among all library expenditures

Percentage of periodicals among all library expenditures

1986

1,827.4

54.42

33.35

1987

1,987.5

54.10

34.39

1988

2,124.6

52.99

35.95

1989

2,358.4

53.44

36.33

1990

2,507.8

52.71

37.41

1991

2,565.7

51.56

38.80

1992

2,655.6

50.99

39.79

1993

2,808.9

50.33

40.83

1994

3,014.0

49.68

41.85

1995

3,244.7

48.89

46.30

1996

3,452.7

48.43

43.73

1997

3,669.9

47.73

44.70

1998

3,857.9

47.41

45.22

1999

4,065.7

47.10

45.75

2000

4,258.1

46.65

46.40

2001 2002*

1,164.1

46.29

47.03

4,682.3

45.90

47.58

2003*

4,911.7

45.55

48.10

2004*

5,151.2

45.18

47.30

2005*

5,404.5

44.80

47.84

2006*

5,670.3

44.41

47.70

2007*

5,935.5

44.10

46.40

Source: Book Industry Trends 1994 (New York: Book Industry Study Group, 1994), pp. 3-3 through 3-30; Booklndustry Trends 1995 (New York: Book Industry Study Group, 1995), p. 3-28; Book Industry Trends 2003 (New York: Book Industry Study Group, 2003), p. 241. *Indicates BISG estimate.

47

TABLE 2.13 Percentage of Budget Spent for Serials Purchased by Specific U.S. Libraries: 1986-2007

School libraries

College and university libraries

Specialized libraries

Year

Public libraries

1986

13.36

12.55

54.63

42.03

1987

13.29

1988

13.73

12.50 12.67

56.36 58.50

1989

13.11

12.55

58.99

43.58 43.76 44.76

1990

13.36

13.03

59.80

45.59

1991

13.71

13.24

61.50

46.51

1992

13.70

1993

14.21

13.96 13.87

47.20 48.48

1994

13.57

13.64

62.39 63.55 64.71

1995

13.33

13.21

1996

13.55

13.46

66.00 67.43

50.17 50.85

1997

13.62

13.56

68.62

51.01

49.26

1998

13.71

13.78

69.24

51.32

1999 2000

13.73

14.09 14.56

69.84 70.60

51.52

14.72

71.29

51.92

52.02

51.85

2001

13.85 14.01

2002

14.11

14.94

71.90

2003* 2004*

14.07

15.11

72.49

52.03

14.06

14.83

71.59

51.98

2005*

14.09

15.03

86.53

52.02

2006*

14.07

14.97

72.04

2007*

13.86

14.57

70.60

52.00 52.10

Source: Book Industry Trend 1993 (New York: Book Industry Study Group, 1993), pp. 3-28 through 3-30; Book Industry Trends 1994 (New York: Book Industry Study Group, 1994), pp. 3-28 through 3-30; Book Industry Trends 2002 (New York: Book Industry Study Group, 2002), p. 246. *Indicates BISG estimate.

48

THE CHANNELS OF DISTRIBUTION

49

Unfortunately, the staggering growth in journal price increases materialized at a time when the vast majority of American libraries faced formidable budgetary ob­ stacles while witnessing a sharp percent increase in circulation demand. How do li­ brarians trim budgets, keep pace with the plethora of new book releases, augment budgetary allocations for needed periodicals, and keep their patrons happy when they requelst more services? In the 1990s, some library experts insisted that electronic versions of serials could provide librarians with the "ultimate answer" to their fiscal problems. Al­ though print journals would not disappear in either the short or long run, online ver­ sions of serials could be the answer to the serials crisis, the magic bullet to elude the debilitating serials price spiral that has aggravated all librarians. However, this sce­ nario proved costly. Hardware and software had to be purchased, and libraries had to maintain (and pay for) both print and electronic versions. By the first decade of the 21st century, many college and university libraries de­ cided that online subscriptions, although not perfect, offered a realistic alternative to costly print journals (and the inordinate amount of space required to house printed journals). If this trend continues unabated, and it appears it will for the foreseeable fu­ ture (through 2006 and possibly 2010), online journals will grow in importance, di­ minishing the importance of print journals and depriving publishers of needed revenues because online subscription fees are lower than print subscription fees. Options and Opportunities Another option available to librarians centered on "document delivery systems." This approach provides a librarian with a plethora of intriguing options. A survey could be undertaken to ascertain the most frequently used serials and those that merely attract dust. The library can then cancel costly subscriptions to journals that are not used or are marginally of interest to patrons. If an individual wants to read a particular article in a canceled journal, the library can contact one of the document delivery systems and order a print or electronic copy of the specific article. This al­ lows a library to cancel little-used journals while providing needed budgetary re­ lief, and, ironically, obtaining a copy of an article for a patron, thereby keeping "peace in the family." This "pay for only what you use" concept has captured the at­ tention of many librarians. One of the most interesting national document delivery services is offered by the Colorado Alliance of Research Libraries (known simply as CARL UNCOVER to librarians). CARL provides access via a computer to over 25,000 publications. Using a consumer or corporate credit or debit charge card, an individual can access CARL's extensive service and acquire a complete copy of an article, delivered via fax, the mail, or sent electronically (html or pdf format). Many college and university libraries rely on "J-Stor," which allowed these li­ braries to build a reliable and comprehensive archive of important scholarly jour­ nals while simultaneously filling in gaps in existing collections. In addition, scarce older issues were available, helping to mitigate escalating costs associated with re­ placing damaged or missing journals.

50

CHAPTER 2

Another viable option available to librarians is a regional consortium. One of the most interesting ones is the Bergen County (New Jersey) Cooperative Library Sys­ tem (BCCLS; known as "buckles"), servicing a large suburban region of+868,796 individuals. Bergen County, the 13th largest populated area in the United States, is nestled next to New York City, Rockland and Orange Counties in New York State, and Hudson County in New Jersey. BCCLS is a federation of 62 public libraries with sizable holdings of almost 4.9 million books, 9,358 serials, 1,600 musical scores, 19,784 "talking books," 1,167 CD-ROMs, and 29,147 videos and audiovisuals. Total Bergen County member li­ brary expenditures topped $37.7 million, and library per capita expenditures hov­ ered at $43.75. In 2001, the system had 506,736 registered borrowers (with 41,590 newly registered). Patrons checked out over 6.97 million books. BCCLS was started in 1979 to improve access to library materials, expand auto­ mated bibliographic access to information, enhance the quality of reference ser­ vices, and strengthen the facilities management of libraries. BCCLS's libraries pay an annual membership fee to cover costs associated with the computerized circula­ tion system and other related services; in 2001, BCCLS had a $2.2 million operat­ ing budget. Individuals who live or work in any of the communities serviced by BCCLS can use any of the libraries free of charge (there are no transaction fees), and over 1.54 million titles were taken out utilizing their reciprocal BCCLS borrowing ser­ vice in 2001; 302,546 of these books were through electronic loans. Patrons in­ clude new immigrants from developing countries, well-known authors who reside in these communities, prominent athletes from the New York Yankees and the New York Giants football team, television and Broadway personalities, and PhD candidates. These people have an insatiable appetite for books. This type of regional association works because books, literally millions of them, are made available to individuals who do not want to purchase them. BCCLS participates in a document delivery system. Yet what did the BCCLS patrons read? Overall, 8.33 million items were checked out by BCCLS patrons in 2001: 9.44% of the total (787,038) were nonfiction; 12.11% (1,011,265) were fiction titles; juvenile books accounted for 23.53% (19,62,519), and multimedia (1,044,751) 12.53%. The strong showing of multime­ dia illustrates the importance and popularity of this growing format.

CHAPTER THREE

The Development of Modern Book Publishing Companies MERGERS AND ACQUISITIONS

Between 1960 and 1989, there were a reported 573 mergers and acquisitions in the U.S. book publishing industry; the precise number is difficult to ascertain because some of the transactions involving private companies were not reported, some sales involved multiple companies, a few involved swapping book lines, and some were pass-through deals (one company purchased another company and then sold parts of that company to other firms). Although this is a staggering total, the pace be­ tween 1990 and 2002 was absolutely frenetic. There were an estimated 300 mergers and acquisitions between 1990 and 1995. Yet the scope and size of mergers and acquisitions between 1996 and 2001 was even more frantic with about 380 mergers. These transactions dramatically changed the business fabric of the book industry in the United States. Who purchased what company? Why did so many mergers and acquisitions take place? What impact did these business transactions have on the level of com­ petition within this industry? Last, did these consolidations have any effect on American society? Background Information

Whereas the film industry is glamorous, periodicals are (generally) profitable, newspapers are influential, and television is powerful, for many people the U.S. book industry was the prestigious keystone of the entire mass communications in­ dustry, primarily for the content it generated. Book companies caught the attention of investors keenly interested in reveling in the rarefied world of ideas, rubbing shoulders with internationally known authors, and gaining access to a tony world that began somewhere near Grand Central Station, spilled over to the Four Seasons 51

52

CHAPTER 3

restaurant (for daily power lunches), and retreated for weekends and vacations to the Hamptons. This was "the stuff dreams were made of," or so they imagined. There were also financial reasons for obtaining the assets of book companies. Between 1963 and 2002, this industry posted an impressive array of business statis­ tics that validated the financial rationale for many (though not certainly for all) of these high-priced mergers and acquisitions. Although profit margins varied greatly in the major book niches, a few of the cat­ egories (textbooks, professional and reference books) posted numbers that caught the attention of many of Wall Street's sharpest financiers; and of course books gen­ erated large cash flows.1 There was money to be made in book publishing, and the industry's highly valued cultural ambiance clearly augmented the deal.2 Mergers and Acquisitions: 1960–1969 Between 1960 and 1969, there were 183 mergers and acquisitions in the U.S. book publishing industry. The level of activity was rather light through 1965, reaching a high of only 14 business transactions in 1960. By 1966, there was a pronounced growth in mergers and acquisitions, and by 1968-1969 the tallies reached the mid-to-high 30 range. The Lyndon Johnson administration launched its War on Poverty and other so­ cial programs, including the allocation of funds to purchase library books and strengthen elementary, secondary, and college programs. This outpouring of money, and the concomitant strong profit margins posted by book publishers, at­ tracted the attention of large educational, electronics, and communications corpo­ rations eager to participate in these new business opportunities. When federal funds began to disappear because of the impact of the war in Vietnam, and margins began to slip, many of these corporations sold their holdings (primarily in the late 1970s and early 1980s). Of special importance were deals involving CBS (Holt, Rinehart and Winston), Dell (Dial Press), Doubleday (Laidlaw Brothers), Dunn & Bradstreet (Thomas Y. Crowell Co.), General Learning (Silver Burdette Co.), Gulf & Western (Pocket Books), ITT (Howard W. Sams), Litton Industries (Reinhold Pub. Corp.; American Book Company; D. Van Nostrand Co.), National General (Bantam Books, 1968), Perfect Film & Chemical (Popular Library, Inc.), RCA (Random House), Times

The Book Industry Study Group, Book Industry Trends 2003 (New York: Book Industry Study Group, 2003), p. 32. John Tebbel, Between Covers: The Rise and Transformation of Book Publishing in America (New York: Oxford University Press, 1987), pp. 5–43; or John Tebbel's A History of Book Publishing in the United States, Vol. I, The Creation of an Industry, 1630–65 (New York: R. R. Bowker, 1972), pp. 1–9; A History of Book Publishing in the United States, Vol. 3, The Golden Age Between Two Wars, 1920–1940 (New York: R. R. Bowker, 1978), pp. 7–16. Also see Kenneth C. Davis, Two-Bit Culture: The Paperback­ ing of America (Boston: Houghton Mifflin, 1984), pp. 48–99; Thomas L. Bonn, Heavy Traffic and High Culture: New American Library as Literary Gatekeeper in the Paperback Revolution (Carbondale, IL: Southern Illinois University Press, 1989), pp. 2–31; Lewis A. Coser, Charles Kadushin, and Walter W. Powell, Books: The Culture and Commerce of Publishing (Chicago: University of Chicago Press, 1985).

MODERN BOOK PUBLISHING COMPANIES

53

Mirror (New American Library; Harry N. Abrams Inc.), and the Xerox Corporation (R. R. Bowker Co.; Ginn & Co.). Table 3.1 outlines these trends. Mergers and Acquisitions: 1970-1979 The 1970s were marked by the end of the war in Vietnam, a deep, debilitating re­ cession in 1973-1975, concerns about natural resources, and a political and social malaise. After a heady level of business activity in 1970, the total number of mergers and acquisitions receded between 1971 and the rest of the decade, attain­ ing levels paralleling the 1960s. Although small in number, there was a qualita­ tive difference regarding the mergers and acquisitions that took place in the 1970s and the 1960s. Some of the most significant transactions in the 1970s involved the American Broadcasting Company's (ABC) acquisition of Chilton Books, propel­ ling the last of the three major television networks into the book publishing indus­ try; West Germany's Bertelsmann AG's purchase of Bantam; Gulf & Western's merger with Simon & Schuster; the Scribner's-Atheneum merger; the Penguin-Viking transaction; MCA's decision to buy G. P. Putnam; RCA's acquisi­ tion of Ballantine Books; and Time, Inc.'s addition of the Book-of-the-Month Club to its list of holdings. Major global players in the mass communications field (Bertelsmann AG, Pearson PLC, etc.), seeking to expand market share and obtain high quality products at what were then perceived to be reasonable prices, entered the U.S. market. These actions essentially set the stage for the continued and impressive growth of these cor­ porations after 1980. Table 3.2 outlines the annual level of activity in the 1970s. TABLE 3.1 Mergers and Acquisitions: 1960—1969

Year

Number of mergers and acquisitions

Percent of total number of mergers and acquisitions in 1960s

1960

14

7.65

1961

11

6.01

1962

7

3.83

1963

12

6.56

1964 1965 1966

8 14 23

4.37 7.65 12.57

1967

23

12.57

1968

38

20.77

1969

33

18.03

54

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TABLE 3.2 Mergers and Acquisitions: 1970–1979

Year

Number of mergers and acquisitions

Percent of total number of mergers and acquisitions in 1970s

16.38

1970

29

1971

15

8.47

1972

8

4.52

1973

12

6.78

1974

22

12.43

1975

16

9.04

1976 1977

16 22

9.04

1978

22

1979

15

12.43 12.43 8.47

Mergers and Acquisitions: 1980–1989 After a few slow years, the merger and acquisition phenomenon accelerated dra­ matically in the 1980s.3 Between 1984 and 1988, there were 151 mergers, almost as many as in the entire 1960s, with 213 mergers and acquisitions in this decade. A small number of firms in the 1980s carefully crafted media empires that were positioned to withstand the ravages of recession and political unrest and capture global business opportunities. The major transactions involved Bertelsmann AG's acquisition of Dell and Doubleday; Rupert Murdoch and Harper & Row; the emer­ gence of Holland's Elsevier-NDU NV as a major player in the United States; the un­ raveling of Harcourt Brace Jovanovich; the rise and fall of the United Kingdom's Robert Maxwell; the transformation of the Paramount Corporation (formerly Gulf & Western) into one of the top players in the industry; the United Kingdom's Pearson PLC's move to acquire New American Library; and the emergence of Canada's Thomson Corporation and the United States' Times-Mirror as global media players. Table 3.3 outlines the annual level of activity in the 1980s. Mergers and Acquisitions: 1990–2003 Although evident in the 1980s, convergence within the mass communications in­ dustry and the search for content (also called product or software), production oper­ ations, distribution channels, and delivery systems changed the media landscape in 3 Martin Feldstein (Ed.), The U.S. in the World Economy (Cambridge, MA: National Bureau of Eco­ nomic Research, 1987), pp. 49-53.

MODERN BOOK PUBLISHING COMPANIES

55

TABLE 3.3 Mergers and Acquisitions: 1980–1989 Number of mergers

Percent of total number of mergers

Year

and acquisitions

1980

12

5.63

1981

16

7.51

1982

9 10

4.23

1983 1984 1985

29 30

1986

40

and acquisitions in 1980s

4.69 13.62 14.08 18.78

1987

26

12.21

1988

26

12.21

1989

15

7.04

this nation by the 1990s. Telephone companies were investing in content for video-on-demand and broadband delivery (i.e., high capacity transmission systems used to carry large blocks of telephone channels using coaxial cables, fiber-optic lines, and microwave radio systems). Cable television corporations saw increased business opportunities due to the availability of compression systems and multi­ channel choices, all of which triggered a new era of greater customer segmentation and, hopefully, higher consumer spending. Large consumer electronic firms exhib­ ited signs of concern that the cable and telephone companies would use their exist­ ing networks to offer customers audio and video-on-demand services, effectively bypassing the need for VCRs, DVDs, and stand-alone entertainment systems. Film studios and some major book publishers recognized the need to expand their own­ ership of talent, content, and electronic rights in order to maintain their hegemony over existing delivery and distribution systems. The end result was a period of business uncertainty marked by unrest and tur­ moil due to the creation of global media firms, rapid technological changes, heated debates over telecommunications standards, and substantive changes in the nation's communication regulatory system. This morass prompted many media man­ agers to accept the fact that there was a race to control media gateways (i.e., set-top boxes or the technology to provide access to consumers to entertainment and infor­ mation services), networks (including cable, satellite transmission, fiber-optic sys­ tems, etc.), and content (including video-on-demand, premium and blockbuster films, and traditional print content). Many media managers wondered if a spending ceiling had been reached. Would consumers want these systems, spend additional funds to purchase the equipment,

56

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TABLE 3.4 Mergers and Acquisitions: 1990–2001

Year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

2001

Number of mergers and acquisitions

25 31 53 45 58 55 56 58 64 71 80 84

Percent of total number of mergers and acquisitions from 1990–2001

3.68 4.56 7.79 6.62 8.53 8.09 8.24 8.53 9.41 10.44 11.76 12.35

and also subscribe for these services? Others insisted that, as the new technology eroded traditional media constraints and changes media usage patterns, in essence sparking alternative options for viewing and entertainment, consumers would de­ velop interest in these new products and services and agree to pay for them. After all, they argued, leisure spending will be pushed to new heights because of the emergence of sophisticated multimedia formats and opportunities. They argued that tremendous choices will emerge, allowing consumers to select programs that correspond to their schedule (what they want and when they want it). This conve­ nience, when augmented with high quality content, allows the consumer to control product, possibly triggering the demise of mass markets and the proliferation of personalized markets. As it turned out, consumers were willing to increase their an­ nual media expenditures, purchase VCRs and DVDs (along with other media enter­ tainment products), and trigger an outpouring of interest and demand for new media products. 1990–1995 These events and theories prompted many media managers to review their exist­ ing operations and to develop new strategic plans. The end result was a flurry of mergers and acquisitions, some quite small and a few huge ones that remade the media landscape. Between 1990 and 1995, about 300 industry mergers took place. The most important ones included: News Corp. merged Harper & Row into

MODERN BOOK PUBLISHING COMPANIES

57

HarperCollins (1990); News Corp. acquired Scott, Foresman (1990); General Cinema acquired Harcourt Brace Jovanovich (1991); McGraw-Hill acquired the remaining 50% of Macmillan/McGraw-Hill School Publishing (1993); and Para­ mount Communications acquired Simon & Schuster and Macmillan (1994). Ta­ ble 3.5 lists some, but clearly not all, of these mergers. TABLE 3.5 Partial List of Mergers and Acquisitions: 1990-1995

Acquired (except)

Acquired company

Year

News Corp.

Harper & Row

1990

News Corp.

Scott Foresman

1990

Quarto Group

Rockport Books

1990

Woltors Kluwer

J.B. Lippincott

1990

Doubleday Book Shops

1990

McGraw-Hill

TAB Books

1990

Waverly Press

Harwal Publishing

1990

Waverly Press

Urban & Schwarzenberg

1990

Waverly Press

Quality Medical Publishing

1990

General Cinema

Harcourt Brace Jovanovich

1991

Paramount

Communications

Macmillion Computer Publishing

1991

Paramount

Communications

Cally Curtis

1991

Paramount

Communications

Computer Curriculum Corp.

1991

Macmillan

Prentice Hall Information Network

1991

Readers Digest

David & Charles

1991

Readers Digest

Joshua Morris Publishing

1991

Thomas Nelson

World Bible Society

1991

Acquiring company

Bantam Doubleday Dell

Sold

Southmark Publishers

1991

Reed International

Macmillan Directories

1991

Reed International

Rigby Education, Inc.

1991

Reed International

Aspen Publishers

1991

Reed International

Martindale-Hubbell

Pearson

Sold

1991 (continued)

TABLE 3.5

Acquiring company

Acquired (except)

(continued)

Acquired company

Year

Waverly Press

Lea & Febiger

Houghton Mifflin

College Survival

1991 1992

Gollancz Ltd.

1992

Cassel PLC

1992

Primedia (K-III)

Pharos Books /World Almanac

1992

Primedia (K-III)

Krames Communications

1992

Primedia (K-III)

Weekly Reader

1992

Primedia (K-III)

Newfield Publications

1992

Primedia (K-III)

Funk & Wagnalls

1992

Houghton Mifflin

Sold

Houghton Mifflin

Acquired interest in

Primedia (K-III)

Newbridge Communications

1992

Thomas Nelson

Word Inc.

1992

Quarto Group

Eagle Books and Running Heads

1992

Times Mirror

Wm. C. Brown

1992

McGraw-Hill

Macmillan/McGraw-Hill School Pub.

1993

Steck-Vaughn

Creative Edge

1993

Times Mirror

Gower Medical Publishing

1993

Prentice Hall Legal & Financial Services

1993

Putnam Berkeley Group

Price Stern Sloan

1993

John Wiley & Sons

Belhaven Press

1993

John Wiley & Sons

QED

1994

Paramount

Simon & Schuster

1994

Pearson

Troll Publishing

1995

Viacom

Ziff-Davi

1995

Paramount Communications

Sold

Dorling Kindersley

Henderson Publishing

1995

Time Warner

Better Homes & Gardens Cookbook Clubs

1995

Thomas Nelson

C.R. Gibson

1995

58

59

MODERN BOOK PUBLISHING COMPANIES

1996–2003 Between 1996 and 2003, there were at least 380 book industry mergers and acquisi­ tions. Some of the largest ones included a number of multibillion dollar deals: Wolters Kluwer buying CCH for $1.9 billion in 1996; Thomson's acquisition of West Publishing for $3.43 billion (1996) and the Harcourt Brace nontrade college book operations for $2.06 billion from Reed Elsevier (2000); Bertelsmann AG's decision in 1998 to buy the venerable Random House for at least $1.4 billion; Reed Elsevier's acquisition of Matthew Bender for $1.65 billion in 1998; Pearson's pickup of the educational publishing operations from Simon & Schuster (Viacom) for $4.6 billion in 1998; and Reed Elsevier's $4.5 billion acquisition of Harcourt Brace's educational and professional books in 2000. Table 3.6 lists some, but not all, of the major mergers and acquisitions between 1996 and 2003. TABLE 3.6 Partial List of Mergers and Acquisitions: 1996–2001

Acquiring company

Acquired (except)

Acquired company

Year

Pearson PLC

Putnam Bereley

1996

GP Holding

Western Publishing Group

1996

Quarto Group

Walter Foster Publishing

1996

Bertelsmann AG

Newbridge Book Club

1997

Torstar

Troll Communications

1997

Random House

Reed Consumer Books' Adult trade list

1998

Perseus Books

Addison Wesley's trade list

1998

IDG Books

Macmillan's reference books

1998

IDG Books

Cliff Notes

1998

Harper Collins

Ecco Press

1999

Perseus

Da Capo Press

1999

Perseus

Plenum's trade books

1999

Harper Collins

Avon and Morrow

1999

IDG Books

Macmillan's general reference books

1999

Harcourt Brace

Morgan Kaufman's computer science books

1999

John Wiley & Sons

Pearson's college textbooks

1999 (continued)

60

CHAPTER 3

TABLE 3.6

Acquiring company

Acquired (except)

(continued)

Acquired company

Year

Nelson-Hall

1999

College Textbooks

2000

Pearson

Dorling Kindersley

2000

IDG Books

Hungry Minds

2000

Thomson

Reed's Harcourt higher education books

2000

Thomson

Greenhaven Press

2000

Thomson

Nelson Information

2000

Thomson

Dialog

2000

Wolters Kluwer

Springhouse Corp

2000

Thomson

Primark Corp.

2000

Thomson

La Ley SA

2000

Random House

(A stake in) Sudamericana

2001

Random House

Prima Communications

2001

Rowman & Littelfield

Taylor Trade Publishing

2001

Workman Publishing

Storey Publishing

2001

Rowman & Littelfield

Taylor Wilson

2001

John Wiley & Sons

Hungry Minds (formerly IDG Books)

2001

Thomson

Harcourt's college textbook line

2001

John Wiley & Sons

Frank J. Fabozzi

2001

Cambridge Information

R. R. Bowker

2001

Wadsworth

Harcourt-Wadsworth

Swap

Content Is "King" Media and entertainment industry experts realized that content was pivotal (especially in the print and film-video arena); however, media analysts became acutely aware of the fact that production, distribution, and delivery systems ascended in importance, along with the need to create gigantic media companies positioned in print and elec­ tronic formats. When the dust finally settled, Disney owned a major television network (ABC) with strong news and sports divisions; entertainment program production expertise, animation studios, and a syndication operation; television stations; AM and FM radio

MODERN BOOK PUBLISHING COMPANIES

61

stations; a cable and satellite division (the Disney Channel); interests in ESPN, A & E, Lifetime, and European and Japanese channels; motion picture operations (Walt Disney, Touchstone, Hollywood, animation studios, Buena Vista and Miramax dis­ tribution); theme parks; newspapers, business and special interest magazines, book publishing, records, and home video; and other businesses (a National Hockey League team and a Major League Baseball team; consumer products, retailing and li­ censing; and Hyperion, a book publishing firm). The Viacom acquisition of CBS produced a media company with holdings in programming (two television network, production units, and syndication), televi­ sion stations, and AM and FM radio stations; holdings in both cable and satellite television (the Spike Network, Country Music Television, and other communica­ tion services), along with other business operations (including a massive bill­ board operation). The noted publisher Simon & Schuster is part of Viacom. Time Warner's acquisition of Turner made the new operation the world's larg­ est media company. Operating units included substantial production and distribu­ tion companies. These included film and television studios (Castle Rock, Front Line, and Warner Brothers), music (record labels including Warner, Elektra, and Atlantic, the world's largest music publisher), news (ranging from Turner's cable networks [CNN, TBS, TNT, and the Cartoon Network] to Time Warner's hold­ ings in HBO, Cinemax, Court TV, and Comedy Central), film libraries (MGM, United Artists, Hanna Barbera cartoons, and all Warner Brothers films released after 1948), a television network (the WB network), and sizable book and maga­ zine publishing groups. Of course, AOL's purchase of Time Warner (including a myriad of book pub­ lishing operations; Warner Books, Little, Brown) set the tone for mergers and ac­ quisitions in the 21st century, or at least it appeared to set the tone until problems surfaced in 2002. By 2002, the media landscape was changed; all that remained was a debate over who would buy the diverse media products these new entities offered. Of course, book managers wondered how they would cope with a radically altered media environment. Why the Growth in Mergers and Acquisitions? Why was there a sharp increase in mergers and acquisitions and the rapid transfor­ mation of the United States book industry in the years between 1960 and 2004? In reality, many different economic and social forces were at play. The first reason centers on two closely interconnected issues: (1) strategic marketing considerations, and (2) globalization and the emergence of the global marketplace. Business schools began to stress strategic marketing theories in their under­ graduate and graduate curricula in the 1970s. A review of the published business literature revealed that strategic planning ideas appeared with some regularity in business publications. This managerial approach influenced a generation of

62

CHAPTER 3

corporate leaders, including many members of the publishing community who read these pieces, were trained in business schools, or who came to publishing from other industries. The chief proponent of strategic marketing ideas was Mi­ chael Porter. Porter maintained that a corporation should have the freedom to penetrate a market quickly and efficiently. This meant strategic planners had to: locate a po­ tentially profitable niche; develop products designed to satisfy the needs of the customers in this market segment; and create a defensive plan designed to with­ stand the intense competitive thrusts of other companies eager to gain market share and profits in this niche. Porter wrote about five key "forces" that affect directly competitive strategies in a market: threat of new entrants; the inevitable power of suppliers; the mercurial in­ fluence of customers; the potential substitute of other products; and the inevitable conflict for positions of hegemony among current competitors.4 Porter also developed a methodology or framework that a strategic manager could follow: 1. 2. 3. 4. 5. 6.

Evaluate existing economies of scale. Determine product differentiation. Ascertain capital requirements. Analyze cost disadvantages independent of size. Consider existing distribution channels. Ponder current regulatory agency rules along with local, state, and U.S. laws.5

Of course, the emergence of the information age and a global marketplace di­ rectly affected the mass communications industry, leading to the creation of the influential Cable News Network (CNN), the rapid successes enjoyed by satellite systems, and the development of regional and global computer and Internet sys­ tems. These technological breakthroughs permitted the rapid spread of data and information for hundreds of millions of people who craved this knowledge. In ad­ dition, the language of this information age was primarily English (especially in publishing, aeronautics, business, science, technology, the arts, and a number of other areas). Coupled to this was the realization by many publishing executives that global­ ization had created an international publishing market of millions of individuals keenly interested in information of all types, from detailed abstracts about con­

4Michael E. Porter, "How Competitive Forces Shape Strategy," Harvard Business Review 57 (March-April 1979): p. 137; Michael E. Porter, Competitive Strategy: Techniques for Analyzing Indus­ tries and Competitors (New York: Free Press, 1980), pp. 20–175; and Michael E. Porter, "Please Note Location of Nearest Exit," California Management Review (Winter 1976): p. 21. Ibid. Also see Alfred D. Chandler, Strategy and Structure: Chapters in the History of Industrial En­ terprise (Cambridge: MIT Press, 1962), pp. 38-102; and Alfred D. Chandler, The Visible Hand: The Managerial Revolution in American Business (Cambridge: Harvard University Press, 1977), pp. 12–1187.

MODERN BOOK PUBLISHING COMPANIES

63

sumer marketing trends to data about the latest cancer and medical research developments.6 These ideas caught the attention of media managers. In addition, the emergence of the European Union and enticing business oppor­ tunities in the Pacific Rim plus key markets in South and Central America, Africa, and the Middle East clearly sparked interest in global publishing opportunities. This "global village" may not exist exactly in the intricate way that Marshall McLuhan depicted it, but it is a reality nevertheless.7 These facts made trade and professional book companies appealing targets for mergers and acquisitions. These English-language firms generated a staggering number of new titles each year, never dropping below the 36,000 mark in the 1970s and 1980s and reaching 150,000 in 2003, and they were rather well established in certain critical and highly profitable niches, notably in the scientific, technical, and medical (STM), college textbook, scholarly publishing, and reference areas. In addition, the United States experienced a series of major business cycles between 1960 and 2004, ranging from periods of staggering growth, recessions, declines and rises in the value of the U.S. dollar (especially against the Euro), and low interest rates. These events prompted some foreign publishing execu­ tives to enter the U.S. book publishing market at prices that they felt were de­ pressed. Compounding this was the belief that the breakup value of many book companies exceeded the total value of these corporations. The parts were worth more than the sum. Were there any legal restraints prohibiting foreign media entities from entering the U.S. market? Because of the U.S. Constitution's First Amendment protection of Freedom of the Press, a foreign company can purchase outright a U.S. book com­ pany. Majority ownership of U.S. radio and television stations is restricted in the Communications Act of 1934 to U.S. citizens. America's highly valued "free enterprise" environment also explained the pleth­ ora of mergers and acquisitions. This large, politically and financially stable, affluent, cash-oriented North American market was able to support thousands of book compa­ nies publishing a myriad of new titles each year. This was the most valuable market in the world, and U.S. and global media leaders wanted a bigger piece of the pie. 6BethLuey, "The Impact of Consolidation and Internationalization," in Fred Kobrak and Beth Luey (Eds.), The Structure of International Publishing in the 1990s (New Brunswick, NJ: Transaction Pub­ lishers, 1992), pp. 1-24; Fred Kobrak, "Post-1992 Europe: History and Implications," in Fred Kobrak and Beth Luey (Eds.), The Structure of International Publishing in the 1990s (New Brunswick, NJ: Transaction Publishers, 1992), pp. 177–182; Albert N. Greco, Advertising Management and the Busi­ ness Publishing Industry (New York: New York University Press, 1991), pp. 182-190; Adrian Higham, "Selling Abroad: Are We Doing Enough?" Book Research Quarterly 4 (Winter 1988-1989): pp. 45–51; Benjamin M. Compaine, "The Expanding Base of Media Competition," Journal of Communication 35(Summer 1985): pp. 81-96; Benjamin M. Compaine and Douglas Gomery, Who Owns the Media? (Mahwah, NJ: Lawrence Erlbaum Associates, 2000), pp. 1-15, 39-77; Linda E. Connors, Sara Lynn Henry, and Jonathan W. Reader, "From Art to Corporation: Harry N. Abrams, Inc. and the Cultural Ef­ fects of Merger," Book Research Quarterly 1 (Winter 1985-1986): pp. 28-59. Marshall McLuhan, The Gutenberg Galaxy (Toronto: University of Toronto Press), pp. 21–51; Marshall McLuhan and Quentin Fiore, The Medium is the Message (New York: Bantam Books, 1967), pp. 34–87; and Marshall McLuhan and Eric McLuhan, The New Science (Toronto: University of Toronto Press, 1992), pp. 1-17.

64

CHAPTER 3

Mergers, Acquisitions, and Competition Did mergers and acquisitions have an adverse impact on the level of competition within the U.S. book industry? Ben H. Bagdikian addressed this issue in The Media Monopoly. Bagdikian insisted that the centralized ownership of media companies involved in the dissemination of knowledge and information via newspapers, peri­ odicals, books, television, and radio is not in the best interest of the American peo­ ple. This concentration, he posited, posed a direct threat to the democratic principles outlined in the U.S. Constitution.8 Although Bagdikian admits that no single company controls all media, he is alarmed that merger and acquisition trends indicated that communications compa­ nies were moving in that direction, that a small handful of global media companies, perhaps numbering no more than a dozen firms, could control most of the publishing–electronic media outlets in this nation and in the world. "Compounding the trend [of media concentration] has been the practice of companies already domi­ nant in one medium, like newspapers, investing in a formerly competitive medium, like television."9 The end result, Bagdikian insisted, was the creation of media conglomerates with alleged "monopolistic" powers. To Bagdikian, the United States is "losing di­ versity and competition among its major media." The impact will lead to a loss of editorial independence, the rise of business-oriented managers seeking to maxi­ mize profits at the expense of quality products, and the possible imposition of "po­ litical" tests on book manuscripts.10 Bagdikian's solution is a bit dicey. "Book publishers ... should be limited in the share of market they can attain by acquiring existing properties, but not lim­ ited by expansion of their own companies."11 If Bagdikian were correct, then the results of the mergers and acquisitions between 1960 and 2001 would have led to a sizable (if not massive) consolidation within the book publishing industry, fewer book companies generating a smaller number of new titles. A careful re­ view of the empirical data indicates clearly that Bagdikian's thesis is question­ able. Concentration levels, as measured by the U.S. Department of Justice's 8 Ben H. Bagdikian, The Media Monopoly (Boston: Beacon Press, 2000), p. 3. Also see Paul Nijhoff Asser, "Consolidation, Internationalization, and the Future of Publishing: A Scenario," Book Research Quarterly 5(Fall 1989): pp. 51-59; Alison Alexander, James Owers, and Rod Carveth (Eds.), Media Economics: Theory and Practice, 2nd ed. (Mahwah, NJ: Lawrence Erlbaum Associates, 1998), pp. 1–43; Alan Albarran and John Dimmick, "Concentration and Economics of Multiformity in the Com­ munications Industries," Journal of Media Economics 9,4(1996): pp. 41–49; Alan Albarran and Sylvia Chan-Olmsted, Global Media Economics: Commercialization, Concentration, and Integration of World Media Markets (Ames, IO: Iowa State University press, 1998), pp. 5–16; Alan Albarran and An­ gel Arrese (Eds.), Time and Media Markets (Mahwah, NJ: Lawrence Erlbaum Associates, 2002), pp. 1–5; John P. Dessauer, "Coming Full Circle at Macmillan: A Publishing Merger in Economic Perspec­ tive," Book Research Quarterly 1 (Winter 1985-1986): pp. 60–72. 9 Bagdikian, p. 5. 10Bagdikian, pp. 35-36. 11'Bagdikian, p. 228. Also see Robert H. Frank and Philip J. Cook, The Winner-Take-All Society: How the Few at the Top Get So Much More Than the Rest of Us (New York: Penguin, 1996), pp. 22–48.

MODERN BOOK PUBLISHING COMPANIES

65

Herfindahl-Hirschman Index (HHI) remained firmly in the lower tail of the con­ centration scale, book prices exceed the Consumer Price Index (CPI) but not by staggering amounts, and market entry into book publishing seems to be, at best, a relatively easy task with more than 53,000 publishing houses releasing 150,000 titles annually. 12 The dramatic increase in both the total number of book publishing firms and ti­ tle output between 1960 and 2002 seems to negate Bagdikian's fear that a media monopoly had been created in this nation. Could a Bagdikian media monopoly be created? This is an unlikely possibility as current technology makes the desktop publishing or electronic publication and distribution of books (i.e., electronic books "e-books" or print-on-demand)a reality, and a relatively inexpensive one at that. Anyone can become a publisher overnight. The distribution of these prod­ ucts could be difficult for amateurs because shelf space is at a premium in book­ stores and other outlets, although direct marketing and "800" numbers certainly minimize many of these sizable problems. Of course, the Internet, the World Wide Web, and online bookselling services opened new horizons for individuals interested in disseminating ideas electronically or in advertising their printed products.13 So it is highly unlikely that a small cluster of firms could ever develop and main­ tain total control over any book market. After all, in 2002 the nation's largest trade book publisher (Random House) held only an 8.12% market share of total sales in the United States; the second place corporation (HarperCollins) trailed with a 4.23% share.14 Table 3.7 outlines these developments. Ironically, it is rather common for book companies to withdraw from a mar­ ket for business reasons; witness New York-based book publishers abandoning the midlist market in the 1970s. A number of university presses quickly jumped into this market, hoping to capitalize on a small, but viable category.15 The Impact on American Society

Did consolidation of book publishing firms adversely affect U.S. society? A review of the empirical data indicated both positive and negative trends.

Albert N. Greco, "The Impact of Horizontal Mergers and Acquisitions on Corporate Concentration Levels in the U.S. Book Publishing Industry: 1989-1994,"Journal of Media Economics 12,3(1999): pp. 165-181. 13 David H. Henard and David M. Szymanski, "Why Some New Products Are More Successful than Others," Journal of Marketing Research XXXVIII(August 2001): pp. 362-375; Pradeep K. Chintagunta, "Investigating Category Pricing Behavior at a Retail Chain," Journal of Marketing Research XXXIX(May 2002): pp. 141–154; Anindya Banerjee and Bill Russell, "Industry Structure and the Dy­ namics of Price Adjustment," Applied Economics 33, 15(2002): pp. 1889-1901. 14 Stephanie Oda and Glenn Sansilo, The Subtext 2001-2002: Perspectives on Book Publishing: Numbers, Issues & Trends (Darien, CT: Open Book Publishing, 2002), p. 64. 15 Albert N. Greco, "University Presses and the Trade Book Market: Managing in Turbulent Times," Book Research Quarterly 3 (Winter 1987-1988): pp. 34–53.

TABLE 3.7

Twenty Largest Book Publishing Firms in North America: 2001–2000 Est. Revenues (Millions of Dollars) Rank

Publisher

2001 Sales

2000 Sales

Percent change

1

Pearson1

$4,901

$4,086

19.9%

2

Reed Elsevier2

$2,736*

$1,849

48.0%

3

McGraw-Hill

$2,322

$1,993

16.5%

4

Scholastic

$1,917

$1,962

-2.3%

5

Random House3

$1,805*

$1,612

12.0%

4

6

Int'l Thomson

$1,781*

$1,600

11.3%

7

Wolters Kluwer5

$1,610*

$1,590

1.3%

6

8

Harcourt General

$1,197*

$2,408

-50.3%

9

Houghton Mifflin

$1,126

$1,035

8.8%

10

HarperCollins

$1,078

$1,029

4.8%

7

11

John Wiley & Sons

$734

$614

19.5%

12

Reader's Digest

$670

$757

-11.5%

13

Simon & Schuster

$649

$596

8.9%

14

Harlequin Books

$396

$394

0.5%

15

Encyclopedia Britannica

$370*

$340

8.8%

16

AOL/Time Warner8

$310*

$300

3.3%

17

Holtzbrinck Group9

$300*

$280

7.1%

18

Rodale Press

$247*

$260

-5.0%

19

BNA

$260*

$250

4.0%

$232

$219

5.9%

$24,641

$23,174

6.3%

20

10

WRC Media Totals:

Sources: Subtext 2002–2003 (Darien, CT: Open Book Publishing, 2003), p. 25; Book Industry Trends 2003 (New York: Book Industry Study Group, Inc., 2003), p. 32. *Subtext estimates. 1Penguin Group $ 1,197; Pearson Education $3,704; exchange rate: £1 = $ 1.46; 2Reed acquired Harcourt General in July 2001. Estimate included a half year of Harcourt's sales, excluding its higher ed unit, which Thomson bought. Estimate also includes books sales for Reed's professional business; 3Esti­ mated based on pro-forma results. In 2001, Random House changes its fiscal year to December 31; 4Esti­ mate includes half year sales for Harcourt's higher ed. Unit, which Thomson acquired from Reed in July 2001; 5Estimate based on WK's book sales; 6Estimates for the first half of 2001. Harcourt acquired by Reed in July 2001; 7Includes Hungry Minds, which Wiley acquired in September 2001; 8Warner Books and Little Brown. Time Warner's continuity program not included; 9Includes St. Martin's Press, Farrar Straus & Giroux, Henry Holt, St. Martin's Press college, and Scientific American Publications; IOWRC Media, formerly Ripplewood Holdings, is comprised of a number of educational companies acquired in 1999. These include Weekly Reader, American Guidance, World Almanac and Compass Learning.

66

MODERN BOOK PUBLISHING COMPANIES

67

First, there was an increase in total employment in book publishing. Second, there was a movement away from the traditional book publishing cities and states (New York, Massachusetts, and Illinois) toward the southern and western regions of the nation. This meant that houses emerged producing more regional titles, unques­ tionably a boon for many authors, readers, and editors who lived and worked in these parts of the nation.16 Third, U.S. book companies were able to develop global marketing strategies, especially when firms opened or purchased a foreign office. Fourth, firms had better access to financial resources (known as capital deepening to economists), enabling publishers to penetrate and defend new domestic and for­ eign markets, publish more titles, and sign interesting and talented (and hopefully successful) authors.17 On the negative side, certain U.S. book companies experienced some unset­ tling setbacks. First, the assimilation of different companies into one "mother company" and the utilization of the mythic "synergy" turned out to be far more difficult than most industry leaders and observers originally thought. This was certainly true for most foreign companies who purchased U.S. book companies. Second, some U.S. citizens questioned the wisdom of the "selling of America" to foreign firms. Third, the U.S. Government, and in essence U.S. industry, be­ came far too dependent on a steady influx of foreign capital. This noncyclical phenomenon could endanger the fiscal vitality of the economy if foreign capital suddenly or slowly became unavailable or disappeared. Fourth, mergers and ac­ quisitions generated hundreds of millions (if not billions) of dollars in both debt and paper profits.18 It is highly unlikely that this process positively affected U.S. industry, Wall Street, or society. Fifth, some critics began to ask whether foreign companies should publish U.S. textbooks. Sixth, foreign corporations invested in U.S. book companies, but a sizable portion of the profits left the country. Seventh, some book editors sustained a loss of editorial independence. The bottom line became more impor­ tant because debts had to be repaid, prompting some houses to issue "fluff to pay the bills. Overall, it appears that consolidation generated more positive than negative trends.

Albert N. Greco, "Publishers in Migration," Publishers Weekly, 12 October 1992, pp. 30–31. Laura Landro, "Simon & Schuster Becomes a Publishing 'Juggernaut': G & W Fuels Unit's Growth with Buying Spree, Focusing on Education," The Wall Street Journal, 17 December 1987, p. 6; William H. Meyers, "Murdoch's Global Power Play," The New York Times Magazine, 12 June 1988, pp. 18–19, 20–21, 36, 41, 42; Rosabeth Moss Kanter, When Giants Learn to Dance: Mastering the Chal­ lenges of Strategy, Management, and Careers in the 1990s (New York: Simon & Schuster, 1989), pp. 16–39; Geraldine Fabrikant, "When Mastery of U.S. Media Does Not Come Trippingly," The New York Times, 18 October 1992, p. F12; Richard M. Clurman, To The End of Time: The Seduction and Conquest of a Media Empire (New York: Simon & Schuster, 1992), pp. 1-55; Connie Brack, Master of the Game: How Steve Ross Rose the Light Fantastic from Undertaker to Creator of the Largest Media Conglomer­ ate in the World (New York: Simon & Schuster, 1994), pp. 1-147. Martin and Susan Tolchin, Buying into America: How Foreign Money is Changing the Face of Our Nation (New York: Times Books, 1988), p. 6.

