Pushing the Business of Books into the Limelight

The writing industry has always attracted an audience, people keen to understand writing through discussion and to store up information for a potential career, traditionally found at lectures by agents and on residential courses.  The digital shift, however, seems to have created a similar fringe for the business of publishing.  At the Hay Literary Festival last month hundreds of festival goers were prepared to spend hard cash and pass their spare time crowded into a cold tent just to understand exactly what is going on in publishing. But why the interest?

John B Thompson believes it is because, ‘up until recently, the book business model had been the same for centuries; there was little for academics to study’. Writers wrote manuscripts, agents found a publisher, and the publisher produced and sold the books.  There was no need for anyone to know much about the business.  The agent managed the deals and the agent’s and the publisher’s aims were roughly in the same direction.  Now, however, Thompson believes the industry is at the most critical juncture since its inception, and well worth anyone’s time trying to understand it.

Thompson outlined the three big steps that he believes have led publishing to the here and now.  The first began in the 1970s when books began to appear in US superstores.  These hangar-size warehouses sold everything and so could promise great sales figures, but these figures did not equate with big profits.  By putting books next to fast-moving consumer goods they became commoditised, and as soon as the books were seen as commodities, the superstores had no intellectual problems with pressuring the publisher to offer the same deep discount as any other supplier.  This commoditisation also opened up publishers to the vagaries of mass marketing.  Mass marketing preferred the costlier hardbacks as they seemed to offer a deeper discount to the consumer, or, more bang per buck. This led to hardbacks replacing paperbacks as the cornerstone of the publishing business model.

Commoditisation dovetailed with the rise of the literary agent. The agent model had not changed since the mid-1800s, but the 1990s saw the rise of the self-described ‘super agents’. Many came from outside publishing, often from the law, and they brought their sharp suits and legalese with them. They changed the function of the agent from a broker of book deals to a passionate advocate for their writer, or client, one crucially prepared, if necessary, to be combative and adversarial in the interests of a meatier cut.  The same decade also saw the US entertainment behemoths decide they needed a publishing arm to support their branded content strategies.  This led them to pursue conglomeration and so to the emergence of publishing corporations.

These three trends brought about what John Thompson terms a ‘polarisation of the field’, with the corporations on one side and the indies on the other.  In this environment of boardroom-led acquisition, the road of the medium-sized publisher became a very hard road to follow and few, save for Faber and Bloomsbury, managed to flourish. This inevitably meant there were fewer places for writers to publish.  Mid-sized publishers could neither benefit from the economies of scale like the big publishers, nor the economies of favour worked out by the network of small publishers. They also continually ran the risk of losing their biggest authors to houses with deeper pockets.

The conglomerates also led onto a preoccupation with ‘big books’.  Boardrooms prefer growth to literary endeavour.  Book publishing, however, is a mature business.  If left to its own devices its growth is fairly static.  However, by the mid-90s, book publishing in a corporate structure on both sides of the Atlantic became subject to ‘the growth conundrum’: the need to find an additional 10% revenue year on year to satisfy shareholders.  One way to cope with this was for publishers to reduce their lists and concentrate on selling more copies of fewer books, effectively cutting out the mid-list.  Another way to plug this 10% gap was to turn to ‘extreme publishing’.  This high-concept style publishing crashed books which were riding on the back of a pre-established buzz into the schedule.  ‘Fifty Shades of Anything’, anyone?

With books under such pressure to perform well, the window through which to sell books began to shrink.  If a book starts to sell (what we might term ‘trend’) then marketing spend is mobilised to make sure no sale is lost.  The downside of this for hard-working writers, editors and agents is that if a book doesn’t ‘trend’ in six weeks, it’s on the way to being finished.  This reality can be befuddling for authors who are now dangerously far from the business side of books after decades of leaving this aspect to others. One unfortunate consequence of this approach is high returns, described by the industry as ‘gone today, here tomorrow’. As many as 1 in every 4 books are pulped and margins continue to be squeezed: by author advances in the US and by retailer’s discounts in the UK.

And then came digital. In the 80s publishing began its digital revolution in production. The revolution is now in the books themselves. US trade e-books took off in 2009 and are now a business worth around $250m, largely driven by the take up of the Kindle. In the US trade houses, e-books account for 20% of revenues, up from 0.1% in 2006. In the UK it’s around 8%.  However these generic figures mask interesting breakdowns. US publishing believed e-books would appeal to businessmen, however the truth is different, and it is in fact women over 50 who drive the market. For some genres like romance the figure can be as much as 50% of the market share. For some authors only e-books will be needed.

But what the room at the festival wanted to know was how e-books will change the market.  No-one really knows but John B Thompson felt confident enough to make some short-term predictions:  ‘Amazon will continue its rise to ascendency, and bricks and mortar will continue their descent.  There will be continued pressure on medium-sized publishers to consolidate.  Books’ struggle for visibility will intensify and shift increasingly online’.  He also sees the shift from print to digital continuing, although the speed and extent of this process will vary from one category of publisher to another.  More intriguing is his belief that large houses will face downward pressure on top-line revenue leading to a growth in emphasis on cost reduction to maintain profitability.  Similarly, all those involved  in the chain – warehouses and sales forces – will find themselves under pressure, as publishers, particularly small presses, find ways to cut out what they don’t need – the oft-cited ‘disintermediation’ of the industry. This may well produce many niche opportunities to redefine the publishing industry in the digital age.  In summary, the future of publishing is currently a ‘mixed economy of print and digital, with both co-existing side by side according to the tastes and preferences of the reader’.

And how did the room react?  One tall, well-dressed, new graduate put away her notebook and turned to her friend as they walked out: ‘I was thinking of going into publishing, but not after hearing that’, she said. ‘Didn’t you listen to a thing he said?‘ said her friend. ‘Everything’s up for grabs’.