F O L K E T I B I L D / K U L T U R F R O N T 8-9/97
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On the Recent Massacres in the
US Publishing Industry
HarperCollins, a publishing giant, is nevertheless a small cog in Rupert Murdoch's vast News Corporation, whose revenues in 1995 were $9 billion from its newspapers, magazines, television, motion pictures and sheep farming. (Who says Murdoch, now a US citizen, has no sentimental attachment to his native Australia?)Why did HarperCollins get so bloody-minded? The mass execution was unprecedented, but only the naive, the ignorant and the wishful could be really surprised. As conglomerates with only a small interest in publishing take over the industry, the demand for profit increases. The new media conglomerates want their book publishing companies to match the profits in their other enterprises. Once content with an average 4 percent profit after taxes, the major publishers now must seek 12-15 percent, according to Andre Schiffrin. Schiffrin was the victim of an earlier massacre when the Newhouse family's Advance Publications bought the Random House group; he left Pantheon to form the not-for-profit New Press.Book publishing in the US is dominated by some half dozen conglomerates with yearly revenues in the billions. Publishing giant Random House, which earned $1.26 billion (estimated 1995 revenues throughout), is owned by the Newhouse family, whose Advance Publications earned $5.3 billion. The largest conglomerate is Bertelsmann AG ($14 billion, owning Bantam Doubleday Dell ($670 million). Viacom, in addition to owning Simon & Schuster ($832.7 million), owns Paramount Pictures and theme parks.Economies of scale give rise to insanities of scale. It is not surprising that, under such ownership, advances in the millions are paid to celebrity authors (a reported $6 million to Whoopi Goldberg or $3 million to Goldie Hawn) or that pre-publication advertising boasts of marketing campaigns costing hundreds of thousands of dollars. Naturally, the publishing arms of the media monopolies package books by their music, movie and TV stars, books that will be made into movies, and books that have merchandise tie-ins. "Star Wars" and "Star Trek" are not just titles of books and movies, they are trademarks for a vast array of merchandise licensed by the owners, who hold trademarks as well as copyrights.These are the people who decide what books get newsprint space and broadcast time, lovers of literature so long as it sells in the tens if not hundreds of thousands.As distribution and bookselling also become monopolized, there is a shakeout also among bookstores and distributors, with bookstores, distributors and wholesalers dying both quiet, unnoticed and also bloody screaming deaths. The front pages of the newspapers occasionally feature headlines about the Bookstore Wars between the chains and the independent booksellers. The two largest chains, Barnes and Noble and Borders, are opening superstores which stock up to 175,000 titles. They will open store within a block of a successful independent or within a block of a rival superstore. One street in Chicago has three superstores within three blocks, each trying to put the others out of business, while combined they already succeeded in closing down a respected independent store up the street. Some of the best known independent stores have gone out of business, unable to compete with the huge chain outlets down the street, which command up to 10 percent more in discounts from the publishers, discount their books, monopolize the readings by authors who are getting any decent publicity and offer chairs and coffee shops for browsers. As a result, independents have been losing market share (from 21.4 percent in 1994 to 19.5 percent in 1995), while chain stores increase theirs from 24.6 to 26.2 percent.These figures represent another potential stranglehold on publishing by a few corporations. The first signs came this last year, as new computer inventory technology made it possible for bookstores to return unsold books much sooner, even before paying the invoices. Returns, especially from the chains, reached staggering figures, pushing some publishers into crisis.HarperCollins was not alone in slashing their forthcoming titles after the returns started coming back. Many smaller publishers simply didn't have the money to pay their printers, as expected checks from the chains were cancelled out by unprecedented returns of up to 50 percent. Now, in response, some publishers are consulting the buyers at the large chains before deciding on press runs or even on contracts with authors.Wholesaling, also, is ruled by monopolies. The giants Ingram and Baker & Taylor have bought out and closed down competitors to dominate sales to public libraries and all but the larger bookstores. If a title isn't available from them, fewer and fewer stores will order them. As for the public libraries, most of them are contracting to Ingram and Baker & Taylor to process their books with library pockets and cataloging service. Hawaii's public library system, to the outrage of many library professionals, went so far as to hire Baker & Taylor to select their new books.All of this has tended to limit the diversity of writing available. But of course there are counteracting tendencies. As established and promising new writers are shunned or lowballed by the larger houses, independent publishers rush into the vacuum.Some even make a principle out of publishing at least some of their books with smaller independents, such as Noam Chomsky or black mystery writer Walter Mosely. Some are the larger or more interesting independents range from Verso and The New Press ($3.5 million each) to Beacon ($4.5 million), Grove/Atlantic Inc ($13.5), and Houghton Mifflin ($87.2 million).The university presses have also become major players. Not only are many of the more important and controversial books by scholars published by them, but, more and more, they are moving into trade publishing. They are supplementing their academic titles with serious non-fiction and seeking a broader readership with their fiction. At the same time, they are responding to the commercializing pressures of American culture as it affects the universities, where they are losing their subsidies and forced to compete with for-profit publishers.The larger independents operate much in the same way as the giants, though mid-sized firms such as the New Press, Beacon and Verso are also consistently an outlet for independent thinking.But there are not many such independents, not enough to meet the needs of either deserving but unpublished writers or readers impatient for new literary experience.In this context, smaller publishers become increasingly important to the flow of ideas. And there seem to be more independent publishers than ever before, as publishing technology becomes cheaper. Anyone with a computer, a few thousand dollars and space for a home office can now become a publisher. But the challenges