68

CHAPTER 3

THE EMERGENCE OF THE MODERN BOOK COMPANY What is the organizational structure of the modern book company? How did this framework evolve? What are the characteristics of the modern firm? Which book firms have emerged as giants of this industry? Since 1945, the modern book company changed inexorably because of: (1) the need to create and maintain viable business operations (from sales and marketing to distribution) to support the editorial function; (2) the demand to supply titles to an expanding market; (3) major technological and distribution developments that al­ lowed firms to issue inexpensive paperbacks; (4) an influx of capital that allowed certain firms an opportunity to expand their editorial and business operations; and (5) the tremendous number of mergers and acquisitions that occurred between 1960 and 2003.19 Random House is the largest English-language publisher in the world, and, in 2001, it generated $1.995 billion in revenues, +3.9% over 2000. Pearson's Penguin Putnam was in second place with $1.141 billion (+25.5%); and HarperCollins was a distant third with $1.06 billion (+1.9%). No other firm cracked the billion dollar mark. Table 3.8 lists the nation's 10 largest firms in 2001, which collectively accounted for about 8% of total U.S. net publishers' revenues in the U.S. Charles Scribner's Sons

Although not present at the "creation," Charles Scribner, Jr., was an astute observer and major participant during what some individuals have called the "golden age" of entrepreneurial book publishing. Scribner entered his family's storied book com­ pany, Charles Scribner's Sons, after the end of World War II. This house was still dominated by the legendary editor Maxwell Perkins, mentor to F. Scott Fitzgerald, Ernest Hemingway, Thomas Wolfe, and many other literary luminaries. Scribner remarked, in In the Web of Ideas: The Education of a Publisher, an evo­ cative work that captured the tone and sensibilities of the last days of the heroic age of Maxwell Perkins, that "growing up in a publishing family was inevitably a book­ ish experience; it prepared me to take over the family publishing business."20 A classics major at Princeton, Scribner's first assignment at the company was "to deal with Ernest Hemingway on an illustrated edition of A Farewell to Arms ... I never

19Jeffrey S. Arpan, Edward B. Flowers, and David A. Ricks, "Foreign Direct Investment in the United States: The State of Knowledge in Research," Journal of International Business Studies (Spring/Summer 1981): pp. 137-154; Jane Sneddon Little, "Foreign Direct Investment in New Eng­ land," New England Economic Review (March-April 1981): pp. 51-56; Jane Sneddon Little, "The Fi­ nancial Health of U.S. Manufacturing Firms Acquired by Foreigners," New England Economic Review (July-August 1981): pp. 5-18; and Jane Sneddon Little, "Foreign Direct Investment in the United States," New England Economic Journal (November-December 1980): pp. 5-22. 20 Jason Epstein, 'The Decline and Rise of Publishing." New York Review of Books, 1 March 1990, pp. 8-12. Also see David D. Kirkpatrick, "An Enemies List, But No Enemies Exist," The New York Times, 2 September 2002, p. C6.

TABLE 3.8 Ten Largest Book Publishing Firms in the United States Share of Domestic Market: 2001 (Millions of Dollars) Publisher

WRC Media Harlequin Pearson Wiley McGraw-Hill HarperCollins

2001

2000

%Chg

2001

2000

%Chg

2001

2000

%Chg

$232

$219 $394

5.9%

$51

9.8%

24.1%

23.3%

0.8%

0.5%

$56 $73

$69

18.4%

17.5%

$396 $4,901 $734 $2,322 $1,078

Scholastic Thorn. Nelson

$1,917

Reader's Dig.

$670

Total

Margin

Income

Revenues

$216

$12,466

$4,086 $614 $1,993 $1,029 $1,962 $214 $757 $11,268

19.9%

$663

$607

5.8% 9.2%

13.5%

14.9%

0.9% -1.4%

19.5%

$88

$95

-7.4%

12.0%

15.5%

-3.5%

16.5%

$263 $118 $186 $12 $14

$308 $111

-14.6% 6.3%

11.3%

15.5%

10.9%

10.8%

–4.2% 0.1%

$99

87.9%

9.7%

5.0%

4.7%

$14

5.6%

6.5%

-0.9%

2.1%

7.4%

-5.3%

$1,473

$1,410

-14.3% -75.0% 5.0%

11.4%

12.5%

-1.1%

4.8% -2.3%

0.9%

-11.5% 10.6%

$56

Sources: Subtext 2002–2003 (Darien, CT: Open Book Publishing, 2003), p. 22; Booklndustry Trends 2003 (New York: Booklndustry Study Group, Inc., 2003), p. 32. 6

9

*$6,541 million, according to AAP Industry Net Sales 2000. Total domestic trade sales, 2000, as computed by the Association of American Publishers: $6,541 million; Combined domestic trade sales of top 10: $5,261 million, or 80.4% of total domestic trade sales in 2000.

70

CHAPTER 3

had one blessed minute of instruction from anybody, in any branch of the business. I was expected to pick it up."21 This was the traditional way family members learned the book business. After college, having generally majored in the humanities, a family member entered the family business in either the editorial department (as an editorial assistant) or in sales and marketing. This process was fraught with dangers when book publish­ ing ceased being a cottage industry and owners were forced to cope with a myriad of complex business and financial matters that taxed their resources. A concomi­ tant difficulty centered on the ability of a family to supply the house with effective family leaders, a complication that plagued many of the privately owned houses into the 1960s. Aside from Hemingway, Scribner had to deal with Perkins. "My father adored him as a colleague ... they ate lunch together nearly every day ... Perkins was al­ ready a legend, amusing, talented, and utterly charming."22 The Charles Scribner's Sons' business office was Dickensian. The library had one of the very few carpets. "It was there that Tom Wolfe was reputed to have spent the night reading his publisher's books until he fell asleep on the floor... Against a wall... were the plaster models, gilded over, of the ornamental heads that adorned the building facade ... The furniture was all oak and quite magnificent, and the li­ brary was paneled."23 Scribner described with some amazement the cashier's cage where very old male and female bookkeepers calculated in longhand each author's royalty state­ ment. As a staunch "Princeton" publishing house, the company employed an octo­ genarian nonacquiring editor (who had been a successful baseball pitcher for Princeton); tiny cubicles housed senior editors and a reference department that was "languishing for lack of investment."24 It was "the only firm in the English-speaking world to combine under one management every function of book production and distribution, being printers, binders, publishers, wholesale importers and exporters, and finally booksellers."25 Scribner's description of the sales operation was enlightening: We had no more than six or seven men. They came each season to a so-called sales conference, which took place in a tiny little room and was presided over by Max Perkins. Nobody else was allowed in. A skeptical group of salesmen gathered about him, and the editor-in-chief would say: 'Now, here's a book by Robert Briffault. I really don't know why we ever took that book. It'sa curious book ...' I am not joking: that was the sales pitch for the book, informal to the point of being Pickwickian.26 21Charles Scribner, Jr., In the Web of Ideas: The Education of a Publisher (New York: Charles Scribner's Sons, 1993), p. 3. 22 Charles Scribner, Jr., In the Company of Writers: A Life in Publishing (New York: Charles Scribner's Sons, 1990), p. 39. 23lbid., p. 39. 24 Ibid.,p.4l. 25 Ibid., p. 43. 26 Ibid., pp. 43-52.

TABLE 3.9 Three Largest Booksellers' 2001-2000 Profitability Index ($ in millions) Booksellers

7 1

Margin

Income

Revenues 2001

2000

%Chg

2001

2000

%Chg

2001

2000

%Chg

BAM

$443

$419

5.7%

$26

$24

8.3%

5.9%

5.7%

0.2%

B&N

$3,618 $3,271

3.6%

$212

$128

65.6%

5.7%

3.5%

$192

$171

12.3%

5.7%

3.5% 5.2%

2.2%

Borders

$3,749 $3,387

0.5%

Total

$7,579

$7,308

3.7%

$430

$323

33.1%

5.7%

4.4%

1.3%

72

CHAPTER 3

Simon & Schuster What is the organizational structure of the modern book company? Simon & Schuster, one of the largest book publishers in the United States (called "S & S" in the book industry), was selected for analysis. S & S, founded in 1924, is one of the world's leading book publishers, serving the consumer, professional, and interna­ tional markets with approximately $596 million in annual sales in 2001. On the corporate level, Simon & Schuster utilized the following organizational structure in 2001: Chairman and Chief Executive Officer; President and Chief Op­ erating Officer; Executive Vice President and Chief Financial Officer; Executive Vice President and President, Educational Publishing; Senior Vice President and General Counsel; Senior Vice President, Human Resources; Senior Vice President, Corporate Development; Senior Vice President, Strategic Planning; Vice Presi­ dent, Purchasing; Vice President, Corporate Communications; Senior Vice Presi­ dent, Chief Information Officer. See Fig. 3.1 details this structure. Synergy works at Simon & Schuster in a complex manner. Viacom and S & S have entered into some joint projects. A detailed analysis of the Simon & Schuster Consumer Group illustrates the structure of a large operating unit. However, a radically different perspective sur­ faces when studying the S & S book imprints. A perfect case in point is the wellknown Pocket Books imprint. See Fig. 3.2 for details regarding the consumer unit.

FIG. 3.1 Typical corporate organization structure.

MODERN BOOK PUBLISHING COMPANIES

73

FIG. 3.2 Book publishing consumer group organizational chart.

Pocket Books, founded in 1939, has long been a leading American book pub­ lisher. On June 19,1939, The New York Times carried a prophetic advertisement an­ nouncing the birth of this historic house: Today is the most important literary coming-out party in the memory of New York's oldest book lover. Today your 250 piece leaps to a par with dollar bills. Now for less than the few cents you spend each week for your morning newspaper, you can own one of the great books for which thousands of people have paid from $2 to $4. These new Pocket Books are designed to fit both the tempo of our times and the needs of New Yorkers.27

The genius behind Pocket Books was Robert de Graff, who was a student of reading habits of citizens in England and the United States. Awed by the Penguin Book operation in England, de Graff wanted to launch a paperback company in the United States. After surveying the American book scene, de Graff realized that cer­ tain impediments existed.28 He needed operating capital to launch a house and di­ rect access to an effective distribution system able to handle paperback books effectively. Aside from bookstores and department store book sections, a sizable number of other outlets loomed on the horizon for paperback books, namely five-and-ten stores, Sears, Roebuck, bus and train terminals, and other nontradi­ tional sources. Independent wholesalers (servicing candy stores, cigar stores, newsstands, corner grocery stores, etc.) were considered as they serviced over 100,000 stores nationwide. Magazine distributors, who carefully guarded their ter­ ritories, tightly controlled distribution to these sources.29 Thomas L. Bonn, Undercover: An Illustrated History of American Mass Market Paperbacks (New York: Penguin Books, 1982), pp. 1-35. Also see Frank L. Schick, The Paperbound Book inAmerica: the History of Paperbacks and Their European Background (New York: R. R. Bowker, 1958), pp. 11–51; Thomas L. Bonn, "Henry Holt A-Spinning in His Grave: Agenting, Yesterday and Today," Publishing Research Quarterly 10(Sprint 1990): pp. 55–65. 28Thomas L. Bonn, Undercover: An Illustrated History of American Mass Market Paperbacks, pp. 7-15. 29 Ibid., pp. 20–27.

74

CHAPTER 3

Realizing the market potential of paperbacks and the inevitable need for assis­ tance, de Graff approached the legendary Richard Simon, M. Lincoln Schuster, and Leon Shimkin (the three leaders of Simon & Schuster) for support. After a series of lengthy discussions, Simon, Schuster, and Shimkin agreed to purchase a minority 49% position in the Pocket Books company. De Graff held onto the remaining 51 % .30 This arrangement allowed de Graff to approach other hardback publishers to purchase paperback reprint rights without generating any conflict of interest issues because S & S was only a minority stockholder. In reality, de Graff shared a 50-50 voting arrangement with these three "minority" partners. This contractual arrange­ ment provided de Graff with much needed operating capital and partners with con­ tacts in the closely guarded world of ideas.31 De Graff developed a three-part strategic plan, and he built his organizational structure around this model. First, he developed strong editorial products appealing to a cross section of the American reading public. The mix of titles was of great concern to de Graff. He sought to offer enough variety to attract serious readers, which ex­ plains the decision to publish literary fiction, as well as mass-market, "lighter" works and children's classics. Within a few months, de Graff decided that mysteries should account for one third of his output (Pocket Books issued Agatha Christie and Erie Stanley Gardner for decades). Other categories that showed potential to de Graff in­ cluded westerns, historical romances, and science fiction.32 Second, he crafted an aggressive marketing-advertising campaign built around mail promotions and highly visible advertising campaigns. Third, he stressed art and design and production innovations. At first, the organizational structure utilized by de Graff was modest, drawing on the services of only a small nucleus of employees. As unit sales and revenues in­ creased, de Graff built a rather formidable business operation. In 1939, ten titles were issued (with an initial press run of 10,000 copies for each title); his first book was James Hilton's popular Lost Horizon (numbered "1" in the Pocket Books list; at that time most paperback books were numbered). The other nine titles were: #2 Dorothea Brande's Wake Up and Live; #3 Shakespeare's Five Great Tragedies, #4 Thorne Smith's Topper, #5 Agatha Christie's The Murder of Roger Ackroyd, #6 Dorothy Parker's Enough Rope, #7 Emily Bronte's Wuthering Heights, #8 Samuel Butler's The Way of All Flesh, #9 Thornton Wilder's highly acclaimed The Bridge of San Luis Rey, and #10 Felix Salten's Bambi.33 Sales were brisk and the first printings sold out, prompting de Graff to issue a second printing of 15,000 copies for his entire original list. Within 2 months, addi­ tional titles were added to the Pocket Book line; total unit sales exceeded the $1.5 million mark, an exceptionally impressive start. Market penetration was impres­ sive, especially among nontraditional sales outlets. Hollywood films directly af­ fected the sales of Lost Horizon, Topper, Wuthering Heights, and The Way of All 30Ibid., pp. 20–27. 31Ibid., pp. 20–27. 32 Ibid, pp. 20–27. 33Ibid., pp. 20–27.

MODERN BOOK PUBLISHING COMPANIES

75

Flesh, a fact that quickly caught the attention of de Graff and other observers of the book scene. Because of the recommendation of his three partners, de Graff decided in 1940 to issue a paperback version of How to Win Friends and Influence People, Dale Carnegie's blockbuster book (originally published by Simon & Schuster in hardcover). Over the decades, this title proved to be a successful book, with tremendous sales in the drug store-variety store market. When America entered World War II in December 1941, de Graff was able, de­ spite strict wartime restrictions, to publish books for the U.S. armed forces. Kenneth C. Davis reported, in Two-Bit Culture: The Paperbacking of America, that war years sales of Pocket Books were brisk. Their "best sellers on U.S. Army camps included a pocket dictionary and vocabulary books, several examples of serious literature (in­ cluding Nana and Wuthering Heights), humor books (The Pocket Book of Boners), and various collections of short stories, verse, and mystery stories."34 The modern "paperbacking" of America began because of the efforts of de Graff and Simon, Schuster, and Shimkin. They revolutionized reading and publishing in America, a fact that other paperback book leaders would capitalize on after World War II.35 By 2002, Pocket Books published trade paperbacks, hardcovers, and mass-market original titles and reprints, and it had a highly structured organizational frame­ work. Figure 3.3 details the structure at Pocket Books. Random House's Bantam Books Growing from a tiny paperback reprint house called Bantam Books (but not the Bantam created in Los Angeles during World War II), Bantam became one of the major publishing firms of the 20th century. Its initial success was due in large part to the creative leadership of the legendary Ian and Betty Ballantine, and this house became the most active and successful paperback company in the years after 1945. It was launched unobtrusively in the summer of 1945 to capitalize on the need for postwar paperback books, a phenomenon that was directly affected by the millions of books consumed by the fighting troops during the war (literally creating a new market for books in this country) and the impact of the G. I. Bill, which enabled tens of thousands of war vets to attend college. The firm's original owners represented an interesting mix of the book and peri­ odical industries. The Curtis Circulation Co., which controlled a sizable portion of the critically important periodical channel of distribution in this nation (and whose parent company owned the veritable cash cow and cultural icon The Saturday Eve­ ning Post), held a 42.5% of the original company. Grosset & Dunlap also held a 42.5% share. Ian Ballantine, Bantam's gifted first president, owned 9% of the com­ pany. Walter B. Kramer and Sidney Pitkin held the remaining 6% equally.36 Kenneth C. Davis, Two-Bit Culture: The Paperbacking of America (Boston: Houghton Mifflin, 1984), pp. 31-55. 35Ibid., p. 65. Clarence Peterson, The Bantam Story: Thirty Years of Paperback Publishing (New York: Bantam Books, 1975), pp. 8-10, 21, 43-57, 79-96.

76

CHAPTER 3

FIG. 3.3 Typical book publishing organizational structure.

Bantam's key leaders and executives included some of the nation's most distin­ guished publishers, including Walter Fuller, Cass Canfield, Meredith Wood, Charles Scribner, Sr., Alfred Mclntyre, Bennett Cerf, John O'Connor, Walter B. Pitkin, Jr., and Sidney Kramer. Betty Ballantine, cofounder of the firm, crafted the high editorial standards Bantam followed throughout its history.37 Bantam relied on Ian Ballantine's entrepreneurial spirit and vision. He utilized a complex tripartite organizational strategy closely resembling the one developed by de Graff before the war: a strong mix of titles (with appealing covers), an aggressive mar­ keting department, and a first-class distribution operation (the Curtis connection). 7Ibid.,pp.11-21.

MODERN BOOK PUBLISHING COMPANIES

77

Bantam placed two advertisements in Publishers Weekly (on July 28, 1945 and again on December 1,1945) notifying the industry that it was in business. The July 28th ad announced Bantam's original corporate mission to be mass publisher and distributor of reprints of novels, detective, mystery, and western stories, nonfiction, humor, short stories, poetry, and anthologies. Their second ad appeared on Decem­ ber 1st. It went on for 6 pages, including book covers (both the inside and outside back covers), and the first 20 titles were listed. Initially, Bantam reissued classic backlist titles for only 250 each. The first 20 ti­ tles represented a cross section of serious literary fiction, westerns, and unadulter­ ated escapism. The company's strategy was to develop a viable mass market for titles; their structure was dependent on utilizing periodical distributors who con­ trolled book racks in drugstores, bus terminals, "five and dimes," and so on. Each title was numbered, and Bantam's first batch of titles included: #1 Mark Twain's Life on the Mississippi, #2 Frank Gruber's The Gift Horse, #3 Zane Grey's Nevada, #4 Elizabeth Daly's Evidence of Things Seen, #5 Rafael Sabatini's Scaramouche, #6 Robert D. Deal's A Murder by Marriage, #7 John Steinbeck's The Grapes of Wrath, #8 F. Scott Fitzgerald's The Great Gatsby, #9 Geoffrey Household's Rogue Male, #10 Marjorie Kinnan Rawlings' South Moon Under, #11 Isabel Scott Rorick's Mr. & Mrs. Cugat, #12 Geoffrey Holmes' Then There Were Three, #13 Elliot Paul's The Last Time I Saw Paris, #14 Antoine de Saint-Exupery's Wind, Sand, and the Stars, #15 Sally Benson's Meet Me in St. Louis, #16 Leslie Ford's The Town Cried Murder, #17 Booth Tarkington's Seventeen, #18 Budd Schulberg's What Makes Sammy Run?, #19 Robert Nathan's One More Spring, and #20 Alice Tisdale Hobart's Oil for the Lamps of China.38 Bantam's version of Life on the Mississippi (#1) was arguably the most widely read version of Twain's classic. Other best-selling Bantam titles were books by Deal (#6), Steinbeck (#7), and Grey (#3). Ian Ballantine and his associates developed an innovative marketing strategy that Bantam followed throughout the 1940s and, with some modification, well into the 1990s. Ballantine stressed clearly defined niches (westerns, mysteries, and ro­ mance titles), big, juicy, promotable novels by well-known authors, attractive, eye-catching covers to attract potential customers, numerous film tie-ins (including #58 Captains Courageous in 1946 and #459 Joan of Arc in 1947), and ventures with the Book-of- the-Month Club and Scholastic. Many of these promotional ideas in­ fluenced the entire mass-market industry.39 Ballantine's strategic plans were successful. By 1946 he and his associates de­ cided to increase the initial press run of newly issued titles, eventually reaching 200,000 copies of each book. Curtis was in charge of the distribution of Bantam's line, guaranteeing Bantam access to a wide number of outlets; and, in addition to the original 20 titles, 4 new ones would be issued each month. In 1946, titles in­ cluded books by James Thurber (#21), James Hilton (#29), and Howard Fast (#30).

38Ibid., pp. 23–28 39Ibid., pp. 31–39

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In July 1947, responding to an unprecedented demand for their books, Ballantine increased Bantam's new monthly title output to 6, eventually jumping to 8 in 1948. Some of the books released in 1947–1948 included #75 John Steinbeck's Cannery Row, #103 George Victor Martin's The Bells of St. Mary's (a successful movie tie-in), and #404 John Hersey's Hiroshima. Ballantine developed a limited royalty schedule (which averaged $2,000), providing the firm with a positive cash flow for a number of years.40 Book publishers were well aware of Bantam's successes, and other paperback companies emerged to challenge Bantam's hegemony. This intense competition from other paperback companies and steeply rising production costs prompted Bantam to raise the cover price from 250 to the then unheard of 350 in 1950. Ballantine designed an innovative marketing ploy to alleviate the impact of this price increase. Bantam inaugurated the "Bantam Giants" in 1951, which were de­ signed to capture the attention of readers looking for "weighty" books. Some of the early Giants included Ben A. Williams' Leave Her to Heaven (#A775) and Taylor Caldwell's This Side of Innocence (#A760). Although successful, the Giants alone could not dissipate the stiff competition Bantam faced, which prompted the company to raise cover prices to 50c. Its first big success at 500 was John O'Hara's A Rage to Live (#F935).41 Ballantine realized rather early in his tenure that American paperback books had a global appeal, so he developed a structure designed to capitalize on this opportu­ nity. He launched an export distribution network with Belgium, Holland, Scandina­ via, and Portugal in 1946. In 1947, the Middle East was added. Bantam entered the United Kingdom in 1949, establishing Trans-World Publishing Co. there in 1951. Ballantine also became a keen exponent of motion picture tie-ins; whenever possi­ ble, he issued titles timed to coincide with film premieres and publicity campaigns (a source of free advertising for his books). A few of these successful books in­ cluded John Steinbeck's The Pearl (#131), Kathryn Forbes' Mama's Bank Account (#135; later to be turned into I Remember Mama, one of television's earliest hits), Borden Chase's Red River (#205), Lucille Fletcher's Sorry, Wrong Number (#356), John Steinbeck's The Red Pony (#402), Edmond Rastand's Cyrano de Bergerac (#858), and C. S. Forester's Captain Horatio Hornbhwer (#A912).42 Bantam faced severe censorship problems in 1950 in New Jersey, leading ulti­ mately to a major court victory but costly legal bills. In addition, a weakened econ­ omy during the Korean War strained Bantam's resources. The company faced massive problems with returns because the market was flooded with titles issued by Bantam and its competitors. Major fiscal woes plagued Bantam in 1951-1952; in June 1952, Ian Ballantine left Bantam, the house he created and led so successfully for many years. Publishing insiders were well aware of the pivotal role Ian Ballantine played in the creation of this modem book publishing firm, and he was not easily replaced. 40Ibid., pp. 43–47. 41Ibid., pp. 49–55. 42 Ibid., pp. 57–66.

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Pitkin ran Bantam until 1954, but the board of directors ultimately selected Os­ car Dystel as Bantam's president in 1954. Dystel had earned a reputation in the peri­ odical industry, especially at Coronet magazine. Apparently the paperback industry's dependence on magazine distributors was a factor in the Board's deci­ sion to select Dystel. Dystel initiated a series of new strategic plans to revamp Bantam. These in­ cluded a reduction of wholesalers' warehouse inventories; smaller print runs; an improvement in the selection, packaging, and promotion of titles; and the develop­ ment of a corporate structure. This strategy worked. Some of the early best-sellers issued under Dystel's reign included: Leon Uris's Battle Cry (#FI279), Pierre Boulle's Bridge Over the River Kwai (#AI677), and John Steinbeck's East of Eden (#FI267). Dystel's planning and managerial expertise pushed Bantam into the black by 1955.43 Yet Bantam and its competitors in the paperback book business were plagued with pesky censorship problems in the late 1940s and 1950s. Many of Bantam's book con­ tents and covers proved to be an intractable bone of contention on the state level, nota­ bly in Michigan. In the late 1940s, many covers for male-oriented titles became a bit risque for a sizable (or at least a vocal) portion of the American population. Many of these colorful covers portrayed women in vulgar poses, with their apparel often com­ ing apart at the seams or literally falling off. Some of the books with sensational cov­ ers included The Amboy Dukes, Come, Fill the Cup, Rag Top, Blondes Die Young, Cage of Lust, The Innocent One, One Lonely Night, Into Plutonian Depths, Passion Road, and the often cited The PrivateLife of Helen of Troy (Popular Library's cover with a full-figured woman with nipples poking through Helen's flimsy gown). In 1952, the U.S. House of Representatives' Select Committee on Current Porno­ graphic Material held public hearings, some of which focused on the influence of pa­ perback covers and books. Dystel and the vast majority of paperback and hardcover book publishers were firmly committed to the First Amendment, and he fought, usu­ ally successfully, all attempts to censor Bantam's books. Whereas most artistic forms experience an ebb and flow, paperback covers remained a source of contention for de­ cades. By the 1960s, risque covers remained evident, including Bantam's The Harrad Experiment and Boys & Girls Together. Mickey Spillane's The Erection Set was is­ sued with two different paperback covers, one with a discreetly covered photograph of Spillane's naked wife and the second one containing only text.44 Trying to develop a backlist of titles that would help stabilize the essentially vol­ atile reprint operation, Dystel launched the famed Bantam Classics series in 1958. These titles proved over the years to be a steady source of cash and great pride for a company looking to find its place in the cloistered world of New York book publish­ ers. Some of the early titles included #AC1 Aldous Huxley's Brave New World, #SC4 Fyodor Dostoyevsky's The Idiot, #FC5 Anton Chekhov's Four Great Plays, #FC6 Theodore Drieser's Sister Carrie, #FC7 Joseph Conrad's Lord Jim, #FC8 Frank Norris's The Octopus, and #FCIO Jane Austen's Emma. Ibid., pp. 79–85. Ibid., pp. 88–96.

4

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Throughout the 1960s, Bantam scored major successes by crafting a plan for re­ printing books that did not sell in hardback (known in the industry as sleepers), de­ veloping creative marketing campaigns for bestsellers (e.g., Valley of the Dolls), westerns (notably with the immense popularity of Louis L' Amour), romances, and other fiction genres, and creating the Bantam Extra (instant books), which included The Report of the Warren Commission on the Assassination of President Kennedy and The Pope's Journey to the U.S. By the 1960s, Bantam had established itself as the leading paperback company in the nation, prompting Dystel in 1964 to termi­ nate its distribution arrangement with Curtis. These successes caught the attention of individuals outside the book publishing world. In 1968, Bantam was sold for $50 million to National General Cinema. Under new owners, Bantam experienced more successes in the 1970s. Special ti­ tles (dictionaries, cookbooks, foreign language books, children's books, and the Bantam War Books series) notched impressive results. Some of their best sellers in­ cluded Portnoy's Complaint, Airport, Jaws, Helter Skelter, and The Deep. Bantam launched the American Review, and there were more movie and television tie-ins (The Twilight Zone and Star Trek). Dystel also decided that film novelizations (The Sting, Taxi Driver, and Jaws 2) would add panache, as would a highly visible Ban­ tam Lecture Bureau (created in 1971).45 Ever vigilant of new opportunities, Dystel added new features to his strategic plan. He expanded the direct sales force, launched a premium marketing opera­ tion, employed a direct response approach, enlarged the school sales program, and continued the development of major product lines, including children's, clas­ sics, and westerns. Success did not generate boredom or a lack of publicity for Bantam. In 1973, the American Financial Corporation (another nonbook corporation) acquired Na­ tional General Corporation for an estimated $70 million, thereby giving Bantam another owner. In 1974, Giovanni Agnelli's Instituto Finanzario Industriale (IFI) purchased Bantam for $70 million, paving the way for Alberto Vitale to join Ban­ tam. Agnelli eventually sold Bantam 3 years later to West Germany's Bertelsmann AG (one of the world's leading book publishers). Bertelsmann ob­ tained a 51 % share of Bantam for a sizable sum (estimated to be between $36 mil­ lion and $50 million) in 1977. In what was then an unrelated transaction, the privately owned Doubleday acquired Dell in 1976. This new set of owners made changes at Bantam. Dystel became Chairman of Bantam in 1978, and then left the firm in 1980. Eventually, Alberto Vitale was named President, and he developed his own strategic plans for Bantam, including a stronger financial system, a vigorous attention to editorial policies (which in­ cluded a flair for finding blockbuster bestsellers), and bringing young managers into the company. Many of these new hires had business degrees and experiences 45 Kenneth C. Davis, Two-Bit Culture: The Paperbacking of America, pp. 60-89; also see Trevor Lipscombe, "The Greatest Story Ever Told: The Pitfalls of Publishing," The Journal of Scholarly Pub­ lishing, 31, 4(April 2000): pp. 179-188; Freeman Lewis, A Brief History of Pocket Books (New York: Pocket Books, 1967), pp. 1–48.

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in other industries. For example, Jack Hoeft (later to be named BDD's President and Chairman of the Board) left a major marketing position at Pepsi-Cola to join Bantam. Bantam in the 1980s and 1990s experienced its most impressive and successful period of growth because of innovative and successful strategic plans, which in­ cluded publishing original fiction, acquiring and developing properties that were eventually licensed to hardbound publishers for first-time publication, increasing its emphasis on instant books, issuing reference and educational materials, publish­ ing blockbuster nonfiction titles in hardcover (Iacocca was the national best seller for 2 years) and paper, and developing a strong sales and marketing orientation that permeated the entire company. In 1981, Bertelsmann AG purchased IFI's remaining 49% position in Bantam, and, in a related move, Bertelsmann sold IFI its 30% share of Fabbri Editori in Mi­ lan. In 1986, Bertelsmann AG acquired Doubleday Dell and merged them into the Bantam Doubleday Dell Publishing Group, Inc. By the mid-1990s, BDD generated +$1 billion in annual sales, employed ap­ proximately 1,700 people, and issued somewhere in the vicinity of 70 new titles each month under a number of well-known imprints. The Bantam imprint includes: Bantam Audio Books, Bantam Books, Bantam Classics, Bantam Skylark, Bantam Young Skylark, Books for Young Readers, Loveswept, New Age Books, and Sweet Dreams. Doubleday issues The Anchor Bible, Anchor Books, Currency, Dolphin Books, Double D Western, Image Books, The Jerusalem Bible, Made Simple Books, The New Jerusalem Bible, Nan A. Talese Books, Outdoor Bible Series, Per­ fect Crime, and Spy Books. Dell releases Delacorte Press, Dell Books, Dell Hardcovers, Dell Trade Paperbacks, Delta Books, Island Books, Laurel Books, Laurel Trade Paperbacks, and Dell Magazines. Since 1945, Bantam Doubleday Dell has published many notable authors, in­ cluding Maya Angelou, Isaac Asimov, Margaret Atwood, Jean Auel, James Baldwin, Ray Bradbury, Arthur C. Clarke, Pat Conroy, John Grisham, Alex Haley, Radclyffe Hall, Joseph Heller, Judith Krantz, Louis L'Amour, Elmore Leonard, Ross Macdonald, Danielle Steel, John Steinbeck, and Jacqueline Susann. The company's authors have earned some of the most impressive awards includ­ ing The Pulitzer Prize, National Book Critics Circle Award, National Book Award, The Booker Prize, The Nobel Prize for Literature, The P.E.N. Hemingway Award, The Agatha Award, The Edgar Award, The Gold Dagger Award, The Hugo Award, The Newberry Medal Award, Newberry Honor Books, The Caldecott Medal, and The Caldecott Honor. In 1998, Bertelsmann AG, the parent of Bantam Doubleday Dell, purchased Random House for about $1.4 billion. The newly merged operation was named Random House, and Bantam, Doubleday, and Dell (and later the newly launched Broadway Books) became operating units. By 2002, Random House, the largest English-language publisher in the world, was a major force in most of the important book categories, including adult and juvenile trade, religious, romance, mystery, reference, cooking, travel, business-personal financeinvesting, and computers.

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Strategy and Structure: Pocket Books and Bantam Books

Pocket Books and Bantam Books (and later Bantam Doubleday Dell and finally Random House) established a strategy regarding editorial, marketing, and distri­ bution and then crafted the organizational structure needed to implement it. In each case, there was a desire to go beyond the industry-entrenched, entrepreneur­ ial, family-owned corporation to shape a modern business framework. Once each firm developed its organizational structure, a more complex (and in­ evitably) bureaucratic operation was put in place. This was needed, as the Bantam experience demonstrated in the late 1940s, to monitor sales revenues, unit sales, and returns. Bantam utilized this centralization effectively from the mid-1950s into the 21st century. There is an inevitable ebb and flow in any organization. Eventually, a need to de­ centralize some operations materialized. Ballantine realized this when he launched the overseas operations, and Dystel accepted this approach when his management team was given the authority to handle major responsibilities ranging from art and design to marketing. For decades, a product mentality permeated both of these corporations. In the 1990s, both Simon & Schuster and Bantam Doubleday Dell decided to return to an earlier entrepreneurial approach stressing Peter Drucker's belief in the significance of both marketing and innovation, which in book publishing is a commitment to the creative editorial function. They became modern book companies, and two of the most successful, because of their reliance on a corporate strategy that then deter­ mined an organizational structure. UNIVERSITY PRESSES

Whereas most commercial houses emphasize business functions, the less visible nonprofit sector takes the opposite approach.46 These houses emphasize editorial excellence, sometimes at the expense of marketing, because they are not under the same pressure to generate a profit as their commercial counterparts. In fact, a non­ profit organization is prohibited from making a profit under U.S. Internal Revenue Service (IRS) guidelines (a "surplus," on the other hand, is permissible). Nonprofit publishers include museums, religious organizations, academic and professional organizations, governmental units (on the federal, state, and local lev­ els), and scholarly and academic organizations. In many ways, university presses comprise the most active and visible compo­ nent of the nonprofit sector. They vary in size, title output, and financial resources, yet they share a strong commitment to scholarship, editorial excellence, and the dis­ semination of knowledge.47 Approximately 121 university presses belong to the Association of American University Presses (AAUP). A few of the most visible 46

August Fruge, A Skeptic Among Scholars: August Fruge on University Publishing (Berkeley: Uni­ versity of California Press, 1993), pp. 40-41,43–46. 47 Ibid., pp. 56–57; also see Marsh Jeanneret, God and Mammon: Universities as Publishers (Ur­ bana, IL: University of Illinois Press, 1989), pp. 28, 37.

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presses were selected in order to review their strategic structure. Figure 3.4 outlines the typical university press organizational structure. The University of Chicago Press Since its creation in 1891, the University of Chicago Press (owned and operated by the university) has been one of the world's preeminent scholarly publishing houses. Between 1884 and 1904, Chicago published over 200 titles in a variety of academic disciplines, including education, literature, economics, and the sciences. Ori­ ginally, the Press published only the work of its own faculty. In 1905 this policy was reversed, allowing it to issue the best scholarly research from other scholars in this nation and abroad. Generally, about 25% of Chicago's current authors are fac­ ulty members of the university. Chicago has a rigorous editorial screening process; it employs an editorial board (comprised of faculty members, the provost, and the university's president) that ap­ proves any book published by the press, an irrefutable sign of the university's con­ trol over it. This board reviews manuscripts after the Press's acquisition editors and two outside reviewers who are experts in the book's subject matter have approved them. Individual editors have the prerogative to reject a manuscript without passing it on to the editorial board.

FIG. 3.4 Typical university press organizational structure.

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In 1999, Chicago issued 255 titles; the following year 272 were published. Its backlist totaled 5,050 in 2000. Although exceptionally impressive in many differ­ ent areas, its strengths have traditionally been in the social sciences (sociology, an­ thropology, political science), business and economics, and the humanities (history, philosophy, linguistics, the classics, and literature), as well as the sciences. Its titles in the field of publishing studies are laudable. Chicago also issues 44 jour­ nals. For extensive series or exceptionally expensive works, the press often seeks outside funding (called a "subvention") from foundations or individuals interested in sustaining a project. Chicago's goal is to publish superb books and, hopefully, to break even, laudable goals. The Press publishes some of this nation's best books, including the definitive Chicago Manual of Style, 15th Edition. This title was first published in 1906; and, ex­ cept when a new edition is released, annual sales generally range between 18,000 and 20,000 copies. Other highly successful titles include Kate Turabian's A Manual for Writers of Term Papers, Theses, and Dissertations, Richmond Lattimore's transla­ tion of The Iliad by Homer, and Milton Friedman's Capitalism and Freedom. Chicago receives manuscripts in a variety of ways, from the tireless efforts of ac­ quisition editors, the academic "grapevine," referrals from existing faculty and Chi­ cago authors, and "over the transom" (i.e., unsolicited manuscripts). Chicago's organizational structure reveals its commitment to editorial excel­ lence while maintaining a strong managerial-business focus. Harvard University Press Although officially created in 1913, Harvard University Press has its roots in the 17th century. In 1643 Harvard, then a small college, gained possession of a press, type fonts, and paper, propelling it into the ranks as one of this country's oldest printer-publishers. Following the old college publisher-printer pattern first estab­ lished in England, the Harvard Press served the internal needs of the college by printing books and pamphlets for faculty and students. Later on, Harvard began to take on outside miscellaneous printing jobs. The term "press" really referred to a printing press and a modest commercial printing operation as well as a publishing function. At this time, most American publishers also printed their own books, in addition to taking on commercial jobs.48 In 1692, Harvard decided to terminate its press, and it relied on commercial print­ ing establishments in Boston to handle its work. This practice was followed until 1802 when the President and fellows of Harvard resurrected the press. An innovative printing and publishing program was launched, and the press again supplied muchneeded textbooks and other materials (including examinations, envelopes, letter­ heads, circulars, etc.) for a growing college. The press was really a printing establish­ ment, and it had no gatekeeping function or control over what was printed.49 48 Morton Keller and Phyllis Keller, Making Harvard Modern: the Rise of America's University (New York: Oxford University Press, 2001), pp. 141-142. 49 Ibid., pp. 195-196.

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After sustaining steep financial losses in 1827, Harvard sold the press for $5,500.00 because it had become a drain and was not a financially viable operation. In 1913 Harvard re-launched the press for a third time. Their rationale was rather complex: (1) a well-functioning press could embellish and burnish Harvard's scholarly reputation; (2) the press could make a substantive contribution to the ad­ vancement of scholarship within the academy and the American community at large; and (3) the press could make available noncommercial books that might not see the light of day without Harvard's support.50 Over the years, the press has published major works, including The Double He­ lix by James D. Watson, Arthur Lovejoy's The Great Chain of Being, and titles by Jean Piaget, Emily Dickinson, and Ezra Pound. In 1999 Harvard University Press issued 142 new titles and 140 in 2000. Its backlist totaled 2,800 books. Its editorial focus is sharply defined: to issue scholarly books and serious works of general interest in the humanities, the social and behav­ ioral sciences, the natural sciences, and medicine. The press eschews contemporary poetry and fiction, festschriften, memoirs, symposia, or unrevised doctoral disserta­ tions. The press's esteemed Belknap Press was created with an endowment, thereby allowing it to publish distinguished works that need a financial subsidy. As with most presses, manuscripts are generated through acquisition editors and academic networks. A small number of its titles are received "over the transom." A rigorous screening process is strictly adhered to, a sign of the press's obligation to maintain a viable gatekeeping function. Their procedures include the initial accep­ tance by an editor and the final approval by the press's editorial board (called the Board of Syndics), which can veto manuscripts, and has. Oxford University Press Oxford University Press was founded in the United Kingdom in 1478, making it the oldest publishing establishment in the English-speaking world. In the decade be­ fore the American Civil War, Oxford sent sales representatives to the United States to sell Bibles, always a profitable venture for Oxford. In 1895 Oxford opened a branch office in New York. For almost 30 years, Oxford's editorial thrust in the United States centered on biblical works (e.g., The ScofieldReference Bible in 1909 and the New ScofieldRef­ erence Bible). During the 1930s and 1940s, the press initiated nonreligious book ti­ tles, reaching a backlist of over 700 titles in 1946.51 In 1950, the New York branch was incorporated under New York State laws as a separate legal entity; since that time it has been financially self-sufficient. However, the press did not forget its origins (primarily because all of its stock is held by its British parent). The New York operation, along with all of Oxford's other branches, report directly to Oxford University's "Delegates" (Oxford scholars appointed by Ibid., pp. 197-199; also see William P. Sisler, "Loyalties and Royalties," BookResearch Quarterly 4(Spring 1988): pp. 12-14. 51Nicholas Baker, The Oxford University Press and the Spread of Learning: 1478–1978 (Oxford: Clarendon Press, 1978), pp. 5–45.

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Oxford University) who are responsible for the press's conduct.52 The university also selects the press's principal officers, printer (an important function and title at Oxford), controller (who also oversees the paper mill, another sign of its strong connections to the printing shop), and publisher. Oxford's New York operation is editorially independent from the English office, yet it still imports all of the books published in England. Its catalog is an amalgam­ ation of American and British titles. The British operation, on the other hand, se­ lects the American titles it will list in its catalog. By 1954 the New York operation had created a wholesale department, which sup­ plied books (including those from other English publishers) to the U.S. market. Ox­ ford generally has been one of the largest importers of British books into this nation.53 As a university press, Oxford's primary goal is to publish books that meet the highest scholarly standards (including erudite monographs).54 It also seeks to pay its bills with general trade hardcover and paperback publications. Its editorial func­ tions can be divided into seven discrete operations: bibles, economics and business, humanities, the social sciences, medicine and the sciences, music, and numerous journals. U.S. title output reached 1,931 in 1999 and 2,250 in 2000; the backlist is a formidable 16,000. As usual, the acquisition editors roam across the academic landscape keeping in touch with senior faculty members and scouting for young authors. Manuscripts are funneled to the key editor for review. If a title passes muster, it is forwarded to an ac­ ademic reviewer(s) for an evaluation. A favorable review generally guarantees seri­ ous attention by an editor. The press has always emphasized serious scholarly academic research, along with reference works (e.g., The Oxford Companion to American Literature, The Oxford Companion to American History, The Oxford Book of American Verse). In 1956 Oxford launched a highly successful paperback operation (Galaxy Books), publishing C. Vann Woodward's The Strange Career of Jim Crow along with other strong titles in a wide variety of areas. In the 1980s Oxford began to pay attention to the scientific field, business ethics, economics, and feminist studies, which aug­ ments its strong positions in history, literature, languages, and linguistics. 52Ibid., pp. 78-79. 53Ibid., pp. 197–235. 54Ibid., pp. 237–251. Of related interest see Bill Bell (Ed.), Where is BookHistory? (Toronto: Uni­ versity of Toronto Press, 2002), pp. 13–51; Rowland Lorimer and Nancy Duxbury, "Of Culture, the Economy, Cultural Production, and Cultural Producers: An Overview," Canadian Journal of Communi­ cation, 19, 3–4(1994): p. 260; Roland Lorimer and E. O'Donnell, "Globalization and Internationaliza­ tion in Publishing," Canadian Journal of Communication 17,4( 1992): pp. 493–510; Dell Champlin and Janet Knoedler, "Operating in the Public Interest or in Pursuit of Private Profits? News in the Age of Me­ dia Consolidation," Journal of Economic Issues, 36, 2(June 2002): pp. 459–468; Amy Jocelyn Glass, "Price Discrimination and Quality Improvement," Canadian Journal of Economics, 34, 2(May 2001): pp. 549-569; Patrick Francois and Tanguy van Ypersele, "On the Protection of Cultural Goods," Journal of International Economics, 56, 2(March 2002): pp. 359-369; Richard E. Caves, Creative Industries (Cambridge: Harvard University Press, 2000); Richard A. Gershon, "The Transnational Media Corpo­ ration: Environmental Scanning and Strategy Formation," Journal of Media Economics, 13, 2(2000): pp. 81–101; Richard Gershon, The Transnational Media Corporation: GlobalMessages and Free Mar­ ket Competition (Mahwah, NJ: Lawrence Erlbaum Associates, 1997), pp. 1–59, 166–177.

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OBSERVATIONS ABOUT CHANGES IN BOOK PUBLISHING FIRMS

The publishing houses described in this chapter did not follow one strategy or struc­ ture as they developed into modern book companies. Instead, one can detect certain patterns, including: defining the managerial and editorial terrain; crafting a viable strategy and structure to reach basic goals; developing effective planning methods; organizing the house and its critically important editorial functions around certain core ideas and beliefs; designing realistic operations and procedures, especially in the area of human resources management; leading the company through the murky waters of the marketplace while working with boards, outside advisors, and so on; controlling the development of the company; and, finally, revising both the strategy and structure whenever necessary to insure that goals are achieved and maintained over both the short and long haul.55 Generally, these procedures worked. One managerial theory present in most of the firm's cases dealt with the notion of "a leader with a vision," someone able to see opportunities where others saw danger, a person driven to achieve greatness. Si­ mon, Schuster, Shimkin, de Graff, Ballantine, and Dystel all exhibited this charac­ teristic as they created their modern corporations.56 While the history of the modern book company is being written every day, it is safe to say that the quest to find the next generation of leaders with vision is a major preoccupation of the industry's current leaders. Peter Drucker once wrote that this type of "genius" is in short sup­ ply; Drucker was correct.

FIG. 3.5

Oxford University Press organizational structure.

