The Three Percent Problem. Chad W. Post
just like him. Even if true, that precisely describes one of the things wrong with American publishing. This sort of pigeonholing, this looking to replicate what “worked” leads to the publication of a lot of pale imitations that are generally uninteresting and create the viewpoint that all fiction from country X is all the same.
All of these events—like everything the French American Foundation, the French Cultural Services, and the German Book Office do—were designed to promote a widening appreciation of literature from other cultures. But this perspective that Scott presented—which actually is pretty dominant in the marketplace—represents the exact opposite. Instead of appreciating art from other cultures, these publishers treat these books as commodities. The Shadow of the Wind is great because it sold well, not necessarily because it’s a great book.
There’s nothing wrong with for profit companies running their business in profitable ways, but in my opinion, expressing such a condescending, somewhat ignorant viewpoint at such a panel designed to celebrate cultural exchanges made Americans look crass and culturally naive.
In December 2008, I was invited by Riky Stock of the German Book Office to give a presentation to GBO directors from around the world about publishing post-financial collapse. Which is a pretty big topic, and one that will probably dominate conversations post-holiday season, especially if the retail sector struggles as much as people are predicting. Anyway, this is an admittedly incomplete, overly simplified look at the industry, the reigning sales models, and what might happen in the next few years. Oh, and it’s extremely long.
Stage One:
Overview of
the Publishing
Marketplace
It’s no secret that publishing folk like to complain a lot and are somewhat addicted to “doom and gloom” prognostications about their industry. Sales are never what they should be (nor are salaries), there can never be enough book coverage for a hot title, everyone is under a lot of pressure to meet unrealistic expectations, and with thousands of over-educated, well-read people entering the work force every year, no one’s job feels safe. See this year’s surprise firing of Jane Friedman, CEO of HarperCollins, in June 2008. Or the fact that Peter Olson stepped down after profits at Random House dropped 4.7%. That’s not to say that publishing people can’t relax, or don’t enjoy the business, but it has—increasingly—become a business, and the strings and complications that go along with increasing profit margins impact all the various aspects of publishing and are altering the industry and literary culture as a whole.
There’s a famous publishing joke that goes, “Do you know how to make a small fortune in publishing? . . . Start with a large one.” Throughout modern times, publishing has been a small margin industry. Rich people got involved because of the glamour, the importance that comes from shaping our culture, the joy of working with intelligent artists. Not to mention the cocktail parties. (Nowadays, you can add free books to that list.) Rarely—if ever—did people start up publishing houses with the idea that this would make them millions. Same goes for bookstores and bookstore owners. In the best of times, these businesses aim for 3% profit margins. As conglomerates took over the industry though, and houses started merging, the expectations jumped to the 10% range, fundamentally changing the rules of the game and, in my opinion, pushing the industry into its current tenuous position where a lot of people are filled with anxiety and dread.
In September 2008, Boris Kachka wrote a nice overview article for New York magazine about the current state of publishing simply titled The End. In this piece he examined several components of the book business, providing evidence about how the system is essentially broke. Here’s how he summed it up:
Sales at the five big publishers were up 0.5 percent in the first half of this year, bookstores sales tanked in June, and a full-year decline is expected. But pretty much every aspect of this business seems to be in turmoil. There’s the floundering of the few remaining semi-independent midsize publishers; the ouster of two powerful CEOs—one who inspired editors and one who at least let them be; the desperate race to evolve into ebook producers; the dire state of Borders, the only real competitor to Barnes & Noble; the feeling that outrageous money is being wasted on mediocre books; and Amazon.com, which many publishers look upon as a power-hungry monster bent on cornering the whole business.
Kachka’s main focus is on commercial publishers, which is fine since the big houses are great case studies in what’s gone wrong, and besides his focus on the major houses leaves me something to add to the conversation.
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Although it’s a bit more complicated than this, the survival strategy of commercial publishers is the “a few big books float the boat” model. This is the idea that most books published by a house will lose money, or at best breakeven, but that every year a few titles will explode, far outselling their costs and generating enough revenue to keep the house afloat. You often hear publishers say things like, “we publish those kind of books so that we can do more literary stuff.” That’s a friendly way of saying that they need some obvious money making books to sell well, otherwise the publishing house would be screwed.
Anecdotally, it often seems that these “break-thru” books are completely accidental. Like Jonathan Franzen’s The Corrections or most any book that Oprah ends up selecting for her book club. “Unexpected successes” pop up every single year. Nevertheless, from the top CEOs on down everyone feels the pressure of acquiring, or marketing, or selling, this year’s “big book” and reaping the profits that come along with these sales.
As a result, huge amounts of money are bandied about on concepts and names. Many of which don’t work out so well. A few recent examples are listed at the end of the New York article, including the $8 million advance to Charles Frazier for Thirteen Moons, a book that sold approx. 368,000 copies, leaving $5.5 million of the advance unrecouped. My personal favorite is Dewey: A Small-Town Library Cat Who Touched the World, which is described in typical movie-pitch comparison style as “Marley & Me meets The Bridges of Madison County in this heartwarming true story.” Advance? One and a quarter million dollars.
Having spent so much on books like these, publishers are then obligated to spend a vast amount of money marketing and publicizing these big acquisitions. Granted, a good deal of the advance money is made up by selling translations rights to countries all over the world (a one-way street as I’m sure you already know), but these titles are also expected to sell really well.
It’s worth taking a moment here to look at the math and explain a bit about how book sales work in America. I believe this is pretty similar to other countries, but not entirely. In the States the big publishers have their own sales force and warehouses, both of which cost a pretty penny, but are necessary to ensure that a publisher gets the largest market penetration possible. (More on this when we talk about independent publishers.) Each of the different outlets publishers sell to—wholesalers, independent bookstores, chains, Amazon, Costco and Sam’s Club, libraries, etc.—receive a different discount, usually in the range of 45-50%.
Sticking with Thirteen Moons, the retail price on the hardcover edition is $26.95, so, for each sale, Random House can expect approx. $13.75 in revenue. Leaving all subrights sales aside, and using New York’s sales figure of 368,000, Random House made approx. $5 million in sales of this book. A huge figure for a lot of presses, but a number that’s less than the initial advance, and definitely less than the total costs that went into publishing and promoting the book. I’ll assure you that this wasn’t the book that allowed Random House to do all their “literary” breakeven titles this year.
Nevertheless, this book sold exceptionally well compared to many others. I was recently talking with a former editor at one of the big six publishers, who said that titles he acquired usually sold in the 5-7,000 range, far less than the 15-20,000 copies his bosses expected his books to sell, sales levels that would’ve allowed the book to break even. He also said that he always thought his sales were incredibly low (publishers always, always lie about print runs and sales, so the numbers you see in print are inflated) until someone from another big house shared privileged sales info