of reaching the readers are not easily met. For example, few bookstores will deal with a small publisher directly. They are driven by their small profit margin (around 4 percent at best for the independents) to limit their accounts. They will buy only from large publishers or large wholesalers. They will not respond well to direct mail, which has always been the advertising medium of choice for the small publisher (and that is more expensive, with recent increases in paper and postage prices). Instead, bookstores rely on sales representatives to show them titles. But publishers must pay sales representatives a 10 percent commission on top of a 40 percent bookstore discount, and 5 percent on top of a 50 percent to 55 percent discount to wholesalers. This leaves the publisher with $4-$5 of a $10 book, out of which author royalties, production costs, marketing and overhead must be paid. Since small publishers typically can do only small press runs, survival is a mystery. Worse, it is a rare sales representative who will take on a publisher who produces fewer than a dozen new titles a year, and of course even then the small publisher is competing with books from larger publishers who can afford print advertising and author tours.As a result of the difficulty reaching booksellers, a new type of middleman has arisen, the "distributor," who offers the small publisher sales representatives, limited marketing, warehousing, fulfillment and collections. All the publisher must do it pay the distributor a commission on all sales to bookstores and libraries.The commissions charged range from 27 percent of the net receipts to 40 or 50 percent of list price (not to mention additonal costs of inclusion in the catalog or booths at book fairs which can cost over $1000).If a book costs $10, and bookstores or wholesalers take 40-50 percent, and the publisher receives only 27 percent of what's left.... Survival is still a mystery.What are the strategies of smaller independent publishers? One popular strategy is suicide. As in every other cranny of the book business, companies are going bankrupt or being bought out by larger companies. If you find an unoccupied niche, the larger predators will ignore you until you become successful, and then they will drive you out or cut you down.Some have conceded it is next to impossible to make profits in a capitalist market; they become not-for-profits and look to grants to cover their salaries and other expenses. A few of these not-for-profits have become successful in the competition for grants, but nearly all are staggering from the attacks on the National Endowment for the Arts and their state arts councils and are facing the hard truths of living in a society that will not subsidize its artists and writers.Other strategies look to other markets besides bookstores.Academic publishers, or publishers of broad interest books which also can be adopted for classroom use, can also compensate for the low margin in bookstore sales by selling books in larger quantities to academic libraries and textbook stores. It is easy to reach the buyers of academic books-lists of every academic in the country are available for rent, sorted by the type of courses they teach or the section of a professional organization they belong to. With the lower overhead of a small publisher, a few dozen classroom adoptions can make a book quite successful. (Of course, the school stores are dominated by a few chains which buy back used textbooks and resell them, so the publisher must respond by updating their more popular textbooks every couple of years-anything that justifies a change in the copyright date will frustrate the resellers.)Niche publishers can rely on direct mail to reach their readers without the middlemen, because they can rent targeted mailing lists or sell through organizations or retailers other than bookstores. The more unorthodox the marketing, the less competition for the book.Looking beyond the economic dynamics within the book industry, there are other pressures to consider. Leisure time is squeezed as dramatic structural changes in the economy affect everyone, pressuring families to put all their members to work and for longer hours in order to maintain their living standard. Any restraints on profits that affect all publishers will affect the smaller publishers disproportionately. Over the last generation, the picture of publishing has been redrawn both in its outline and its details. There are still other questions that we cannot begin to answer. For example, there is more competition from other media for books than ever before-there are now niche magazines in every interest area, 100 cable TV channels replacing the dozen we knew in the fifties and new media, video and laser discs, CD-ROM and the vast possibilities of the internet.One question intriguing all publishers today is the future role of sales and marketing through the World Wide Web. There are now two huge internet bookstores which claim to be able to supply any book published in the US, amazon.com, the first to use the new technology effectively, and the largest of the bookstore chains, Barnes & Noble. So far independent publishers have benefited from orders received directly from the internet store, but the volume is low.The entry of Barnes & Noble into internet bookselling is predictable but ominous. Can we look forward to the domination of the new media, including the internet, by a few media monopolies? Will the carnage in print be succeded by cybermassacres?How long will the massacres go on and who will survive is a matter of continually entertaining debate. My own response as a publisher is to say that it is best to find a niche and maintain some ironic distance. Because the independent publishers are not likely to change the situation for the better by themselves. It is because of broad political, cultural and economic change in the larger society that these trends have developed, and they can be counteracted only by broad political, cultural and economic change. Is the basic problem is this or that economic dynamic within book publishing and bookselling, or is it that ruling political elites do not care to make cultural products available widely, cheaply, and, most important, with the diversity befitting a democracy. Right now independent publshers are being driven mad even to the point of political discussion by the mass strike of the United Parcel Service workers, which many observers regard as a possible turning point for a pitifully weak labor movement. If so, perhaps that strike, whether the Teamsters Union wins or loses, will have far more consequence than anything publishers can do.| Paul Elitzik is editor of The Illinois Book Publisher and is on the Board of Directors of the Illinois Book Publishers Association. He is also the publisher at Lake View Press. |
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F O L K E T I B I L D / K U L T U R F R O N T 8-9/97
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