55Robert Picard has studied these issues in some detail. See Robert Picard, Media Economics: Con­ cepts and Issues (Newbury Park, CA: Sage, 1989), pp. 1–121; Robert Picard (Ed.), Media Firms (Mahwah, NJ: Lawrence Erlbaum Associates, 2002), pp. 17-32. 56 Robert Picard, The Economics and Financing of Media Companies (New York: Fordham Univer­ sity Press, 2002), pp. 7–58,77–201; and Robert Picard, "The Rise and Fall of Communication Empires," Journal of Media Economics 9, 4(1996): pp. 23–40.

CHAPTER FOUR

Business Operations In book publishing, the bottom line is that there is a bottom line. Publishing is a business, and the company's officers and directors have legal and fiduciary respon­ sibilities to their stockholders (or owners), employees, and society. At first glance, this statement seems rather obvious. Yet a series of well-publicized events in the United States in 2001,2002, and 2003 involving gross violations of ac­ counting and securities regulations and guidelines, dishonesty in the reporting of payables, receivables, and profits, and the concomitant unraveling of corporations sparked a renewed interest in what some individuals viewed as rather basic, if not ho-hum, issues. Clearly, these issues are not ho-hum matters. They are, in reality, substantive concerns, and this chapter addresses in some detail these critical subjects. BASIC LEGAL ISSUES Every publishing industry employee is obligated to comply with all appropriate U.S. Government laws, the Uniform Commercial Code (the U.C.C.; commonly known as business law), as well as applicable regulatory agency, state, county, and local codes. Firms involved in global affairs confront federal laws governing for­ eign business transactions as well as the policies of the nation(s) where they are conducting their business. Anyone not sure of the appropriate laws or guidelines should discuss this matter with the firm's legal officer or corporate representative before an "ENRON" or "WorldCom"-type disaster materializes in the book publishing community. To insure compliance with a variety of internal systems of auditing, the typical book company delegates major fiduciary responsibilities among senior officers, generally designated as senior vice presidents, group vice presidents, or vice presidents. A typical organizational chart (based on a composite utilized by many of the ma­ jor U.S. book firms), illustrates how responsibilities are delegated: There are 6 se­ nior vice presidents handling information (i.e., public relations and corporate communications), operations, legal affairs (the office of the general counsel and 88

BUSINESS OPERATIONS

89

secretary to the board of trustees), financial matters, and human resources; and planning and development. Figure 4.1 outlines a typical organizational chart, which should be of interest to anyone seeking an understanding of business opera­ tions in the book publishing industry. BUSINESS OPERATIONS, THE CFO, AND BUSINESS PROFITS Business Operations

The senior vice president for business operations is responsible for a myriad of ac­ tivities, from data processing to the company's book warehouse and order and ful­ fillment duties. The introduction of computers and enterprise software into business offices increased the flow and accuracy of information. The computerization of book inventories in warehouses allowed houses to keep relatively accurate records of damaged books (which often occurs when warehouse fork lifts inadvertently cut into cartons or plastic covered skids), normal errors due to the miscoding of cartons or skids, and "shrinkage" (i.e., the disappearance of books). Business operations also handle the processing and fulfillment of a book order (e.g., 12 copies of a paperback version of Hamlet are requested by a bookstore in Upland, California). The order is processed to ascertain the title's correct ISBN number (the International Standard Book Number; each book, whether hardcover or paperback, has a unique identification number that can be found on the back out­ side cover), whether it is in print (if not the invoice is labeled "OP," out of print), temporarily out of print ("TOP"), in stock (if not, "OS"), temporarily out of stock,

FIG. 4.1 Typical publishing organization structure.

90

CHAPTER 4

not yet published, or not issued by this publisher. This must be done to avoid com­ mon order problems, making this task rather cumbersome. In addition, operations have to initiate a credit check on customers, especially new ones. Once all of these procedures have been followed, and the correct number of books has been assembled, the final invoice is prepared. Typically, a billing invoice (often called a packing slip) contains the information shown in Fig. 4.2. To expedite the processing of orders, the industry has adopted an identification system to code the outside of cartons or skids. This is used in addition to a house's existing external marking system (if any). A bookstore can order a title through a sales representative, a wholesaler, or a job­ ber. Because there is real competition in the marketplace to sell books to bookstores and other retail establishments, it would seem logical for the publisher to develop INVOICE Remit to: CP Book Company 831 E. 62nd St. Room 142 New York, NY 10021 212-555-2567 Control # 8025063-01 Purchase # 102193 Terms: 30 Days Net Ship: 4th Class IBSN 9-684-19250-0 9-684-19591-7

Ship to: Lincoln Book Store 1000 Front Street New York, NY 10012 212-555-1098 Invoice # X848064 Date: 7/15/2004 Page 1 of 1 Ship Terms: Our Expense TITLE

QUANTITY

The Search for Life Harry's Web

UNIT PRICE

2 10

6.95 5.99

IMPORTANT MESSAGE You can now have your invoice sorted the way you want! Let us know which sequence you prefer by selecting one of the options below. Alphabetical by author ISBN sequence Same sequence as order Signature

ALL CLAIMS FOR ADJUSTMENT MUST BE MADE WITHIN 60 DAYS OF INVOICE DATE FIG. 4.2

Sample book invoice.

BUSINESS OPERATIONS

91

"user friendly" fulfillment and distribution procedures to attract and retain custom­ ers. Publishers have released literally dozens of business books describing the impor­ tance of quality service and effective customer service systems. However, within the fulfillment department, it appears that many managers never read any of these books. In fact, the type of "important message" listed on the bottom of the sample invoice to help the customer's file maintenance is the exception, not the rule. Bookstore personnel complain about the often-intolerable slowness by publish­ ers in processing simple requests. The "average" accepted time to order and receive books directly from a publisher's warehouse to a bookstore is at best 3 to 5 business days; some bookstores report that 7 to 15 days is not all that uncommon, a time frame that is totally unacceptable, as certain distributors promise a shipment within 1 or 2 business days. During the Christmas season, all shipments take longer. To combat this problem, most of the largest and many of the medium-sized book publishers established ordering systems, ranging from "800" telephone numbers to electronic ordering exchanges to listing titles on the Internet. Eventually a bill is created based on this book order. Although publishers take great care to insure that the bill is accurate, irksome errors still plague this part of the industry. Some of the most common billing errors involve incorrect: (1) invoice or purchase or account numbers; (2) billing addresses (in the sample invoice, the bill was sent to one address but the books were forwarded to another location, a poten­ tial source of billing confusion); (3) credits or discounts; (4) bills for previously paid orders; (5) balances or late charges; (6) shipments ("short shipments" do oc­ cur); or (6) abbreviated titles that are difficult to ascertain by the people opening the cartons in the bookstore. The Chief Financial Officer In the post-ENRON environment, this office received increased scrutiny. The chief financial officer (CFO) insures that all of the appropriate financial and accounting policies are followed and that required reports are prepared accurately to show the results of the business's operations. This means insuring that generally accepted accounting guidelines are followed, including cost accounting, budgeting, data collection, and internal auditing. This office also monitors the preparation of budgets, cash flow, and accounts payable and receivable operations. In addition, the CFO handles, along with the general counsel, the preparation of documents related to public offerings (e.g., stocks, bonds, debentures, etc.), shortterm or long-term borrowings from banks, and short-term and long-term invest­ ments. These obligations require the CFO and the chairman and/or the president to have extensive contacts with underwriters, analysts, regulatory agencies (e.g., the Securities and Exchange Commission; SEC), stock exchanges (e.g., the New York Stock Exchange; NYSE), banks, and so on. A variety of financial documents must be prepared. One of the most important is the "Consolidated Balance Sheet." A sample consolidated balance sheet for a book company with a sizable periodical operating unit has been provided to illustrate the

92

CHAPTER 4

key accounting elements a publisher must be familiar with in order to manage the company (see Fig. 4.3 for details). This document lists the company's assets, liabilities, and owner's equity as of a specific date. A publisher must remember that, to accountants, assets equal liabili­ ties plus owner's equity, and assets minus liabilities equal owner's equity. This sheet provides a snapshot picture of a firm, and it is often called the "Statement of Financial Position." The assets section of the consolidated balance sheet lists what the company owns. It has cash on hand (or cash equivalents; e.g., cash in a checking account or money invested in U.S. Treasury Bills that can be converted to cash with little deConsolidated Balance Sheet for the CP Book Company (Dollars in Thousands) Item Current Assets Cash Short-terra Investments Account Recievable Inventories Deferred Income Tax Benefits Prepaid Expenses Discount Operation: Current Assets Total Current Assets Product Development Assets Property and Equipment Intagible Assets Other Assets Discontinued Operation: Non-Current Assets Total Assets

FIG. 4.3 Consolidated balance sheet.

$10,656 71,342 36,356 36,061 8,143 3,756

$1,419 50,034 38,669 36,298 6,823 2,180

­ 166,314

13,146 148,569

16,328 16,009 51,140 1.527

17,309 14,198 55,095 2,402

251,318

11,327 248,900

15,873 17,997 35,800 1,013 25,358

2,1% 21,410 30,992 1.806 18,415

-­ 96,041 40,000 8,690 11,682

11,927 86,746 55,000 5,752 7,840

3,830 1,113 32,187 64,466 876

3,782 1,150 31,863 64,138 (850)

6,567 94,905 251,318

6,521 93,562 248,900

­

Liabilities and Shareholder's Equity Current Liabilities Notes Payable and Current Portion of of Long-term Debt Accounts and Royalties Payable Deffered Subscription Revenues Accrued Income Taxes Other Accured Liabilities Discontined Operation: Current Liabilitiy Total Current Liabilities Long-term Debt Other Long-term Liabilities Deferred Income Taxes Shareholders' Equity Common Stock: Class A Common Stock: Class B Additional Paid-in Capital Retained Earnings Cumulative Translation Adjustment Less Treasury Shares at Cost Total Shareholders' Equity Total Liabilities and Shareholders' Equity

As of December 31 st 2003 2004

BUSINESS OPERATIONS

93

lay), short-term investments (perhaps 90-day bank certificates of deposit), ac­ counts receivable (money owed the company from bookstores, wholesalers, etc.), deferred income tax benefits, and prepaid expenses (perhaps insurance premiums). These data list the firm's total current assets, a critically important tally. Other assets on the financial statement sheet deal with property (e.g., buildings, land) and equipment (from new computers to old IBM typewriters), intangible as­ sets (defined as "an asset with no physical form; a right to current and expected fu­ ture benefits"), and "other" assets. The bottom line for this firm's total assets was $251,318,000 for the year ending on December 31, 2003 and $248,900,000 as of December 31,2004, a decrease of $2,418,000. The liabilities section of the balance sheet indicates what the firm owes. This document reveals that this company has accounts payable (money it owes to other firms and individuals) as well as "royalties payable." Book firms generally pay roy­ alties to their authors twice a year. So these funds are held by the publisher in trust in an escrow account for the true owners (the authors or heirs, etc.), and they are listed as a liability on the financial position statement. Other liabilities include deferred subscription revenues. This company has a journal (periodical) division, and it col­ lects subscription fees in advance. These funds are considered a liability on the bal­ ance sheet, as are accrued income taxes, and so on. The book company's total current liabilities as of December 31,2003 were $96,041,000 and $86,746,000 for the following year, a nice decrease of $9,295,000. Other significant data appears on the balance sheet, including any long-term debt (e.g., money borrowed to finance the construction of a new warehouse) and lia­ bilities, deferred income taxes, and shareholders' equity. Total liabilities and share­ holders' equity as of December 31,2003 stood at $251,318,000 and $248,900,000 for 2004, a drop of $2,418,000. The financial position document "balances"; that is, total assets equals liabili­ ties plus owner's equity for both 2003 and 2004. On financial statements, any number placed within a parentheses (for example the $850 in the Consolidated Balance Sheet) is a negative number. All other numbers are always considered positive numbers. In order to gauge the success of a firm, and to make plans for the future, manag­ ers need precise information about revenues, costs, and expenditures. A "Consoli­ dated Statement of Income and Retained Earnings" is the accounting document that best summarizes this material. In this document (Fig. 4.4), revenues tallied $236,859,000 as of December 31, 2003, and $231,015,000 for the following year (off $5,844,000). The firm's costs and expenses (that is, the cost of sales as well as operating and administrative ex­ penses) are listed on the income and retained earning sheet, along with other reve­ nue streams. The preparation of this document allows an individual to ascertain total income from continuing operations as well as net income dollars. In addition, detailed information is always provided outlining cash dividends (always an impor­ tant figure to stockholders) and retained earnings, in this case as of December 31st for both 2003 and 2004. Per share data can then be calculated.

94

CHAPTER 4 Consolidated Statements of Income and Retained Earnings for the CP Book Company Item As of December 31 st 2003 2004 Revenues Costs and Expenses Cost of Sales Operating and Administrative Expenses Total Costs and Expenses Unusual Items: Gains Operating Income Interest Expense Other Income (Expense): Net Income Before Taxes Provision for Income Taxes Income from Continuing Operations Discontinued Operation: Gain on Sale Loss from Operations Income (Loss) from Discontinued Operation Net Income Retained Earnings at Beginning of Year Cash Dividends Class A Common ($1.10 per share) Class B Common ($.98 per share) Total Dividends Retained Earnings at End of Year Per Share Data Income from Continuing Operations Primary Fully Diluted Income (loss) from Discontinued Operation Primary Fully Diluted Net Income Primary Fully Diluted

FIG. 4.4

$236,859

$231,015

92,575 138,707 231,282 471 6,048 (5,918) 4,771 4,901 1,334 3,567

95,234 126,576 221,810 13,626 22,831 (5,718) 1,357 18,470 10,952 7,518

5,018 (4,534) 484 4,051 64,138

(4,851) (4,851) 2,667 66,176

3,821 902 4,723 63,466

3,783 922 4,705 64,138

$0.81 $0.81

$1.70 $1.70

$0.11 $0.11

$(1.10) $(1.10)

$0.92 $0.92

$0.60 $0.60

Consolidated balance sheet and retained earnings.

The third pivotal accounting document is the "Consolidated Statement of Cash Flow," which addresses the issue of money (cash) flowing into and out of this book firm during the year (as shown in Fig. 4.5). This data is generated to predict future cash flows (from various revenue streams), evaluate managerial decisions, deter­ mine the ability of the company to pay dividends to stockholders and interest and principal to creditors, and reveal the relationship between net income and changes in the book company's cash. In essence, this statement divulges where the cash came from and how the firm spent it during both 2003 and 2004. This statement is divided into three distinct components: operating activities (which generate both revenues and expenses in the company's business); investing activities (which list the firm's planning endeavors that affect long-term assets of the book company); and financing activities (efforts to obtain cash from investors

The Consolidated Statement of Cash Flows for the CP Book Company Item

As of December 31 st 2003 2004

Continuing Operations Operating Activities Income from Continuing Operations Non-Cash Items Depreciation and Amortization Provisions for Returns, Doubtful Accounts, and Obsolescence Differred Income Tax Other Unusual Items Changes in Operating Assets and Liabilities Decrease (Increase) in Recievables Increase in Inventories Increase (Decrease) in Accounts and Royalties Payable Increase in Deffered Subscription Revenues Net Change in Other Operating Assets and Liabilities Cash Provided by Operating Activites Investing Activities Acquisitions of Publishing Assets Item

$7,518

20,036 7,922 1,505 2,273 (471)

20,482 7,196 5,164 2,237 (13,626)

246 (3,350)

(2,667) (2,797)

(3,771) 4,361

(4,711) 5,146

(5,813) 26,505

(3,451) 20,491

(5,800)

(35,515)

As of December 31st 2003 Additions to Product Development Assets Additions to Property and Equipment Proceeds from Sale of Publishing Lines Cash Provided by (Used in) Inventing Activities

Financing Activities Additions to Long-term Debt Repayment of Long-term Debt Net Barrowings (Repayments) of Short-term Debt Cash Dividends Proceeds from Exercise of Stock Options Cash Provided by (Used in) Financing Activities Effects of Exchange Rate Changes on Cash Increase (Decrease) in Cash: Continuing Operations Dicontinued Operations Operating Activities Investing Activities Financing Activities Proceeds from Sale of Assets Increase in Cash ; Discontinued Operations Cash and Short-term Investments Increase for Year Balance at Beginning of Year Balance at End of Year Cash Paid during the Year for Continuing Operations Interest Income Taxes

FIG. 4.5

$3,567

2004

($12,324) (5,146) 8,000

($12,503) (7,284) 34,491

(15,270)

(20,361)

­ — (1,418) (4,723) 271

40,000

450 (4,705) 1,491

(5,870)

37,236

(129)

97

5,236

37,463

1,248 (2,592) 475 26,178

7,719 (2,032) (2,522) ­

25,178

­

30,545 51,453 81,998

40,628 10,825 51,453

5,977 410

4,623 5,895

Consolidated statement of cash flow.

95

96

CHAPTER 4

and creditors that the firm needs to support business activities). Each portion of the statement lists cash receipts and cash disbursements and ends with a net cash in crease or decrease figure. Special mention must be made about the funds allocated for book returns (al ways an unknown; for this reason, most of the major publishers keep a portion of ar author's royalties in a special escrow account as a hedge against returns), doubtfu business accounts (covering firms that go out of business or enter bankruptcy), anc obsolescence (books that no longer have any commercial value; this is a critica problem with textbooks that become dated or unsalable because of the used text book market). These tallies are estimates based on past business performance on standard industry financial ratios. In any given year, the actual sums of money needed to cover these obligations can be higher than what was originally estimated which can create some financial difficulties for the house. Of course, revenues and expenditures are calculated throughout the year. An other useful financial document is the "Results by Quarters," which outlines how this book company did in each quarter (see Fig. 4.6). This document indicates tha Financial Results by Quarter for the CP Book Company 2003 Revenues: first Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year

2004

$63,215 57,480 63,739 52,425 236,859

$62,075 53,199 61,114 54,627 231,015

Operating Income (Loss) First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year

5,841 1,139 2,851 (3,783) 6,048

5,884 12,8% 2,376 1,675 22,831

Income (Loss) from Continuing Operations First Quarter Second Quarter Third Quarter Fourth Quarter fiscal Year

2,922 853 1,481 (1,689) 3,567

2,825 1,784 1,344 1,565 7,518

2,145 278 650 978 4,051

1,839 (222) 1,351 (301) 2,667

Net Income (Loss) First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year

Income (Loss) Per Share Primary and Fully Diluted First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year

Continuing Operations

$0.66 0.19 0.34 (0.38) 0.81

FIG. 4.6 Financial results by quarter.

Net Income

$0,48 0.06 0.15 0.22 0.92

Continuing Operations

$0.63 0.41 0.30 0.36 1.70

Net Income

$0.41 (005) 0.30 (007) 0.60

BUSINESS OPERATIONS

97

revenues varied somewhat for the CP book house, with the smallest amount gener­ ated in the fourth quarter, a pattern that was repeated with operating income, net in­ come, and income per share. One of the more interesting financial documents is an author's royalty statement, which differs dramatically from house to house (see Fig. 4.7). Many authors have complained that these statements are inherently difficult to read and understand, and an author really has little access to the actual sales tallies to see if the payment is accurate or if any errors were committed. Some authors have sued their publishers to "look at the books." This sample royalty statement is for a midlist novel that sold a total of 4,781 cop­ ies between July 1, 2003 and June 30, 2004. This document outlines the essential features needed to convey to the author information about domestic and foreign sales. Aside from basic information about the author's name and address, the roy­ alty period, and some accounting notes, this royalty statement indicates that the book in question (South of Somers) was issued only in hardbound. The basic royalty fee is 12.5% on both domestic and foreign sales. Net sales tallies are listed, as are ROYALTY STATEMENT CP BOOK COMPANY Author: James M. Washington 70 South Everett Street Callaway, Ohio 00000

Reciept Number 280540-02

Royalty Period From To 7/1/2003 6/30/2004

Settlement Date: 9/30/2004 Note: (1) A dash after the sales number means that returns exceeded sales during the period covered. (2) "CR" indicates a negative balance due to prior payments in excess of total royalties earned (3) Amounts under $10.00 are carried over to the following royalty period. (4) Please refer to your reciept number and department number in all your correspondence. (5) If there are no sales and no balances owed on a title, no statement is generated for that title.

ISBN

Author/Editor/Title

Description Net Copies Sold

354715

Washington South of Somers (Hardbound) Domestic Sales Foreign Sales 12.5 percent royalty rate Total Amount Due: Less Author's Advance Amount Due:

FIG. 4.7

Royalty statement.

3,601 1,180

Net Reciepts

$37,810.50 $12,390.00

Royalty This Period

$4,726.31 $1,548.75 $6,275.06 ($3,500.00) $2,775.06

98

CHAPTER 4

net receipts and the dollar amount of royalties earned by the author from both reve­ nue streams. A total of $6,275.06 is listed; from this amount the author's $3,500.00 advance was deducted, leaving a net amount of $2,775.06 to be paid to the author. How much of the financial information listed in these five documents does an editor, marketer, or publisher need to know? In all probability, more than he or she ever expected to know. Because book revenues and expenditures determine future budgets, a basic understanding of this material is important. With increased mana­ gerial responsibility comes a concomitant growth in budgetary obligations, a fact of life in book publishing. Book Profits in the Consumer Book Industry

What are the profit margins in the consumer book industry? Although many book firms are publicly traded and obligated to release information about their financial operations, many are privately held and do not issue public pronouncements about their affairs. Fortunately, Veronis Suhler Stevenson and Publishers Weekly (the industry's major publication) collect and analyze financial data from publicly traded con­ sumer book publishing firms. While financial data covering the years 1988 through 2001 are available, consolidation in the industry, and the inevitable closing down of some companies, triggered a reduction in the total number of publicly traded firms during that 13 year period of time. Consequently, although the historical data shed light on substantive trends and patterns, data for the years since 1995 are far more stable and useful. According to Veronis Suhler Stevenson, publicly traded book firms sustained a 30.45% increase in total revenues between 1995 and 2001. Operating income totals were lower, up only 11.85%; tallies for operating cash flow were impressive, up a sharp 41.55%. Assets increased a staggering 78.22% during those 7 years.1 Clearly, the data generated by the Book Industry Study Group indicated conclusively a growth in total business activity during those years. Table 4.1 outlines in detail the trends between 1988 and 2001. The key financial ratios are quite revealing. Operating income margins fluctu­ ated somewhat between 1996 and 1998 before sustained growth emerged in 1999 (6.8%), 2000 (11.2%), and 2001 (off slightly to 10.6%). These operating income margins lag somewhat when compared to other industries, but, perhaps, they indi­ cate the potential impact increased efficiencies could have in book publishing if costs can be contained and distribution economies can be achieved. 1 The Veronis, Suhler & Associates Communications Industry Report (New York: Veronis, Suhler, 2001), pp. 273-274; Veronis Suhler Stevenson Communications Industry Forecast 2002 (New York: Veronis, Suhler, 2002), pp. 316–341. Also see The Veronis, Suhler &Associates Communications Indus­ try Report (New York: Veronis, Suhler, 1993), p. 200; The Veronis, Suhler & Associates Communica­ tions Industry Report (New York: Veronis, Suhler, 1998), pp. 233-234; The Veronis, Suhler & Associates Communications Industry Report (New York: Veronis, Suhler, 1999), pp. 236-236; The Veronis, Suhler & Associates Communications Industry Report (New York: Veronis, Suhler, 2000), pp. 219-220; also see Robert J. R. Follett, The Financial Side of Book Publishing (Oak Park, IL: Alpine Guild, 1988), pp. 37-82.

99

BUSINESS OPERATIONS TABLE 4.1

Financial Results of Publicly Traded Consumer Book Publishing Firms: 1988-2001 ($ Millions)

Revenues 1988

$6,556.4

Operating income 922.0

Operating cash flow

Assets

1,157.0

6,449.6

1989

7,277.5

879.9

1,179.7

8,092.7

1990

8,172.5

1,033.8

1,368.2

8,737.5

1991

9,909.0

1,201.5

1,593.6

10,638.5

1992

10,647.7

1,336.5

1,700.6

11,395.5

1993

4,161.4

539.8

594.1

3,431.1

1994

3,470.8

399.8

456.3

1,942.5

1995

3,489.5

432.0

576.0

2,088.5

1996

3784.0

216.6

295.3

3,068.3

1997

3,099.2

340.1

536.5

3,099.6

1998

3,951.9

185.9

409.5

3,086.1

1999

4,067.4

278.0

482.2

3,433.6

2000

4,196.8

471.0

695.3

3,646.1

2001

4,552.2

483.2

815.3

3,722.1

Source: Communications Industry Forecast 2002 (New York: Veronis Suhler Stevenson).

This pattern was also evident in the operating cash flow margins (with some un­ wieldy swings in totals), operating income return on assets (rather soft until 2000 and 2001), and operating cash flow returns on assets (again soft totals until 2000 and 2001). Table 4.2 outlines these trends. How did publicly traded book firms do in 2000 and 2001 ? Publishers Weekly re­ viewed the annual reports of 18 major publicly traded firms (14 U.S. companies, 1 Canadian, and 2 from the U.K.), and the results were illuminating.2 The 2000 operating income margins posted by nine of these companies were im­ pressive. As for margins, Thomson's results were the best that year, topping 16.8%, with McGraw-Hill Pearson (16.5%) and Harlequin and Harcourt (both at 15.3%) rounding out the top 4. Golden Books (-56%) reported negative numbers, and Ran­ dom House acquired it in 2001. Overall, 11 firms posted margins in double digits. Jim Milliot, "Publishers Profits Lagged in 2000," Publishers Weekly, 10 September 2001, p. 10; Jim Milliot, "Lower Operating Margins Prevailed in 2001," Publishers Weekly, 2 September 2002, p. 9.

100

CHAPTER 4 TABLE 4.2 Operating Income Margins, Operating Cash Flow Margins, Returns on Assets, and Asset Turnover of Publicly Consumer Book Publishing Firms: 1989–2001

Operating income margins

Operating cash flow margins

Operating income return on assets

Operating cash flow return on assets

Asset turnover (times/year)

1989

–4.6%

2.0%

12.1%

16.2%

1.0

1990

17.5% 16.2%

16.0%

12.3%

16.5%

12.4%

16.3% 16.4%

1.0

1991 1992

11.2%

6.7%

12.1%

15.4%

1.0

1993

13.0%

14.3%

—

—

—

1994

11.5% 12.4%

13.1%

14.7% 21.4

16.4%

1995 1996

5.7%

16.5% 7.8%

1.0

24.5

1.23 1.73

8.3%

14.3%

1.64

9.2%

1.20

1997

11.0%

1998

4.7%

17.3% 10.4%

6.0%

11.9% 13.2%

1999

6.8%

11.9%

8.5%

14.8%

1.25

2000

11.2%

16.6%

13.3%

19.6%

1.19

2001

10.6%

17.9%

13.1%

22.1%

1.24

1.28

Source: Communications Industry Forecast 2002 (New York: Veronis Suhler Stevenson).

The results in 2001 were somewhat different; no company had negative num­ bers, although Golden, Harcourt (Elsevier; with parts sold to Thomson), and Hun­ gry Minds (John Wiley & Sons) were acquired and fell off the list. Harlequin's performance was superb, hovering at 18.4%). Pearson was second (14.7%), out­ pacing John Wiley (12%) and EDC (11.9%). Overall, 7 firms were in double digits, a decline from 2000. Table 4.3 outlines the trends in 2000 and 2001. HUMAN RESOURCES The senior vice president for human resources is responsible for the recruitment, in­ terviewing, hiring, and training of almost all book company employees, exception­ ally important functions in an industry that has had difficult over the years recruiting and retaining top-flight people. The only exceptions are: top management positions (often handled directly through the publisher or the office of the president or chair­ man working with publishing industry consultants or a placement firm; field sales

TABLE 4.3 Operating Performance of Publicly Held Book Publishing Firms: 2000–2001 ($ Millions; Canadian Dollars for Harlequin or U.K. Pounds for Pearson, Penguin, and Quarto) 2000 Operating data

2001 Operating data Revenues

Revenues

Operating income

Margins

$20.5

$2.4

11.9%

$17.6

$1.8

10.2%

n/a

n/a

n/a

149.0

(83.4)

-56.0%

Harcourt

n/a

n/a

n/a

2,408.2

367.7

15.3%

Harlequin (C$)

582.6

107.5

18.4%

579.2

102.3

15.3%

HarperCollins

1078.0

118.0

10.9%

1,029.0

111.0

10.8%

Houghton Mifflin

n/a

n/a

n/a

1,027.6

140.1

13.6%

Hungry Minds

n/a

n/a

n/a

243.3

28.2

11.6%

2322.0

263.0

11.3%

1,993.3

307.8

15.4%

Millbrook Pearson (£) Reader's Digest Scholastic Simon & Schuster

0 1

Margins

EDC Golden Books

McGraw-Hill Ed.

1

Operating income

21.6

0.8

21.4

1.8

8.4%

2537.0

374.0

14.7%

2,044.0

337.0

670.3

14.3

2.1%

756.8

55.8

16.5% 7.4%

1917.0

184.7

9.7%

1,962.3

98.7

5.0%

648.0

40.8

6.3%

596.0

49.6

8.3%

3.4

(continued)

0 2

TABLE 4.3

(continued)

2007 Operating data Revenues

Operating income

2000 Operating data Margins

Revenues

Operating income

Margins

17.6 95.4

8.2%

Thomas Nelson

215.4

16.2

7.5%

214.1

John Wiley

734.4

87.8

12.0%

613.8

15.5%

Quarto (£)

73.6

6.2

8.4%

73.6

6.1

8.3%

Penguin (£)

820.0

80.0

9.8%

755.0

79.0

10.5%

1851.0

264.0

1388.0

234.0

16.8%

Thomson

Source: Publishers Weekly (New York).

14.2

BUSINESS OPERATIONS

103

representatives (generally hired directly by the regional sales manager but approved by the corporation); and some regional or field operations (for example, warehouse personnel are hired locally by the facility's manager). These hires would be approved by the corporate office (generally a "rubber stamp" situation). Where does the human resources office find employees for the home office? Publishing is a glamorous profession, and there seems to be an endless supply of ex­ ceptionally bright, eager people (mainly English and history majors) who want jobs in book publishing. A typical firm receives dozens of letters and resumes each week. Yet this flow of eager but inexperienced candidates (who know literally noth­ ing about book publishing aside from what they gleaned by reading Maxwell Perkins' letters to authors) must be augmented. Human resources places advertisements, primarily in The New York Times Sunday classified section, in Publishers Weekly, and often on one of the popular book indus­ try email services. This is done to find new candidates; however, there is often a sec­ ondary motive. Sometimes a firm will "test the waters" to find out if experienced E. A.s (editorial assistants) or a marketing assistant, for example, from other firms are looking for new jobs (while determining how much they want to be paid, a useful and important barometer of generally prevailing wage rates at other houses). Figure 4.8 is a typical ad, outlining needed computer skills and some background information. The human resources department also deals with job placement or recruiting firms, called "headhunters." Headhunters work for the publisher, not the candidate. This recruitment firm screens all applicants and forwards the most promising ones to the book house for an interview. After all, their reputation and standing with the house will be in jeopardy if they recommend inappropriate candidates. If one of their nomi­ nees is hired, the placement firm is paid directly by the house, not by the candidate. However, if the publisher were willing to pay $80,000 to an individual, and the headhunter's finder's fee is $8,000 (normally it is a fixed percentage of the individual's first year's wages), then it is quite common for the candidate to be offered only $72,000 by the book company; the $8,000 difference goes to the headhunter. ASSISTANT EDITOR We seek an Assistant Editor for the trade book division of our Harrison Books imprint. Responsibilities include line editing new and revised manuscripts, consulting with authors and assistant editors in developing new titles. A minimum two years experience in book editorial work required. Background with editing on MS Word a plus. An interest in romance novels a plus. We will only respond to those candidates under consideration. Send Resume WITH SALARY REQUIREMENTS to R. Hoffman, T-10-30, Mercury House, 55 Madison Avenue, New York, NY 00000 FIG. 4.8 Advertisement for assistant editor.

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College placement offices are sometimes used as they provide a steady source of highly trained individuals at no fee to the publisher. Some book houses also recruit employees from communications or journalism programs. An innovative program is offered by Fordham University's Graduate School of Business Administration. Fordham, located at Lincoln Center (in the heart of New York City's publishing and mass communications industries), offers the M.B.A. with a major in Communications and Media Management and the M.S. in Media Management. Aside from traditional work in accounting, management, marketing, finance, statistics, and business law, courses are offered in book publishing, maga­ zine publishing, newspaper publishing, publishing law (the press, the law, and the corporation), public relations, the new media, the mass media in the United States, broadcasting (television, cable), and various advanced seminars (business and the mass media; corporate power and the public). Fordham also offers advanced courses in management (operations management; leadership and change) and mar­ keting (sales management; marketing research; consumer behavior; advertising and media planning; and direct marketing). A similar program is offered to under­ graduates at Fordham's College of Business Administration. The second type of training is offered by summer publishing institutes. These students are recent college graduates. Typically, these noncredit (or optional credit) summer programs run for 6 or 7 intensive weeks; a few of them also review maga­ zine publishing in addition to book topics. Summer programs generally place up­ wards of 80%-90% of their students directly into publishing by the end of the summer term. Some colleges, universities, trade associations, and other institutions offer con­ tinuing education certificate (nondegree or noncredit) courses in publishing (e.g., electronic publishing, editing, indexing, etc.). All three types of programs appeal to human resources departments, as the stu­ dents are talented, trained, and no finder's fee has to be paid to the college. Once someone is hired, on-the-job training begins. Most book companies do not offer in-house specialized training courses. They rely, instead, on a time-honored, informal apprenticeship system. Some companies provide tuition remission for in­ dividuals pursuing an advanced degree or participating in a continuing education or certificate program; others hire consultants to teach specialized courses in-house. In addition, the human resources department monitors compensation schedules (e.g., to insure that all E.A.s doing the same work with the same time in service re­ ceive "identical" wages), U.S. Government affirmative action and labor laws, as well as any state, county, or local regulations. What are the compensation levels in book publishing? Overall, the book indus­ try lagged behind compensation packages (a basic wage plus a bonus) offered by many other industries, notably the computer information, financial service, and package good industry. Random House in the late 1990s established a minimum starting salary of $30,000, placing them far and away ahead of all competitors (they also readjusted salaries to compensate individuals earning near the $30,000 mark). Publishers Weekly studied salary ranges, and they concluded that, on average, employees working at larger houses earned more (and in some instances signifi­

105

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cantly more) than their counterparts at smaller firms, and editors generally lagged behind those employed in management and marketing and sales functions. Table 4.4 indicates the ranges for many typical jobs in the business. Although the path to the top at most large houses is through the sales and marketing departments, top editors able to find and keep "star" authors are rewarded handsomely for their efforts and contributions to the bottom line. Although small (revenues of $10 million or less) or medium sized (revenues be­ tween $10 million and $99.9 million) publishing houses are cozy, and allow indi­ viduals to get a grasp of different editorial or marketing functions, the average compensation levels at these houses are below, and in every instance significantly below, those available at the big houses. CEOs at the largest houses averaged $425,650 more than CEOs at the smallest firms, and directors/editors-in-chief earned $48,420 more at larger (rather than the smaller) houses. This pattern was ev­ ident in 17 of the major job classifications available for analysis. The only glaring exception was in the editor classification. The average editor at a small house earned $1,670 more than his or her counterpart at a large house. Table 4.5 outlines these trends. As for compensation among top executives, the annual reports and 10-Ks (re­ ports required of publicly traded companies by the Securities and Exchange Com­ mission) of 14 companies in 2000 and 2001 were analyzed to ascertain what these key people earned. Only salaries were reviewed, as stock options were rarely listed in 2001. Ironically, beleaguered Amazon.com posted the two highest salaries in 2000 (hov­ ering near $1.9 million and $2 million), easily outpacing McGraw-Hill, Reader's Di­ gest, and their archrivals at Barnes and Noble (and BN.com). This pattern was TABLE 4.4 Wage Scales in Book Publishing: 2001 & 2002 Range

2001

2002

Editor

$40,000–60,000

$55,000–75,000

Senior editor Publicity manager (large house)

$65,000–85,000

$62,000–96,000

$80,000–115,000

$89,000–102,000

Job

Marketing coordinator

$27,000–35,000

$27,000–35,000

Marketing manager Marketing director

$40,000–60,000

$56,000–360,000

Around $100,000 $90,000–500,000

$105,000 + $90,000–500,000

$50,000

$57,000

Top editorial jobs Editor Source: Publishers Weekly (New York).

1 06

TABLE 4.5 Publishing Pay Scales, 2001 Company revenue Job description

$100–499.9 mil

$500 mil +

$1-9.9 mil

$10-99.9 mil

Management net average

112,793

151,799

198,000

252,194

President/CEO Executive/Senior VP

131,850 90,080

224,571 153,859

400,000

557,500 260,000

VP General Manager VP Production

83,400 NA

126,781 95,900

Editorial Editorial net average

70,612 90,280

85,589 105,308

86,000 58,250

96,003 55,667

62,500

65,333

68,300

96,897 56,580 NA

NA

28,000

30,250

28,000

Management

Director/Editor-in-Chief Senior/Executive Editor Editor Production Development

173,000 181,250 110,667 90,280 128,500 99,964 54,833

255,500 246,721 94,166 138,700

Editor/Acquisitions Editorial Assistant

Company Revenue Job description

$1–9.9 mil

$10-99.9 mil

$100–499.9 mil

$500 mil +

Sales and marketing S&M net average

56,190

78,225

85,743

85,640

VP Sales/Marketing

81,667

117,250

137,250

174,000

Publisher

73,796

150,000

134,625

NA

Sales Director/Manager

64,176

84,375

98,343

105,857

Marketing Director/Manager

46,902

72,080

70,083

79,845

Promotion Director/Manager

32,667

55,813

NA

67,000

Sales Rep/Account Manager

57,598

63,043

61,338

70,013

Marketing Assistant

35,500

NA

30,000

36,000

Publicity Director/Manager

44,905

50,814

67,500

63,833

Operations/rights Production Manager/Director Distribution Manager/Fulfillment

70,652

85,683

68,000

95,336

NA

79,000

137,500

125,000

40,000

50,000

72,000

81,875

Director Sub Rights Director/Manager 10 Source: Publishers Weekly (New York).

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repeated in 2001, although the top 2 people at Amazon.com sustained declines in the 11.6% and 28.4% ranges. Declines were also registered at McGraw-Hill (-29.2%) and Reader's Digest (–67.1%). Key managers at Barnes and Noble experienced far more modest declines (-9.4%). Table 4.6 outlines these salaries. In recent years, the Human Resources department has also developed "em­ ployee assistance" programs (professional guidance and counseling services for employees facing financial, emotional, medical, or family crises). Often, outside counseling professionals are retained to handle some of these sensitive matters. Publishing is a people business, and a house's "real assets" walk out the front door every night. Without the right individuals (e.g., editors working with authors and manuscripts or sales people telling booksellers about a new novel), book pub­ lishing would collapse because it relies exclusively on people, relationships, and contacts. This is ironic, as most firms have done remarkably little to retain junior personnel; the turnover rate among these employees (the lifeblood of the industry and its hope for the future) is staggering. Among midlevel employees, it is almost as high. There is a tremendous amount of job "churning," that is, A.E.s (assistant edi­ tors) and assistant marketers going from one house to another for more money, a more rewarding or stable work environment, or the opportunity to work with a top expert in the field. Of course, there are other mitigating circumstances that affect employee turn­ over. Individuals retire, die, or leave the industry for personal, professional, or fi­ nancial reasons. Some people take a leave of absence for medical reasons; others are hired away by literary agents and other publishing firms; still others are released or terminated because of poor work performance, adverse financial conditions, or the results of a merger or acquisition. During a typical year, the human resources department is constantly looking for new, talented individuals, which places a tremendous amount of pressure on this department to generate viable job candidates while maintaining some semblance of control over budgetary considerations and, concomitantly, satisfying the needs of some rather demanding editors, publicists, and others. THE CHIEF INFORMATION OFFICER: INTERNAL AND EXTERNAL COMMUNICATIONS

The senior vice president and chief information officer oversees the preparation and timely dissemination of documents employed in corporate communications, publicity, and public relations campaigns. These tasks are compounded, ironically, because the text as well as tables, charts, appendices, and notes used in various documents issued and disseminated by this office are often prepared and supervised by other senior vice presidents (e.g., the general counsel generates all legal documents; the chief financial officer administers financial data; etc.). There are also overlapping (and at times conflicting) responsibilities with other components of the book house's operating unit, including campaigns and strategies

TABLE 4.6 Selected Executive Salaries, 2000–2001 % Change

2000

2001

$1,994,117

$1,762,008

1,865,704

1,335,292

-11.6 -28.4

Don Katz, Chairman, CEO

362,500

225,000

-37.9

Andrew Kaplan, EVP, CFO

187,163

181,396

-30.8

Stephen Riggio, Acting CEO

480,769

662,500

37.8

Marie Toulantis, CFO

350,000

463,750

32.5

Clyde Anderson, Chmn., CEO

465,000

680,000

46.2

Sandra Cochran, Pres., Sec.

337,500

561,000

66.2

J. Alan Kahn, COO

960,000

870,000

-9.4

Mitchell Klipper, EVP, Pres., DB&N Dev.

800,000

725,000

-9.4

Amazon.com Warren Jensen, SVP, CFO Diego Piacentini, SVP, Retail, Mkting. Audible Inc.

Barnesandnoble.com

Books-A-Million

Barnes & Noble

109

(continued)

1 1

TABLE 4.6

0

(continued) 2000

2001

% Change

Borders Group Greg Josefowicz, Pres., CEO

650,000

1,148,700

76.7

Tami Heim, Pres., Borders Stores/Online

300,000

397,019

32.2

130,000

130,000

0.0

Michael Herrick, CEO

194,167

225,000

15.9

John Levy, CFO

182,027

197,500

8.5

2,300,000

-29.2

770,000

1,628,380 581,872

David Allen, EVP, COO, CFO, Sec.

168,000

161,000

Jean Reynolds, EVP, Publ.

144,000

145,000

–4.2 0.7

$400,000

$400,000

0.0

240,000

210,000

-12.5

Educational Development Randall White, Chmn., Pres., Treas. Media Bay

McGraw-Hill Cos. Terry McGraw, Chmn., Pres., CEO Ken Vittor, EVP, general. Csl.

-24.2

Millbrook Press

Thomas Nelson Thomas Moore, Pres., CEO Joe Powers, EVP, secretary., Treas.

2000

2001

% Change

Reader's Digest Thomas O. Ryder, Chmn., CEO

2,260,000

742,307

–67. 1

M. John Bohane, SVP, Pres., Int'l Pub.

1,038,562

508,461

-51.0

Richard Robinson, Chmn., Pres., CEO

1,435,000

1,294,231

-9.8

Barbara Marcus, EVP, Child Book Pub.

1,110,711

1,089,749

-1.9

1,061,064

984,527

-7.2

636,247

415,520

-34.7

Scholastic Corp.

John Wiley & Sons William Pesce, Pres., CEO Stephen Kippur, EVP, Pres., Pro/Trade Source: Publishers Weekly (New York); Various annual reports and 10-Ks. 1 1 1

112

CHAPTER 4

formulated by promotion, sales and marketing, and editorial departments eager to publicize a book or an author. In essence, a lot can go wrong unless someone is minding the shop. While disparate in nature, a uniform corporate image must be created and main­ tained in the look and feel of these documents. Examples include corporate letters, newsletters, magazines, and so on, sent to employees (and often retirees). Other key documents prepared or supervised include those required or requested by regula­ tory agencies (e.g., annual reports). In addition, this office handles liaison relations with national, international, and local news organizations and publications. This role is especially crucial during any unusual events affecting the company, including the recalculation of past earnings, declines in earnings, layoffs, the termination of a CEO, or major typographical er­ rors in a book that causes physical or mental harm to readers. Clearly, incidents of this type are rare, but they undermine the public's confi­ dence in the book industry and the house in question. Corporate communications officers also handle all of the appropriate notifications to the industry and the public about these events and tragedies. "Disaster or crisis management" emerged as a major focal point after a series of deadly illegal tampering problems with products, serious environmental accidents, and insider trading abuses that undermined confidence in the business community. This office is responsible for many other tasks, including community relations. If the company plans to relocate one or more operations to another location, local politicians and community groups sometimes protest the move (urban centers are very sensitive to this issue because of job losses). Liaison work must be initiated with the new community, especially if concerns are raised about the construction of a new building or the expansion or renovation of an existing one. In addition, con­ tacts must be made with the local chamber of commerce and other organizations vi­ tal to the well-being of the book firm. Lastly, this office might oversee speeches and public appearances made by ma­ jor corporate officers (from actually writing the speech to disseminating it to the trade and business press). Often detailed plans are made to prepare an executive if he or she is scheduled to meet with stock analysts or to build the public image of an officer within the book industry or in the general business community. Corporate communications also supervises the company's work with charities. THE GENERAL COUNSEL AND SECRETARY TO THE BOARD OF DIRECTORS

As the firm's chief legal advisor, the general counsel reviews and approves all doc­ uments and contracts, ranging from book agreements with authors to real estate leases to complex medical-dental-pension trust indentures. In addition, members of the general counsel's staff review any "questionable" manuscripts to determine if any libelous issues are present and to verify any possible copyright infringement matters. They also draft and review documents, ranging from the termination of an author's book contract to grievance and dismissal notices.

BUSINESS OPERATIONS

113

This office is involved with a variety of publishing activities, but only as advi­ sors. In addition, the general counsel represents the firm (as a defendant or a plain­ tiff) in all lawsuits and appearances before any worker compensation boards or other federal, state, county, or municipal regulatory agencies. As for the board of directors, a corporation seeking "incorporation" status in a state must submit the appropriate documents to that state's agency (often the secre­ tary of state) for approval. These papers are prepared by the general counsel's of­ fice. Once this legal status has been granted, the board of directors must follow rather strict guidelines, ranging from the minimum number of annual board meet­ ings, maintenance of official board minutes, and the submission of various annual forms and documents to the state, stockholders, and others. The general counsel's office supervises these guidelines and the execution of these obligations. The United States government, as well as its regulatory agencies, has laws and rules that a corporation must follow (along with document submission requirements), an­ other area to be supervised by this office. The general counsel and his or her staff are attorneys working for the company. This compels many houses to employ outside counsel to handle certain specialized duties (perhaps labor negotiations with the unionized warehouse employees) and to act as a "check and balance" mechanism over the internal legal staff. PLANNING AND DEVELOPMENT

The last major business function is planning and development. Planners address ba­ sic questions about a book firm's current and potential business environment: What is our business? Are we undercapitalized? Are there signs of actual or potential cash flow problems? What is or should be our business in the coming years? What com­ petitive advantages or edges do we currently have in the marketplace? Do we rely on "mushy" marketing techniques? What are the strengths and weaknesses of top and middle management? Is there a realistic succession plan in place in case of a "crisis"? Did top management develop "crisis management" plans? How will we participate in the globalization of markets for books and information products? What type of mergers, acquisitions, or strategic alliances (in America or abroad) should we consider in the next few years? How will technology affect how we con­ duct our editorial, marketing, distribution, and business affairs? Will electronic books (e-books) affect our company and the entire book industry in the next 3 to 5 years (and in the next 5 to 10 years)? What new book and/or electronic products will we need to develop and bring to the market? What existing resources (i.e., sources of content, human resources, financial resources, etc.) do we have (and what will we need to obtain) in order to enter this market? How long will it take our firm (as well as our competitors) to enter this market? How mature is this market? What book firms are currently active in (or are on the verge of entering) the electronic market? How will domestic and global book competitors influence us if we do or do not enter the electronic market? Will any existing (or proposed) U.S. governmental or regulatory agency guidelines affect us?

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In essence, the key issue a planner confronts centers on how a book firm plans for the future. Over the years, strategic planners have developed a number of theories and practices that are followed by the majority of professionals active in this field. What comes first, a company's organizational structure or a detailed strategy? In Management: Tasks, Responsibilities, Practices, Drucker insisted that a corporation's structure always follows its strategy, and not vice versa. This theory is accepted by most scholars and practitioners; two of the best detailed studies on this issue are Alfred Chandler's Strategy and Structure: Chapters in the History of Industrial En­ terprise and The Visible Hand: The Managerial Revolution in American Business.3 Structure is a means for attaining the objectives and goals of an institution. Strat­ egy (i.e., the answers to the questions "What is our business, what should it be, what will it be?") determines the purpose of the structure. Effective structure is the de­ sign that makes these key activities capable of functioning and performance.4 This is not an easy task; and Drucker and Chandler recommend that a series of questions be addressed. How should a corporation's organizational units be con­ structed? What organizational components should be aligned and which ones must be left alone? Where and how should units be placed within the corporation? What relationships will be created to insure that this structure operates effectively? An effective manager must determine what his or her business is and what it should be. "If you were not in this business today, would you enter it?"5 If the an­ swer is no, then you are in the wrong business. Drucker insists you must abandon this operation as quickly as possible, bold advice that is not always easy to follow and implement. Once answers are generated, a series of decisions must be made. This means de­ termining what existing activities or organizational groupings no longer fit into the company's strategy and mission. Quite often this means closing or selling units. In order to avoid morale problems, top management must provide itself and its manag­ ers with a realistic vision, values, standards, and with procedures to audit perfor­ mance against these standards. This requires the book firm's executives to define clearly the purpose of the business. If the primary goal of a company is to create a customer and then satisfy the customer's wants and needs, then a business enterprise "has two, and only these two, basic functions: marketing and innovation. Marketing and innovation produce re­ sults; all the rest are costs."6 In Drucker's organizational system, the word "innova­ tion" refers specifically to the creative side of the enterprise (in the book business, this would be the aesthetic work of an author and the intricate, subjective, ephem­ eral process of editors). Alfred D. Chandler, Strategy and Structure: Chapters in the History of Industrial Enterprise (Cam­ bridge, MA: MIT Press, 1962), pp. 1-27; also see Chandler's The Visible Hand: The Managerial Revo­ lution in American Business (Cambridge, MA: Harvard University Press, 1977), pp. 7-38. Peter Drucker, Management: Tasks, Responsibilities, Practices (New York: Harper & Row, 1974), pp. 523-524. 5 Ibid., p. 61. 6 Ibid., p. 81. Also see two books by Al Ries and Jack Trout, Marketing Warfare (New York: McGraw-Hill, 1986), and Positioning: The Battle For Your Minds (New York: McGraw-Hill, 1981).

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115

How do you create a customer? To do this, a firm must stress marketing and es­ chew hard selling. This necessitates a reevaluation of business functions and opera­ tions. Drucker insists rather firmly that there should not be a separate marketing department or division within a company, which means the abandonment of the tra­ ditional linear organizational chart found in most organizational theory books or annual reports. Few firms have been able to follow this strategy consistently. Many successful large, global firms that dominated the business landscape in the 1960s through the 1980s seemed to stumble badly in the 1990s when markets shifted and consumers reevaluated their needs and questioned the quality of certain products.7 The plight of IBM in the early 1990s is a prime example of a corporation that once dominated domestic and foreign niches and later sustained debilitating reversals.8 Who is the customer? Drucker believes that there is always more than one cus­ tomer for a product. In the case of the book industry, for example, the "customers" are the booksellers, wholesalers, and jobbers, as well as the final consumer or end-user (perhaps a library) who purchases the book. What is "value" to the customer? In today's marketplace, many managers would insist rather persuasively and passionately that value is quality.9 Drucker insists, "The customer never buys a product. By definition the customer buys the satisfac­ tion of a want."10 This means that what is value to one customer may be a restraint to another individual. Why does a successful firm slip and lose market share? Theodore Levitt ad­ dressed this issue in "Marketing Myopia." Levitt insisted that firms declined invari­ ably because their managers defined the corporation too narrowly. To continue growing, a company must ascertain and act on their customers' needs and desires. They cannot bank on the flimsy assumption of the longevity of their products. In re­ ality, Levitt posits there is no such thing as a growth company, only firms able to capitalize on growth opportunities. Looking back on America's economic history, Levitt was struck with the unset­ tling development of this nation's railroads. He insisted railroads ended up in trouble not because of a precipitous decline in the number of passengers or freight transporta­ tion but, instead, because this need was not satisfied by the railroads. Other forms of transportation (the bus and the airplane) took customers away from them. Railroads assumed, erroneously, that they were "in the railroad business rather than in the trans­

7 Some books about the "total quality" movement include: Bill Creech, The Five Pillars of TQM [To­ tal Quality Management]: How to Make Total Quality Management Work for You (New York: Dutton, 1994), and Neil H. Synder, James J. Dowd, Jr., and Dianne Moss Houghton, Vision, Values and Culture: Leadership for Quality Management (New York: Free Press, 1994). 8Joseph H. Boyett, Stephen Schwartz, Laurence Osterwise, and Roy Bauer, The Quality Journey: How Winning the Baldridge Sparked the Remaking of IBM (New York: Dutton, 1993), pp. 3,19,24; also see Steven Levy, Insanely Great: The Life and Times of Macintosh, the Computer That Changed Every­ thing (New York: Viking, 1993), pp. 7, 89, 112, 119, 142, 206, 239, 281. Drucker, Management, p. 84. Also see William H. Davidow and Bro Uttal, Total Customer Service: The Ultimate Weapon (New York: Harper & Row, 1989). 10 lbid., p. 534.

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portation business. The reason they defined their industry wrong was because they were railroad-oriented instead of transportation oriented."11 Their failure was due to the fact that they were, in essence, product and selling oriented, not customer and marketing focused. Railroads emphasized their need to fill seats or to haul coal (i.e., to sell services or products that they had in abundance and desperately needed to peddle) rather than addressing the four components of an effective marketing strategy: development, production, distribution, and promo­ tion. So the railroads failed to comprehend the fact that their product was being made obsolete because other forms of transportation were meeting the "satisfaction of their customer's wants" more effectively. Levitt was also harshly critical of the practices of certain industries, particularly automobile makers in Detroit. These manufacturers, according to Levitt, never re­ ally researched their customers' wants and needs. Instead, they were only interested in their preferences between the kinds of products Detroit had already decided to place on the market. Professor Levitt insisted a manager must accept the fact that "building an effective customer-oriented company involves far more than good intentions or promotional tricks; it involves profound matters of human organization and leadership."12 So a company must adapt to new trends in the marketplace, and this is better done sooner rather than later. Levitt also dealt with the issue of leadership. He discovered in his re­ search that great companies have great leaders with a vision and a dream. Lastly, he posited that the entire organization must adopt a customer-creating mind-set. This means a book executive provides value satisfaction for the customer. All other corporate functions must be directed toward the attainment of this elusive but central goal. "How do consumers choose among the products that might satisfy a given need?"13 This key question helps frame Philip Kotler's diverse ideas and opinions about marketing, and it certainly is a question frequently heard at any book publish­ ing meeting or sales conference. To Kotler, a consumer confronts a "product choice set" of all available options; from this set, he or she selects a "need set." This means that the consumer ascertains the real or implied utility of a product (in essence, "the ideal product" if more than one version is on the market). How an individual makes this decision (i.e., determines his or her behavioral response) comprises the focus of marketing management. Kotler defined this as "the process of planning and execut­ ing the conception, pricing, promotion, and distribution of ideas, goods, and ser­ vices to create exchanges that satisfy individual and organizational objectives ... marketing management is essentially demand management."14 11Theodore Levitt, "Marketing Myopia," Harvard Business Review 53(September—October 1975): p. 26. Also see Seymour Tilles, "How To Evaluate Corporate Strategy," Harvard BusinessReview 41 (July-August 1963): pp. 111–121. 12Ibid., p. 36. 13 Philip Kotler, Marketing Management, 10th ed., (Englewood Cliffs, NJ: Prentice-Hall, 2000), p. 5. l4 Philip Kotler, Marketing Management, pp. 11–12. Also see Rosabeth Moss Kanter, When Giants Learn to Dance:Mastering the Challenges of Strategy, Management, and Careers in the 1990s (New York: Simon & Schuster, 1989), and Kotler's "From Sales Obsession to Marketing Effectiveness," Har­ vard BusinessReview 55 (November-December 1977): pp. 67-75, and "Operations Research in Mar­ keting," Harvard BusinessResearch 45(January—February 1967): pp. 30–38.

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Normally, an organization can adopt different, and at times conflicting, strategies to meet the specific needs of consumers. The first and oldest management marketing theory is the "production concept," which holds that the consumer "will favor those products that are widely available and low in cost. Managers of production-oriented organizations concentrate on achieving high production efficiency and wide distribu­ tion coverage."15 Under this scenario, a book is a low-price commodity. So generic paperback dictionaries and thesauruses, or inexpensive children's books sold in su­ permarkets, toy stores, drug stores, price clubs, or Wai-Marts are prime examples of the "book as a low-priced commodity" theory. The second theory is the "product concept," which holds that large numbers of consumers "will favor those products that offer the most quality, performance, and features. Managers in these product-oriented organizations focus their energy on making good products and improving them over time."16 Leatherbound books, well-made hardbound books, and high quality four-color reference books are mod­ els of this type of thinking. The key question surrounding this concept is, "What is of value to the customer?" Although the product manager might be enraptured with the item's quality, will the consumer pay extra for this product? The third theory is the famous "selling concept," which posits that consumers "if left alone will ordinarily not buy enough of the organization's products. The organization must, therefore, undertake an aggressive selling and promotion effort."17 In this theory, consumer inertia is an accepted fact (Isaac Newton wrote that an object at rest remains at rest unless acted upon by an unbalancing force). So marketers build aggressive sales and promotions efforts (often called "hard selling") to convince the "ignorant" individual that he or she really needs to pur­ chase a specific stock, a subscription to a newspaper or magazine, new windows for a house, or siding for a house. Telephone calls are employed, generally during dinnertime. The goal is to sell either what they have made or a service they offer the public. Whether one wants to admit it or not, this theory is the generally ac­ cepted practice within the book industry. After all, publishers issue a title, and then they try to influence customers to purchase it. This approach dominates the marketing of mass-market paperbacks and scientific, technical, and medical (STM) titles. The last theory is the "marketing concept." "The key to achieving organizational goals consists in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors."18 The four components of this strategy include: a clearly defined market focus; a customer-first orientation; the formulation of an intelligently coordinated marketing plan; and an understanding of profitability. This means that the marketer starts a campaign with a grasp of both the real and potential market and the needs of the cus­ tomer. With this in place, a coordinated blueprint is conceived and consummated that affects consumers by providing satisfaction of each individual's specific needs. l5

Kotler, Marketing Management, p. 13. lbid., p. 14. 17Ibid., p. 15. 18Ibid., p. 17. I6

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The focus is on, incontrovertibly, the market, the customer, and an intelligent co­ ordinated game plan intended to generate real customer satisfaction. Kotler's orga­ nizational chart of these activities is quite revealing because the customer is at the top of the chart. On the bottom tier, one finds top management. Between these two groups are front-line personnel (interacting with customers) and the ubiquitous middle managers supporting those individuals "in the trenches." How is a customer-focused philosophy created and utilized? Certain sophisti­ cated procedures have been developed to sculpt and institute such a program. These include developing a strategic plan principally by creating a fit between a company's corporate mission, objectives, and resources and the needs of the market. One scenario is to adopt the "McKinsey 7-S Framework." In the "7-S" system, a close relationship is developed between a firm's structure, strategy, systems, shared values, skills, style, and staff. McKinsey also developed specialized computer soft­ ware to trace and evaluate a corporation's activities. An effective strategic plan cannot be created overnight. A sophisticated under­ standing of a number of issues must be mastered. First, one must analyze the market. This means gathering accurate information about: customers and their preferences and the substantial factors influencing their purchase of a product; suppliers; market­ ing intermediaries; legal and regulatory issues; locational (especially on specific re­ gions of the nation) and demographic issues (i.e., age and life-cycle matters); psychological factors (primarily motivation); the always pivotal role of price; and economic (wages and occupations) and sociological factors (notably data on refer­ ence groups, opinion leaders, and the family). A planner must obtain realistic and timely statistical data, observational research, input from focus groups, or survey re­ sults in order to determine targets (which includes a determination about consumer, wholesaler, jobber, nonprofit, and international book markets). Second, existing and potential book market opportunities must be understood, especially if technological innovations will directly and possibly adversely affect the market. Third, one must have a clear understanding of the existing and potential channels of distribution. Fourth, planners must design and implement effective strategies that take into consideration an individuals' buying behavior patterns (e.g., a preference for known brands, habitual purchasing patterns; random selection procedures, etc.). Finally, thought must be given to controlling, implementing, and monitoring these marketing endeavors.19 This entails drafting strategic plans, which generally include: an analysis of the current market (including information about competitors); an analysis of both opportunities and substantive issues; a clear statement of objectives and the mar­ keting strategy; information about what will be done and by whom and when, along with costs associated with the plan; a projected proflt-and-loss statement; and various controls that will be implemented to insure how the firm's actions can be monitored. 'ibid., p. 67.

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Although these activities appear to be rather straightforward, quite often plan­ ners neglect some or many of them when they get involved "in the heat of battle." Planners must consider the issue of motivation. Abraham Maslow developed his fa­ mous five-part "Hierarchy of Needs" triangle that outlined clearly what motivates an indi­ vidual. On the lowest level, an individual strives to fulfill basic physiological needs (hunger and thirst). Once these are met, then safety issues (security and protection) and later social needs (a sense of belonging and love) are targeted. On the next to the highest level, a human being seeks esteem (self-esteem, recognition, and status). Finally, once all four of these needs are achieved, an individual seeks self-actualization (self-development and realization). Maslow's framework assists planners in their quest to understand how a specific product or service satisfies the wants and needs of a customer. Another concern centers on analyzing competitors, especially market leaders. This is a critically important endeavor, and one that must be vigilantly monitored. How do book competitors maintain their dominance in a specific market? Do "mar­ ket pioneers" (e.g., the book firms that first entered the e-book market or the paper­ back field) have a distinct advantage over later entrants? Do they offer product substitutions with a high cross-elasticity of demand (perhaps a new line of romance novels targeted for a specific ethnic or racial group)? Are there any entrance (e.g., book distribution systems after World War II) or exit barriers (perhaps inventory or long-term real estate leases) that could suffocate a plan? What pricing trends exist (why are most mass-market paperbacks priced within a narrow range)? Are there firms with clearly defined objectives and advantages (e.g., a sophisticated direct marketing apparatus) that could be used against an entrant into the marketplace? If so, what are the likely or possible strategies such a competitor could adopt? What are the competitor's weaknesses (i.e., its market share, profit margins, cash flow, sales operation, personnel, capacity utilization)? How can a market leader be at­ tacked? What type of attack strategy can be implemented (frontal, encirclement, flanking, or a bypass)? Is a "market following" approach appropriate? Attention must also be paid to measuring and forecasting existing or potential market demand and product life cycles. How mature is the market? Is the market growing or contracting? Has it leveled off? Will market segmentation, clustering, targeting, and positioning strategies work? Robert H. Hayes and William L. Abernathy wondered why some firms achieved success and then floundered. "Our experience suggests that, to an unprecedented degree; success in most industries today requires an organizational commitment to compete in the marketplace... over the long run by offering superior products."20 Hayes and Abernathy were critical of managerial principles that encouraged "analytic detachment rather than the insight that comes from 'hands on' experience and short-term cost reduction rather than long-term development of technological competitiveness. It is this new managerial gospel, we feel, that has played a major role in undermining the vigor of American industry."21 20Robert H. Hayes and William J. Abernathy, "Managing Our Way to Economic Decline," Harvard Business Review 58(July-August 1980): p. 68. 2l lbid., p. 68.

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What were the irrefutable signs of this economic malaise? The authors insisted the principal indicator was a preoccupation with buying and selling companies (and operating units) rather than in marketing a product to a customer, a situation readily visible in book publishing between 1960 and 2004. There were, unfortunately, additional secondary signs of the debilitating sick­ ness that was sapping the vitality of America's industries. These two professors in­ sisted that far too many corporations turned to the government for temporary financial relief, as if Washington had become an investor banker and a source of cheap loan money that became a balm to sooth injuries sustained on the corporate battlefield. If a company cannot compete, Hayes and Abernathy argued, it should devise a new strategy or go out of business. The federal government should not be construed as being the "southern division" of Wall Street. Other firms seemed enamored with the possibility of just making money without stressing the corporations' primary strategic goals. Far too many managers invested capital in financial instruments (e.g., Certificates of Deposit, U.S. Treasury Bills, etc.) instead of plowing these funds back into the operation. Still other corporations began to allow industrial plants and equipment to age and accept low rates of pro­ ductivity, arguing that the American work force was unable or unwilling to compete internationally with growing economies generating higher rates. So why invest if the return was unsatisfactory? One scenario dealt with neatly trimming the work force of full-time employees and replacing them with freelancers (a rather common event in book publishing) to save money and post outstanding quarterly results, that is, managing only for the short-run. This devotion to managing by the numbers, especially elevating short-term return-on-investment (ROI) theories and a reluctance to invest in new processes or products, became a managerial mantra. It was also a symptom that the purpose of the enterprise had become only an exercise in investing capital rather than meeting the wants and needs of the customer. Another intriguing policy centered on the ill-conceived notion that it was saga­ cious to service existing markets rather than creating new ones, an example of milk­ ing the cash cow at the direct expense of future earning. Some financial experts, who reached the top echelons of management, crafted the strategy of developing profit-centers to ascertain which units were and were not successful in covering corporate overhead charges and other expenses. Drucker dismissed this scenario by pointing out that there were only "cost centers" in any accounting system. The other unsettling trend to Hayes and Abernathy centered on the emergence and acceptance of modern portfolio managerial theories, which were adapted from financial portfolio concepts. Managers would evaluate their operating units and create "strategic business units" (or SBUs) and place them in a four-part matrix. This process was designed to identify the existing and potential performance of a specific unit. There were four types of SBUs, developed by the Boston Consulting Group. Fig. 4.9 illustrates this matrix. A "star" was a high growth, high market-share strategic business unit requiring a steady supply of cash to finance its rapid growth. A star's rapid growth rate eventu­ ally slows down, which transforms the star into a cash cow.

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FIG. 4.9 "Star" matrix.

A "cash cow" is a slow growth, high market-share operating unit. It generates a steady supply of cash that the company utilizes to cover its bills, overhead, and costs associated with stars and other SBUs. A "question mark" is a low market-share SBU in a high growth market. This means that management must support its activities with a steady stream of cash in order to maintain its share of the market; unusually large sums of money would be required to enhance a question mark so it can increase its market share. Managers are preoccupied with trying to ascertain if a question mark has the potential to be­ come a star or whether it should be sold, terminated, or reduced in size. The "dog" is a low growth, low market-share SBU. It may generate enough cash to support its revenues, and in some instances, might generate a surplus. It is by def­ inition not a source of large sums of money for the corporation. This matrix allows a company's managers to formulate a strategic plan designed to (1) build up the business unit's market share (especially among "question marks"); (2) hold onto an SBU's market share (primarily for strong "cash cows"); (3) harvest a unit's short-term cash flow regardless of the long-term impact of this strategy on the SBU's stability; or (4) divest a unit (i.e., either sell or liquidate) to utilize the SBU's resources elsewhere in the portfolio. Hayes and Abernathy's advice on portfolio theories was blunt. "The key to long-term success, even survival, in business is what it has always been: to invest, to innovate, to lead, to create value where none existed before.... In our preoccupation with the braking systems and exterior trim, we may have neglected the drive trains of our corporations."22 MAJOR BUSINESS CHALLENGES

The small, cozy, romantic cottage industry so long associated with Maxwell Perkins, the great house of Scribner's, and tweed jackets has disappeared. In its place has grown a towering industry employing thousands of individuals and gen­ 22

Ibid, p. 74. Also see Martin Levin, "The Publishing Executive of the 1990s,"Journal of Scholarly Pub­ lishing 21 (October 1989): pp. 41–44; Robert H. Waterman, Jr., What America Does Right: Learning from Companies That Put People First (New York: W. W. Norton, 1994), Charles Handy, The Age of Paradox (Cambridge, MA: Harvard Business School Press, 1994), and Mary C. Gentile (Ed.), Differences That Work: Organizational Excellence Through Diversity (Cambridge, MA: Harvard Business School Press, 1994).

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erating billions of dollars in book shipments. Change is rampant in the book indus­ try; and now the industry's future existence and successes are dependent directly on the quality of leadership at the top. Some of the major problems and questions these individuals will be forced to address include: 1. Expectations for operating profit and return on investments are higher and more rigorous than ever in the past due inextricably to the need to pay off huge debts generated during the merger and acquisition spree. How will this debt be reduced without cutting into the editorial process? 2. The staggering advances that literary "superstars" command, the quest for both growth and market share, and the ferocious (and often public) campaigns to at­ tract and keep major authors and editors generated massive headaches and pressure within the publishing community. How will managers handle what appear to be never-ending problems? 3. The conflict between the cultural and commercial forces in the industry has yet to be resolved. How should managers handle this conundrum? 4. When will the electronic dissemination of book content (e-books; e-readers) be accepted by consumers? How much seed money should be plowed into these en­ deavors? When can a firm expect to see a real return on its investment in e-books? 5. Members of the investment community are looking closely at publishing to determine its financial viability in an electronic age cluttered with numerous other entertainment and media opportunities. What must managers do to understand and work with a financial community that, too often, seems to look only to quarterly re­ sults? 6. How do you manage and motivate creative people working in a knowledge environment? 7. Can small to medium sized companies survive in a business environment dominated by large, global companies with access to capital? Crafting answers and strategies to these questions will dominate the book indus­ try through 2010.

CHAPTER FIVE

The Editorial Process Book editing is one of the most romantic and misunderstood jobs in America. It is exciting to read about Maxwell Perkins (America's foremost fiction editor) poring over a totally unorganized manuscript from Thomas Wolfe, delivered unceremoni­ ously in a battered trunk. Perkins saw the finely crafted "sculpture" deeply hidden in a dense block of literary "marble." His ability to organize and edit "chapters" en­ abled Wolfe, F. Scott Fitzgerald, Ernest Hemingway, and other writers at Scribner's to realize their potential. Yet Perkins was given an inordinate amount of time by Scribner's to handcraft "fragments" into finely tuned novels, to allow ge­ niuses to blossom, and to influence the course of American letters. In the 21st century, the "Perkins archetype" is, for the most part, a faint dream at the large commercial publishers (although it is still found at some of the smaller houses and at most university presses). EDITORIAL CATEGORIES

Book publishing firms have distinct editorial categories, although some of the terms are used interchangeably (especially at small houses). The editorial director is the individual in charge of all editorial matters, from fi­ nal approval of a manuscript to supervision of everyone in the editorial department. This high profile job involves financial matters (including budgets), aesthetic is­ sues, the special handling of major authors and their agents, publicity, meetings with the publisher and other key people at the house, and the more numbing daily administrative chores that cannot be passed on to others in the department. At many publishing houses, the editor-in-chief, senior editor, and executive edi­ tor supervise the daily operations of the editorial department, reviewing manuscript submissions, working with authors and agents, and routing manuscripts through the in-house system. The term acquisition editor is used in most houses to describe the duties of an ed­ itor, associate editor, or assistant editor, although the editor-in-chief, senior editor, and executive editor also acquire manuscripts. This is the glamorous job in the edi­ torial world. At the largest houses, this job carries with it a variety of perks (limou­ 123

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sine service to and from work, expense accounts, lunch at the Four Seasons) and a high salary. This editor acquires manuscripts, but often this individual does not line edit the manuscript. This task is turned over to an assistant, often an editorial assis­ tant (or EA; an entry-level position for someone right out of college or a summer publishing institute). The acquisition editor represents a publishing company in a convoluted legal, fi­ duciary, managerial, and marketing relationship with a wide variety of individuals in the disparate book community: authors, agents, editorial advisors, book packag­ ers, freelancers, translators, book reviewers, and others. This editor is the company's arbiter of "beauty and truth," acts as the corporate gatekeeper, and plays a substantive role (often the dominant one) in acquiring, se­ lecting, and supervising the editing manuscripts. These editors make decisions. They open the "gate"; they anoint a writer with "Holy Chrism" and transform him or her as if by wizardry into an author. An acquisition editor accepts and rejects pro­ posals, outlines, and manuscripts. This is hard, gritty work; at times it can be un­ pleasant because they are held accountable for the titles they acquire and publish as well as for the ones they reject. Acquisition editors defend a book proposal. Sometimes this means convincing colleagues (fellow editors as well as individuals from sales and publicity) that a pro­ ject has literary, artistic, or financial merit. Occasionally past favors are called on to gather enough votes for a project; sometimes a more forceful strategy is utilized. They learn to cope, or they falter. These editors have title quotas. They must publish a certain number of books each season or else there will be a void in the list. Of course, they must maintain a steady stream of manuscripts into the house's editorial-production conduit in order to avoid a drastic surge of titles one season and far too few books in another season. Lastly, they are expected to scout around and find new authors with potential (everyone is always looking for the next John Grisham) and to convince established authors that they would be happier working with them at their house (while always maintaining some semblance of ethical propriety). Other Editorial Job Categories

A development editor generally handles the development of a book, often a text­ book. This editor works with specialists in an academic field, perhaps high school U.S. history teachers, developing the topics, themes, and pedagogical approach a new high school U.S. history might take in order to capture market share. This edi­ tor might hire one or more prominent college U.S. history professors to write the book. In many instances, these college professors (often stars in their fields) merely review or supervise the text, which is prepared by others (this is known as a "man­ aged text" in college publishing). A developmental editor in medical publishing attends medical and scientific conferences and reads (for example) The New England Journal of Medicine, The American Journal of Asthma and Allergy for Pediatricians, The International Jour­

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nal of Fertility, or The Journal of Thoracic and Cardiovascular Surgery. A text­ book developmental editor visits dozens of colleges, monitors closely the key journals in their field(s) of specialization, attends scholarly conferences (looking out for cutting-edge papers and leads), and reads titles issued by competitors (and evaluate their sales tallies). The production editor supervisors the flow of a manuscript (called the "ms." in book publishing; manuscripts are "mss."). Starting with the submission of the manuscript (on computer disks and a hard copy), this editor tracks its progress through the various editorial functions (e.g., line editing, the addition of half-tones or four-color photographs, the proper placement of the index, etc.). At that point the manuscript is sent off to either a typesetter or, more commonly today, directly off to the printer with the content on a disk. The production editor monitors the produc­ tion process and ultimately receives copies of the book galleys, "blues" (blue copies of the final pages), etc. This individual must also understand fully the fairly complicated, technologically driven lithographic (sometimes called litho, offset, or photo litho) prepress and print­ ing processes as well as binding operations (either hardbound, often called case bind­ ing; paperback, sometimes called perfect binding; or some form of saddle stitching or plastic binding; issues discussed in chap. 6) used in the production of a book. Editing a manuscript is hard, unromantic work performed by someone called a line or manuscript editor. His or her actual job classification could be editorial assis­ tant, assistant editor, or associate editor. At small houses, and at almost every univer­ sity press, line editing is performed by almost everyone on the editorial staff, including the editor-in-chief and sometimes by the press director. At the largest trade houses, the line work is subcontracted out to freelancers to reduce overhead costs. Line editing is done quietly and alone, often in small windowless cubicles, ordi­ narily with a blue pencil and stacks of yellow Post-it pads adroitly and liberally used by a line (or manuscript) editor to pose important but often numbing queries to the author. Computers have entered the industry, and most editors now ply their trade on them. Many do not because paper manuscripts cast a long, captivating, and seductive spell over the sensibilities of many editors. Line editors are customarily anonymous, and very few of them become publicly known, much less celebrities profiled in The New Yorker or Entertainment Weekly, and their letters are rarely collected and published to illuminate the editorial pro­ cess or the intricate author–editor relationship. They might be thanked by the au­ thor in an introduction for their tireless efforts, but then again they might not. The Editorial "Learning Curve" The average editor learned his or her craft in a medieval apprenticeship system that lasts, on average, between 2 and 6 years. Quite often this individual is just out of college (generally an English or history major). He or she begins as an editor-in-training (generally called an editorial assistant or an E.A.) before becoming an assistant editor (or A.E.), associate editor, editor, senior editor, editorial director, or editor-in-chief.

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All of this is done under the close, demanding (often authoritarian) tutelage of a seasoned editor. The E.A. slowly learns the dynamic art of editing, from mastering editorial marks to refashioning a faulty, unclear sentence, a weak paragraph, or a badly organized chapter. Everyone in publishing agrees that editing is an art (and not a science); that it takes years to become a proficient, successful editor; and that great editors are rare. An editor must love to read (and read broadly), be curious, and learn to become and remain tenacious. This means poring over a variety of publications, including The New York Times Book Review and Publishers Weekly, a large number of general lit­ erary publications (The New York Review of Books, The New Yorker, Harpers, The Atlantic Monthly), and an array of periodicals (including Time, Newsweek, Busi­ ness Week, and New York). Some editors are generalists, others are specialists. Their level of specialization affects their reading habits. A fiction editor reads works issued by competitors, pores over bestseller lists trying to detect patterns, follows the latest trends in fiction (whether it be serious literary fiction, experimental fiction, or short stories), and keeps up-to-date with the journals that publish fiction (e.g., The New Yorker). Visits to summer writing institutes and academic writing programs frequently occur. An editor must have a keen grasp of standard written English, communicate quickly and effectively to authors, and remain aware of the varied needs of authors, many of whom are mercurial, insecure, and rather demanding if not outright hostile to anyone who dares touch a single word or a comma in a manuscript. Editors are managers. They hire, fire, discipline, and promote. They attend busi­ ness luncheons (sometimes at the Four Seasons; more often in a coffee shop), sales conferences, and that annual mystical rite of passage known as the BEA (Book Expo America) conference. Editors handle business issues, including budgets, press runs, book promotions, author tours, and so on. This is the one area where many E.A.s flounder. They en­ tered publishing because they loved books; they discovered they were expected to love books that made money. To do this they had to master accounting, manage­ ment, marketing, and financial and economic terms, hardly an exciting prospect for serious students of Milton and Shakespeare. They also uncovered another bald fact. Book publishing was part of a gigantic, global mass communications industry where the convergence of media formats was in­ evitable. Two trends became evident in the 1980s (and continued unabated through the 1990s and into the 21st century). First, some nonbook managers in these media enter­ prises dismissed the book as passe and talked about the inevitable supremacy of elec­ tronic publishing. Second, many of these new owners were not always "book people" (sometimes not even "publishing people"). They paid hundreds of millions of dollars (in a few instances, the tallies exceeded the billion dollar mark) to purchase the book company, and they demanded accountability and a return on their investment. This was unsettling to editors primarily interested in the world of literature and ideas. Yet these are the facts of life in the contemporary book industry, and those who learn to handle business obligations emerge as better editors. Those who do not, languish.

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Editorial Circles

Editors work in informal but highly structured circles. These circles sometimes over­ lap, but at times they stand alone. In general, a fiction editor will fraternize with other fiction editors at his or her house as well as other firms. This person has more in com­ mon with individuals working at competing companies than with fellow editors em­ ployed at the same firm handling nonfiction, textbooks, or juvenile titles. Some specialization is inevitable, but the majority of adult trade editors remain generalists. These circles involve well-established and entrenched "old boy" and "old girl" networks, perhaps friends from college or graduate school, frequently colleagues who used to work together but are now employed by competitors, and, periodically, by individuals who belong to the same clubs. The "big trade circles" include agents, authors, book packagers, consultants, "manuscript doctors," Hollywood agents, and other professionals. This circle, as one might imagine, is visible, powerful, and influential. To many insiders, these circles are an absolutely essential component of trade book publishing. Unfortunately, one does not quickly or easily enter a circle. It takes years in the industry, a certain status and panache, and, frequently, intangible traits (especially the ability to trade manuscripts from one house to another). The "Accidental Profession"

Editing is an "accidental profession." No one is born with innate editorial skills; they must be obtained and polished vigorously and constantly. An E.A. pledges al­ legiance to both the house and the senior editor; he or she takes "vows" (certainly not religious vows of poverty, chastity, and obedience but "vows" nevertheless) to accept a life of long hours of work, low pay, and far too many nights and weekends reading manuscripts. Editing must be approached with seriousness and enough humor to keep some semblance of sanity and sobriety. This is the life of an editor. Yet something is in­ herently wrong with this picture because the workload is often unbearable, the re­ straints unacceptable, and the rewards all too frequently inconsequential. One highly experienced editor was once asked what he looked for in an editor. He re­ plied quickly, "Someone who walks on water." This casual statement sums up what is wrong with the way editors are selected and trained. Peter Drucker once said there is a terrible but inevitable shortage of uni­ versal geniuses. He warned that an effective executive must learn to build on the strengths of each employee knowing full well that this person has noticeable skills and hidden weaknesses. No one "walks on water"; the search for this messianic edi­ tor is a quest for the Holy Grail, a process that preoccupies far too many people and is doomed to disappoint almost everyone. Yet one irrefutable fact exists: No one should ever underestimate the role editors play in the development of a book. They make sure that the author's thoughts and words, the work's "circulatory system," operate effectively, insuring that an author's final manuscript has the necessary soul to become a book.

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Is there a typical editor? There is no simple answer to this question because the major studies on this subject were conducted in the 1980s. Compounding the prob­ lem is the fact that various components of the industry (trade, mass market, college textbooks, etc.) developed very different operational patterns.1 EDITORIAL THEORIES

How does an editor "edit" a manuscript? Does an editor reshape or rewrite a book? Or does an editor approach the author with suggestions or questions designed to as­ sist the author in presenting the best possible work to the reader? What are the ethi­ cal, business, or literary obligations an editor has to the author, the manuscript, and the publishing firm? Gerald Gross confronted these issues in Editors on Editing: What Writers Need to Know About What Editors Do. He insisted that the "best editing is not the least or the most; it is whatever measure of editing evokes the writer's greatest talents, that presents the writer's work in the best possible light."2 Gross confronted some old chestnuts. Who "owns" the book? Whose judgment should prevail in the editor-author relationship? Gross believes "the editor must remember that the work in question is the author's book, and that the author's decisions must prevail."3 Gross incorporated the birth analogy into his argument. The author gives birth to the book; the editor acts as an attending physician or midwife, playing a critically important role in assuring the safe delivery of the new "baby"; thus the editor, hardly the source of life, is re­ ally a "guardian angel." 1Barbara F. Reskin, "Culture, Commerce, and Gender: The Feminization of Book Editing," in Job Queues: Explaining Women's Inroads into Male Occupations, Barbara F. Reskin and Patricia A. Roos (Eds.), (Philadelphia: Temple University Press, 1990), p. 95; also see Lewis A. Coser, "Professional Au­ thors and Publishing Houses," Book Research Quarterly 3(Summer 1987): pp. ll–14;MicheleCaplette, Women in Publishing: A Study of Careers in Organizations. Ph.D. dissertation, SUNY at Stony Brook, 1981; pp. 6–67;Lewis A. Coser, Charles Kadushin, and Walter W. Powell, Books: The Culture and Com­ merce of Publishing (Chicago: University of Chicago Press, 1985), pp. 112–117; Walter W. Powell, Getting Into Print: The Decision-Making Process in Scholarly Publishing (Chicago: University of Chi­ cago Press, 1985), p. 140; William Germane, Getting It Published: A Guide for Scholars and Anyone Else Serious About Serious Books (Chicago: University of Chicago Press, 2001), 19–68; Paul Parsons, "The Editorial Committee: Controller of the Imprint," The Journal of Scholarly Publishing, 29, 4(July 1989): pp. 238-244; Paul Parsons, "The Evolving Publishing Agendas of University Presses, " The Journal of Scholarly Publishing, 23, 1 (October 1991): pp. 45–50; Paul Parsons, Getting Publishing: The Acquisition Process at University Presses (Knoxville, TN: University of Tennessee Press, 1989), pp. 1-59; Dorothy Commins (Ed.), What is an Editor? Saxe Commins at Work (Chicago: University of Chi­ cago Press, 1978), pp. 12-78. 2 Gerald Gross, "Preface: Reflections on a Lifetime of Editing," in Editors on Editing: What Writers Need to Know About What Editors Do (New York: Grove Press, 1993), p. xv. Also see Bill Harnum, "The Characteristics of an Ideal Acquisition Editor," The Journal of Scholarly Publishing, 32,4(July 2001): pp. 182-188; William Germano, "Surviving the Review Process," The Journal of Scholarly Publishing, 33, l(October 2001): pp. 53–69; Ann M. Hutchinson, Editing Women (Toronto: University of Toronto Press, 1998), pp. 1–14, 37–55, 67–81; Diana Athill, Stet: An Editor's Life (New York: Grove, 2001), pp. 7–42; Richard Balkin, A Writer's Guide to Book Publishing (New York: Plume, 1994), pp. 15-21, 25-56. 3 Gerald Gross in Editors on Editing: What Writers Need to Know About What Editors Do, p. xvi.

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He was also concerned about ethical issues. "Too little, however, has been said of the editor's responsibility to his or her own integrity; the duty to be true to one's political, moral, ethical, societal, and aesthetic convictions."4 Over the years he had been asked to work on projects that offended his beliefs. "I turned them down, often recommending the author or agent to another editor, one who would be more sym­ pathetic to the theme and content of the work I refused to edit."5 This raises the issue of censorship. "I am a devout and unconditional supporter of the First Amendment.... But I know I have to sleep at night and face myself in the shaving mirror in the morning and live with my wife and my children without shame or guilt."6 However, Gross, a well-established editor, has earned the right to "pass" on certain manuscripts. What type of professional or personal relationship should emerge between an editor and an author? Gross argued that a professional relationship must be cre­ ated (personal ones might or might not evolve). "The two parties should work to­ gether collegially, not adversarially—symbiotically, not parasitically. Put even more simply: each needs the other; each has much to offer the other."7 In reality, an editor is a coach, pushing the author to new and higher levels of excellence while offering the author creative advice, a sense of objectivity, and advice on "the positive and negative elements of a manuscript" and prescribing a possible cure to what ails it in the same way that a diagnostically trained internist can read an X-ray.8 The writer, Gross argues, must accept critical advice and utilize it whenever pos­ sible. The writer is the author; the editor is the consultant. Yet "the editor must not in any way at any time attempt to edit the book so that it will be written the way the edi­ tor would write it if the editor wanted to, or could, write."9 The editor must approach the manuscript using the author's voice and perspective; the alternative is Hobbesian, an antagonistic relationship doomed to fail. The editor must give the author respect and admiration; the author owes the same to the editor. Alan D. Williams insisted that one of the major duties of an editor is to act as a "therapist-nag or magic worker-meddler. An editor is, or should be, doing some­ thing that almost no friend, relative, or even spouse is qualified or willing to do, namely to read every line with care, to comment in detail with absolute candor, and to suggest changes where they seem desirable or even essential."10 The editor's goal is to provide invaluable, realistic, and uncoated input that the author needs to craft a better work, whether it is a poem, novel, or biography. Aug­ menting this, in Williams' mind, are the editor's thoughts on "taste" (always a diffi­ cult idea to convey effectively to anyone) and insight into what the market wants and needs, from readers to reviewers to booksellers. 4Ibid., p. xvii. Ibid., p. xvii. 6 Ibid., p. xvii. 7 Ibid., p. xvii. 8Ibid., p. xviii. 9 Ibid., p. xviii. 10Alan D. Williams, "What Is An Editor?" in Editors on Editing, p. 6. 5

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To achieve a high level of constructive criticism, the editor, out of necessity, must handle several conflicting notions in his or her head simultaneously. First, the editor must analyze the author's form and content, specifically targeting the work's structure and sense of clarity. Second, the editor must act as the author's "Godfa­ ther" or "Rabbi" within the publishing house to insure that the book receives both attention and care. Third, the editor must "articulate clearly and appealingly the sin­ gle virtues of a given book. From editorial reports on through catalog copy, jacket flaps, and publicity releases, it is the editor's initial core descriptions that implicitly explain why the book has been chosen in the first place."11 Thomas McCormack's thoughts on editorial theories are often philosophical but always provocative. He dealt with the concept of "sensibility" in order to understand the proper role of an editor. "The good editor reads, and he responds aptly, where 'aptly' means 'as the ideal appropriate reader would.'" This response depends on "sensibility—the apparatus within that reacts to what's immediately given."12 "Sensibility," although critically important, must be balanced with the editor's ability to analyze, which McCormack calls "diagnosis." He views this as the ability to identify what is causing a response within the reader, which can vary from being unengaged, deflated, frustrated, or baffled by the title in question. This process leads to the editor's inevitable quest to "repair" the manuscript, which is no mean assignment. A manuscript must be perused cautiously in order to understand its strengths and weaknesses; and this procedure is unquestionably an exceptionally difficult undertaking. Unfortunately, too many senior editors ask their editorial assistants to handle these chores. McCormack is appalled by this practice. He wonders if a young, inex­ perienced E. A. has the sensibility, tact, and skills needed to perform this task effec­ tively. He points out repeatedly that most editorial assistants are expected to "absorb" editorial skills inasmuch as very few of them are actually taught anything about editing in a systematic way, even those working in the time-honored editorial apprentice system. They are too young, too rushed, and too inexperienced to look deep into the soul of a book and make these decisions.13 McCormack ruminates how an editor can best approach characters, language, and form, and he formulates hypotheses about how an editor reads, reacts, and iden­ tifies the cause of his or her responses. Once this is achieved, the editor's third phase involves "revision, and it calls for sensibility, craft, and art. Art from an editor? Yes, a part of it. A small, not only possible but necessary part."14 Yet what is "sensibility"? McCormack insists it has different meanings. "The first is the one that tastes and judges; it's a taste-bud performance; call it gustant. The second is the one that registers, among other things, appetite, anticipation, anx­ iety, curiosity. It too is responsive, the way any craving is. Call it salivant."15 11Ibid, pp. 7–8. 12 Thomas McCormack, The Fiction Editor, the Novel, and the Novelist (New York: St. Martin's Press, 1988), p. 5. 13Ibid., pp. 8–12. 14Ibid., p. 59. 15Ibid., p. 59.

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Can one learn and understand and apply these philosophical concepts? McCormack insists some can, but most cannot. In essence, this characteristic or trait is almost God-given, but one that can be burnished. Leslie T. Sharp and Irene Gunther approach these matters within more of a prag­ matic rather than a philosophical framework. "There is no pat formula, no one way of approaching each different text. Each book has its own problems; each feels like starting from scratch."16 What every editor needs, however, is a conceptual frame­ work that provides an understanding of what should and should not be done. "First, do no harm." Be cautious about the author's style and voice. "Doing no harm when editing a manuscript means doing the minimum necessary to clarify an author's language or intent, which is also the essence of our first principle economy."17 Change as little as possible; do not alter an author's style or language merely because it conflicts with your taste; use tact. All queries to the author must be clear, concise, and respectful. Approach every manuscript on its own terms (be flexible but be consistent, and be confident). Take responsibility and pride in what you do.18 M. Lincoln Schuster, one of the cofounders of Simon & Schuster, formulated ed­ itorial theories that still have merit. Schuster insisted that an effective editor must learn to "think and plan and decide as if he were a publisher.... To his 'sense of liter­ ature,' he must add a sense of arithmetic. He cannot afford the luxury of being color-blind. He must be able to distinguish between black ink and red."19 As for the craft of editing, Schuster believed that an editor must look beyond the words on the paper and seek to ascertain what the book could become. To do this the editor had to "learn patience, sympathetic patience, creative patience."20 This meant the editor had to see beyond the latest fads and trends. "Never think of doing 'an­ other' book imitating the best seller of the moment. Start trends, do not follow them."21 Lastly, the editor had to earn the confidence of an author before, during, and after the book is published. "Unless you inspire and enlist such confidence and cooperation, you will find yourself going back to the early days when booksellers were also publishers, and the relationship between an author and a publisher was a relationship between a knife and a throat."22 Walter W. Powell commented on editorial theories in Getting Into Print: The Decision-Making Process in Scholarly Publishing. He felt that editing must be 16Leslie T. Sharp and Irene Gunther, Editing Fact and Fiction: A Concise Guide to Book Editing (New York: Cambridge University Press, 1994), p. 79. 17 Ibid., p. 80. 18Ibid., pp. 81–82. Also see George M. Zinkhan, "The Role of Books and Book Reviews in the Knowledge Dissemination Process," Journal of Marketing, 59(January 1995): pp. 106–108; Wendy Strothman, "Multiculturalism at One Press: The Beacon Experience," The Journal of Scholarly Pub­ lishing 24,3(Spring 1993): pp. 144–150;Wendy Strothman, "On Moving from Campus to Commerce," The Journal of Scholarly Publishing, 18,4(April 1987):pp. 157–162; Jack G.Goellner, "The Other Side of the Fence: Scholarly Publishing as Gatekeeper," Book Research Quarterly 4(Spring 1988): pp. 15-19. 19 M. Lincoln Schuster, "An Open Letter to a Would-be Editor," in Editors on Editing, p. 23. 20 Ibid., p. 24. 2l Ibid., p. 25. 22 Ibid., p. 27.

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perceived as a skilled craft. Effective "editorial skills are developed through a process of technical socialization, characterized by an apprentice system. Editors learn on the job.... Learning to be an editor is a gradual process. As one first-rate editor commented, 'You can learn all the technical stuff in six months; the rest takes a life time.'"23 What talents does an editor need? Powell insisted that they develop a strong sense of autonomy. Yet Powell agrees with McCormack that editors must rely ex­ tensively on creative intuition, which is exceptionally difficult to see, feel, weight, or master. They must develop (or perhaps absorb) this sensibility through social and professional interactions with fellow editors, authors, and society. Lastly, they must learn to work within a system of informal controls, primarily creating priorities and coping with bureaucratic operations. There is another editorial theory, one that industry experts are rather cautious to address: the "nonediting theory." It is a well-known and accepted fact within publish­ ing that certain authors in the "star" category (primarily novelists) pen massive works desperately in need of editing. Far too many of these weighty tomes of star authors are rarely edited, and then only to remove any grammatical or spelling errors. This approach is fraught with peril because these longer works usually contain a substantially solid, impressive work deeply hidden amidst the author's clutter and verbiage. Effective, realistic "pruning" would have helped the author and pleased the reader. Too often, this is not done. The rationale utilized by editors is that these individuals do not look kindly on anyone tampering with their prose, and, given their star status, their editors are fearful of alienating such an important figure (who might be a cash cow for the house or have a huge advance). So editing is minimized, as long as the book sells and the author remains popular. If any slippage is detected, if sales flatten out, then alarm bells go off in the house, compelling editors to con­ front the situation they allowed to develop. Johnny Mercer wrote the classic American song "Hurrah for Hollywood!" In it he mused, "Hurrah for Hollywood, where you're terrific if you're even good." Ap­ parently Mercer's comments sometimes also hold true for book publishing. The second variation of the nonediting theory pertains to editors who are sloppy, uninterested in their craft, or dulled by years of work in the trenches. This phenome­ non has reached epic proportions, at least to some industry critics. Unfortunately, with the availability of computer software programs ("Spell Check," "Grammar Check"), these problems should be minimized; often they are not. It is rare to read a book free of editorial errors. Perhaps the vast amount of titles in the marketplace makes this problem inevitable; perhaps more care is needed. CASE STUDY: BOOKS, READING, AND BESTSELLERS IN 2001

Book publishing began rather modestly in the United States in 1639 when Matthew Day (often spelled "Daye"), an English-born, illiterate, Colonial Massachusetts 23Walter W. Powell, Getting into Print, pp. 140–141.

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locksmith printed the first book in what eventually became the United States. A group of Puritan leaders (including Richard Mather) sought psalm books for their congregations (becoming the first acquisition editors in this nation). Day worked for Mrs. Joseph Glover (the owner of New England's only privately owned printing press and the widow of the man who brought Day to the New World). He set the type and ran the press.24 The end product was The Bay Psalm Book (although it was officially known as The Whole Book of Psalms Faithfully Translated into English Metre). This modest 51/2"x 7" title was only 148 pages long. Its typography was embarrassing, as was Day's command of standard written English (perhaps the first example of the nonediting phenomenon). Nevertheless, it became America's first "bestseller" (with sales of 1,700 copies) at 20 pence, gener­ ating an impressive profit. Regrettably, only 17 copies of this book remain in exis­ tence because most copies literally wore out from use. Since 1639, American publishers have played formidable roles as gatekeepers in the transmission of knowledge.25 This is an important task because society relies to a great degree on books to educate, entertain, and inform. American citizens recog­ nize the fact that books contain ideas, have a long life of their own, have an innate ability to transmit knowledge and transform political institutions, and to topple governments.26 J. North Conway addressed this issue in American Literacy: Fifty Books That Define Our Culture and Ourselves. He wrote about books (Common Sense, Webster's Spelling Book, and The Silent Spring) and authors (Thomas Jefferson, Betty Friedan, and Benjamin Spock) that had a direct and important impact on our na­ tion. "Some people would like you to believe that movies and television have ren­ dered reading books obsolete, but a recent Gallup Poll suggests that reading is on the rise."27 However, some critics insist that America is a nation of couch potatoes who watch numbing television shows and an endless parade of sports events. Ameri­ cans' reading habits are "pitiful," they maintain, because anything weightier than TV Guide or mindless escapist fiction is eschewed. They posit that the name "Mar­ cel Proust" is more likely to conjure up images of a hard-fighting left wing for the New Jersey Devils ice hockey team than the author of Remembrance of Things Past. These commentators are deeply alarmed about the steep decline of reading and the disappearance of meaningful, intelligent public discourse in the United States. 24 John Tebbel, Between Covers: The Rise and Transformation of American Book Publishing (New York: Oxford University Press, 1987), pp. 5-7. 25 Bennett Cerf, At Random: The Reminiscences of Bennett Cerf (New York: Random House, 1977), pp. 70–89; also see Charles Scribner, Jr., In the Company of Writers: A Life in Publishing (New York: Charles Scribner's Sons, 1990), pp. 37-88; Charles Scribner, Jr., In the Web of Ideas: The Education of a Publisher (New York: Charles Scribner's Sons, 1993), pp. 3–64; and August Fruge, A Skeptic Among Scholars: August Fruge on University Publishing (Berkeley, C A: University of California Press, 1993), pp. 21-36, 87-103. 26 Fritz Machlup and Kenneth Leeson, Information through the Printed Word, Vol. 1, Book Pub­ lishing (New York: Praeger, 1978), 7–31. 27 J. North Conway, American Literacy: Fifty Books That Define Our Culture and Ourselves (New York: William Morrow and Company, 1993), p. 14.

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Alan Bloom, in The Closing of the American Mind: How Higher Education Has Failed Democracy and Impoverished the Souls of Today's Students, remarked that American students "have lost the practice of and taste for reading. They have not learned how to read, nor do they have the expectation of delight or improvement from reading."28 Bloom ruminated at great length about the decline of reading and the concomitant decrease in the importance of classic texts. Neil Postman addressed some of these same issues in Amusing Ourselves to Death: Public Discourse in the Age of Show Business. Postman analyzed the im­ portance of public discourse in this nation and the primacy of the printed word, which he wrote was "insistent and powerful not merely because of the quantity of printed matter but because of its monopoly.... From the seventeenth century to the late nineteenth century, printed matter was virtually all that was available."29 There was, as he pointed out, no television, radio, film, cassettes, and so on, to dis­ tract Americans or to distort an American's understanding of the key issues sur­ rounding a major theme. When the electronic media achieved their present powerful position, public discourse, according to Postman, declined, perhaps be­ yond repair. "Even on news shows which provide us daily with fragments of trag­ edy and barbarism, we are urged by the newscasters to 'join them tomorrow.' What for?.... Because we know that the 'news' is not to be taken seriously, that it is all in fun, so to say."30 Robert Alter, in The Pleasures of Reading in an Ideological Age, blames aca­ demics for the decline of reading in this nation because they embraced "discourse studies." "The most central failure, I think, is that so many among a whole genera­ tion of professional students of literature have turned away from reading."31 Dis­ mayed about the rise of "discourse" based literary criticism, a theory also attacked by Harold Bloom in The Western Canon: The Books and the School of the Ages, Alter wonders why "for many of the new trends in literary studies, the ob­ ject of the preposition 'about' is often no longer literature. The great prefix of the day is meta: metalanguage, metatext, metadiscourse."32 The end result to Alter was that "discourse studies" achieved preeminent status in many of America's de­ partments of English, literature, and comparative literature. Now professors would be able to "teach Shakespeare, television scripts, government memoranda, 28 Allan Bloom, The Closing of the American Mind: How Higher Education Has Failed Democracy and Impoverished the Souls of Today's Students (New York: Simon and Schuster, 1987), p. 62; also see Allan Bloom, Giants and Dwarfs: Essays 1960–1990 (New York: Simon and Schuster, 1990), pp. 295-314, and S. Robert Lichter, Stanley Rothman, and Linda S. Lichter, The Media Elite: America's New Powerbrokers (Bethesda, MD: Adler & Adler, 1988), pp. 1-19. 29 Neil Postman, Amusing Ourselves to Death: Public Discourse in the Age of Show Business (New York: Penguin Books, 1985), pp. 41,1–9. 30Ibid,pp. 61–64. 31 Robert Alter, The Pleasures of Reading in an Ideological Age (New York: Simon and Schuster, 1989), pp. 10–11. Also see Harold Bloom, The Western Canon: The Books and the School of the Ages (New York: Harcourt Brace & Company, 1994). Bloom defends the literary canon (especially Shake­ speare and Dante) by drawing on the organizational theories of Giambattista Vico; he is highly critical of what he calls the "death of reading." 32 Robert Alter, The Pleasure of Reading, p. 10.

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comic books, and advertising copy in a single program as instances of the language of power."33 A Bookseller Syndrome?

With over 3.5 million titles listed in the 2002-2003 version of R. R. Bowker's Books In Print, and with an annual avalanche of new titles (topping 150,000 in 2003), Americans have an extraordinary array of books to select from for enter­ tainment, pleasure, or edification. However, all of the available statistical data re­ veals that most Americans read popular titles (mainly bestsellers) in clearly definable categories. Does this interest in bestsellers reinforce the "elitist" posi­ tions outlined earlier? Or should one argue that reading anything is important because it exposes the reader to ideas and knowledge? Alter pointed out, in The Pleasures of Reading in an Ideological Age, that "the language of literature abundantly draws on ordinary lan­ guage and achieves its coherence through operations that are sometimes instruc­ tively analogous to those of ordinary language, but it carries them to higher exponential power, transmits through them messages of a different order."34 Experts on children's literature have made compelling comments about the im­ portance of reading. Sam Sebesta, in Inspiring Literacy: Literature for Children and Young Adults, remarked, "Reading experts come close to agreeing that the more actual reading children do, the better they will do it," issues also raised by Su­ san B. Neuman, Donna C. Celano, Albeit N. Greco, and Pamela Shue in Access for All: Closing the Book Gap for Children in Early Education?35 Because of reading, "we generalize; we relate our thinking about alternatives to our lives; and the rest of the world. Thus we have reached a stage of reflective thinking. It is a thematic level, where literature significantly touches life."36 2001: A Record Year For Consumer Book Bestsellers

Consumer book sales records were abundant in 2001. Thirty-five titles sold more than 1 million copies (and Bruce Wilkinson's The Prayer of Jabez topped the 8.4 million threshold); 37 books were in the +500,000 category; and 32 exceeded the +100,000 level. 33Ibid., p. 13. Also see "At Leisure: Americans' Use of Down Time," New York Times, 9 May 1993, sec. 4. 34Robert Alter, The Pleasure of Reading, p. 48. 35 Sam Sebesta, "A Renewed View of Children's Literature," in Sam Sebesta and Ken Donelson (Eds.), Inspiring Literacy: Literature for Children and Young Adults (New Brunswick, NJ: Transaction Publishers, 1993), p. 3; and Susan B. Neuman, Donna C. Celano, Albert N. Greco, and Pamela Shue, Ac­ cess for All: Closing the Book Gap for Children in Early Education (Newark, DE: International Reading Association, 2001), pp. 12–22. 36Ibid., p. 4; also see John Donovan, "Children's Book Publishing on the Ascent," Publishing Re­ search Quarterly 7(Fall 1991): pp. 7–14; Lindsey Fraser, The North American Children's Book Market: A Report for the Sir Stanley Unwin Foundation (London: Book House, 1989), pp. 17–28, 36–45.

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In addition, the top 6 bookstores posted $8.1 billion in total sales in 2001 (up 3.4% over 2000): Barnes & Noble, $3.68 billion, 896 stores; Borders Group, $3.39 billion, 1,212 stores; Books-A-Million, $442.9 million, 204 stores; Family Chris­ tian Stores, $325 million, 332 stores; Musicland, $162 million, 69 stores; Hastings, $118 million, 141 stores; and Tower, $32.4 million, 173 stores. "Brand name" authors dominated all sales categories in 2001. This was espe­ cially true in the fiction arena, where Grisham (with two books in the top fifteen), Steel, Clark (Mary Higgins Clark had one book and Mary Higgins Clark and her daughter Carol Higgins Clark posted another one), Cornwell, McMillan, Patterson (two books), Cussler, Grafton, Franzen, and King accounted for 12.4 million unit sales (out of a total of 16 million units), proving how difficult it is for new authors to make significant inroads in the fiction market. Table 5.1 outlines fiction sales for the top 15 bestsellers in 2001. Nonfiction sales results were equally impressive, and unit sales topped the 23.26 million plateau with a number of "stars" posting strong numbers. Television per­ sonalities Bill O'Reilly (FOX News) and Suze Orman (Public Broadcasting Sys­ tem; PBS) sold 1.45 million units; a book by golf star Tiger Woods reached the number nine spot with 770,286 units, and Jack Welch (the much admired, recently TABLE 5.1 Top Fifteen Fiction Bestsellers: 2002 Rank /Title

Author(s)

Copies sold

1. The Summons

John Grisham

2,625,000

2. Red Rabbit 3. Remnant

Tom Clancy Jerry B. Jenkins & Tim LaHaye

1,970,932 1,880,549

4. The Lovely Bones

Alice Seybold

1,841,825

5. Prey

Michael Chrichton

1,496,807

6. Skipping Christmas

John Grisham

1,225,000

7. The Shelters of Stone

Jean M. Auel

1,223,105

9. Everything's Eventual 10. The Nanny Diaries

Stephen King Emma McLaughlin & Nicola Kraus

925,000 852,021

11. From a Buick 12. The Beach House

Stephen King James Patterson & Peter de Jonge

840,000 835,723

13. Star Wars: Attack of the Clones

R.A. Salvatore

784,750

14. Nights in Rodanthe

Nicholas Sparks

744,543

15. Answered Prayers

Danielle Steel

725,000

8

Source: Publishers Weekly (New York).

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retired CEO of General Electric) topped 724,345 units. Table 5.2 outlines nonfic­ tion sales for 2001. In the trade paperback niche, sales were dominated by seven titles in the +1 mil­ lion range and eight titles all posting +800,000 unit sales (for a total of 15,855,164 units). These included Gates (1.5 million), Tolkien (3 books; 2,977,876 units), and Jenkins & LaHaye (4 books; 3,881,005), another indication of how difficult it is for new authors to make significant inroads in this market. Table 5.3 lists these top 15 bestsellers. The mass-market paperback list was completely dominated by well-established authors generating an intimidating 31,007,616 unit sales. While Grisham's 3,000,000 units topped the list, Nora Roberts dominated these bestsellers with 6 bestsellers (+12 million units), yet another gauge illustrating how a small number of brand-name authors dominate the mass-market paperback market. Table 5.4 lists these results. Because of the huge popularity of the Harry Potter series, children's books un­ derwent a renaissance in 1999 and 2000. Unfortunately, J. K. Rowling did not pub­ lish a hardcoverPotter book in 2001, and sales in that category lagged significantly. TABLE 5.2 Top Fifteen Nonfiction Bestsellers: 2002 Rank / Title

Author(s)

Copies sold

1. Self Matters

Phillip C. McGraw

1,350,000

2. A Life God Rewards

Bruce Wilkinson with David Kopp

1,186,000

3. Let's Roll!

Lisa Beamer with Ken Abraham

958,208

4. Guiness World Records 2003

Guiness World Records Ltd.

919,953

5. Who Moved My Cheese?

Spencer Johnson

850,000

6. Leadership

Rudolph W. Guiliani

801,470

7. Prayer of Jabez for Women

Darlene Wilkinson

704,626

8. Bush at War

Bob Woodward

690,000

9. Portrait of a Killer 10. Body for Life

Patricia Cornwell

683,340

Bill Phillips

676,464

11. I Hope You Dance

Mark D. Sanders & Tia Sillers

648,021

12. Stupid White Men

Michael Moore

634,711

13. Bringing Up Boys

James Dobson

612,109

14. Good to Great

Jim Collins

528,031

15. Get with the Program

Bob Greene

490,000

Source: Publishers Weekly (New York).

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TABLE 5.3 Top Fifteen Trade Paperbacks Bestsellers: 2002 Rank / Title

Author(s)

1. Fix-It and Forget-It Cookbook

Dawn J. Ranck & Phyllis Pellman Good

2. The Two Towers

J. R. R. Tolkien

Copies sold 1,806,379 966,869

3. The Lord of the Rings

J. R. R. Tolkien

871,276

4. The Return of the King

J. R. R. Tolkien

799,123

5. The Fellowship of the Rings

J. R. R. Tolkien

785,385

6. What to Expect When You 're Expecting

Heidi Murkoff, Arlene Eisenberg & Sandee Hathaway

769,416

7. Sula

Toni Morrison

720,000

8. Empire Falls

Richard Russo

677,063

9. Fast Food Nation

Eric Schlosser

676,464

10. The Last Time They Met

Anita Shreve

652,615

11. The Hobbit

J. R. R. Tolkien

650,885

12. A Common Life

Jan Karon

650,000

13. Suzanne's Diary for Nicholas

James Patterson

644,069

14. Chicken Soup for the Mother's Soul II

Edited by Canfield & Hansen et al.

631,000

15. Fix-it and Forget-it Recipes for Entertaining

Dawn J. Ranck & Phyllis Pellman Good

625,229

Source: Publishers Weekly (New York).

A review of BISG data covering the years 1982-2001 revealed conclusively that the juvenile or children's book business is essentially cyclical. A new series will emerge and dominate sales for a few years, sparking interest in these books and convincing marketers that children are now reading books. Then the series falters, and marketers bemoan the fact that children are not reading because they are watch­ ing too much television or using the Internet eight hours a day. The Goosebumps se­ ries in the mid-1990s is a perfect example of this phenomenon. In the late 1990s and 2000, the Potter series rekindled hope among experts that children were eschewing television and the Internet and were smitten by books. These hopes were dashed by the stark reality of 2001. No new Harry Potter hard­ cover book was released in 2001; and the Jabez books led the way, eclipsing the suc­ cessful Lemony Snicket series. Unfortunately, unit sales for these 5 books (1.966 million units) were significantly lower than the staggering results posted by the

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TABLE 5.4 Top Fifteen Mass Market Paperback Bestsellers: 2002 Rank /Title

Author(s)

Copies sold

1. The Summons

John Grisham

3,965,000

2. The Lord of the Rings: The Two Towers

J. R. R. Tolkien

2,828,087

3. Face the Fire

Nora Roberts

2,700,269

4. The Villa

Nora Roberts

2,204,755

5. Midnight Bayou

Nora Roberts

2,034,602

6. On the Street Where You Live

Mary Higgins Clark

1,796,342

7. The Lord of the Rings: The Fellowship of The Ring

J. R. R. Tolkien

1,718,720

8. The Hobbit

J. R. R. Tolkien

1,710,430

9. The Kiss

Danielle Steel

1,610,000

10. Isle of Dogs

Patricia Cornwell

1,601,026

11. Table for Two

Nora Roberts

1,600,000

12. The Lord of the Rings: The Return of the King 13. The Black House

J. R. R. Tolkien

1,584,587

Stephen King & Peter Straub

1,555,038

14. One Door Away from Heaven

Dean Koontz

1,535,000

15. Chosen Prey

John Sandford

1,500,936

Source: Publishers Weekly (New York).

frontlist Potter in 2000 (7.9 million units for Harry Potter and the Goblet of Fire) or 1999 (Harry Potter and the Prisoner of Azkaban, 3.6 million units; Harry Potter and the Chamber of Secrets, 3.4 million). This category remained rather flat until 2003 when the 5th Potter book was re­ leased, creating a groundswell. Table 5.5 outlines this trend. Children's paperback frontlist sales tallies revealed clearly the power and al­ lure of the Potter books, 2 of which dominated the top 3 spots on this list (account­ ing for slightly more than 4 million units). As usual, the ubiquitous Chicken Soup was on this list, and Mary Pope Osborne placed two titles in the top 15. Table 5.6 lists these trends. Among children's backlist titles, Harry Potter and the Chamber of Secrets came in first with 1,872,000 units with Harry Potter and the Prisoner of Azkaaban in sec­ ond (1,275,000 units) and Harry Potter and the Sorcerer's Stone third (990,000 units). Table 5.7 illustrates these trends.

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CHAPTER 5 TABLE 5.5 Top Fifteen Children's Hardcover Frontlist Bestsellers: 2002

Rank /Title

Author(s)

Copies sold

1. The Carnivorous Carnival (A Series of Unfortunate Events #9)

Lemony Snicket

726,543

2. If You Take a Mouse to School

Laura Numeroff

526,008

3. America: A Patriotic Primer

Lynne Cheney

408,403

4. Double Fudge

Judy Blume

310,884

5. I'm Gonna Like Me: Letting Off a Little Self-Esteem

Jamie Lee Curtis

310,246

6. Lemony Snicket: The Unauthorized Autobiography (A Series of Unfortunated Events)

Lemony Snicket

302,176

7. Junie B. First Grader: Boss of Lunch

Barbara Park

298,257

8. Scholastic Children's Dictionary (revised edition) 9. Who's That Knocking on Christmas Eve?

Scholastic Reference

297,000

Jan Brett

284,743

10. Junie B. First Grader: Toothless Wonder

Barbara Park

284,444

11. Who Moved My Cheese? For Teens

Spencer Johnson

265,076

12. Artemis Fowl: The Arctic Incident

Eoin Colfer

258,602

13. The Night Before Christmas

Clement C. Moore

14. HarperCollins Treasury of Picture Book Classics

Harper Collins

255,269 254,292

15. Let's Count (Bob the Builder)

Kelli Chipponeri

234,107

Source: Publishers Weekly (New York).

The Bestseller List All of the major bestseller lists (The New York Times, Publishers Weekly, USA To­ day, The Wall Street Journal) and those maintained by wholesalers and bookstores (especially the innovative one developed by the American Booksellers Association; ABA) are closely scrutinized by consumers, agents, authors, editors, and librarians. How accurate are these lists? Could one of them be manipulated in a scam?

141

THE EDITORIAL PROCESS TABLE 5.6

Top Fifteen Children's Paperback Frontlist Bestsellers:2002 Rank /Title

Author(s)

Copies sold

1. Harry Potter and the Goblet of Fire 2. Harry Potter and the Chamber of Secrets (mass-market)

J. K. Rowling

2,810,000

J. K. Rowling

1,217,000

3. Chicken Soup for the Teenage Soul: On Tough Stuff

Jack Canfield et al.

584,978

4. The Adventures of Super Diaper Baby

Dav Pilkey

512,000

5. Good Morning Gorillas

Mary Pope Osbome

490,965

6. Gathering Blue 7. Princess in the Spotlight (The Princess Diaries #2)

Lois Lowry

469,292

Meg Cabot

423,122

8. Dora 's Backpack (Dora the Explorer)

Sarah Willson

378,922

9. Go, Stitch, Go! (Lilo & Stitch)

Random/Disney

373,386

Lois Lowry

347,540

11. Little Star (Dora the Explorer)

Sarah Willson

337,351

12. Spider-Man: I Am Spider Man

Acton Figueroa

321,559

13. Chicken Soup for the Teenage Soul: On Love and Friendship 14. Stage Fright on a Summer Night (MTH#25)

Jack Canfield et al.

317,426

Mary Pope Osborne

317,227

15. The All New Captain Underpants Extra-Crunchy Book O ' Fun #2

Dav Pilkey

317,000

10. The Giver

Source: Publishers Weekly (New York).

Bestselling lists compiled by wholesalers and bookstores represent actual sales (before returns). Key newspapers and periodicals tracking bestseller sales use dif­ ferent methodologies. The New York Times employs a statistical sampling tech­ nique. Each week staff members contact independent and chain bookstores (the precise list is not revealed to the public, although members of the book community have a general idea which stores are included in the sample), wholesalers, gift shops, newsstands, supermarkets, and price warehouse clubs. After the numbers are collected, the paper utilizes a statistically weighted evaluation of sales to deter­

142

CHAPTER 5 TABLE 5.7 Top Fifteen Children's Paperback Backlist Bestsellers: 2002

Rank /Title

Author(s)

Copies sold

1. Harry Potter and the Chamber of Secrets

J. K. Rowling

1,872,000

2. Harry Potter and the Prisoner of Azkaban

J. K. Rowling

1,275,000

3. Harry Potter and the Sorcerer's Stone

J. K. Rowling

990,000

4. When I Get Bigger

509,928

6. Tales of a Fourth Grade Nothing 7. Holes

Mercer Mayer S. E. Hinton Judy Blume Louis Sachar

8. Love You Forever

Robert Munsch

5. The Outsiders

506,171 442,299 439,993 431,420 382,796

9. Junie B. Jones Is a Graduation Girl 10. Number the Stars

Barbara Park Lois Lowry

357,898

11. A Wrinkle in Time

Madeleine L'Engle

339,000

12. Nate the Great

Marjorie Weinman

337,844

13. Dinosaurs Before Dark (MTH#1) 14. The Adventures of Captain Underpants

Mary Pope Osborne Dav Pilkey

337,844 313,000

15. Island of the Blue Dolphins

Scott O'Dell

309,762

Source: Publishers Weekly (New York).

mine bestsellers. It appears this paper favors sales data from independents over those generated by other components of the book-selling community. Publishers Weekly (PW) calls chain bookstores and independents; distributors to drugstores and other retail establishments are queried to determine mass-market bestsellers. fWeschews specialty stores, price clubs, and book clubs for the weekly hardcover list. They also employ a system of weighting to evaluate sales tallies. USA Today's bestseller lists (which are quite popular with many booksellers) draw on chain and independent stores and leave out of the equation price clubs, book clubs, and specialty bookstores. They also incorporate a weighting system to calculate bestsellers. The Wall StreetJournal only calls on the chains, leaving inde­ pendents, price clubs, specialty stores, and book clubs uncovered. Their procedure is rather simple; for example, they incorporate the sales of hardcover books and compute a "sales velocity index" relative to other hardcover titles.

THE EDITORIAL PROCESS

143

All of these publications employed protective features and devices to insure ac­ curacy, ranging from keeping the names of the stores confidential, routinely adding and deleting establishments on the polling list, monitoring bulk sales, and so on. Could an overly eager author arrange to have enough copies purchased in stores to artificially inflate sales figures in order to place the title on a bestseller list? For years, seasoned industry experts discounted this possibility. Starting in 1995, sub­ stantive allegations surfaced questioning this long-held belief. Apparently, 3 au­ thors in 1995 spent hundreds of thousands of dollars to buy tens of thousands of copies of their own book, even having them trucked to a giant warehouse for stor­ age, to drive up the sales figures and force the book onto bestseller lists. Additional rumors resurfaced in 2001 that other authors were employing the same tactics to push their books onto the bestseller lists. Why would anyone do this? The answer is quite simple: fame and fortune. Someone seeking status, trying to burnish a frayed reputation, or pursuing higher consulting fees (as was alleged in 1995 and again in 2001) might be swayed to in­ flate sales figures in order to become a celebrity. Anyone seeking a lucrative paper­ back contract, based on blockbuster hardcover sales, could be tempted to "buy" a spot on a bestseller list to drive up bids. The intrinsic integrity of the bestseller lists issued by The New York Times or Publishers Weekly, etc., has never been impinged by scandals, although it appears that individuals could manipulate a title's sales tallies. However, all of the publica­ tions releasing bestseller lists initiated major changes in book unit data collection and analysis procedures to minimize or negate bulk purchase manipulation. The lists of stores were kept confidential, new stores were added periodically and old stores deleted, and each bookstore in the sample was asked to filter out corporate sales that seem designed to influence a book's standing on the list. What is remarkable, however, is the fact that sales figures from nontraditional book outlets (price clubs, specialty stores, etc.) are frequently bypassed, when recent infor­ mation revealed that slightly more than half of all the books purchased in the United States are sold in these establishments. A more detailed evaluation of the weighting procedures might be prudent to ascertain with more precision bestselling patterns. Book Titles and Categories In 1999, sociology and economics dominated the total number of new titles issued in the United States with 14,579 (12.21% of all new books) out of 119 357, holding the number one spot since 1992. The fiction niche was second with 12,372 (10.37%); ju­ venile was third among new titles with 9, 438 (7.91%). By 2000, the rankings re­ mained the same, paced by sociology and economics (14,908, 12.21%), fiction (14,617, 11.97%), and juvenile (8,690,7.12%; and barely beating the surging tech­ nology category's 8,582, 7.03%). By 2001, there was a substantive shift in title output. Fiction emerged as the larg­ est book category with 17,349 titles (and a 12.24% share of the market), outpacing sociology and economies' 16,555 titles (11.68% market share). Juvenile books were in third place (9,582 titles; 6.76% share). Table 5.8 lists these totals.

TABLE 5.8 United States Book New Title Output: 1999–2001

Category

1999

Percent of total

2000

Percent of total

Agriculture Art Biography Business

1,037 4,795 51 3,789

3.17

1,073 4,980 3,899 4,068

Education

3,408

2.86

3,378

2.77

12,372 1,456

10.37

11.97

1.22

14,617 1,318

History

7,486

6.27

7,931

Home Economics Juvenile Language Law Literature

2,564

2.15

Medicine

Fiction General Works

0.87 4.02 0.04

0.88 4.08 3.19 3.33

2001

Percent of total

1,195 5,324

0.84

4,887 5,023 3,914

3.45 3.54

3.76

2.76 12.24

1.08

17,349 1,553

6.50

9,028

6.37

2,513

2.06

2,430 9,582 2,954 3,266

1.71

9,438 2,565 3,078

7.91 2.15 2.58

8,690 2,536 3,070

7.12

3,646

3.05

3,371

2.76

6,153

5.16

6,234

5.11

2.08 2.51

1.10

6.76 2.08 2.30 4.24

1,593

1.33

1,582

1.30

6,009 7,080 3,098

5,861

4.91

5,556

4.55

6,320

4.46

2,455 6,044 7,862

2.06 5.06 6.59

2,479 6,206 8,464

2.03 5.08 6.93

2,924 8,015 8,928

2.06 5.66 6.30

Sociology & Economics

14,579

12.21

14,908

12.21

16,555

11.68

Sports & Recreation

3,252

2.72

3,483

2.85

3,789

2.67

8,896 2,977 119,357

7.45

8,582

7.03

3,170

2.60

9,359 3,121 141,703

6.60

2.49

Music Philosophy & Psychology Poetry & Drama Religion Science

Technology Travel Total:

122,108

5.00 2.19

2.20

Source: The Bowker Annual Library and Book Trade Almanac, published by Information Today, Inc. 143 Old Marlton Road, Medford, NJ 08055.

144

145

THE EDITORIAL PROCESS

The average price for hard cover books grew 12.4% between 1999 and 2001, topping the $70.05 mark. While general works paced the entire sector, with law books a distant second, books on technology, business, and sociology-economics approached the $100 plateau. Table 5.9 outlines these price trends. The price of adult trade paperbacks averaged $32.93 in 1999 and $38.20 in 2001, an increase of

TABLE 5.9 Hardcover Average Per-Volume Price: 1999-2001 Category

1999

2000

2007

Agriculture

55.40

66.52

61.03

Art

59.31

50.31

56.00

Biography

45.20

45.31

53.05

Business

131.50

93.84

95.61

Education

59.75

62.23

72.55

Fiction

27.95

25.75

28.84

153.98

165.39

167.40

52.25

54.01

61.21 51.45

General Works History Home Economics

38.52

39.76

Juvenile

23.06

22.71

23.85

Language

55.92

54.27

73.96

Law

100.13

101.50

89.70

Literature

73.92

55.17

62.99

Medicine

90.03

90.32

99.62

Music

55.55

42.91

112.31

Philosophy, Psychology

54.01

52.02

66.03

Poetry & Drama

46.11

39.90

43.79

Religion

44.68

41.61

41.93

Science

94.55

90.11

100.61

Sociology & Economics

62.24

66.79

94.80

Sports & Recreation

38.45

40.64

41.63

100.53

102.40

99.93

Technology Travel

40.31

40.27

67.88

Total:

$62.32

$60.84

$70.05

Source: The Bowker Annual Library and Book Trade Almanac, published by Information Today, Inc. 143 Old Marlton Road, Medford, NJ 08055.

146

CHAPTER 5

16%. In 2001, fiction titles averaged $17.98 while juvenile books stood at $18.27. Table 5.10 outlines these trends. The immensely popular mass-market paperback book is highly price sensitive, and average prices inched up from $5.64 in 1999 to $6.31 in 2001 (an increase of 11.88%). Juvenile titles had the lowest average price in 2001 at $5.49, with fiction at $6.29. Table 5.11 outlines these prices. TABLE 5.10 U.S. Adult Trade Paperbacks Per-Volume Price: 1999–2001 Category

1999

2000

2001

Agriculture Art

39.26 26.54

41.31

36.64 30.49

Biography Business Education

19.99 48.85 29.18

26.96 19.47

20.33

52.00 28.43

93.48 29.08

Fiction

16.09

15.90

17.98

General Works History Home Economics Juvenile

40.76 26.05 19.32

39.84 27.24

118.76 24.38

18.95

19.47

20.78

32.49 18.27

Language Law

30.17 49.52

26.52 51.87

27.49 48.92

Literature Medicine

20.52 44.41

20.53 35.72

34.36

Music Philosophy, Psychology Poetry & Drama Religion

23.49 16.04 20.40

22.49 21.60 16.26 18.38

Science Sociology & Economics

49.33 39.20

40.29

48.86 25.31 22.77 19.83 19.20 45.11

41.22

36.38

Sports & Recreation

22.62

Technology

59.82

20.76 56.22

100.59

21.56 $32.93

22.45 $31.07

Travel Total:

21.71

21.05 22.12

$38.20

Source: The Bowker Annual Library and Book Trade Almanac, published by Information Today, Inc. 143 Old Marlton Road, Medford, NJ 08055.

THE EDITORIAL PROCESS

147

TABLE 5.11 Mass-Market Paperbacks Per-Volume Price: 1999-2001 Category

1999

2000

2001

Agriculture

6.42

7.48

5.96

Art Biography

6.95 6.37

7.26 6.71

6.74 7.49

Business Education

7.61 7.39

8.41 7.30

9.51 6.85

Fiction General Works

5.58 7.01

5.78 6.57

6.29 6.92

History

6.65

7.36

7.01

Home Economics Juvenile

6.99 5.12

7.07 5.21

7.89 5.49

Language

7.13

6.92

6.36

Law

6.66

8.77

6.73

Literature

6.49

6.71

7.06

Medicine

6.32

6.70

8.15

Music

6.64

7.24

6.97

Philosophy, Psychology Poetry & Drama Religion Science

7.20 6.26 7.48 6.34

7.24 6.09 8.16 6.58

7.43 6.17 7.77 6.53

Sociology & Economics Sports & Recreation

6.53 6.73

6.99 6.66

7.73 7.79

Technology

6.89

6.71

7.74

Travel

8.35

8.65

7.57

Total:

$5.64

$5.77

$6.31

Source: The Bowker Annual Library and Book Trade Almanac, published by Information Today, Inc., 143 Old Marlton Road, Medford, NJ 08055.

Bestselling Books and American Culture Is the bestseller (either nonfiction or fiction) a negative influence on culture and reading? What forces drive the sales of popular, mass-market, bestselling books in the United States?

148

CHAPTER 5

Janice A. Radway explored these issues in "Reading Is Not Eating: Mass-Produced Literature and the Theoretical, Methodological, and Political Consequences of a Metaphor." Radway conducted a detailed analysis of romance novel readers, and she came to believe that, "Once I had analytically distinguished the acts of book purchases and reading from the context of the books that were read, it became pos­ sible to see that romance reading was infinitely more complex than the traditional picture of it as the ritual consumption of patriarchal cliches dispensed by others."37 Radway interviewed a large number of romance writers and readers, and she dis­ covered that romance readers, who were generally married, middle-class mothers, used these books in what she termed a "covertly and mildly subversive way ... as a form of escape."38 Once they became immersed in a novel, "family members were constrained to leave them alone.... Book reading became a 'declaration of indepen­ dence' ... This is my time, this is my space' ."39 So the act of reading developed into a "way of denying the psychological attitude of selfishness and self-abnegations demanded by the traditional female role."40 Radway concluded: The consumers of mass culture are apparently neither as passive nor as quiescent as the traditional theory would have it.... What we must learn to do first, then, is to listen more carefully to consumers of mass culture in order to detect the nature and source of their intense interaction with it.... We cannot attempt it, however, until we give up our easy sense that mass culture consumers are beyond hope and that the fantasies they love are impossible to transform.41

Elizabeth Long also tackled bestsellers in "The Book as Mass Commodity: The Audience Perspective." Long, a sociologist, insisted that, "The specter of 'massifi­ cation' in literature is essentially the fear that book production geared to large audi­ ences will result in standardized and degraded literary fare serving only the lowest common denominator of literary taste, thus suppressing cultural diversity, critical ideas, and even the free development of literature itself as effectively as any totali­ tarian state censorship."42 Long believed bestsellers have an intrinsic value. The "commercialization of lit­ erature has been linked to the expansion of the reading public since the eighteenth

Janice A. Radway, "Reading Is Not Eating: Mass-Produced Literature and the Theoretical, Meth­ odological, and Political Consequences of a Metaphor," Book Research Quarterly 2(Fall 1986): p. 13. 38 Ibid., p. 14. 39Ibid.,p. 14. 40Ibid., p. 14. 41 Ibid., p. 27. Also see Ian R. Willison, "Massmediatisation: Export of the American Model," in Les Mutations du Livre et de L'Edition dans Le Monde du XVIII e SieleA 'L'An 2000, Actes du Colloque In­ ternational, Sherbrooke 2000 (Quebec: Les presses de L'Universite Laval, L'Harmattan, 2001), pp. 55–67; James D. Hart, The Popular Book: A History of America's Literary Taste (New York: Oxford University Press, 1950), pp. 33–67; Richard Curtis, Beyond the Bestseller: A Literary Agent Takes You Inside the Book Business (New York: New American Library, 1989), pp. 36–59; Alice Payne Hackett and James Henry Burke, 80 Years of Bestsellers, 1985–1975 (New York: R. R. Bowker, 1975), pp. 2–98. 42 Elizabeth Long, "The Book as Mass Commodity: The Audience Perspective," Book Research Quarterly 3(Spring 1987): p. 9.

THE EDITORIAL PROCESS

149

century."43 In The American Dream and the Popular Novel, Long sought to study success in post-1945 America and how popular American novelists captured both this phenomenon and this extraordinary time period. Long stated that popular "nov­ els are an especially fruitful mode of access ... because they explore the meeting-places of self and society, of inner desires and external constraints."44 She took this approach because popular literature "is an institutionally mediated process of communication between authors and audiences, and [the idea] that knowledge of the entire process is necessary for understanding the relationship between textual content and the environing culture, has gained currency lately."45 Long realized that bestsellers are important cultural artifacts and share a signifi­ cant role with social critics in delineating important themes, such as motivation, the failure of the post-1945 entrepreneurial synthesis, and the decline of traditional conventions, a position echoed by Patrick O'Donnell in The Columbia History of the American Novel. O' Donnell outlined the impact pre-1945 authors (Leo Rosten) and post-1945 writers (Chaim Potok, Carson McCullers, and Betty Friedan) had on American society. "Late in the postwar period the generalized sense of female un­ rest received a name and a focus from the publication of Betty Friedan's The Femi­ nine Mystique."46 Clearly, it is imperative to understand bestsellers in order to evaluate modern America. These books influence society, help guide discourse, and present an in­ triguing portrait of the American landscape. They are a fundamental part of Americana and mirror the American mind and character.

43Ibid., p. 9; also see Michael Korda, Making the List: A Cultural History of the American Bestseller 1900–1999 (New York: Barnes & Noble, 2001), pp. Ix–xxviii. 44Elizabeth Long, The American Dream and the Popular Novel (Boston: Routledge & Kegan Paul, 1985), p. 3. Also see Alberto Manguel, A History of Reading (New York: Penguin Books, 1997), pp. 11–8, 119–183; John W. Aldridge, The American Novel and the Way We Live Now (New York: Oxford University Press, 1983), p. 4. 45Ibid., pp. 17-18. 46 Patrick O'Donnell, The Columbia History of the American Novel, Emory Elliot, Ed., (New York: Columbia University Press, 1991), p. 505.

CHAPTER SIX

Editors, Book Acquisitions, and Production ACQUISITION Books are the lifeblood of publishing, and a demanding, sometimes fickle public requires a steady source of readily available frontlist and backlist titles. How does an editor acquire a manuscript in order to satisfy the diverse wants and needs of consumers? Although a variety of intriguing options exist, the vast majority of editors acquire books in a rather systematic manner drawing on well-established procedures and contacts. Over the Transom A small number of manuscripts get published each year because they were submit­ ted "over the transom" (i.e., sent unsolicited to a publishing firm with a "To Whom It May Concern" letter). This approach is done without the benefit of a sponsor (e.g., an agent, an author published by the firm, another editor, an academic advi­ sor, etc.). Whenever a book firm receives a manuscript over the transom, it is rele­ gated to the "slush" pile; in 2004, most large New York publishing firms receive well in excess of 100 over-the-transom manuscripts each week. How many of them ever get published? Although no one keeps tabs on this type of submission, The New York Times once commented that the odds of this type of a manuscript ever being published were 15,000 to 1. So the odds of a manuscript sent cold to a commercial publisher ever getting into print are, at best, remote. Among university presses, the rejection rate for over-the-transom manuscripts is almost certainly higher. Yet these manuscripts are not discarded out of hand. Young E.A.s (with months or perhaps only a few years experience) are asked periodically to read through these submissions to weed out the unacceptable and identify manuscripts worthy of a sec­ ond review. The goal is to stumble onto a sliver of gold amidst the hundreds of tons of "rocks," to identify an author in the rough who just might have an interesting 150

EDITORS, BOOK ACQUISITIONS, AND PRODUCTION

151

manuscript that could fit the house's list. If such a manuscript is unearthed, it is routed within the editorial department to gather other opinions and, possibly, to as­ certain if the author should be contacted. A rejected manuscript is returned (assuming the author provided a self- ad­ dressed stamped envelope) along with a tactful though brief form rejection letter (often merely a form letter). Direct Referral A direct referral or recommendation is another method to find manuscripts, and this approach is generally successful. After all, any respectable author must have a col­ league or friend with connections who can write a strong, personal letter to an editor or publisher recommending that the house consider the enclosed manuscript or book outline. Many industry experts believe that it is best to submit only an outline for a non­ fiction title, followed, if requested, with a few sample chapters. Sending a com­ pleted nonfiction manuscript generally identifies the author as someone unfamiliar with the publishing business. On the other hand, complete fiction manuscripts are frequently submitted.1 Agents A third acquisition method involves the submission of a manuscript or an outline from an agent. Agents generate the largest number of usable trade and mass-market manuscripts annually in the United States, although they became active in the mid to late 1990s in textbook and religious publications. They eschew small to medium

Two excellent sources are The Chicago Manual of Style, 14th ed. (Chicago: University of Chicago Press, 1993), pp. 3-104; and Bruce P. Squires, "The Ethical Responsibilities of the Editor," Journal of Scholarly Publishing 24, l(July 1993): pp. 214-218. Also see James M. Banner, Jr., "Guidelines for Peer Review of Sponsored Book Manuscripts," The Journal of Scholarly Publishing, 20, 2(January 1989): pp. 116–122; James M. Banner, Jr., "Preserving the Integrity of Peer Review," The Journal of Scholarly Publishing, 19,2(January 1988): pp. 109–115; Maxwell Perkins, Editor to Author (Ed.), John Hall Wheelock (New York: Charles Scribner's Sons, 1950), 11-95; Robert A. Caro, "Sanctum Sanctorum for Writers," The New York Times, 19 May 1995, pp. C1, C25; Daniel L. Fischel, "Planning for Book Reprints," The Journal of Scholarly Publishing 19, l(July 1988): pp. 195-201; Roger Burlingham, Of Making Many Books: A Hundred Years of Reading, Writing, and Publishing (Univer­ sity Park, PA: Pennsylvania State University press, 1997), pp. 33–89; Joseph M. Williams, Style: To­ ward Clarity and Grace (Chicago: University of Chicago Press, 1990), pp. 67–82; Wendy Strothman, "On Moving from Campus to Commerce," The Journal of Scholarly Publishing 18, l(April 1987): pp. 144–150; Clarkson N. Potter, Who Does What and Why in Book Publishing (New York: Birch Lane Press, 1990), 14–31; Jim Haughey and Deborah Selsky, "The Economic Context of Book Publishing," Publishing Research Quarterly 6(Winter 1990/1991): pp. 62–65; Sara A. Finnegan, "The Art of Skillful Acquisition," Book Research Quarterly, 4(Spring 1988): pp. 20–25; Elizabeth A. Geiser, Arnold Dolin, and Gladys S. Topkis (Eds.), The Business of Book Publishing (Boulder, CO: Westview Press, 1985), 7-12; Larry Z. Leslie, "Peering Over the Editor's Shoulder," The Journal of Scholarly Publishing 23, l(April 1992): pp. 185-193; Beth Luey. Handbook for Academic Authors, Rev. ed. (New York: Cam­ bridge University Press, 1990), pp. 8-19.

152

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sized university presses because the majority of these houses rarely pay advances. The large university presses will pay an advance, and often get into a bidding war against fellow university presses and the major commercial academic houses. An agent is viewed within the book industry as an important participant in the gate-keeping function. Reputable agents will review a manuscript with great care, making suggestions to the author about possible revisions (frequently hiring a "manuscript doctor" to rework or polish the manuscript) and outlining strategies re­ garding submission to a house whose list matches the manuscript. Most agents will take on a new author only if convinced the author has something to say and can say it effectively. If not, negotiations end. Agents also receive manuscripts over the transom, and they review them (often utilizing a secretary or a young agent-in-training). Their procedures and results par­ allel those of the publishing house, especially regarding the acceptance of "tran­ som" manuscripts. Agents generally charge 15% of the author's advance (i.e., an advance against future royalties) as well as of all other earnings, which include subsidiary rights (e.g., a sale to a motion picture studio or producer or first serial rights to a newspa­ per or a magazine), foreign rights (e.g., a rights sale to a foreign book publisher al­ lows this publisher to release the book in a another country, often translated into another language), paperback rights, etc. This payment covers professional ser­ vices. Agents also collect advance and royalty checks from the publisher, make sure that the house complies with all contractual matters, and other details (contacting book reviewers, arranging the author's tour and publicity, etc.). Some agents offer to evaluate a manuscript for a fee, which is paid in advance; this practice is held in low esteem among most agents. Others request a retainer fee, also paid in advance. Once the decision has been made by an agent to take on a new author, and after the manuscript has been polished, contact is made with an editor at a house. The agent often has a working lunch with the editor to discuss this project. The agent handles all contractual negotiations, perhaps for a single or a multibook deal, U.S. rights, North American rights (i.e., U.S.-Canadian rights), English language rights, a hardback version, a paperback edition (or both), etc. Agents also negotiate elec­ tronic publishing issues, foreign and subsidiary rights, and other matters. Although an outline is generally presented at the luncheon, an oral presentation sometimes occurs, sparing the author and agent the hassle of preparing documents for a house that might show no interest in the book. The selection of the "correct" publisher for a specific project taxes the skills and knowledge of an agent. First, the agent seeks out the best publisher or editor to han­ dle editorial, marketing, advertising, and distribution concerns. Not every publisher has the resources, both human and administrative, to cope with a book likely to sell large quantities, especially in a short period of time. For example, in 2003 Scholas­ tic had an initial print run and orders for 5.5 million copies of Harry Potter and the Order of the Phoenix, which sold out in a matter of days (forcing Scholastic to order another 800,00 copies from the printer). Only a relatively small number of trade houses can handle this level of sales volume.

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One of the most interesting cases involved the small but highly prestigious Naval Institute Press, which averages 90 new titles annually and keeps approximately 825 books in print. In the 1980s, it issued a naval novel written by an unknown Mary­ land insurance salesman. The book was The Hunt for Red October, and Tom Clancy was the author. This title became a gigantic hit, almost drowning the Naval Institute Press because it was unable to keep pace with the demand for this blockbuster book. Eventually, Naval Institute sold this book's rights to a large New York publisher able to supply bookstores. The last thing an author wants to find out is that the pub­ lisher cannot print enough copies, publicize the book, or distribute them effectively. This eliminates many small and medium-sized houses from taking on "big" books (in the Grisham, King, or Mary Higgins Clark categories). Second, if a "big" (i.e., potentially blockbuster) book is being sold, perhaps one with an advance well into the seven figures, a small or even a medium-sized firm is unlikely to exhibit great interest if it averages "only" $100,000.00 advances. Al­ though stories abound about large advances, the truth is that the vast majority of all advances are quite small (as are royalties). In reality, most full-time writers rely ex­ tensively on second jobs, wages earned by a spouse, or perhaps from other types of income (e.g., retirement funds, inheritances, etc.). Robert Caro sold his house in or­ der to support himself and his family when he was writing The Power Broker. Third, the agent is always looking to the next deal. So there is a reluctance to go to a house in turmoil, transition, or one where there is a high turnover of editors. Any business uncertainty can pose problems if an editor leaves and the agent's book becomes an "orphan," a title sponsored by one editor who leaves the book to a new editor. This inheritance may not generate the same interest or devotion with the new editor; and the author or the project can suffer. This is a concern in an industry con­ stantly in a state of flux, especially in the trade book sector where editors frequently leave one house to join another to get more money or a better position. Stability is an important consideration for both the agent and the author. Fourth, the agent wants a guarantee from the publisher to take care of both the author and the book. This quest for commitment cannot be measured. It can only be felt. So it is quite common to see the same agents approaching the same editors and houses over an extended period of time. They develop firm relationships, belong to the same circles, and do business together. This rapport is important, especially if problems surface when an author falls behind on delivering a manuscript. The Association of Authors Representatives (AAR) is the not-for-profit organi­ zation of independent literary and dramatic agents with approximately 350 mem­ bers. This organization keeps agents and authors informed about developments in the publishing industry, and they created a canon of ethics for agents to insure that agents conform to the highest standards of conduct in the performance of their pro­ fessional responsibilities. Advisory Editors

The term "advisory editor" refers to an individual hired or appointed by a publisher to oversee a book series. This individual scouts around for authors and manuscripts,

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reviews and comments on manuscripts, and insures that the authors achieve the se­ ries mission and goals. The advisory editor works exclusively for the house and performs specified editorial services, which almost always exclude the right to sign an author or to negotiate advances or royalties, prerogatives tightly held by the house's editorial staff. Acquisition Editors Scout for Manuscripts Acquisition editors at publishing houses are always looking for new authors and manuscripts. They visit writer's conferences and academic meetings. They read popular and serious periodicals and titles in their area of interest published by com­ petitors. They respond to recommendations from colleagues, published authors, and reputable scholars, and they mine their circles for leads. Although informal, this is a carefully developed procedure that must, out of necessity, produce a major number of titles so the editor's quotas are reached each year. Direct Commission, Foreign, and Out-of-Print Editions Another acquisition method involves the direct commissioning of a book (or possi­ bly a series) on a specific topic(s). The editor approaches potential authors with the appropriate professional or writing background and asks them to write a title. This is often done with film, television, recording, and sports personalities. Some foreign books are acquired and published because an editor feels there is a U.S. market for a specific title. English language books from the United Kingdom, Ireland, Canada, or Australia often appeal to America's editors. Whereas foreign language titles from France, Italy, and Germany have been successful in the United States, Americans purchase very few books translated into English (foreign coun­ tries ingest U.S. titles in both English or translated into another language). A relatively large number of publishers acquire and issue out-of-copyright books (i.e., titles and authors no longer covered by the international copyright laws), which explains the proliferation of available works by Shakespeare, Greek and Latin classics, masterpieces of world literature (Chaucer, Dante, Milton), phi­ losophy (Marx, Kant, Mill), and others. Auctions Another method employed is the time-honored, much criticized auction procedure. The U.S. book industry is generally offered "U.S. and Canadian rights." In some in­ stances, "world English rights" are proposed. A publishing firm is rarely presented with "world rights" as the agent wants to sell them abroad to maximize revenues for the author. Starting in the 1980s, agents also held onto motion picture rights, and auc­ tions of these rights generated large sums of money for a cluster of successful authors. It was reported that film auctions generated John Grisham $7 million per book. Starting in the mid-1990s, many agents began holding onto (or at least trying to retain) electronic rights, multimedia rights, licensing rights, and so on. However,

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book publishers always want these rights, and many publishers (notably several of the largest ones) refused to offer a contract unless electronic-multimedia rights were included. Agents follow well-established procedures for auctions of hardback books. First, the author's agent prepares a list of prospective U.S. publishers and editors. Generally, this list contains between five and six editors. Second, if the book is a nonfiction title, a proposal (i.e., generally a 10-page out­ line, table of contents, etc.) is prepared and forwarded to the editors with a cover let­ ter outlining the terms and conditions covering the auction. Editors are often given 2 to 3 weeks to review the materials and then respond to the agent by a specific date. Any questions are referred to the agent. Quite often, the agent will call the editor a few days after mailing the proposal to arrange for a luncheon meeting to review the book's outline. If the manuscript is a work of fiction, an entire manuscript is generally submit­ ted. Of course, well-established fiction authors often sell an idea or a brief outline to an editor; this outline is often 3 to 6 pages in length. Third, on the appointed day the agent opens the sealed bids. Often, a publisher will request to become the "floor bid"; in essence, this means that a publisher wants the option to enter a second or subsequent bid in order to obtain rights to the book. First-time authors generally have a difficult time obtaining large advances. By 2003, advances in the $10,000.00-$80,000.00 range for first-time writers were re­ ported, with the majority of these advances well below the $25,000.00 mark. How­ ever, if the author is a celebrity, if film rights have been sold, if any extenuating circumstances exist, the sky is the limit. The second type of auction deals with paperback rights of an existing book. A publisher who issued a hardbound version of a book but is uninterested in proceed­ ing with a paperback version (or perhaps the author kept all paperback rights) can call for an auction of these rights. Again, the process operates in the same manner as the hardbound practice. A third type of auction centers on foreign or electronic rights, and essentially the same auction rules apply. Many industry observers castigate the auction process. They posit that it has driven up the costs of books, thereby allowing the emergence of a group of super agents and superstar authors and depriving many authors of advance money. In a publishing world with finite financial resources, auctions of big books take money off the table for midlist books and authors. Small books, especially serious literary fiction and poetry, become casualties, making it exceptionally difficult for books in these two categories to get published. These critics insist that a vicious circle is created; the majority of authors receive little or nothing for their creative efforts, and a small minority of commercial au­ thors receive the bulk of the available dollars and attention. This system undermines the very bedrock of publishing, the ability of the nation's book publishers to gener­ ate, support, and publish new authors. The end result is a scenario where only com­ mercially acceptable authors survive. However, this nation was built on the spirit of capitalism. If an agent or author can extract from the marketplace the best fee possible, so be it. Why deprive tal­

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ented authors from earning the most they can? America is a meritocracy, after all. So those who have something to sell should be able to receive whatever the market will pay. Book Producers

Another way to acquire titles is from book producers (also called book packagers), who operate in many of the same ways that film producers do in Hollywood. Pack­ agers are autonomous entrepreneurs who perform professional services. They stay close to the market and monitor social, political, and publishing trends. They re­ spond quickly (often within 1 to 2 months) to fads or events. Many packagers often specialize in certain niches (food, gardening, humor, illustrated books, etc.), and they offer economical services to publishers (especially regarding overhead costs), which appeals to firms. A packager approaches a specific publisher with a title (or perhaps a series) that fits the house's list. They also fill out holes in an editor's list when authors fail to de­ liver manuscripts that the firm counted on for a particular season. Some publishers lack the commitment or resources to sponsor certain authors and books, and many hard-pressed editors with slim staffs cannot allocate the time needed to harvest enough titles each season. Also, magazine or newspaper publish­ ers interested in issuing a book version of their articles, photographs, or illustrations often utilize a packager's services because they lack real book publishing experi­ ence and knowledge, as do some consumer products companies (e.g., Jello or Crayola). Consequently, the "full service, one-stop shopping" approach has great appeal to many individuals. Generally, a packager "owns" the copyright for the manuscript (including illustra­ tions) because the producer paid an author a fee for a "work for hire" product; so the publisher does not have to worry about author–editor relationships (or contracts). Packagers stay in touch with the editor, deliver a hard copy along with one on a com­ puter disk, and, most importantly, a publishable manuscript (including the foreword, preface, and index) to the editor. The manuscript sometimes is in camera-ready form (that is, professionally typeset and ready to be photographed and printed); on other occasions, the production film is delivered (this means the printer only has to make printing plates to print the book). Some packagers will deliver completely finished, bound books to the publisher for distribution (including an ISBN). There are a number of typical publisher-packager contracts. First, the packager provides the completed manuscript (and possibly the film). In consideration, the packager receives an advance on signing a contract with the house. A traditional royalty clause appears in the agreement, however, the fee often exceeds the stan­ dard 10% to 15% rate. All subsidiary and foreign rights fees are split evenly be­ tween the publisher and the packager, who also pays all costs associated with producing the manuscript. Second, a copublication agreement can be arranged. The producer supplies the completed manuscript, film, and a finished bound book. The publisher and the packager share all of the costs, risks, and profits. Third, a standard "author" contract

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is issued to the packager, who provides only a publishable manuscript. In some in­ stances, the packager will insist on holding all foreign and subsidiary rights so they can be auctioned off at a later date. Packagers also work directly with nonpublishing corporations (perhaps an oil and gas company, a toy corporation, or a professional sports team) interested in is­ suing a book directly but lacking the expertise to handle such a project. A packager handles all aspects of the project for a set fee as many corporations give away the book to consumers (thereby negating the possibility of royalties). Prior to 1980 there were very few American book packagers (although quite a number operated in England). Book producers have grown in popularity within the book community; and the American Book Producers Association represents ap­ proximately 60 book producers. Some of the major titles produced by book producers include: The Encyclopedia of Modern Asia; The Producers (the book and lyrics from the hit Broadway show); Rolling Stones 40 x 20; and Hamptons Bohemia. The Imprint

An imprint is essentially a "publishing house within a publishing house" under the direct management of an imprint editor. Imprints exist for many different reasons. First, some publishers believe that certain economic and managerial guidelines ac­ tually work within a firm (primarily the "law of diminishing returns," "economies of scale and mass production," and "span of control"). This means that once an op­ erating unit reaches a certain level of title output, revenues, or employment (which varies from house to house), editorial effectiveness begins to be lost, additional rev­ enues cannot be extracted from the unit, the management of people and processes becomes difficult, and editors lack the time to work with their authors. One response is to create an imprint, a smaller, more manageable editorial unit. The imprint might specialize in a particular type of book (e.g., business books) or genre (serious literary fiction). Second, an imprint is a way to reward an outstanding editor who achieved great editorial (and financial) successes for the publishing firm. The imprint is named af­ ter this individual. Third, an existing book company (e.g., Scribner's) is sometimes acquired through a merger or acquisition, and the new owner decides to keep the Scribner name as an imprint rather than as a freestanding corporation. The imprint's editor, appointed by the unit's president, is generally given lati­ tude in handling acquisitions and other details (budgetary matters, title selection, marketing and promotion, personnel, etc.). All of this is done within specific guide­ lines established by the mother company. EDITORIAL PRACTICES AND PROCEDURES

What happens to a manuscript when an editor accepts it for publication? How is a manuscript turned into a book?

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This is a complicated process involving the editor and many different depart­ ments and individuals, and not all of them are in the traditional "editorial depart­ ment." The process of turning a manuscript into a book is illustrated in Fig. 6.1. THE AUTHOR'S CONTRACT

A contract (also known as an agreement) between an author and a publisher is pre­ pared by the editor with input from the publisher's staff attorney. This is a legal doc­ ument; it contains (or at least should contain) clear information about fundamental issues so that all parties understand fully their rights and obligations under the agreement. Authors sometimes worry about the agreement's language because the terms and conditions seem to favor the rights of the publisher over those of the author. Some authors delete (or "X" out) provisions because they do not want to assign cer­ tain rights (perhaps foreign, subsidiary, or electronic) to the publisher. The author is primarily concerned about the creative work, as well as crucial economic matters. The publisher is committed to protecting the house inasmuch as it takes all of the business risks involved in the publication, marketing, and distribution of the work. In reality, both sides have much to gain and lose whenever an agreement is exe­ cuted; each party needs the other. So both of them surrender some control, some semblance of "sovereignty," to the other in order to have a business relationship that will profit both sides. The following material provides some general (nonlegal) comments on distinct parts of a typical agreement; it should not be construed as providing legal advice.2 Typical Language in an Agreement

Contracts vary significantly between houses, especially between commercial and scholarly presses. A good contract should contain the following key elements. Generally, the first page of the agreement begins with standard information naming both the author and the publisher, listing the name of the book to be written (often nothing more than a "working title"), addressing the exclusive assignment by the author of the work to the publisher, designating the projected length of the book (another estimate), and outlining in rather specific language the publisher's royalty terms. Both the author and the publisher sign this document, often on the first page; subsequent paragraphs are initialed by the author (or authors). 2 William S. Strong, The Copyright Book: A Practical Guide, 5th ed. (Cambridge, MA: MIT Press, 1999); pp. 4–217; Arthur R. Miller and Michael H. Davis, Intellectual Property: Patents, Trademarks, and Copyrights, 3rd ed. (St. Paul, MN: West Wadsworth, 2000), pp. 10–55; Gordon V. Smith, Valuation of Intellectual Property and Intangible Assets, 3rd ed., (New York: John Wiley & Sons, 2000), 1221–654; Alexander I. Poltorak and Paul J. Lerner, Essentialsof Intellectual Property (New York: John Wiley & Sons, 2002), 26–88; Deborah E. Bouchoux, Protecting Your Company's Intellectual Property: A Practical Guide to Trademarks, Copyrights, Patents, and Trade Secrets ( New York: AMACOM, 2001), 62–71; Jonathan Kirsch, Kirsch's Handbook of Publishing Law: For Authors, Publishers, Edi– tors, and Agents (Los Angeles: Acrobat Books, 1995), pp. 17-138; Richard Labunski, "The Evolution of Libel Laws: Complexity and Inconsistency," Book Research Quarterly 5(Spring 1989): pp. 59-95.

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FIG. 6.1 The editor and the manuscript.

One clause generally delineates how the manuscript must be submitted (a hard copy on81/2"x 11" paper, a copy on a computer disk in a specific language, etc.), and specifies that the timely delivery of the manuscript is a necessity. The author agrees to read all proofs, which are sent to the author in a three-part sequence including: (a) an edited version of the originally submitted manuscript; (b) the galleys, generally typeset pages that might not contain page numbers, statis­ tical tables, and other elements; and (c) the page proofs (a final version of the book with page numbers, tables, the bibliography, an index, etc.). These are sometimes called "blues" or "blueprints" because many houses actually send page proofs on blue-tinted paper. How should someone read or interpret these first three provisions? Do the con­ tractual words and phrases stand "as is"? Is there a possibility that a section could be interpreted in a slightly different way? Are there industry practices that are not in­ corporated into the agreement that both parties need to know? If a manuscript is to be delivered on July 1,2005, and the author tenders it on July 30,2005, was there a breach of contract because the agreement indicated clearly a July 1st submission date? What happens if an author signs an agreement to work with editor "Z," who then leaves the house? Can the author ask to be released from this contract in order to follow the editor? Can editor "Z" ask the house for permission to take this author to the new publishing firm? The list of possible issues is literally endless. Generally speaking, if an author asks for additional time to complete a manu­ script, most editors will honor this request, as long as the time extension is reason­ able. After all, they want the manuscript. Many editors might construe an extra year as an unreasonable request. Although publishers are reluctant to release an author from a contract in order to follow an editor to another house, this does happen, often to keep peace in the fam­ ily. There is some flexibility on certain terms and conditions, but not for all of them (for example, the manuscript must be written in standard English). The contract outlines the book's specific components that must be submitted by the author, which include: a table of contents, title page, preface, foreword, text, in­

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dex, and so on. This is standard "boiler plate" language (i.e., traditional language found in most author-publisher contracts). This section often addresses the author's warranty regarding authorship, ownership of the manuscript, and legal right to assign the book to the publisher. The author affirms that the manuscript is free from any libelous material that could trigger a lawsuit. These warranties extend be­ yond the termination of the contract, in essence in perpetuity. The agreement will have very specific language regarding copyrighted material. This alerts the author that written permission is needed to use certain materials. What precisely can an author use in the manuscript? Are there limits on the length of a quotation? Can another author or publisher demand that a fee be paid before copyrighted material can be included in another work? Can unpublished materials be incorporated into the book? These issues are complex, and the editor and author should discuss these matters. The publisher is provided with the legal authority to publish and market the book. Obviously, every editor seeks advice on these issues from the author. The total num­ ber of free copies supplied by the publisher to the author is listed. Other elements ad­ dressed in this section include the publisher's offer to allow an author to purchase copies at the publisher's net price. No royalty payment is made on these sales. The publisher has the right to accept or refuse a manuscript if it deemed by the publisher to be unpublishable, and the author has an obligation to make any neces­ sary, reasonable revisions requested by the publisher. If needed, the publisher can hire an outsider to perform this service and can recover these costs from the author (generally from a royalty payment). Subsidiary (or "sub") and foreign rights are an important source of additional rev­ enue to the house and the author. This section of the contract outlines in specific terms how the publisher might sell the sub rights. In this contract, "new media" (often called "multimedia" or "electronic publishing") forms of publishing are included. In addition, the contract contains detailed information about the royalty percent­ age as well as special sale terms, the minimum threshold for royalty payments, and any sums owed by the author to the publisher. Before a contract is signed, royalty percentages are subject to negotiation. Some small houses and some small and me­ dium sized university presses insist that a minimum number of copies must be sold before any royalty is paid (a "hard trigger" mechanism). Other firms provide a slid­ ing royalty scale (a "soft trigger"), again based on sales. This means, for example that a 5% royalty might be paid on the first 500 copies 8% on the next 500 copies, and so on. Many of the nation's star authors have sliding royalty terms. A royalty is quite often paid on "net cash received" by the publisher; this is not to be confused with the book's retail sale price. For example, a 10% royalty based on "net publishers' receipts" is not a 10% royalty on the book's retail price (e.g., $35.00) but on the actual net price paid to the publisher by the bookstore or distribu­ tor (i.e., the fee paid after the discount and all returns have been calculated). For ex­ ample, if one copy of a $35.00 book is sold to a bookstore at a 48% discount (generally bookstore discounts rates range between 42% and 48%, although some­ times discount rates top the 50% mark), the net cash price paid to the publisher by the bookseller is $18.20 (a discount totaling $16.80). This single $18.20 sale trans­

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action triggers a 10% royalty of $1.82 to the author (assuming the advance has been earned back by the author). However, once a book is sold to this bookstore and payment is made to the pub­ lisher under the publisher's sale agreement, that store has a legal right to return it for full credit to the publisher, as long as the publisher's terms of sale are fulfilled by the bookstore. Six months after the sale (and payment was been made to the publisher), the book could be returned to the publisher. What happens to the author's $1.82 royalty? It must be subtracted from total sales revenues, producing the "net cash received" by the publisher. A sizable num­ ber of publishers hold part of an author's royalties in an escrow account to compen­ sate for future returns. Others will deduct the $1.82 in royalty payment from the author's future payments. The agreement states that the publisher determines when and if a title goes out of print. Publishers want to keep a title in print as long as possible to stimulate sales, so taking a book out of print is done reluctantly. This section of the contract contains specific language that limits the right of an author to publish a competing work while the original one is in print. In addition, this section lists any amendments and waivers, and outlines the fact that any legal suits will occur in a specific geograph­ ical location where the publisher is either incorporated or conducts its business (perhaps New York State). The advance fee schedule is defined in the agreement. An advance is a draw against future royalties; and it assumes future royalties. This clause obligates the house to put up money to help defray some or all of the author's expenses related to the writing (and/or preparation) of the manuscript. Advances can vary. Stars are able to command six- and seven-figure advances. Stephen King is reportedly to have received advances of $25 million per book from one large publisher; when he left that house, his new contract reportedly called for an advance of $5 million per book and 50% of all profits from that book. So the large commercial houses have tens of millions (if not hundreds of mil­ lions of) dollars tied up in advances every year, a fact that places a financial burden on publishers and editors alike. Most advances are small, however; some houses (especially university presses) refuse to pay any advance. Lastly, the transfer of electronic rights from the author to the publisher is required (in most agreements). A typical book contract is several pages long, and it is dense but important read­ ing for the author. THE AUTHOR AND MANUSCRIPT INQUIRY FORM

Once an editor accepts a manuscript, the author is asked to supply the house with pertinent information about the manuscript, the author's background, and ideas or suggestions for potential marketing plans. The form is used to gather pertinent in­ formation to assist editors when preparing marketing materials, flap copy, and sales pitches for sales representatives. The promotion and marketing departments rely on this document (as well as the author's resume) to identify possible strategies, from

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author's tours to radio talk shows, that might be employed to generate interest in both the title and the author. Most houses use a simple form that the author completes and returns to his or her editor. Basic questions are asked about the themes and issues addressed in the books; this is an important document to the editor. Unfortunately, far too many au­ thors, in a hurry to send in the manuscript, rush through this form. Fig. 6.2 is a typi­ cal author's inquiry form used by many houses.

FIG. 6.2 Author and manuscript inquiry form.

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THE PROFIT AND LOSS (P & L) ESTIMATE The editor has to prepare a profit-and-loss analysis or document (called a "P & L" by accountants) for all manuscripts under review and every accepted book. Although only an estimate, the P & L provides the editor and publisher with preliminary information about the book's length, production costs, and its po­ tential price. This is an accounting tool that relies on certain assumptions, many of which are subject to revision. It is common for an editor to prepare several P & Ls. The first part of the standard P & L statement requires the editor to determine (or estimate) the following: 1. print run; 2. gross sales (that is, the print run minus any copies supplied to the author, sales representatives, editorial personnel, the publisher, etc.); 3. the project return rate (i.e., copies "sold" but returned by vendors for full credit; while historical data on returns is readily available from BISG, a specific book's returns can vary significantly); 4. net sales (gross sales minus returns equals net sales); 5. the suggested retail price (a bookstore is free to charge any price for a book, more or less than the suggested retail price); 6. the average discount rate (i.e., a publisher sells books at a discount; the dif­ ferential between the retail price and the discount price is the book store's pretax profit); 7. the unit manufacturing costs for paper, printing, and binding (PPB); 8. plant costs (which includes costs associated with copy-editing, setting type, proofs, and proofreading); 9. direct marketing; 10. the royalty advance (if any); 11. any sub or foreign rights revenues. Once these numbers are determined, a series of calculations are made to de­ termine if the book will generate a net profit. Table 6.1 outlines in detail a sam­ ple P & L calculation for an adult trade paperback. On this P & L, certain assumptions were made: (1) gross sales minus returns generated net sales of $317,100; (2) the return rate of 38.78% mark, and a sell-through rate of'61.22%. Both percentages were "standard" industry averages for an adult trade paper­ back book in 2004. Plant, PPB, and royalties cost $116,710, providing the pub­ lisher with a gross margin of $200,390. Once other publishing income and the inventory write-off were determined, the final gross margin is ascertained. Sub­ tracted from that tally are direct marketing (the general rule at trade houses is to spend $1 for every unit printed) and the industry standard overhead of 30% (a fixed number determined on the presidential or group-vice presidential level), resulting in a net profit of $28,860 (9.10% of sales).

164

TABLE 6.1 Profit and Loss Analysis of Adult Trade Paperback

ASSUMPTIONS: 1. Print Run:

50,000 copies

2. 3. 4. 5. 6.

49,000 copies

Gross Sales: Returns:

19,000 copies

38.78% return rate

Net Sales:

30,000 copies

61.22% sell through rate

Suggested Retail Price:

$19.95

Average Discount:

47%

7. UnitPPB:

$1.50@

8. Plant:

$10,000.00

9. Direct Marketing:

$50,000.00

10. Royalty Advance:

Royalty:

$0

10% Net

Sub Rights: Gross

Author%

Reprints

0

0

Book Club

$3,000

50%

1st Serial

$600

90%

2nd Serial

$3,000

30%

Total

$6,300

44.5%

$10.57 Net to Publisher

ASSUMPTIONS:

65

1. Gross Sales

$517,690.00

[49,000 x $10.57]

2. Returns

$200,830.00

[19,000 x $10.57] [#1 ­ #2]

3. Net Sales

$317,100.00

4. Plant

$10,000.00

5.PPB

$75,000.00

[50,000 x$ 1.50]

6. Royalty

$31,710.00

[10% Net Sales]

7. Total Cost

$116,710.00

[#4 + #5 + #6]

[$317,000– $116,710]

8. Gross Margin

$200,390.00

9. Other Publishing Income

$2,100.00

10. Inventory w/o

$28,500.00

[$1.50@ x 19,000 returns]

11. Royalty w/o

$0.00

[Difference between advance and earned royalty]

12. Gross Margin

$173,990.00

[#8 + #9 –#10 –#11]

13. Direct Marketing

$50,000.00

14. Overhead 30%

$95,130.00

[30% of net sales]

15. Net Profit

$28,860.001

[9.10% of net sales]

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So this book appears to be a good investment for a publisher, providing a steady cash flow and a net profit. Unfortunately, many books do not generate a profit. The P & L in Table 6.2 indicates a net loss of $31,454 even though the return rate was well within the industry average. This title just was unable to generate enough sales to cover its total costs. Lithography (often called litho, offset, or photo-offset) is the most commonly used printing technology for books. The average "signature" is 32 pages long. A signature length can be 8,16,24,32, or 64 pages in length (in even multiplies of 8).3 However, a signature must be folded in the book manufacturing process, and the majority of commercial book binders prefer 32-page signatures because of the ease in folding this number of sheets; signatures longer than 32 pages often pose techni­ cal difficulties, especially if the paper's weight is heavy. The estimated print run decision is based on a number of complex issues: the po­ tential domestic and foreign market, backlist sales, and spoilage. In spite of sophis­ ticated printing presses and procedures, some spoilage (damaged copies; books with inverted or missing signatures, etc.) is inevitable. Ironically, it is quite com­ mon for a print run to exceed the order. Printers will often quote an "under-over" al­ lowance of 10%. Assuming a print run of 50,000 copies for the book described in Fig. 6.1, this under–over allowance permits the printer to deliver up to 10% below the agreed on total (in this instance 45,000 copies) and up to 10% above the 50,000 mark (55,000). The customer's bill is adjusted accordingly. The cost of printing, paper, and binding (PPB) are also estimated, especially as many large publishers purchase paper directly from paper mills instead of from the printer. These relate specifically to the projected press run (i.e., the total num­ ber of printed copies). A modern commercial book printing company provides an intriguing example of how economies of scale and mass production operate. Lon­ ger press runs have lower unit manufacturing costs. So a press run of 1,500 copies will have a higher unit cost than a book with 3,000 copies. This means that the printing cost differential between a 1,500 and a 2,000 press run is remarkably small, often only a few hundred dollars. This is due to the high costs of setting up a press (called "make ready"). For example, once a typical sheet-fed litho press is set up (i.e., the correct ink has been put into the ink fountains, plates affixed to the press, etc.), it can print between 1,000 and 10,000 sheets per hour. Unit costs de­ cline as more units are produced. A book publisher's average cost for plant will vary significantly depending on a number of variables, including the type of book being printed (hardback or paper­ back), the printer handling the job, the paper stock utilized, the number of units proMarshall Lee, Bookmaking: The Illustrated Guide to Design/Production/Editing (New York: R. R. Bowker, 1979), pp. 7–119; S. H. Steinberg, Five Hundred Years of Printing (New York: Penguin, 1974), pp. 34–193; Elizabeth L. Eisenstein, The Printing Press as an Agent of Change, Vol. 1 (New York: Cam­ bridge University Press, 1979), pp. 25–189; Rose Marie Bratland and William S. Lofquist, "Economic Outlook for the U.S. Printing and Publishing Industry," Publishing Research Quarterly 11(Summer 1995): pp. 29–35; Rosalind Remer, Printers and Men of Capital: Philadelphia Book Publishers in the New Republic (Philadelphia: University of Pennsylvania Press, 1996), 17–45; Charles Rosner, The Growth of the Book Jacket (Cambridge, MA: Harvard University Press, 1954), pp. 11–23.

TABLE 6.2 Profit and Loss Analysis of Adult Trade Hardcover ASSUMPTIONS: 11. Print Run:

25 ,000 copies

12. Gross Sales:

24,000 copies

13. Returns:

8,640 copies

14. Net Sales:

15,360 copies 64% sell through rate

15. Suggested Retail Price:

$25.00

16. Average Discount:

47%

17. Unit PPB + Plant:

$84,000.00

18. Direct Marketing:

$25,000.00

19. Royalty Advance:

$25,000.00

Royalty:

36% return rate

$11.75 Net to Publisher

10% Net

Sub Rights:

167

Gross

Author%

Reprints

0

0

Book Club

$3,000

50%

1st Serial

$600

90%

2nd Serial

$3,000

30%

Total

$6,300

44.5% (continued)

168

TABLE 6.2

(continued)

ASSUMPTIONS: 1. Gross Sales

$282,000.00

[24,000 x$l1.75]

2. Returns

$101,520.00

[8,640 x$l 1.75]

3. Net Sales

$180,480.00

[# – #2]

4. PPB + Plant:

$84,000.00

5. Royalty

$18,048.00

[10% Net Sales]

6. Total Cost

$102,048.00

[#4 + #5 + #6]

7. Gross Margin

$78,432.00

[$180,480 – $102,048]

8. Other Publishing Income

$2,100.00

9. Inventory w/o

$25,920.00

[$3.00@ x 8,640 returns]

10. Royalty w/o

$6,952.00

[Difference between advance and earned royalty]

11 . Gross Margin

$47,660.00

[#8 + #9 – #10 – #11]

12. Direct Marketing 13. Overhead 30%

$25,000.00 $54,114.00

[30% of net sales]

14. Net Loss

–$31,454.00

EDITORS, BOOK ACQUISITIONS, AND PRODUCTION

169

duced, and so on. The P & Ls for Table 6.1 and Table 6.2 assumed that the average costs for PPB for a trade paperback book was $1.50 per copy and $3.00 for an adult trade hardcover book. PPB costs for juvenile books are significantly lower because of the quality of the paper and the binding. These averages are useful barometers because they provide general ballpark fig­ ures a publisher can utilize to gauge the estimates submitted by printers. Most book companies guard their P & Ls (as well as their standard operating costs and overheads) as if they were the secret formula for Coca-Cola. James B. Stewart, in "Moby Dick in Manhattan," profiled James Wilcox, a young author of serious literary fiction.4 Stewart revealed the calculations HarperCollins employed for Wilcox's novel Guest. Plant costs were calculated at $10,000; its press run of 6,000 copies generated $9,000 for PPB. Advertising expenditures added another $5,000.00 (including a l/5th page advertisement in The New York Times Book Re­ view). An author's tour took place, and expenses for the tour and posters slightly ex­ ceeded $10,000. Wilcox's advance was $20,000. As for corporate overhead, HarperCollins charged 25% of total gross sales to cover these expenses, and they sought a 15% return on their investment (i.e., above the recovery of all of these costs and charges). Many of the large consumer book publishers try to achieve a 15% re­ turn on their investment (i.e., an ROI). Guest was a midlist book retailing at $20.00, and it posted sales of 4,000 copies (for a potential gross of $80,000). Due to the standard discount offered to book­ stores, chains, superstores, distributors, and others, HarperCollins netted $38,000 (not $80,000; this meant that a 52% discount was utilized, thereby generating a 48% share for the publisher). Stewart reported "retailers and middlemen kept just over half the cover price."5 HarperCollins's general overhead (25%) tacked on an additional $14,400, and total costs associated with Guest hovered in the $68,400 range (although Stewart used the figure "approximately $63,000" in his article). Guest had no subsidiary or foreign rights, and HarperCollins calculated costs asso­ ciated with the paperback rights separately. According to Stewart's calculations, "Guest produced about $38,000 in revenue to HarperCollins, leaving a deficit of $25,000."6 In order to recoup fully all costs and have a 15% return, "Guest would have had to sell more than 7,000 copies to generate the roughly $73,000 necessary to meet that standard."7 BOOK MANUFACTURING PROCEDURES

Once the author submits a manuscript, the editor is ready to begin the editorial pro­ cess. The editor prepares a book transmittal form listing the various stages the manuscript must go through (the "traffic" process). These include: assigning a con­ 4

James B. Stewart, "Moby Dick in Manhattan," The New Yorker, 27 June & 4 July 1994, p. 46. 5Ibid., p. 60. 6 Ibid., p. 60. 7Ibid., p. 60.

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tract number, manuscript editing, rights and permissions, design and production, and marketing. Although mundane, this traffic procedure is critically important; errors can delay (if not "misplace") a manuscript. The traffic office (often using a computerized system) monitors each book, often twice each month. If a book's progress falls behind schedule, steps are taken to expedite it. Preproduction meetings are held in the house (generally every 1 to 4 weeks) to monitor progress and to make decisions. At the first preproduction meeting, key elements are examined and discussed, including: the book's title (does it work?), the length of the manuscript (is it too long?), publication date (will the sales representatives have enough time to sell it?), the market (bookstore sales or direct marketing?), the jacket, trim size, tables or illustrations, elements missing in the manuscript, press run, suggested price and discount, editorial problems, and so on. Line (or manuscript) editing then commences, generally using a hard copy of the manuscript submitted by the author. Many editors just feel more comfortable editing with printed pages in front of them because they can go back and forth quickly and get a better feel for the book. To many people, it is exceptionally diffi­ cult to edit long documents on a screen. Computers are slow, the screen never (or rarely) includes the entire page, and going backward and forward on the computer is hardly easy. The placement of comments by the line editor onto the manuscript and Post-it notes onto the page just seems to work, a process that was followed during the line editing of this book. A senior editor might perform editing, but an editorial assistant or assistant ed­ itor generally does it. In many houses, experienced freelancers are hired. Freelancers are often paid a set fee to edit a manuscript; the average fee in 2004 in New York City was between $45 and $70 per hour (but more for a rush or compli­ cated manuscript). Top freelancers can obtain a sizable amount of work during a year, but they do not receive any benefits (e.g., medical, dental, or life insurance, paid vacations, etc.). The use of freelancers burgeoned in the early 1990s when many houses were forced to decrease expenses; departing editors were replaced with freelancers. While this practice minimized overhead costs, some industry observers have questioned the efficiency of this approach. Line editing is a critically important function. The first goal is to read the manuscript for errors, inconsistencies, themes or issues that need additional ex­ planation or elaboration, extraneous material that could be deleted, unclear sen­ tences, missing illustrations, errors in footnotes or appendices, and so on. The editor to the manuscript adds standard editorial marks. Some comments are writ­ ten on the page of the manuscript (often with a blue editor's pencil), and tags (i.e., Post-its) are also attached to the sides of pages asking the author to review a point or to consider making a change in a word, sentence, or paragraph. A second and equally important aim is to determine whether the manuscript is clear, readable, and stylistically acceptable. An editor generally asks a series of questions: Was the tone consistent in the manuscript? Was the work overwrit­ ten? Was material repetitious? Were technical terms or phrases defined? Was the thesis clear?

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171

This process must be done carefully, and line editing can take a number of weeks. A "reader's report" and a "style sheet" are also prepared by the line editor or freelancer. The reader's report addresses substantive issues. A typical reader's report might contain the following: Aside from a need to highlight the atmosphere of medieval England and the king's castle, there is also a logical problem in the ms. [manuscript] in that it is difficult to develop sixteen characters in any depth. But they have to be since the reader devel­ ops an emotional stake in the story. Since this novel is a quest for the Holy Grail, the reader needs to see and understand all of the characters, from King Arthur to the lowest knight. The easiest way to approach this dilemma is to concentrate on only six characters so the reader becomes attached to a small, more manageable number of people.

The style sheet highlights problems that the author needs to address immedi­ ately. A typical style sheet might contain the following: P[age], 8 line 3: several technical problems. Why is Merlin monitoring astronomical anomalies? P. 37 lines 1–14: What did the typical castle room contain regarding] fur– niture, candles, carpets, etc.? P. 127 lines 7–18: How much rain falls in England in March? Are there rainfall records for medieval England? Also, were wagons com– monly used then?

While this is going on, the production and marketing departments are making decisions about the book's future. Once the manuscript is edited, it is returned to the editor, along with the reader's report and the style sheet, who reviews them before they are forwarded to the author. The author then has an opportunity to respond to the line (or manuscript) editor's questions and suggestions. A letter from the editor is always included with the manuscript outlining the author's obligations to review the manuscript and respond to all of the queries and recommendations. THE AUTHOR'S MANUSCRIPT REVISIONS

Once the edited manuscript and the author's inquiry form are returned, the editor checks the manuscript to make sure that there is a response to every query and sug­ gestion. Assuming no problems, the manuscript (or the disk version of the book) is sent out for composition (although some houses perform this task in-house), the promotion and marketing departments finalize their plans, and design and produc­ tion make sure the book is processed.8 The author will eventually receive a galley proof of the book and, ultimately, page proofs. He or she will proof them, looking for "printer's errors" (also called PEs), typesetting errors) and "author's alterations" (also called AAs; an error made The Chicago Manual of Style, 14th ed. (Chicago: University of Chicago Press, 1993), pp. 126–154.

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by the author, a point that needs clarification, etc.). He or she will make any changes or pose questions to the editor. If the type was set using the author's computer disks, the total number of PEs and AAs should be minimal. In many contracts, authors are penalized financially if they make too many AAs in the page proofs. Again assuming no problems, the book will be printed, bound, sent to a ware­ house, reviewed, distributed, and sold; but there are always problems. Both the edi­ tor and the author must be patient, especially as authors are often the cause of some of these complications if galleys or page proofs are not returned in a timely fashion, if queries are not addressed, and so on. BOOK DESIGN AND PRODUCTION

The company's design department is responsible for the "look" of the book. This is a complex process, and a number of major decisions have to be made. Designers select the book's typefaces to achieve certain aesthetic goals. Type must be determined with great care, especially regarding readability and legibility. The type "families" include light, light italic, regular, regular italic, medium, me­ dium italic, bold, bold italic, regular condensed, and regular condensed italic. Any­ one familiar with a computer quickly becomes aware of these terms. However, various printing organizations (notably the Graphic Arts Technical Foundation) have published extensive studies on these and related printing issues, and their works should be consulted to see the various type families. Type is based on old letterpress configurations, and comes in a variety of sizes (from 6 point to 72 point. A "point" measures approximately l/72nd of an inch); and typefaces include old style, modern, square serif, sans serif, script, text, and decora– tive styles. Spacing is also a consideration, that is, the amount of space used be– tween letters. Type was originally set by hand; a typesetter selected type from bins and placed them on a stick one line at a time, under the then-prevalent letterpress procedures. This was a slow, error-prone process because the line was set "reading left" (i.e., backwards; this was done because the line of type "kissed" or touched the page, transforming the "reading left" line into one the reader could comprehend). Modern lithography employs a "reading right" process, which is the way you are reading this line on this page. Eventually, a variety of commercially acceptable "hot lead" machines were de­ veloped to expedite this prepress operation. In the hot lead method, a matrix (a mold for each type character) was released from a magazine (i.e., a storage case). All of the matrices were assembled into a line with space-bands separating words. The line of type was moved into the hot lead casting mechanism, and a line of type was cast. Because lead was used, many typesetters fell ill because they were exposed to hot, molten lead fumes. Although hot lead type produced a beautiful final product, this procedure was fraught with human errors, primarily spelling errors, spacing problems, and miss­ ing words (printer's errors; PEs). Frequently, the lead typeface would split while printing a page, causing problems for the reader.

EDITORS, BOOK ACQUISITIONS, AND PRODUCTION

173

Later on "cold type" emerged. In this process, a typewriter type of machine (e.g., a VariTyper) used a strike-on procedure to set type directly onto paper or a paper tape. This process was refined in the 1950s, eventually opening the door for computer-generated type and imaging systems. This cold type process allowed for the introduction of digital machines and the utilization of digital photographic equipment. The type used for most books in the 21st century (including this one) is set on a computer. This procedure became commercially acceptable when the cost of hard­ ware declined in price and authors began using computers to write books. Many publishers require an author to submit a manuscript's first draft and final version in both hard (paper) and electronic (disk) formats. The editor uses the disk containing the final version of the manuscript and then forwards it to the production depart­ ment. The disk is used to generate the type for the book, thereby expediting this en­ tire process, reducing typesetting errors, and cutting both typesetting costs and the time needed to set the book. The designer also selects the book's cloth cover, dust cover (type faces, illustra­ tions, layout, etc.), and pages (generally offset opaque, a closed level surface with superb ink holdout). Decisions are also made about the paper's tint (white, offwhite, etc.) and weight. Paper (called "fine paper" by printers) is an important element of a book, and pa­ pers vary in size and weight. Most people are familiar with copier paper, purchased by the ream in stationery stores. A single piece of copier paper is called "20 pound" paper, and it is sold in 500-page reams. When copier paper is manufactured, the original dimensions of the produced sheets are 17" x 44"; and a 500-page ream of this paper weights 20 pounds, thus the name "20 pound paper." These large sheets are cut into four smaller sections (each81/2"x 11") and packaged in 500-page reams (this ream weighs 5 pounds) and wrapped with a heavy-duty outer paper cover and labeled. Book publishers use a variety of paperweights, ranging from "bible paper" (used in bibles) to lighter weight papers (for catalogs) and heavier papers (for art books, textbooks, etc.). The next phase deals with art preparation and the book's layout using mock (i.e., dummy) pages. If needed, the artwork is selected, assembled, scaled (i.e., changed in size to fit on the page), and cropped (i.e., reduced in size) on a computer. Once the finished book page is assembled, it is sent off to be photographed. A book's page assembly is a bit unusual because pages are organized to maximize the available space on a printing plate and the paper as well as to accommodate the binding process. For example, in order to produce a 16-page signature with printing on the front and back of the paper, two printing plates (illustrated as Printing Plate "A" and Printing Plate "B" in Fig. 6.3) are prepared. The "A" plate would be used on the front page, and it would contain page numbers 4, 13, 16, 1,5, 12,9, and 8. The "B" would print on the back of the sheet, and it has page numbers 2,15,14, 3,7,10,11, and 6. In these layouts, pages 5,12,9, and 8 on plate "A" and 7,10,11, and 6 on plate "B" are inverted so they can be folded and bound in the correct order. Light-sensitive photographic film is used to prepare negatives and positives. If photographs or illustrations are used, continuous tones or halftones are prepared. Lithographic printing relies on a system of printing dots. A photograph is converted

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CHAPTER 6

Printing Plate " A" Front of Sheet

Printing Plate "B" Back of Sheet

FIG. 6.3 Printing Plate "A" and Printing Plate "B."

to a series of thousands of dots using a grid pattern of a halftone screen so it can be reproduced. If the photo contains color, then a color separator works on the image to insure that all colors are reproduced accurately. This is a complex process whereby filters are placed over the photographs; these filters match the printing inks: cyan (blue and green); magenta; yellow (these three are the "subtractive pri­ maries"); and black. The colors are corrected to generate the correct shade through dot etching, masking, or electronic scanning (a computer system); then color proof­ ing occurs. These steps produce the finished film, from which a printing plate is generated; litho plates are lightweight metal, although "quick print" shops often use paper plates to reduce costs and expedite their work. The make-ready process then begins. This in­ volves placing the plates and ink receptive "blankets" (a carefully manufactured piece of rubber that fits the dimensions of the press) onto the press, cleaning and fill­ ing the ink fountains (containers on a press where the inks are kept during the printing process), bringing in the correct paper and placing it onto the press's lift, and so on. There are a number of different printing processes used in book manufacturing in the United States. The first one is letterpress, the process developed by Gutenberg. Letterpress uses a hot lead system to generate a piece of raised type (similar to the type used on a typewriter), which is assembled onto a letterpress press. There are three types of presses: (1) platen, a flat type of press used, for exam­ ple, by Ben Franklin (on display and still functioning in the Franklin print shop in Philadelphia and the Farmer's Museum in Cooperstown, New York) in which a

EDITORS, BOOK ACQUISITIONS, AND PRODUCTION

175

piece of paper is pressed between the type and the press's bed (frame); (2) a flatbed cylinder, where a flat bed of type is attached to a revolving cylinder that applies the pressure to make an impression on a piece of paper; and (3) rotary, in which the type is affixed to a cylinder that rotates to generate impressions onto paper. Letterpress was used extensively in this nation for several centuries; it was slow, costly, and cumbersome to operate (especially if a piece of raised type face broke and had to be repaired or replaced because of an error). Although it produced an ele­ gant printed page, it slipped out of general usage in the 1970s because of the eco­ nomic advantages of lithography. Lithography (often called litho, off-set, or photo-offset) is a planeographic print­ ing process whereby a photosensitive plate is created with type and illustrations that are neither raised (letterpress) nor recessed (gravure). This process is exceptionally fast, cleaner than letterpress, and economical. Different types of litho presses are used to print books. A sheet-fed press is capa­ ble of printing between 1,000 and 10,000 "impressions" per hour (an impression is one standard sheet of litho paper, generally 25" x 38" on a sheet-fed press), al­ though some litho presses reached the +15,000 mark. This press uses precut pieces of paper. A single piece of paper is pulled through the press, using a series of suction cups, to receive the "impression" (or image) from the lithographic rubber blanket. In litho, the press's metal plate (which contains the page's text, illustrations, etc.) is inked by rolling it through the ink fountain; it then "kisses" (or touches) the blanket. The blanket "kisses" the paper, hence the name "offset." A typical four-color 38" litho press (commonly used to print books) is approximately the length of 3 to 5 standard four-door automobiles; a six-color press (another book press) can be be­ tween 5 and 8 car lengths. A "web" press prints from a roll of paper. Webs often have attachments that en­ able the printer to cut the roll into sheets, glue, fold, and so on. Webs operate at rapid speeds, frequently in excess of 25,000 impressions per hour, and they often have gas-driven heaters to dry the ink before one piece of paper touches another one. The typical web press can be the length of a city block. How many books can be printed in one day at one plant? The Offset Paperback Manufacturing Company (owned by Bertelsmann AG), for example, is the world's third largest paperback printer. On an average day, it produces between 1.1 million and 1.2 million paperback books (+375 million books annually). Their press opera­ tions generally work 24 hours per day 6 to 7 days per week in a 231,000-square-foot operation (plus an additional 200,000- square-foot warehouse). They have 10 web presses running 72,000 64-page sections per hour, 4 sheet-fed presses, and 4 bind­ ing machines.9 Almost all books, magazines, and newspapers are printed using the litho method. However, for many years litho plates were able to make only 100,000 im­ pressions; then they had to be replaced. Developments have increased this number. Gary Porter, "One Million Paperbacks A Day? No Problem," Printing News East, 4 July 1994, pp. 9-10. Also see Donald Carlson, "Strength of a Book's Binding is Found in the Adhesive," Printing News East, 11 July 1994, p. 12.

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For decades, long press runs of a +100,000 or more impressions (e.g., catalogs) were printed using gravure (often called rotogravure), which used a "recessed" type and illustration system. Instead of plates, gravure adopted a cylinder; letters and il­ lustrations were etched into a brass-plated or chromium-plated cylinder. Originally, this was done by hand; eventually a machine and later a laser-etching system came onto the market. Gravure presses can be sheet-fed or web. While the quality of the impression is exceptionally high, costs associated with gravure have limited its ac­ ceptance in the printing industry. There are two other types of printing processes, but they are not used for book printing: screen printing (e.g., used for tee-shirts), and flexographic printing (a rub­ ber plate variation of letterpress used for milk containers, bread wrappers, etc.). Copiers and laser-printing machines are too small to be used for the mass pro­ duction of books. However, print-on-demand (POD) printing systems (often utiliz­ ing a Xerox "DocuTech" system, as well as others) print exceptionally acceptable books. Print-on-demand is economically viable for short print runs, and it became widely used in the late 1990s by many book publishers, from large trade houses (Random House) to small university presses (Northwestern). POD allows a pub­ lisher to maintain a small inventory, curb production costs, and reduce unwanted re­ turns. In addition, POD allows a book to remain in print, theoretically, in perpetuity. For some publishers, it is an exceptionally attractive alternative to large litho print runs and costly warehouse expenditures. Once pages have been printed, they are sent to a binder. Hardbound books are bound using the edition (often called the hardbound or casebook) method. Once the signatures have been collected, four-page endleaves are pasted onto the outside of the first and last signatures. The remaining signatures are gathered together mechani­ cally and then sewn together using special machines and durable threads. Once sewn, the sewn side is glued while the remaining parts of the book are trimmed (top, side, and bottom). The book is then passed through a rounding machine, which completes the shaping part of the casebook process. A thin piece of gauze is glued to the sewn area, and the pre-printed or embossed cloth covers (the case) are attached to the book. Each book is allowed to dry; it is then inspected, jackets are affixed, and either wrapped in thin plastic or packed in cartons for shipment. Perfect binding is used for paperback books. After the book is collated, a glue (and not a case or hardbound) binding system is used before a heavy weight "card" stock is attached. Mechanical binding is also available for workbooks, cookbooks, and so on. A plastic or metal spiral is inserted into prepunched holes, allowing the book to sit flat on a table. Sometimes, paperback covers are embossed (letters or im­ ages are raised to highlight the cover) or die-cut (a piece of the cover is cut-out for dramatic purposes). These prepress, printing, and binding procedures are complex and take years to master, especially with the introduction of computerized systems (i.e., the "direct to plate" method). This allows a book printer to use electronic disks to bypass many of the prepress procedures.

CHAPTER SEVEN

Marketing Books

How are books marketed? How are sales, marketing, and promotions departments structured? How is the sales force organized? In essence, how are books placed into channels of distribution and how successful are these efforts? As could be expected, every book firm handles marketing in a slightly different way because of internal and external exigencies. A paradigm was constructed based on organizational and marketing configurations employed by many of the largest U.S. book publishers. Most large book publishers utilize a multifaceted organizational structure with a president of marketing and sales and individual vice presidents who handle, respec­ tively, retail, wholesale, jobber, and "other" sales. Fig. 7.1 outlines this organiza­ tional structure. RETAIL SALES OPERATIONS Adult consumer book sale patterns changed dramatically between 1972 and 2002. The proliferation of superstores, as well as the emergence of nonbookstore estab­ lishments (notably supermarkets, specialty stores, warehouse or discount clubs, etc.), triggered a deep, debilitating decline in the role independent bookstores played in the retail sector. In 1972, the chains accounted for 11% of all book sales, and independent stores held a commanding 58% share. Only 31% went through nontraditional channels. By 1983 the total share of the market held by chains grew to 18%; independents, on the other hand, dipped to 44%, still a formidable presence; the nontraditional sector held a 38% market share. In 1994 retailing patterns changed again. The chains burgeoned to 27%; inde­ pendents slumped to 19%. Nontraditional retail establishments held a commanding 54% market share. In 2001, the chains declined somewhat to a 23% market share, while the inde­ pendents sustained yet another dramatic decline, ending up with only a 15% share. As for the rest of the market: book clubs, 20% share; wholesale-price clubs, 7%; 177

178

CHAPTER 7

FIG. 7.1 Organizational chart of sales and marketing.

mass merchandisers, 6%; mail order, 3%; food and drug stores, 3%; discount stores, 3%; used bookstores, 3%; the Internet, 8%; and all other, 10%.1 This meant that chains surged from 11% to 23% between 1972 and 2001, inde­ pendents suffered through a debilitating decline from a commanding 58% share to a paltry 15%, and the prognosis through 2006 was equally depressing for the inde­ pendents. Because of this massive shift in the marketplace, book companies adjusted their sales and marketing strategies to take advantage of the opportunities offered by the superstores (far fewer book buyers to call on). In addition, far more attention was paid to nontraditional channels of distribution. The organizational chart in Fig. 7.2 illustrates the retail sales and marketing op­ eration of a typical large publisher. Retail operations are divided into two main components: retail operations in the eastern, western, and central regions; and na­ tional sales' sectors: frontlist; backlist; and special sales. The Sales Representative and Independent Bookstores The retail sales operations force (i.e., field sales representatives or "reps") tradition­ ally sold frontlist books to America's independent bookstores. With the emergence of superstores, some of the large book publishers assigned backlist duties to retail salespersons because they were already in the field and had close access to independ­ ent bookstores. Some of the very largest publishers eschewed a "frontlist–backlist" strategy in favor of using reps to sell specific imprints. The itinerant sales representative covers a geographical district as small as New York City's Manhattan sales district between Wall Street and 59th Street, an entire state (Florida), or several states. One large company assigned Kentucky, Indiana, Michigan, Minnesota, and western Ontario to a rep. Book Industry Study Group, Inc., The 2001 Consumer Research Study on Book Purchasing (New York: Book Industry Study Group, Inc. 2002), pp. 20–28. Also see Victor Aguirregabiria, "The Dy­ namic Markups and Inventories in Retailing Firms," Review of Economic Studies, 66, 2(April 1999): pp. 275-308; David A. Aaker, "Measuring Brand Equity Across Products and Markets," California Man­ agement Review, 38, 2(1996): pp. 102–120; John F. Baker, "Publishers Concerned by Superstore-Indie Struggle," Publishers Weekly, 18 September 1995, pp. 10–11, 19; Robert A. Carter (Ed.), Trade Book Marketing: A Practical Guide (New York: R. R. Bowker, 1983), pp. 9-23.

MARKETING BOOKS

179

FIG. 7.2 Organizational chart of retail sales.

The rep has a myriad of duties, all of which are carried out using the trunk of his or her car and spare space in an apartment or home. Regional sales offices are al­ most nonexistent. Reps receive a free car (all costs associated with gas, insurance, and repairs are paid for by the company), a computer with a modem for e-mail from the home of­ fice, a printer, a FAX machine, and an expense account for entertaining customers, travel, telephone costs, and so on. The typical rep (officially known as a "district sales manager" in many of the largest companies) reports to a regional sales man­ ager. Most companies are divided into at least three regions (generally eastern, cen­ tral, and western), although a variety of configurations exist. The rep is the publisher's frontline sales and marketing contact with retail booksellers, generally independents or small chains. In the past, sales reps handled all of the publisher's title output. By 2004, some large book publishers (generally those ranked in the top 5 or 10) split these diverse responsibilities into at least two disparate areas, adult and children's. Some reps working for the very largest publishers handle only adult hardcover or trade whereas other reps concentrate solely on mass-market paperbacks. A representative's total compensation package is impressive. By 2004, base sal­ aries generally started in the $40,000 range (although the large trade houses fre­ quently paid higher salaries), plus a commission (which can vary rather dramatically from one house to another) and a sales bonus. In addition, a pension plan plus medical and dental (but ironically not vision care for employees working in a reading-intensive profession) are provided by the publisher, as is a term life in­ surance policy. Some small houses have a probationary period, generally lasting 3 months, and benefits are not provided to probationary employees, although this practice has fallen out of favor among the largest trade houses. A rep's work duties are diverse. He or she begins preparing for a new sales sea­ son and the 2 or 3 annual national sales conferences. Some firms prepare sales vid­ eos. Each tape is generally 2 to 3 hours in length and narrated by key sales and marketing personnel and editors who handled the titles; most segments run between 3 and 10 minutes. On occasion, an author might discuss his or her book to provide insight into and excitement about the themes or issues raised in the title. Often, companies use television footage, especially if the author appeared on one of the

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national morning shows or an afternoon talk show, or news footage (if a prominent personality or event is covered in the book). Some firms use audiotapes; some of the largest houses moved toward large group video presentations at the publisher's home office to minimize expenses. The purpose of the video is to provide the rep with a brief but concise over­ view of the title's content and importance to the company. Large publishers might release more than 100 new titles every month, so it is impossible for the typical rep to read through all the titles. The video "primes the pump" and allows the representative to understand the salient selling and editorial issues related to every title. Some of the largest trade houses also use teleconferencing with or in­ stead of videos. In addition, the rep receives a binder filled with "title information" sheets (of­ ten called a "tip" sheet) on every new title. The tip sheet contains practical sales and marketing data compressed into workable units. A typical tip sheet lists the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

14. 15. 16. 17. 18.

imprint; publication date; format (e.g., adult trade paperback); title; subtitle; ISBN number; author; subject category (important information because the rep wants the book placed in the correct section of the bookstore); the title's history ("originally published in hardcover in July 2004 at $29.95 with 189,717 copies sold"); suggested retail price in United States and Canada; page count; trim size; spine size; carton pack (usually 24 copies per carton); author's residence (useful for planning a local author tour); a brief description and some keynote points ("This author won two major book prizes in 2004; a superb analysis of economic theories related to globalization; special emphasis on Africa and Latin America"); key selling points (hardcover book was a national bestseller on The New York Times and The Wall Street Journal; went through 12 printings; we bought paperback rights; author will appear on various U.S. news shows. This book is considered superior to Brown's book on the same topic); the publisher's marketing plans (major national print advertising cam­ paign planned; college lecture tour in New York City, Boston, Chicago, Florida, Alabama, and Texas); marketing goals; recent information about the author; comparative titles in same book category; names and telephone, FAX, and e-mail addresses of the book's editor, publicist, and marketing contact.

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The representative then attends the national sales conference, generally held ev­ ery 4 months (often in April, August, and December). Most conferences last be­ tween 3 and 5 days, with August in the 4- to 5-day range. The sales meeting is all business. Aside from field sales and marketing person­ nel, the house traditionally sends a large number of key corporate executives from sales, marketing, promotion, and editorial (generally on the vice president–director levels and often lower down the organizational chart), as well as corporate officers (presidents, group vice presidents, etc.). If the company is owned by another corpo­ ration, either domestic or foreign, representatives from the mother company fre­ quently attend. Prominent authors are also invited to talk about their upcoming books. However, the actual number of individuals attending varies somewhat: Au­ gust attracts the largest contingent; April and December tend to have smaller turn­ outs. If any of these meetings are held in or near the corporate office, many firms send junior-level employees to attend (i.e., editorial assistants, assistant editors, as­ sistants in the sales and promotion departments, etc.). Every sales conference has a strong "revival camp" atmosphere. The real pur­ pose is to spark interest in new frontlist books. Premium presents are often given to those attending, including corporate buttons, tee-shirts, gym bags, baseball caps, canvas tote bags (this industry literally drowns in a sea of canvas tote bags), and so on. There are athletic events, especially tennis and golf (the "link that binds"), al­ though younger employees tend to play racquetball and basketball; there are a plethora of social events to galvanize the employees. The locales often change, with a midwestern city (perhaps Chicago or St. Louis) in December, a warm-weather location (Dallas, Florida, or Arizona) in April, and a country-club style retreat in August (Westchester outside New York City). Some publishers hold one (or perhaps all of these meetings) at the company's headquarters. A typical sales conference agenda opens with a breakfast, followed by a general "state of the company" presentation made by the firm's president (perhaps 30 min­ utes in good years; somewhat longer in disappointing ones). This presidential ad­ dress informs everyone about the last quarter or fiscal year's goals regarding unit and dollar sales, bestsellers, and total performance, including some mention of profits or losses. These preliminary events are followed by actual business sessions: "closed" and rather candid divisional meetings (e.g., retail, jobbers, telemarketing, special mar­ kets); only those working in a specific division can attend. Quite often the editors, sales, and promotion specialists discuss a specific imprint's progress or problems. Additional divisional meetings are then held, allowing sales reps to discuss book campaigns and covers that worked last season and those that failed to live up to ex­ pectations. They also converse (if not sermonize) about the next season's title out­ put; jeremiads are often heard at these meetings. Lunch follows; often an author will talk or entertain those present. After lunch another imprint is evaluated, followed by another divisional meet­ ing. The traditional hospitality suite will be open before cocktails and dinner. Cus­ tomarily, a major topic or concern (sales quotas, commissions, and the impact of

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superstores on their independent customers) dominates discourse in and out of divi­ sional meetings. This pattern is followed for 3 or 4 days, interspersed with tennis, golf, basketball, and numerous sidebar discussions about the company, book pub­ lishing, and general business conditions. Another important part of the sales conference is the job interview. Up-andcoming employees are identified for new jobs, and the appropriate sales, editorial, or corporate people interview them. Maxwell Perkins (the great editor of Fitzgerald and Hemingway) followed a somewhat different tactic at Scribner's. He called the half dozen or so traveling sales reps into his office, and he alone informed them, in rather candid tones, about the next season's list; no fancy videos, luncheons, or motivational speeches perme­ ated his approach. Of course, it helped that Scribner's published some of the great­ est authors of his time. The rep returns to his or her sales district rejuvenated and excited about the com­ pany and its next line of books. Somehow this convoluted, antediluvian process, fraught with distractions, seems to work, and the representative has a better grasp of the books he or she will present to booksellers. The next major assignments deal with planning for the trade bookselling season. He or she compiles all of the pertinent sales material (including the publisher's cata­ log and sample covers) into a useful kit. Sales visits are scheduled, and the critically important business review of each store's past performance occurs. This allows the rep to ascertain what titles succeeded and failed in a specific store and what types of promotions (author's signing; advance reading copies, etc.) should be considered. The rep then calls on the independent bookstore's book buyer (often the owner or co-owner) and tries to sell the list. He or she also outlines any advertising and promotion techniques that should be considered, what author's requests (for signings or readings) the store has, various point of sale (the ubiquitous sales bins, called "dumps") and merchandising and marketing techniques that might be useful, and ideas regarding space allocation of titles (hopefully on a well-lit table near the front door) and display materials (banners, signs, or bookmarks inserted into a book). "Stripped books" and returns are discussed. A stripped book is a paperback whose cover has been removed. The cover (and not the entire paperback) is returned to the publisher as a return for full credit. The cost to print a paperback is quite small (actual costs vary depending on the print run, use of illustrations, paper, etc.; the typical mass-market paperback with a + 100,000 press run could cost as little as 500 to 700 to fabricate), so it is just not economical to return paperback books. The re­ maining portion of the paperback book is supposed to be destroyed by the book­ seller, although stripped copies frequently appear for sale by sidewalk vendors. The entire hardcover book is returned for a complete credit (hopefully resold or placed into a remaindered or sale channel of distribution by the publisher), assuming of course that all of the publisher's terms and conditions are fulfilled. Mass-market selling differs somewhat from trade book practices. Generally a sales call is made every 3 months to discuss backlist specials, any television or film tie-ins, and any recent trade additions. Reps or the corporate office often prepare

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quick delivery lists. These lists contain information about ISBN numbers, titles, au­ thors, selling prices, package-carton minimums, and comments ("available 8-15," "NY Times #11," "CBS This Morning July 28th"). In addition, inventories are dis­ cussed because the rep often does a physical inventory of his or her publisher's books in stock at the bookstore. The paperwork associated with all of these activities is prodigious. Special mail­ ings about new titles are prepared and mailed; often a rep prepares a newsletter for his or her accounts to highlight new releases. In addition, a galley will be dropped off for a bookseller to read. A galley is an exceptionally durable but dull-looking paperback copy of the com­ plete book. Heavy cardboard stock is used; standard colors are blue, red, green, and yellow. A galley is issued about 3 months before a book's official release date. They are sent to book reviewers, and, quite often, they are often given to bookstore person­ nel. In addition, copies of chapters of a new book and advanced reading copies (ARCs) are also dispensed to bookstore salespeople. Although similar to a galley, an advanced reading copy has an attractive cover, often the same as the real book. Brief editorial flap copy is always included. The following is an example of copy: A gripping novel of love, revenge, and redemption spanning three generations and three continents, Truth Dies Slowly is a work of stunning intensity and riveting sus­ pense. With this novel, Angelica Hersey will be recognized as a major writer and an exciting new name in contemporary fiction.

Sales and marketing data can also be found on the back cover: A Simon & Schuster hardcover; 100,000 copy first printing; $100,000 marketing campaign; national consumer advertising; point-of-sale materials; eligible for co-op advertising; free freight; publication date: October 1, 2004.

Yet this is a critically important part of an elaborate sales, marketing, and promo­ tion network. The vast majority of sales reps are often recruited from bookstores be­ cause they worked in and know that part of the business. Interestingly enough, many sales and marketing people in the home office never worked as a rep, so their understanding of this type of marketing is sketchy. Of course pirating reps from competitors is an old, trusted tradition in book publishing. An exceptionally small number of trade houses select reps from the ranks of the corporation's sales and marketing staff. These individuals are identified as potential managers and publishers, yet they need some seasoning and field experience. They are sent to the field for at least 2 to 4 years before they return to the company, nor­ mally to assume a leadership position in a major operation or department. The Sales Representative: National Accounts Every major book company maintains a national sales force. This group services the large national or regional superstores, chain bookstores, companies supplying books to warehouse-price clubs, etc. Superstores emerged in the late 1980s as a

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powerful retailing forum. The majority of superstores are large and well stocked with titles. For example, a typical Barnes & Noble or Borders superstore is in a 60,000- to 70,000-square-foot freestanding building. Offering more than 150,000 titles (often reaching the 160,000 range) plus access to Barnes & Noble's or Bor­ ders massive title network, consumers browse through over 74 departments (rang­ ing from taxes to pets), a large electronic and audio book collection, a cafe (serving a variety of coffees and beverages and food items), and a sizable music and video department. An abundant inventory of magazines, newspapers, maps, and sidelines round out the store's inventory. Some superstores also house a used book annex (generally about 7,500 square feet). Most superstores offer 20% discounts on every hardcover book and current New York Times Book Review paperback bestsellers every day; hardcover bestsellers are often sold at a 30% discount. Chain stores (Barnes & Noble's B. Dalton stores or Borders' Waldenbooks stores) are located primarily in well-established shopping malls or in strip (small, stand-alone) malls. Chains are smaller in size and offer for sale a reduced number of available titles. Barnes & Noble and Borders are in the process of closing unprofit­ able chain stores. The national sales force calls on the superstore or chain book buyers, located at the company's corporate office, to discuss an upcoming list and make recommen­ dations on the number of copies the superstore could take. The publishers utilize a highly trained sales force to sell frontlist and backlist books and special titles. They follow many of the same procedures utilized by sales reps in the field. However, buyers for the superstores and chains are specialists in specific categories (e.g., cooking or juvenile). Barnes & Noble's adult trade fiction buyer is considered one of the best in the business. In addition, these buyers have computer data outlining in great detail how a specific title or book category per­ formed in a specific store at precise times; information about sales in clearly de­ fined geographical regions also exists. In reality, these buyers have access to the best sales and marketing dataset (i.e., detailed cash register output) in the industry, and they guard this data as if it were golden (because it really is). In 2000, Nielsen's Book Scan, the equivalent of Sound Scan (Nielsen developed both sales data analysis systems), was launched. Initially, many book publishers (including some of the largest ones) were indifferent to Book Scan, deciding not to participate in the program. Some publishers argued the mid-six-figure fees were too high (this is an industry, after all, that has never spent much money on applied consumer research). Others insisted the number of bookstores reporting sales data to Book Scan was too small to be meaningful in certain book categories (especially as books on home improvement, crafts, and such were often sold in home improve­ ment centers, hardware stores, etc. not surveyed by Book Scan). Still others were concerned that Book Scan tracked only about 10,000 titles when the nation had about 3.5 million titles in print. The bottom line is that superstore book buyers dictate how many copies they will buy for certain stores based on their exceptionally reliable datasets, and these individ­ uals are exceptionally important participants (and perhaps the most important ones) in the entire bookselling value chain. Their decision can make or break a book.

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CASE STUDY: SELLING TEXTBOOKS The College Sales Representative Sales reps in a college textbook division perform different tasks. They call on instruc­ tors (or in some instances departmental textbook review boards) to market new prod­ ucts. In addition to the standard textbook, publishers active in the large adoption academic areas (e.g., freshman English composition, psychology, sociology, ac­ counting, management, nursing, etc.) also provide instructors with free collateral documents and services, namely an annotated version of the text, instructor's man­ ual, a test booklet, transparencies, accounting or chemistry or mathematics or statis­ tics problems or readings on a computer disk, or a videocassette. Competition in 2002 was intense; net publishers' revenues in this market topped the $3.9 billion mark that year. BISG estimates this dollar volume will reach about $5.6 billion by 2007.2 So each house is forced to distribute massive numbers of free copies of textbooks to college instructors, although some publishers try to maintain an illusory 30-day examination policy. Many houses bill professors if payment is not received or un­ less at least 10 copies of the text are not ordered for class use. This policy was adopted because some professors built sizable personal libraries with free copies; others sold them back to college bookstores, used bookstores, or directly to stu­ dents. Some very large publishers now issue specially stamped or printed copies ("This is a free book; not for resale") to professors to minimize their sales to book­ stores, but some used textbook firms remove these covers and replace them with new ones devoid of warning labels. Some professors are "antitext" and refuse to or­ der them even if a department insists all students purchase them for a section. As rough as these problems may be, they pale when compared to the ultimate threat undermining the entire college textbook industry in the United States: the used textbook market among college students. Generally, textbook publishers and acquisition editors and marketers use a "90–45–10" ratio when they do a profit and loss statement. If the real market de­ mand for a new marketing textbook on "advertising management" is projected to be 15,000 copies annually (theoretically totaling 45,000 over the three-year life of the textbook), it is quite common to run a P & L using the following: 1. potential first-year sales of 15,000; projected first-year sales of 13,500 (90% of 15,000); 2. potential second-year sales of 15,000; projected second-year sales of 6,750 (45% of 15,000); and 3. potential third-year sales of 15,000; projected second-year sales of 1,500 (10% of 15,000). 2 Book Industry Study Group, Inc. Book Industry Trends 2003 (New York: Book Industry Study Group, Inc. 2003), p. 32.

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Textbook marketers assume that in the first year, 10% of the potential market (i.e., students) will not purchase the book. Some students will not buy the book and hope to pass the course; a group of students (perhaps 3 or 4) will buy and share 1 copy of the book or make copies of the chapters and share the copies. Textbook ex­ ecutives also assume that the used textbook market for this book will materialize immediately after the first semester the book is introduced into the market. In some instances, used books are available in the first semester the book is available be­ cause some professors sell the copies they received from a sales rep prior to the offi­ cial publication date of the text. So the potential market of 45,000 units over a 3-year period of time is in reality an actual market of 21,750 units. What is the advantage of buying a used textbook? In 2004, a new copy of Kotler's Marketing Management has a suggested retail price of $105.00, a steep price for many college students. Used copies are available anywhere from $60.00 to $82.00 at college bookstores or from on-line book-selling sites. This used price compels some students to purchase the used book and save between $23.00 and $45.00, sizable sums especially if this student has to buy 5 textbooks in a single semester. At the end of each semester in the first year, a large number of students will sell the Kotler text back to the college bookstore, a firm visiting the college, or a large commercial bookstore specializing in textbooks. The student might be paid $20.00-$30.00 for this textbook. If the college bookstore purchases the book, it could be resold to another student at that college; perhaps one of the national firms specializing in the used textbook market will purchase it from the book store, inven­ tory and warehouse it, and then sell it to a college looking for used copies of that textbook. Eventually, this used book appears somewhere in the distribution channel, most often at the college bookstore for a vastly reduced price. Students are happy be­ cause they saved money; the college bookstore also profits because used books sat­ isfy the wants and needs of the customer and generated a higher profit margin than new textbooks. According to data released by the National Association of College Stores (NACS; the college bookstore association), the average profit margin on a new textbook is 25%; the average profit margin for a used textbook is 33%. Every­ one is satisfied and happy. Everyone, that is, except the publisher, the sales rep, and the author because they receive nothing in these resale transactions. The sale of used texts cuts deeply into unit and dollar sales for the publisher (as they know unit sales will decline, they are compelled to absorb their extensive and expensive developmental-productions costs upfront in the first year), royalties to the author, and sales commissions to the rep. By the start of the third year, new sales of this textbook are at best marginal, and everyone on the publisher side is looking forward to a new edition from the author, which triggers the repetition of this chain of events. Ironically, a student who purchases this text in the second year is rarely able to sell the book back to the college bookstore because the supply of these books now exceeds the demand, and a new edition will be on the market within a year. Used textbook companies monitor forthcoming book lists to ascertain when a new edi­

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tion will be released. This is one of the few instances where economic laws (in this case the law of supply and demand) actually work. In spite of the jeremiads emanating from textbook publishing firms, it appears unlikely that publishers can make any inroads into the used text system unless a new, revised text were issued annually. Some textbook marketers developed elabo­ rate scenarios to issue new editions annually; still others posited that print-ondemand technologies could cut into the used textbook market as the book could be easily updated. So far, these strategies have failed. Printing and selling new text­ books annually was impractical, and authors balked at having to rewrite their books every year. Some textbook leaders investigated selling or distributing texts via elec­ tronic publishing platforms, but the computer-literate student market was not yet ready to read long texts on a computer screen. Of course, many publishers worried privately that electronic copies could suffer the same fate as recorded music when "Napsterization" (i.e., file sharing) undermined sales and profits. In addition, pho­ tocopies and the shared use of texts would not disappear, and student indifference toward purchasing books would almost certainly undermine even sophisticated strategic plans directed toward this phenomenon. Students are pretty smart; sooner or later, they will develop a way to beat the system. The Elhi Sales Representative Elementary and secondary school (Elhi) textbook reps confront other challenges, including local boards (comprised of the principal and a few teachers or, quite of­ ten, members of the board of education) that select texts. In some instances, state boards review and recommend textbooks. Approximately 21 states follow the state adoption process (including Alabama, Florida, Texas, California, North Carolina, and Indiana); all of the local school boards in that state must select titles only from the approved list if they want to receive state aid to purchase textbooks and supple­ mental materials. Net publishers' revenues reached $4.1 billion in 2002. BISG estimates this total will reach $5.2 billion by 2007.3 The 21 adoption states account for slightly half of that total, so they are a formidable force in the Elhi adoption business, paced by the big three: California, Texas, and Florida. The developmental costs associated with launching a new Elhi series are quite high, running into the millions of dollars to put together a social studies textbook se­ ries, which generally includes the teacher's edition, the test booklet (often on a computer disk), overhead transparencies or Power Point materials, and other re­ lated support services. All book reps wander the landscape making contacts at annual national associa­ tion meetings, regional meetings, and in colleges and schools. It is an exceptionally difficult job with some sizable rewards for those who succeed. For those who fail, for publishers who sank millions into developing a series that is not selected as an 3Ibid., p. 32.

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approved series in California, Texas, and Florida, the outcome is at best unpleasant: red ink and books that have to be peddled in the nonadoption states, (often called open adoption states) who will question why none of the big three adopted them. WHOLESALE OPERATIONS

The term wholesale refers specifically to the channel of distribution made up of re­ gional or local companies (i.e., merchant wholesalers, brokers and agents, manu­ facturers' and retailers' branches and offices, and miscellaneous wholesalers) who sell to other businesses rather than directly to the consumer. Although some of these functions appear to be similar to tasks performed by jobbers, in book publish­ ing wholesalers generally distribute other products, including newspapers, periodi­ cals, and so on. Wholesale sales operations are an important linchpin in the entire marketing strategy of book firms. The vice president of wholesale operations deals with a large number of essentially small firms called independent distributors (I.D.s) servicing literally tens of thousands of retail establishments. This type of opera­ tion requires a staff able to respond quickly to new retail marketing trends and es­ tablish and maintain good working relations with a diverse number of small entrepreneurs. Many of the wholesalers have developed rather large distribution-warehousing operations, especially those servicing major urban and/or sub­ urban regions (i.e., New York City and northern New Jersey, Chicago, Los Angeles, etc.). The organizational chart in Fig. 7.3 illustrates how wholesaling is handled by book publishers. This distribution process emerged initially because many manufacturing com­ panies lacked the physical merchandising network, warehousing, distribution, transportation, and general risk-bearing obligations necessary to penetrate and ser­ vice the tens of thousands of retail establishments interested in selling specific products. Wholesalers developed intricate contacts with small retail establishments and the ability and resources to handle this complex but lucrative task. In the book industry, wholesalers operate as "rack jobbers," literally distributing books by inserting them into bookracks, onto shelves, or into display cases or stands. The fight for rack space between publishers can become fierce because a prominent position on a rack can help spark sales.

FIG. 7.3

Organizational chart of wholesale sales.

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Wholesalers buy books at a steep discount, distribute them, undertake invento­ ries, refill the racks when necessary, reorder popular titles, and withdraw from cir­ culation books that fail to find a niche (books that do not sell can be removed from this channel rather quickly, often within 2 to 4 weeks). In essence they deliver, shelve, monitor, finance the inventory, and service their customers, the storeowners. They do not get involved in promotions or advertising because this is the job of the publisher. Customarily, they handle high-volume sales outlets at airports, bus and train terminals, and subway stations. In addition they supply books to small, independent, and often obscure newsstands, grocery stores, drugstores, and convenience stores. This is an exceptionally large market, and the wholesaler division generates a sizable number of unit and dollar sales for book publishers, as long as publishers continue to provide the type of titles the public wants. This is a supply-and-demand operation sensitive to customers' needs and interests, and many sophisticated wholesalers use handheld computer to monitor inventories (and in essence sales), thereby enabling them to oversee their stock and keep pace with new trends. The modern book publisher cannot afford to have his or her titles or backlist dropped by a major wholesaler because of lackluster sales or strained business relations. JOBBERS

The book publisher's jobber unit is also a highly significant component of the mar­ keting strategy. They service large national and regional book distributors who stock and maintain warehouses filled with books (some companies have invento­ ries that exceed 200,000 titles and 1,000,000 copies). The organizational chart in Fig. 7.4 (which lists the representative types of distributors) outlines how the jobber function is handled within the typical large book house. Many distributors sell books directly to libraries. They provide generous dis­ counts, critically important collection development advice and services, and one consolidated bill to the library covering all of its services, an especially attractive service for hard-pressed librarians working with slim staffs. In addition, they pro-

FIG. 7.4

Organizational chart of jobbers.

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vide independent bookstores, some of the smaller to medium-size chains, other re­ tail stores, and Internet bookselling sites with frontlist and backlist titles. Successful distributors created fast, efficient, cost-effective delivery services (us­ ing their own fleet or land or air package services); they can provide a needed title within 1 to 2 days. Some firms promise same-day delivery. Book publishers, often plagued with ineffectual warehousing and distribution systems, in spite of invest­ ing countless millions of dollars in computer systems, offer better discounts than jobbers; but they can take up to 7 to 10 days to deliver the same title. Some publish­ ers established dollar minimums for orders, forcing many stores to consolidate or­ ders or use the services of jobbers. The laws of supply and demand indicate that distributors will continue to exist and profit handsomely from some publishers' inability to improve their delivery services and rigid ordering procedures. Price clubs emerged as a powerful force in the U.S. book industry in the earlyto-mid 1990s. These clubs generally charge members an annual fee, which allows members to purchase items at rock-bottom prices. Although their inventories are substantial, they generally do not offer the enormous variety of a giant supermarket or a home improvement center. They follow the same strategy regarding books. A limited number of titles are of­ fered for sale, but what they have are delivered in the hundreds (if not the thousands) on skids. Titles are stacked on tables, the floor, or, occasionally, on delivery skids. Purchased at a steep discount from the publisher, books are offered at tremendously reduced prices, often only pennies above their wholesale cost. This retailing strat­ egy seems to work because the book is positioned as a commodity, along with bulk purchases of peanut butter, cereals, and automobile oil. Some independent book­ store owners can purchase books at a price club cheaper than they can get them from the publisher or distributor (a fact that became rather public in June 2003 when cer­ tain independents, unable to obtain copies of the fifth Harry Potter book, shopped at price clubs). These clubs offer reading for the millions, and they sell tremendous numbers of units annually. However, the titles they stock are almost always in the bestseller or blockbuster categories, along with cook books, children's books, map books, and inexpensive reference books. In the late 1990s, many of the major children's toy store chains opened "book centers." These stores provide effective, convenient one-stop shopping for people looking for toys, baby supplies, swing sets, and other products. Their book opera­ tions proved to be immensely successful, so much so that many independent book­ stores (and even some of the national book superstores) worried about sales siphoned off by the toy stores. As retailing continues to change dramatically in this nation, as new sources of book outlets open, it is easy to speculate that the bookselling "pie" is getting bigger with a sharp increase in retail outlets selling books, convincing more people to read. It is also easy to imagine that independents (and some chains) will come under tre­ mendous economic pressure, compelling many of them to discount, broaden their inventories (which is usually not easy to do in a small store), or confront what some industry experts see is the inevitable, slow death of independent bookstore opera­ tions in this nation.

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OTHER SALES OPERATIONS

Book companies also operate a variety of other units involved in sales and market­ ing. This is the one area where unique business patterns determine a specific orga­ nizational structure. Fig. 7.5 is a composite illustration outlining these functions in a typically large house. "E & L" (the educational, library, and institutional segment of the sales effort) services schools (massive consumers of books: $4.6 billion in 2002; 17.57% of all sales), libraries and institutions (collectively they purchase approximately 8.69% of all books in 2002; $2.3 billion), and "other" institutions.4 This operating unit works under rather rigid constraints because many school districts are slow to pay, select books from approved lists, and often are subject to local political pressure re­ garding sensitive issues. In addition, competition is keen in this niche, and it can take a long period of time before a new text or a series is accepted or adopted. Special sales handles bulk sales for a variety of customers, including mail-order sales (e.g., to a catalog company); books used for in-house or proprietary manage­ ment training programs; special sales (i.e., to gift, gourmet, or sporting goods

FIG. 7.5 Organizational chart of "other" sales.

4Ibid.,pp. 32,212.

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stores); premium sales to organizations (e.g., a biography or the autobiography of a hotel tycoon might be purchased by the hotel chain and given away free to individu­ als who stay in these hotels, placed in every nightstand in every hotel room in the chain, etc.); or professional trade associations (a title on printing might be pur­ chased at a steep discount and then resold by a national graphic arts association to its members, etc.). Customer service operations handle inbound and outbound telemarketing func­ tions. Most of the large publishers maintain "800" lines, fax, and e-mail addresses for this purpose. At the larger houses and at many of the small to medium firms, it is not cost-efficient to have a sales rep call on or service small, independent book­ stores ordering books under a specified dollar amount. These accounts are asked to rely on an "800" line, fax, and e-mail to place their orders directly with an inbound telemarketer. Other firms draw on outbound telemarketers to replace field reps. These salespeo­ ple have their own bookstore accounts (often in the 250–350 range), providing a per­ sonal touch when an order is placed, negating the need for sales reps. These telephone reps send out galleys, ARCs, and newsletters. They often attend regional bookseller association meetings, and some large trade houses use this function to train individu­ als who will be transferred into other sales positions. This highly efficient, profitable operation provides a valuable service and turns a profit for the publisher. Bookstores equipped with electronic data interchange (EDI) equipment can or­ der titles electronically, an innovation that also saves the publisher money. One of the more successful online customer self-service systems is "Pub Easy." By 2003, Pub Easy had over 10,000 firms participating (it is free for booksellers). Firms can place orders, check prices, and determine the availability of titles, improving ser­ vice while removing inefficiencies in the supply chain. Another important component of the "other" sales operation is foreign sales. In 1996, exports stood at $1.45 billion and represented 7.20% of all net publishers' revenues. By 2002, the export total grew 24.14% from 1996 to $1.8 billion (but dropping to 6.9% of net publishers' revenues). The BISG projects export tallies to reach the $2.2 billion plateau in 2007 (+20.96% since 2001, inching up slightly to 7.06% of all revenues).5 Books are a positive balance of trade product. More books are exported than for­ eign titles are imported into this nation, thereby helping the sagging balance of trade. OTHER MARKETING SERVICES: BOOK SHOWS

All of the major book publishers operate corporate marketing and promotion de­ partments servicing a variety of needs. Their business is to create "buzz" for a book, not an easy task in any house. The marketing department generally handles all as­ pects of the industry's annual Promethean (and often ostentatious) "Book Expo America" as well as many regional trade shows. 5

lbid., p. 212.

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Book Expo America Formerly known as the ABA show (American Booksellers Association; the ABA ran this operation for decades), it is now called Book Expo America (or BEA). In the United States book community, this event has a mythic reputation: over 300,000 square feet of exhibits; 2,000 or more exhibitors; sidelines; multimedia (music, videos, DVDs, etc.); an extensive educational program; a rights center ex­ clusively focusing on the business of rights; and numerous special events. Publishers vie for the biggest and best booth in prime locations, sponsor elabo­ rate parties (in the late 1990s, costs for these one-night extravaganzas exceeded $400,000, although they were toned down somewhat by 2004), premium gifts (the ubiquitous canvas tote bags), literally stacks of free books (in 2004 most book pub­ lishers refused to allow bookstore personnel to load up shopping carts of free books at BEA), and other educational and social events highlight BEA. Although New York City is the logical place for this event, BEA eschewed this location for over 10 years. Finally realizing their error, BEA rotates between New York City, Los An­ geles, and Chicago between 2004 and 2010. Traditionally, the large publishers brought hundreds of editors, sales personnel, marketers, and promotion people to BEA; starting in the late 1990s, many firms cut back on their entourages to trim costs and, in a few instances, to deflect criticism about their ostentatious spending at the BEA. A small number of large consumer publishers do not have any presence at BEA. The overt purpose of BEA is to reach bookstore personnel who are there ostensi­ bly to look over the next season's list of titles. Is it worth the time and money to mount these lavish booths? BEA is the largest, most important book show in the United States; to some individuals it surpasses the Frankfurt Book Fair. Regional Shows In addition, regional booksellers' meetings are held throughout the United States, and they are planned and staffed by the marketing department. In many ways these meet­ ings tend to be more useful than BEA. They are smaller in size and scope, allowing sales reps more time to discuss rationally the merits of a new title with bookstore rep­ resentatives who want to talk about and buy books. These shows also allow marketers an opportunity to ferret out data on the state of business conditions in a specific re­ gion, to catch up on store openings and closings, and to gauge the pulse of bookstore owners about new trends. These shows have less glitz and far more substance. Usually held in the Fall and on weekends, the more prominent ones include the Mid-South Booksellers Association Trade Show, the Upper Midwest Booksellers Association Trade Show, the Pacific Northwest Booksellers Association Trade Shows, the Southeastern Booksellers Association Trade Show, the Mountains and Plains Booksellers Association Trade Show, the Northern California Booksellers Association Trade Show, the New England Booksellers Association Trade Show, and the New York/New Jersey Booksellers Association Trade Show.

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One of the best regional shows is the annual Upper Midwest Booksellers Associ­ ation Trade Show (UMBA). UMBA's focused program addresses the immediate concerns of independent booksellers in the upper Midwest region. Talks generally focus on "Your Store's Financial Health," "Promoting Children's Books in Your Community," "Taking Charge of Change in Your Bookstore," "Solving Customers' Nightmares' and Soothing Nightmare Customers," and "How to Know Your Cus­ tomers Better and Persuade Them to Buy More Books from You." A children's book and author breakfast always occurs, and prominent authors attend the Book and Author Dinner to speak and sign copies of their books. Bookstore tours are ar­ ranged (often sponsored by a publisher, perhaps Random House), and a large book exhibition is mounted (again with authors signing books for booksellers). The fee to attend is reasonable for UMBA members, talk centers on books, and sales are made. This forum promotes books and creates buzz for forthcoming titles, a promotion manager's dream. Other Marketing Opportunities and Projects During the span of a year, marketing will also handle special book projects. These include "Banned Book Week" and "New York Is Book Country" in September, "National Book Week" in January, "Black History Month" in February, and "Women's History Month" in March. These special "months" allow a publisher to encourage people to read books about a specific topic and, hopefully, to find a mar­ ket for backlist titles. Some industry critics insist that these events are not publi­ cized enough by publishers. Marketing departments also handle liaison efforts with literacy organizations (e.g., Reading is Fundamental or the American Library Association) or other indus­ try associations. These activities do not generate sales revenues, but they are an in­ valuable function that must be maintained. Other promotions include campaigns with corporate sponsors ("Buy a package of 'X' and receive a $4.00 rebate off of 'Y' book"). Not enough of these promotions have been undertaken to ascertain their effectiveness in selling books, although they generally tend to generate attention in the popular and trade press. THE PROMOTION DEPARTMENT Although the promotion department handles high profile events, the scope of its activi­ ties is rarely known or understood outside book houses. Their goal is simple: create buzz (called the information cascade by economists) for an author's new book. Sending an author out on the road to sign books and talk on radio and television shows is costly and time consuming, yet everyone in the industry recognizes the overarching importance of these endeavors. It is not, clearly, a vacation for the author. The Author Tour: Readings and Signings

This department arranges all aspects of an author's tour. Although the author is not paid to go on tour, a fact many authors constantly bemoan, all of his or her expenses

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(airfare, hotel, food, transportation, etc.) are arranged for and paid by the company. The purpose is to have the author meet and talk with consumers, generating favor­ able publicity for the author and his or her book, and it works. For example, Janet Evanovich went on the road in July 2003 to publicize her lat­ est novel To The Nines. She visited Australia, New Zealand, the United Kingdom, and Commonwealth territories. She returned to the United States for a major tour, with stops in Virginia, New Jersey, New York City, Indiana, Illinois, Minnesota, Texas, California, and New Hampshire. She has ground rules for book signings. Evanovich will sign all books bought at the signing; all hardcover books; and one paperback from home. She will personal­ ize a book for special occasions (birthdays, anniversaries, graduations, etc.). She urges everyone to bring a camera and take pictures; and "Remember, you must have fun." Evanovich has an immense following of readers, and, aside from signings, she also did some readings from her new book in New York City and in Minnesota. The local sales rep made sure all of the needed preparations were made to insure a pleasant experience for the author, the bookstore personnel, and those attending the reading or signing. One significant task is to make sure enough copies of the author's book are available in every store the author visits. This is unquestionably a once-in-a lifetime opportunity for small, independent bookstores and their patrons, and it sells books. The Barnes & Noble and Borders superstores emerged as prime exponents of this type of activity. All of their superstores sponsor events designed to bring people into the store: cafe music sessions (e.g., contemporary folk rock, new age and clas­ sical guitar, good old tunes, etc.); featured events ("Sign up for your local library card"); art exhibits; sessions about securities and investments; an open mike poetry and prose night ("Read five minutes of your original works or those of a favorite au­ thor"); how to write and produce your own newsletter; singles events (sessions on understanding your motivations and aspirations; how to attract anyone, anytime, anyplace; the bimonthly singles game night); book groups; story times and special events designed for children (international Cinderella stories, books in both Eng­ lish and Spanish, back-to-school stories from around the world, a special ballet class, and stories from the Pacific Rim and Native Americans); join a new novelwriting group; and, of course, numerous author signings. The Author Tour: Radio and Television In addition, the promotion department arranges for the author's radio and television interviews. While radio is still influential, television has the power to make an au­ thor almost overnight. So this type of author's tour is a tested way to generate sub­ stantial buzz about a book. A promotion director constructs a highly structured tour (a prominent massmarket fiction author might cover 8 cities in about 10 days) to minimize problems and maximize the author's exposure to the media. In addition, great care is also taken to "manage" the tour. The goal is to get the author on the best radio or televi­ sion shows with responsive hosts, exposing the author to potential readers in key

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geographical regions of this nation. If Murphy were correct, "If it can go wrong it will," a promotion manager in New York City can expect to hear from the author about uneven hotel accommodations, late flights to distant cities, and enchanted ra­ dio and television personalities eager to book her the next time she writes a new book. Hope springs eternal. The following is a typical memo from the promotion department outlining the start of an eight-city tour: 1. August 30: • Leave JFK airport in New York City on the 5:45 p.m. flight #213 Ameri­ can Airlines. • Arrive in Pittsburgh at 7:09 p.m. • Hotel reservations at the William Penn Hotel (530 William Penn Way), hotel confirmation #147-895-3A. • Local sales rep is Monica Durso (Cell telephone number: 412-555-7100). 2. August 31: • 8:30 a.m. Monica meets you in the lobby of the William Penn Hotel and pays the bill; take your suitcases with you since you will not return to the hotel. • Take cab; arrive at 8:45 a.m. at radio station KDKA-AM (One Gateway Center; the number one radio station in Pittsburgh since November 1920); 9:00–10:00 a.m.: live interview on the "Mike Pintek Show;" radio contact is Dan Hurwitz (412-555-2300, ext. 11); Pintek loves Gothic novels, west­ erns, and anything about ethnic minorities; Pintek will read your book and ask leading question about plots and character development; but he will be very supportive and not press you. • Take cab to television station WPXI-TV (11 Television Hill) for a taped interview (11:00-11:30 a.m.) for "Talking Pittsburgh" with Ralph Martino; TV contact is May Marshall (412-555-1189, ext. 27); Martino relies heavily on "notes" about books; they are prepared by his assistant; he rarely reads an entire book before the interview; he will read through the notes and a list of questions while you are talking; do not be distracted by this. • Take cab at 11:45 to radio station WLTJ-FM (7 Parkway Center, room #789) for a taped interview for "Weekwatch" with Laura Forbes; starts at Noon; 60 minutes; radio contact is Rich Lee (412-555-9290, ext. 2); Forbes is an excellent interviewer; she reads books, prepares her own notes and questions; and is able to probe deeply into the heart of a book; she tends to talk a bit too much, often wandering off; Forbes is very influ­ ential in the Pittsburgh literary community; do not interrupt her; if she likes your book, she will praise it, and this generates sales. (continued,

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• Take cab at 1:15 p.m. to radio station WDUQ-FM (corner of Forbes and Park) for a taped 30-minute interview for "Between the Lines" with Harry Bennack; radio station contact is Kevin Murphy (412-555-6030, ext. 19); Bennack used to write book reviews for one of the local Pittsburgh news­ papers; has an advanced degree in American literature; very interested in poetry; Bennack will let you discuss key elements of your novel; but be prepared for detailed, probing questions; Bennack and Forbes are the two key people you need to impress. • Lunch with Monica Durso between 2:15–3:30 p.m. • Take cab at 3:45 to airport; American Airline flight #518 departs at 6:05 p.m.; arrives in Cleveland at 6:45 p.m. • Take cab to Cleveland Stouffer Tower Plaza Hotel (24 Public Square; 216-555-5600; hotel reservation # 9950-214-51). Local sales rep is Ann Townsend (cell phone: 216-555-9585). It starts all over in Cleveland, followed by Detroit, Chicago, etc. Book Reviews The promotion manager also sends a galley or an advanced reading copy (ARC) and a carefully crafted letter to reviewers at the major book review outlets in the United States. These powerful publications, which can make or break a book, in­ clude The New York Times Book Review, Publishers Weekly, The New York Re­ view of Books, The New Yorker, Time, Business Week, Newsweek, etc. Specialized publications are also utilized: scholarly journals (The Journal of Me­ dia Economics); journals of opinion (Foreign Affairs, The Nation, The New Re­ public, and The National Review); and major newspapers (especially in New York, San Francisco, Chicago, Boston, Miami, etc.). Whereas most publications review books when they are first published (for ex­ ample, The New York Times Book Review), Publishers Weekly does only prepubli­ cation reviews (i.e., they appear about 2 to 3 months before the official publication date), which makes these reviews rather influential to booksellers, librarians, and distributors eager to find out what books will be in demand in the coming months. Getting reviewed is an arduous task. Title output is so expansive that only a small portion of all new titles will ever be reviewed; PW reviews over 5,000 titles annually; The New York Times reviews one book each day (from Monday through Saturday; only 313 annually) plus a substantial number of reviews in the Sunday Times Book Review. Compounding the problem is the dramatic cutbacks in book review pages at some papers and the cancellation of book reviews at other publi­ cations. Failure to get reviewed can easily doom a book. Many of these publications create and publicize "bestseller lists," and the most important one is The New York Times Book Review bestseller lists; other publica­

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tions with significant bestseller lists include Publishers Weekly, The Wall Street Journal, USA Today, and Business Week. How do they determine what books are selling enough copies to make these lists? No single methodology is employed by these publications, so making com­ parisons between the number 3-bestselling hardbound fiction books on various lists is completely a waste of time. The New York Times Book Review's bestseller lists use the following methodology: Rankings reflect sales, for the week ended [previous week], at almost 4,000 bookstores plus wholesalers serving 60,000 other retailers (gift shops, department stores, newsstands, supermarkets), statistically weighted to represent all such out­ lets nationwide. An asterisk indicates that a book's sales are barely distinguishable from those of the book above. A dagger indicates that some bookstores report re­ ceiving bulk orders.6 The Wall Street Journal's approach is somewhat different: The Wall Street Journal's [bestseller] list reflects nationwide sales of hardcover books during the week ended last Saturday at more than 2,500 Barnes & Noble, B. Dalton, Bookland, Books-A-Million, Books & Co., Bookstar, Bookstop, Borders, Brentano's, Coles, Coopersmith, Doubleday, Scribner's, and Waldenbooks stores, as well as sales from online retailers Amazon.com and barnesandnoble.com. A sales index 100 is equivalent to the median number of copies of the No. 1 fiction bestsell­ ing titles sold each week during [the previous year]. The business sales index is adjusted to reflect median sales of [previous year's] No. 1 fiction bestsellers, calculated using sales only from these booksellers (Barnes & Noble, Books-A-Million, Amazon.com and barnesandnoble.com) that contribute to the business bestseller list.7 Business Week's approach is a bit less convoluted: Business Week's Best-Seller List is based on a survey of chain and Independent book­ sellers that carry a broad selection of books on economics, management, sales and marketing, small business, investing, personal finance, and careers. Well over 1,000 retail outlets nationwide are represented. Current rankings are based on a weighted analysis of unit sales in [month].8 Can bestseller lists be manipulated, especially by bulk sales? This question sur­ faced in 1995 and again in 2001-2002. Apparently, bulk sales in 1995 perpetrated by several authors pushed their titles onto a few bestseller lists, including The New York Times. The goals were to stimulate sales and to create reputations for the auThe New York Times Book Review, 8 February 2004, p. 26; also see Lynette Felber, "The Book Re­ view: Scholarly and Editorial Responsibility," The Journal of Scholarly Publishing 33, 3(April 2002): pp. 166–172; Gerald Howard, 'The Cultural Ecology of Book Reviewing," Media Studies Journal 6(Summer 1992): pp. 90–110. 7 The Wall Street Journal, 6 February 2004, p. B8. 8Business Week, 9 February 2004, p. 26.

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thors, allowing them to charge higher fees for their consulting work. Similar allega­ tions appeared in 2001 and 2002. All of the reputable publications maintaining bestseller lists take extraordinary measures to insure fair and accurate counting of unit sales. It appears that a few peo­ ple devised strategies to beat the system in a few, and only a few, instances. Overall, the validity of the major bestseller lists has never been questioned; and they are an invaluable source of information about sales. CASE STUDY: THE MARKETING OF AN UNKNOWN AUTHOR

For most of his life, John Grisham was an obscure attorney, a former state legislator in Mississippi, and a youth baseball coach. How did he become the darling of the book world with a series of immensely popular novels dealing with ordinary people confronting extraordinary events (in an "Alfred Hitchcockian" manner)? It did not just happen; it was planned. In February 1991, Doubleday (then part of Bantam Doubleday Dell and now part of Random House) released hardcover copies of The Firm. The Pelican Brief appeared in February 1992; The Client followed one year later. Dell later issued these books in paperback in 1992 (The Firm in February and A Time to Kill in July) and 1993 (The Pelican Brief in February). From the start, Doubleday's strategy was to create a strong market demand for what was then an unknown author. They utilized the "hand selling" technique in prominent independent bookstores (sometimes referred to as the "major national influential independents" because of their influence and visibility). "Hand selling" generally does not work in chains and superstores. Doubleday's sales representatives read and enjoyed Grisham, and they person­ ally talked up the book's themes, plots, characters, and locales with independent bookstore sales personnel at the major stores (primarily in New York City, San Francisco, Chicago, Denver, Los Angeles, Boston, etc.). Bookstore personnel were provided with advance reading copies and reviews. Special attention was paid to each book's cover by Doubleday's production department, a fact that also seemed to please the booksellers. The goal was to get the word out from the sales force to bookstore clerks to potential buyers (who would become satisfied customers) and to their friends. This tactic worked, and a veritable groundswell of positive word-of-mouth emerged. As soon as the chains and superstores realized a hot new property was on the market, they ordered more copies and provided the book with prominent positions in their bookstores, that is, with the cover facing outward on book­ shelves, in the window displays, and on tables near the front door. Their efforts propelled Grisham's sales into the millions in hard and soft units, and his reputa­ tion skyrocketed. Grisham became known, and his books caught the attention of Hollywood pro­ ducers, who optioned the books for possible film use. The Firm, starring Tom Cruise, was a big success. This movie tie-in, with a new paperback book cover with

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Cruise on it, sold a significant number of copies. When The Pelican Brief and The Client were released (each film had major stars, Julia Roberts and Denzel Washing­ ton in the former and Susan Sarandon and Tommy Lee Jones in the latter), large posters in theater lobbies and advertisements in newspapers and magazines helped to push sales of these two titles into the millions. John Grisham became a "brand name," a lofty status reserved only for the popu­ lar pantheon of King, Steele, Clancy, Clark, and a few others. Yet the real impetus behind his rise was a committed force of sales reps who believed in Grisham as an author (they also liked his books). They "made" Grisham, a fact that he has not for­ gotten. How often does this happen? In reality, this is a rare occurrence. In spite of tacti­ cal campaigns, the support of field reps, and positive word of mouth, the vast major­ ity of new authors remain as unknown as Grisham was in December 1990. There are clear limits to the influence even the largest, most powerful publishing houses can exert on the public, issues clearly raised by De Vany and Walls and addressed in chapter 1. Book publishing is, at times, a bitter mystery. CRITICS OF THE BOOK MARKETING SYSTEM

Are current marketing systems undermining the book industry in this nation? Are flimsy, intellectually empty books being sold aggressively to consumers while de­ serving titles wither and ultimately die on the vine because they lack the glitz and buzz associated with bestsellers? Have books become commodities? Is the bestseller list a depressing collection of third-rate or fourth-rate products (many of which are not even "books"), while authors of serious literary fiction and nonfiction are unable to get their works published? Some critics contend that publishing has been taken over by nonbook people un­ interested (and in some instances downright hostile) to books, reading, or culture. In essence, "barbarians" with M.B.A.s pierced the sacred veil, breached the pro­ tected gates, and are now in the boardrooms controlling what we read and think. One such group is the "literary-industrial complex" school, represented by Ted Solotaroff, Thomas Whiteside, Jacob Weisberg, and Michael Norman. Ted Solotaroff carefully staked out his theses in "The Literary-Industrial Com­ plex," which appeared in The New Republic.9 He outlined his early years in book publishing, heavily seasoned with romanticism: "I came from the world of letters, a vague but real place that has given me my standards and shaped my skills." He wrote about the world of ideas, prized literary houses (Knopf, Scribner's, Harper Brothers, Farrar Straus, etc.), and the genteel, patrician atmosphere that seemed to surround the houses and all those who toiled in the vineyards. "The 'houses' were, like the homes of the gentry, distinctive, stable, guided by tradition or at least prece­ dent, inner-directed in their values."10 9

Ted Solotaroff, "The Literary-Industrial Complex," New Republic, 8 June 1987, p. 28. 10lbid., p. 28.

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This world was framed, according to Solotaroff, by the house's prized back­ lists (legacies supporting current endeavors), a commitment to literature, the known tradition and character of each major house, the behavior of the publishers-owners (very few were publicly held corporations), a firm emphasis on "good reading for the millions" (i.e., publishing serious highbrow works along side commercially appealing books), and the almost religious commitment to excel­ lence at mendicant wages. It was a quaint but secure world where Alfred Knopf once said, "he did not care to publish any author whom he would not want to invite to dinner."11 Conglomerates purchased book houses in the 1960s as if book publishing firms were the same as factories, restaurants, or military defense suppliers. These events shattered his sense of tradition and tranquility. Ted Solotaroff was appalled because "they worked like a pincer movement to narrow the scope and prospects of literary and intellectual publishing.... [Publishing] has largely sold out its cultural purpose to its commercial one, thereby losing the vision and the energy and the realism that guided and empowered publishers."12 To some, the end result was a disaster. In the 1970s and 1980s, the houses ac­ quired by outsiders (i.e., media companies, newspaper firms, electronics corpora­ tions, etc.) were managed by what Solotaroff termed "procurement executives" who "climbed the magic beanstalk of increased operating capital, shares of stock, and reassuring promises, only to end up in the land of the hungry giants."13 Solotaroff admitted that in the old days budgetary controls were almost non­ existent, costly returns existed, and cash flow was always a monumental prob­ lem. Yet he seemed to prefer these anemic conditions that threatened to under­ mine operations to what the conglomerates wrought, a "proliferation of cook­ books and dieting books; physical, mental, and spiritual self-help books; fad and celebrity books.... With few exceptions, the major houses today are virtu­ ally indistinguishable."14 All of this, according to Solotaroff, left a weakened and debilitated industry populated with "merchandising" executives selling products (i.e., books), follow­ ing strategic plans, utilizing the chains, and all the while sapping the blood and spirit out of the industry. "The conglomerateer has bred an atmosphere of fear, cynicism, rapaciousness, and ignorance that has been destructive to serious pub­ lishing.... Its cost can be reckoned in the number of sagacious and dedicated pub­ lishers, editors, and marketing executives who ... were driven out or demoralized or corrupted."15 Where have these "demoralized" publishers gone? According to Solotaroff, they escaped to small houses still clinging to standards and to university presses. "The literary and intellectual culture is finding in the university presses a home 11Ibid., p. 28 12Ibid., p. 33. 13Ibid., p. 34. 14Ibid., p. 38. 15Ibid., p. 45.

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away from home. The campus-based publishers have been widely occupying terri­ tory that the trade houses have retreated from."16 Thomas Whiteside, in The Blockbuster Complex: Conglomerates, Show Business, and Book Publishing, argued that book publishing, as late as the 1950s, was believed to offer its practitioners a rather select and gentlemanly way of life. It may not have been considered a particularly profitable business, or a notably efficient one, but it was a business in which publishers and editors could feel sustained not only by their love of books but also by their sense of pro­ fessional independence.17 Whiteside reviewed the impact of conglomerates on book publishing, which he insisted was distasteful and debilitating, triggering a feeling of uneasiness in the literary community. He railed against the rise of chain stores (a development that has been paralleled by a decline in prosperity, and even the numbers, of inde­ pendent booksellers), agents, the Hollywood mindset, the "unacceptable influ­ ence television talk shows have on the sale of books, and book tie-ins (the gruesome hype and publicity encircling books that become films or television shows)."18 All of these events, portrayed as mayhem and disarray by Whiteside, saw the rise of managerial and budgetary controls imposed on publishing by their new owners seeking to maximize the return on their investment while paring down steep debt. "One general effect of such changes has been to polarize the people in the business into groups that might be roughly characterized as the corporate en­ trepreneurs and the litterateurs."19 This new managerial elite sought to reach out into the heartland and sell more books to more people, and to draw on their reser­ voir of "modern merchandising, publicity, and multimedia market saturation."20 The litterateurs were frustrated because they were subjected to unreasonable "cost-accounting and cost-benefit calculations, on the one hand, and, on the other, to an ominous emphasis on editors' 'performance.'"21 This malaise prompted many editors to move from company to company to escape from the worst curse of all: the end of editing and the rise of acquiring editors who do not edit. These noneditors "devote far less time than ever before to the actual literary, or even the grammatical, details of their author's manuscript."22 Other concerns that bothered Whiteside in­ cluded the demise of the midlist book (i.e., serious fiction and nonfiction books with limited press runs and sales, often in the 5,000–15,000 range), the rise of "star" authors, stratospheric advances, the consolidation of book publishing into the "haves" (mainly the top 15 or so publishers) and the "have-nots" (everybody else), 16 Ibid., p. 45; for additional material on "The Literary Campus and the Person of Letters," see Ted Solotaroff, A Few Good Voices in My Head: Occasional Pieces on Writing, Editing, and Reading My Contemporaries (New York: Harper & Row, 1987), pp. 241-256. 17 Thomas Whiteside, The Blockbuster Complex: Conglomerates, Show Business, and Book Pub­ lishing (Middletown, CT: Wesleyan University Press, 1981), p. 1. 18 Ibid., p. 39. ]9 Ibid., p. 93. 20 Ibid., p. 93. 2l lbid., p. 93. 22 Ibid., p. 100.

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and the pervasive influence of "show business" ("this appetite for vulgarity which seems limitless.... And if you are not in show business, you are really offBroadway."23 Jacob Weisberg, in "Rough Trade," was also alarmed about the sad state of edit­ ing: "Most editors don't do much editing if they can help it."24 He posited that edi­ tors were frustrated because their endeavors were not properly rewarded, aside from "a heartfelt thanks from an author on his acknowledgments page."25 To rectify this inequality, line editors want to become acquiring editors because they have such nifty perks: lunch at the Four Seasons, $200,000 and up annual sala­ ries, and trips to the West Coast, London, Paris, and Frankfurt. In reality these ac­ quisition editors migrate from house to house, one step ahead of shoddy books with big advances and no editorial direction. Although serious fiction continues to be published, Weisberg insisted literature plays second fiddle to what he termed "schlock," a pattern found even at the most prestigious houses: Today even the serious books that Random House produces are, like those of its in­ terchangeable competitors, filled with ungainly and ungrammatical sentences, er­ rors of spelling, typography, and fact. They are badly organized, long winded, and repetitive to the point of unreadability. Like most books from the major publishing houses these days, they are edited haphazardly, if at all.26 The cause of this malaise is money and the rise of conglomerates in the book in­ dustry, according to Weisberg. The owners are more concerned, he alleges, with profit and loss statements than with literary merit. The end result is books "rushed to judgment" before they are ready, and Weisberg recounts a litany of prominent au­ thors and their books filled with gaffes. "Editors have largely abandoned the task of finding the slim book in the unwieldy manuscript, of discovering the sculpture in the raw stone,"27 Weisberg also castigates authors for allowing these practices to occur; he insists these writers are reluctant to discuss or criticize these instances for fear their careers will be undermined by editors or publishers seeking revenge. Another symptom is the insistence of many editors to mark manuscripts manu­ ally rather than using computers; this practice adds insurmountable delays and re­ flects the publishers' heartfelt belief that markets "for their products will always exist and see no reason to waste money on bettering them.... There's no Japanese competition to force American publishers to beef up their quality control."28 23Ibid., p. 198. 24Jacob Weisberg, "Rough Trade: The Sad Decline of American Publishing," The New Republic, 17 June 1991, p. 16. 25Ibid., p. 16. 26Ibid.,p. 17. 27 Ibid., p. 17. 28Ibid., p. 21; also see "Book Publishing: The Diseconomies of Scale," The Economist, 7 April 1990, p. 25; Mary Curtis, "Planning and Budgeting in Publishing: The Link with Marketing," Book Research Quarterly, 4(Summer 1988): pp. 3-9.

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Michael Norman tackled book marketing in a two-part article in The New York Times Book Review. "A Book in Search of a Buzz: The Marketing of a First Novel" and "Reader by Reader and Town by Town, A New Novelist Buildsa Following." Norman, clearly influenced by Whiteside's ideas, studied the marketing of a specific book, Mark Richard's first novel Fishboy. This work, as Norman described it, "is a story, a myth, really, about a young grotesque, looking for redemption, who goes to sea on a trawler crewed by misfits and murderers. The plot is oblique, the characters bizarre, the language so rich it is sometimes impenetrable. Such a book is a tough sell, and not just to a general readership."29 Clearly, anyone who knows anything about the book industry realized that Fishboy, an exceptionally complex experimental first novel, is difficult to read and difficult to sell to book buyers at the superstores and the independents. It falls squarely into the midlist category. Midlist books generate total sales in the range of 5,000 copies; tallies beyond 7,500 copies are a cause for jubilation. Norman described in detail the tireless efforts of Nan Talese (Richard's publisher who issued the novel under her imprint at Doubleday) and Marly Rusoff (Doubleday's vice president and associate publisher). Talese prodded Richard to submit his manuscript on time and provided him with sagacious editorial guidance. Rusoff con­ tacted book reviewers across the nation to make sure Fishboy was reviewed (no easy task in a market flooded with first fiction); she also worked the marketing channels to plan author tours and appearances on public radio. Talese and Rusoff devised strate­ gies to place this novel on the shelves of America's bookstores. The end result was a novel with three printings, an initial press run of 8,000 (high for a first novel), and two additional editions (each 3,000); there were 14,000 copies in print. Total sales hovered at 12,700 (for an exceptionally modest return rate of 1,300 copies; 9%). As Richard had a 3-book deal with Talese (in the "$120,000 range") and garnered positive reviews, his future as a novelist appeared bright. In fact, first novelists rarely achieve these successes, another fact industry experts clearly understand. Yet Norman was deeply concerned about the state of publishing. He castigated marketing because "sales people, of course, speak the language of commerce, not culture."30 Publishers were portrayed by Norman as bean counters and anti-intellectual "Babbitts." Norman insisted that whereas American publishers maintain they support liter­ ary fiction, their record suggests something else. "Today the big conglomerates that have spent the last thirty years buying up most of the country's major publishing houses want big books with big sales to justify their investments."31 If this were true, Fishboy would never have been published by publishing "con­ glomerate" Bantam Doubleday Dell (then owned by the international publisher Bertelsmann AG and in 2004 part of Random House); it never would have received 29 Michael Norman, "A Book in Search of a Buzz: The Marketing of a First Novel," The New York Times Book Review, 30 January 1994, p. 3. 30Ibid., p. 22. 31Ibid., p. 22.

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the attention of Talese and Rusoff; and it would not have received a sizable amount of corporate support and financing from Doubleday. Over $12,000 was spent publi­ cizing this book, in addition to Richard's advance. One could only wonder about Doubleday's other direct and indirect expenses (including the costs to print, ware­ house, and distribute the book; the expenses associated with Bantam's accounts billable and payable departments, sales rep commissions, etc.), items well known to industry insiders familiar with P & Ls. Unfortunately, Norman glossed over or failed to address these facts. Instead, he concentrated on Richard's efforts, as if he alone built his own following. Norman's final words expose his naivete about book publishing. "Is he [Richard] still as bold, as adventurous when turning out his sentences [of his second novel]? Or has a hard summer hustling his book persuaded him to stick his nose in the wind before he sits down to write?"32 If the cold conglomerates Norman castigated were as greedy and anti-intellectual as he insisted, Richard would not have a three-book deal, $120,000 in guaranteed money, and the opportunity to see his name in print; but he did. Either Norman failed to understand anything about publishing, the sales force (on this count he was inaccu­ rate, if not mean-spirited), and the intricate author–editor–publicist relationship, or else his use of the English language was dreadfully imprecise. Or perhaps he merely selected the wrong book to "prove" his theses. In any case, this article and his argu­ ments, although clearly stimulating, fall flat and do not mesh with the facts or reality. Houghton Mifflin published Leonard Shatzkin's In Cold Type: Overcoming the Book Crisis, an intelligent critique of the marketing and distribution of books in the United States. This book was so contentious it contained a disclaimer from the pub­ lisher, an exceptionally rare event in the world of publishing; even Mein Kampf (also issued by Houghton Mifflin) does not contain a disclaimer from the publisher. Shatzkin's candid observations and allegations clearly aroused significant attention within the book publishing industry. He was concerned about what he viewed as the useless flood of new titles each year that confused consumers. "No other consumer industry produces 20,000 dif­ ferent, relatively low-priced products each year, each with its own personality, re­ quiring individual recognition in the market."33 In the book industry, the retailer may buy some copies directly from the pub­ lisher and other copies of exactly the same title from a wholesaler. The publisher sells to the wholesaler and then competes with him (and, as we shall see, must com­ pete with him), offering favorable discounts to entice the bookseller's business.34 How does publishing survive with this archaic, redundant system? Shatzkin in­ sisted that the constant churning of books within the system provided the illusion that the system was indeed functioning in an efficient manner. In reality the opposite was the case, according to Shatzkin, because of its acceptance of what he viewed as "meMichael Norman, "Reader by Reader and Town by Town, A New Novelist Builds a Following," The New York Times Book Review, 6 February 1994, p. 30. "Leonard Shatzkin, In Cold Type: Overcoming the Book Crisis (Boston: Houghton Mifflin, 1982), p. 3. 34Ibid., p. 3.

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thodically created confusion. Publishers are so sensitive to the possibility of federal antitrust suits that they go to exaggerated lengths to avoid any possible accusation of collusion in setting retail prices or establishing discount schedules or conditions of sale.... The result is a nightmarish obstacle course for the retailer."35 So how does a title become known in this sea of confusion? Shatzkin posits that this abundance of books, with a remarkably short shelf life, undermines all attempts to advertise and publicize them, especially as there is no broad market or a "hard-core book buyer" in this nation. This frustrated Shatzkin, and he was essentially pessimis­ tic about prospects to reform a system with no drive shaft. Shatzkin also addressed the issue of the permanence of the book. He insisted that books would endure because they are a convenient way to read and learn and be entertained. "They are portable, easy to store, inviting to pick up for a moment or for hours.... Books are the most practical way for anyone to communicate with a small group."36 Shatzkin adopted the classical view of book publishing as a sacred calling. "The tiny book publishing industry is like a trust held by those who print and publish and sell books for those who love books.... So book publishing is more than a matter of making money. It has a very strong element of service."37 Shatzkin was deeply concerned that this trust has not always been handled in a prudent manner, a belief that alarmed him. As for the channels of distribution, Shatzkin was totally disenchanted and an­ noyed. In fact, he accused editors and publishers of failing themselves, authors, and the reading public. "Books still struggle under the burden of a costly and wasteful distribution system made even more costly and more wasteful by the heightened de­ mands made on it by the growth of publishing, the greater discrimination of a more affluent and better educated public, and by the growth in the number of eager and talented writers pleading to be published."38 The bottom line was disheartening. Consumers looking for specific titles cannot find them; so they exit from bookstores dissatisfied. Authors are unable to reach po­ tential readers; and the cost of new books is too expensive, even though publishers insist prices are too low. Is there any hope that book publishing will survive? Shatzkin is pessimistic, es­ pecially because of the growth of chains (fueled, he posits, because of the steep dis­ counts offered by publishers). "Publishers give the higher discounts, even though these cut their margins severely, because the chains seem to provide relief from the frustration of dealing with the inefficient, recalcitrant, incomprehensible distribu­ tion network of independent stores. And dealing with chains seems so much sim­ pler and less expensive."39 Andre Schiffrin, in The Business of Books: How International Conglomerates Took Over Publishing and Changed the Way We Read, echoed many of the ideas de­ veloped by Whiteside:

35Ibid., p. 4. 35IbuL, p. 5. 37Ibid., p. 6. 38IbuL, p. 7. 39Ibid., p. 7.

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Until quite recently, publishing houses were for the most part family owned and small, content with modest profits that came from a business that still saw itself as linked to intellectual and cultural life. In recent years [the 1990s], publishers have been put on a procrustean bed and made to fit into one of two patterns: as purveyors of entertain­ ment or of hard information ...40

To Schiffrin, entertainment prevailed at the expense of ideas, culture, and, ulti­ mately, democracy. "Caught up in this financial machinery, editors are perceptibly—and understandably—less willing to take a gamble on a challenging book or a new author."41 As for the impact book conglomerates had democracy, Schiffrin was rather pointed. "The resulting control on the spread of ideas is stricter than anyone would have thought possible in a free society."42 OBSERVATIONS Certain facts are known about the marketing function. Book houses spend an inor­ dinate amount of time and money marketing books to a variety of channels. Yet it appears that marketers know very little about book purchasing patterns; their ef­ forts are often haphazard and undercapitalized, far too many titles are issued each year (strangling the chance many good books have to become successful), and sales reps are asked to count the number of angels on the head of a pin while touting the latest experimental novel and romance novel, heady responsibilities for individuals working out of the trunk of a car. Although critics of the existing marketing system raised important issues, one must wonder about their highly romantic depiction of the "good old days" of book publishing. One should not forget that this industry, during the time period they found so endearing, was essentially a white male WASP province. African Ameri­ cans, Hispanic Americans, and Asian Americans were rarely found in the corridors of power or in editorial or sales meetings; and the serious literature Solotaroff and others lavishly praised concentrated primarily on their white male world, which was not filled with multicultural or feminist themes and issues. Perhaps the critics are right; perhaps their world was better, filled with individu­ als reading Camus, Proust, and Dickens; but perhaps their lost firmament was not so grand. In any case, their universe hardly reflected modern American society; and the idea that large corporations are suffocating democracy is, at best, difficult to ac­ cept since no one has yet provided empirical data to substantiate this allegation. The United States has 3.5 million books in print, and 150,000 new titles were released in 2003, hardly indicators that free speech, open discussions, and the marketplace of ideas were in peril. 40 Andre Schiffrin, The Business of Books: How International Conglomerates Took OverPublishing and Changed the Way We Read (London and New York: Verso, 2000), p. 7. 4l lbid., p. 107. 42 Ibid., p. 153; also see Jason Epstein, Book Business (New York: W. W. Norton, 2001), pp. xi, 1–4, 11-29.

CHAPTER EIGHT

Consumer Book Purchasing Trends Who buys books in the United States? What types of titles are selected? Where are these purchases made? Why was a specific book purchased? What foreign coun­ tries purchase American books? Has there been a substantive shift in export sales? What impact did the emergence and development of chain bookstores, book super­ stores, and on-line book selling sites have on retail sales? Did these shifts in book retailing increase the number of people reading books? INTRODUCTION Marketers in the United States developed exceptionally sophisticated technologi­ cal procedures to track consumer marketing trends.1 Computerized registers in su­ permarkets and retail stores capture data regarding unit and dollar sales (along with information related to the date and time of a purchase) for a wide variety of prod­ ucts, ranging from coffee to blue jeans.2 Inventory and ordering control systems 1George F. Lowenstein, "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes 3(March 1996): pp. 272-292. Also see Demetrios Vakratsas and Tim Ambler, "How Advertising Works: What Do We Really Know?" Journal of Marketing 61,1(1999): pp. 26–43; James R. Bettman, Mary Frances Luce, and John W. Payne. "Constructive Consumer Choice Processes," Journal of Consumer Research 25(December 1998): pp. 187–217; Rajiy Lal and J. Miguel Villas Boras, "Price Promotions and Trade Deals with Multi-product Retailers," Management Science 44(1998): pp. 935–949; Sang Yong Kim and Richard Staelin, "Manufacturer Allowances and Retail Pass-Through Rates in a Competitive Environment," Marketing Science 18(1999): pp. 59-76; Susan Foumier, "Consumers and Their Brands: Developing Relationship Theory in Consumer Research," Journal of Consumer Research 24(December 1997): pp. 343–373. 2 Margaret Campbell, "Perceptions of Price Unfairness: Antecedents and Consequences," Journal of Marketing Research 26(1999): pp. 187-199. Also see Drazen Prelac and Duncan Simester, "Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay," Mar­ keting Letters 72(February 2001): pp. 5-12; K. Lancaster, "The Economics of Product Variety: A Sur­ vey," Marketing Science 9( 1990): pp. 189–206; Ludger Linnemann, 'The Price Index Effect, Entry, and Endogenous Markups in a Macroeconomic Model of Monopolistic Competition,"Journal of Macroeco­ nomics 23, 3(Summer 2001): pp. 441–458; Martin A. Koschat and William P. Putsis, Jr., "Who Wants You When You're Old and Poor? Exploring the Economics of Media Pricing," (continued)

208

CONSUMER BOOK PURCHASING TRENDS

209

benefited from the utilization of these systems, as did programs generating discount coupons along with a sales receipt for customers.3 Many of these techniques were adopted by segments of the book-selling com­ munity. In the United States, independent bookstores have the best overview of who purchases what books and why; the chains and superstores amassed superb data­ bases on store and category sales; and on-line sites captured the imagination and discretionary dollars from consumers. Unfortunately, much of this information is not analyzed by publishers because they do not have access to these datasets (retailers generally shield their data and re­ fuse to release very much information about unit and dollars sales), compelling far too many book marketing executives to rely on anecdotal remembrances of suc­ cessful book campaigns and reports from sales reps and bookstore personnel for their information, hardly effective consumer marketing procedures. There are some notable exceptions. Many small press publishers and university presses developed close working re­ lationships with their readers and customers, providing editors with insight into what consumers want. A few trade houses launched "focus groups" among key in­ dependent bookstore personnel, who report weekly on business trends; at least one of the major book clubs also conducted focus group interviews among current and prospective members. Editors and publishers in highly specialized or well-defined niches, notably the scientific-technical-medical area (STM), textbooks, and ro­ mance novels, crafted exceptionally effective procedures to monitor and under­ stand the inevitable vagaries in the marketplace. For example, STM editors attend scholarly conferences, comb through scientific papers (including databases), and have a keen grasp of the market. Because academics write (and select) most text­ books, textbook editors have a discernible understanding of both the subject matter and the specific needs of instructors and students. Many romance authors stay in contact with their customers through fan clubs, newsletters, and appearances at bookstore and romance organizations. Concerned about the general lack of information, the Book Industry Study Group (BISG) launched a number of innovative research projects on consumer book purchasing patterns among adults in the United States. Other book categories Journal of Media Economics 13, 4(2000): pp. 215-232; Andre Gabor and C. W. J. Granger, "Price as an Indicator of Quality: Report on an Enquiry," Economica 33(February 1966): pp. 43-70; Klaus Wertenbroch and Bernd Skiera, "Measuring Consumers' Willingness to Pay at the Point of Purchase," Journal of Marketing Research XXXIX (May 2002): pp. 228–241; Bridget Kinsella with Joy Parisi and David Sidrane, "Tactics That Work: More and Meatier Than Ever, Panels Focus on How Booksellers Can Become Better at What They Do," Publishers Weekly, 20 June 1994, pp. 41–42. 3 Sanjar Dhar and Stephen J. Hoch, "Why Store Brand Penetration Varies by Retailer," Marketing Science 16, 3(1997): pp. 208–227. Also see Robert F. Hurley, "Putting People Back Into Organizational Learning," Journal of Business and Industrial Marketing 77,4(2002): pp. 270–281; Gerald J. Tellis and Fred S. Zufryden, "Tackling the Retailer Decision Maze: Which Brands to Discount, How Much, When, and Why?" Marketing Science 14(1995): pp. 271-299; Margaret Slade, "Optimal Pricing with Costly Adjustment: Evidence From Retail Grocery Prices," Review of Economic Studies 65(January 1998): pp. 87-107; Martin A. Lariviere and P. Padmanabhan, "Slotting Allowances and New Product Introduc­ tion," Marketing Science 16(1997): pp. 112–128.

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(textbooks, professional, etc.) were excluded. They hired the Ipsos-NPD (a market­ ing research company) to ascertain who, what, where, and why books were pur­ chased in the United States. Ipsos-NPD utilized a panel of approximately 12,000 households representative of the U.S. census population, consisting of both single member and family households; the years studied were 1997 through 2001.4 All geographical areas of the country, and most segments of the population (but clearly not all segments) are represented in proportion to their frequency in the overall pop­ ulation. Much of the material in this chapter is based on various reports published by BISG. BOOK PURCHASING TRENDS: ADULT TRADE BOOKS Selling Seasons

When do people purchase books? Has there been a shift in seasonal book pur­ chases? In many industries, the broadly defined Christmas season (specifically the last quarter of the year; October, November, and December) accounts for between one third and one half of all annual revenues. For a number of years, Christmas was the most important selling season (as evident in the data for 1997), accounting for about 28% of all sales. Starting in 1998, an important shift was discernable in the marketplace. Table 8.1 illustrates this. An upswing in sales in the Spring (April, May, and June) and the Summer (June, July, and August) months resulted in a par­ tial "flattening" of sales in 1998, 1999, and 2000. By 2001, sales in all four seasons were equal at the 25% mark. Is this good for the bookselling business? In all likelihood, it is. Some industries are plagued with dynamic downward shifts in sales and revenues in the first quarter, prompting them to conserve cash to get them through lean months. Now, with a bal­ anced selling season, publishers can feel confident releasing new titles in January or March; they avoid February because John Grisham traditionally releases his new novel in that month. Booksellers can now rely on a more balanced cash flow throughout the year. Book Sales by Format

Do consumers prefer the more durable (and more expensive) hardback version of a book versus the less durable (and inexpensive) paperback version of the same book? Consumer books are, by definition, items purchased with discretionary dollars (one really does not have to have the latest novel from Stephen King). Thus one might assume that economic forces compel the majority of consumers to pur­ chase book in the less expensive paperback format. Admittedly, books are almost always published first in hardcover; then, after about nine to twelve months, de­ 4 The Book Industry Study Group, Inc., 2007 Consumer Research Study on Book Purchasing (New York: The Book Industry Study Group, Inc., 2002), pp. 5-159. Also see Leonard A. Wood, "Demo­ graphics of Mass Market Consumers," Book Research Quarterly 3(Spring 1987): p. 31.

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TABLE 8.1 Seasonal Trends: 1997-2001 (Percentage of Total Annual Units) Winter

Spring

Summer

Fall

Year

(JFM)

(AMJ)

(JAS)

(OND)

1997 1998 1999 2000 2001

23% 26% 26% 25% 25%

24% 24% 24% 24% 25%

24% 23% 24% 24% 25%

28% 27% 26% 26% 25%

Source: 2001 Consumer Research Study of Book Purchasing (New York: Book Industry Study Group). All numbers were rounded off and may not add up to 100%.

pending on sales, a title might appear in paperback (a process knows as "window­ ing" to economists). The BISG data reveals clearly that consumer's prefer paperbacks to hardbacks by a 2-to-l ratio. However, between 1997 and 2001, there was a shift away from mass-market paperbacks; its market share fell from 35.3% to 34% even though books in this category are inexpensive (often with suggested retail prices between $4.99 and $6.99 and occasionally up to $8.99). Hardbound books, on the other hand, increased slightly from 31% in 1997 to 31.9% in 2001. Trade paperbacks inched upward. Table 8.2 outlines these trends. This modest increase in hardbound sales was due to a decline in average retail prices (see Table 8.5 below); and it is pos­ sible this trend is likely to continue through 2003 and possibly through 2004 be­ cause of the lingering effects of the recession of 2001-2002. Even though some industry consultants predicted a surge in the sale of electronic books (e-books), the much-touted e-book remained a dismal selling failure in the opening years of the 21st century, accounting for less than 1% of all sales. Audio books, although rather popular, also generated weak sales, barely in the 1% range. The preferred format in 2001 was the bound book (with a 99% market share). Table 8.3 outlines this trend. Retail Book Prices and Consumer Expenditures How expensive are books? How much will consumers pay for books? There are, unquestionably, price points for books, a fact book editors and marketers need to evaluate when they run a P & L on a book. More than half (55%) of all new books purchased at retail establishments in 2001 cost less than $15.00; and about 7% were at the +$25 mark. The actual break down of sales reveals consumer preferences for books with "reasonable" process: (1) slightly more than one fifth of all new books

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TABLE 8.2 Books by Classification: 1997–2001 (Percentage of Total Annual Units) Book classification Year

Hard cover

Trade paper

Mass market

1997 1998 1999

31.0% 31.2% 31.3% 32.0% 31.9%

33.7% 34.0% 34.2% 34.2% 34.1%

35.3% 34.8% 34.5% 33.8% 34.0%

2000 2001

Source: 2001 Consumer Research Study of Book Purchasing (New York: Book Industry Study Group). All numbers were rounded off and may not add up to 100%.

TABLE 8.3 Binding/Format Type: 2001 Type

% of Total units sold

ebook Audio Hardcover Mass Market Trade Paper