Guest Blog: Are the Books in the Stores?

Before leaving on vacation, RINOcracy.com had become concerned that the current controversy between a major publisher, Hatchette, and Amazon has serious implications for the industry and its customers. We asked for comment from an individual with a long and distinguished career in publishing and he generously responded with the guest blog below. We are delighted to relieve the vacation hiatus with its publication. Because the writer is still active in publishing, and reluctant to become a combatant in the current conflict, it is published under a pseudonym.

As previously indicated, regular postings on RINOcracy. com will resume in July.

Are the Books in the Stores?

“In this city I account [my book] as fallen on barren ground. I avoid all public places, so as not to meet the persons to whom I have sent it; and if I cannot avoid them, I greet them without stopping; for when I pause they give me not the faintest sign that they have received it, and thus they confirm my belief that it has gone forth into a desert.”

     This might be the lament of a contemporary novelist, but instead it is Giambattista Vico, writing in 1725 upon the publication of his book New Science, which was destined to become a classic. Ah, if only the publisher’s job ended when the book came out of the bindery. But in 2014 as well as 1725, there remains the damnable problem of “getting the book out there” so that people might buy it. This, despite all the agonizing details of contracts, royalties, manuscript editing, proofreading, jacket design, and the hand-holding of authors, is the real bane of the book publishing business: distribution.

     It’s been aptly pointed out that book publishers are always lamenting the plight of their industry. “Promise me, my son,” gasps the old patriarch on his deathbed in a Sorel cartoon, “that you’ll never go into book publishing.” But the current crisis with the ogre Amazon seems to be more existential than most. And it all boils down to distribution. Amazon now controls so much of publishers’ sales (more than 40 percent by some reports—Amazon won’t say) that it easily throws its weight around. From publishers it wants a greater percentage of this or that, at the moment a bigger cut of e-book revenues from Hachette, a major house. The outcome, like yesteryear negotiations between labor and the auto industry, may set the parameters for all industry players. At stake are decent margins and effective distribution for almost all trade publishers.

     Getting the book to the consumer has been the mystery without a satisfactory solution for as long as books have been commercially published. Since the nineteenth century, when publishers clearly separated themselves from booksellers, they had to sell through the “book trade.” That meant persuading booksellers and wholesalers to carry as many titles as possible, then doing the necessary promotion and advertising—at the right time—to move those books off of store shelves. Occasionally there were subscription sales, enabling the publisher to guarantee a certain number of sales in advance. And well into the twentieth century several New York publishers continued to maintain a “trade counter” on the ground floor of their offices, where the public could buy a number of their titles. But the major marketing effort involved book “travelers” carrying new titles to the booksellers and taking advance orders for them, after which the publisher hoped to create enough “buzz” to move them off the shelves.

     The model was imperfect. For one thing, booksellers didn’t like getting stuck with books that didn’t sell, so they might order fewer copies of a particular title, or sometimes none at all. Publishers thus faced the problem of having too few books in the stores to meet demand. To remedy this situation, Simon and Schuster in the 1930s decided to offer booksellers full credit for any books they returned—thus revolutionizing both the publishing and the bookselling business. New books would be in the stores, but returns became the cross that publishers had to bear. Every publisher’s accounts receivable became suspect as return percentages rose and inventories swelled. As Alfred Knopf would famously say, book publishing became the only business where it was gone today and here tomorrow.

     Book clubs, beginning in the 1920s, were another exploration around distribution problems. Bypassing the bookseller and going direct to the consumer made publishers happy and eased promotional expenses. But the clubs, with the exception of Book-of-the-Month, were not major avenues of distribution.

     When Barnes & Noble began the proliferation of its superstores in the 1970s, it’s not surprising that trade publishers were willing to sell their souls to B&N. After all, by calling on a single buyer in New York a publisher could take away an order for his new season’s list with advance sales that were multiple times what he was used to seeing. And placement would be assured in many stores across the country. No such large nationwide chain-store opportunity had ever existed in American publishing. Instead of advancing 1500 copies of an ordinary new novel, publishers saw orders for 4500. Those kinds of numbers produced giddiness.    

     Of course, Barnes & Noble had its downside for publishers. As it made books readily available in locales that had never seen a bookstore, with discount prices for many titles, the appeal of the book club began to decline. Before long most had disappeared, their share of the market being shifted to B&N. Then too, B&N was capable of returning books for full credit—which they proceeded to do in boxcar quantities. It took a few years for both parties to appreciate this wasted transit before B&N adjusted its orders to more realistic levels. Still, publishers were now pretty much locked in to B&N as a pacesetter for the bookselling business—especially in terms of discounts and promotional payments from publishers—because the chains had effectively destroyed all but a handful of independent booksellers. Those individual shops that publishers had once painstakingly called on one at a time were no longer around—and no longer able to provide a personalized sales pitch to their customers. Publishers, who had gone all in with B&N, were now stuck with it. If Barnes & Noble didn’t like a big new title, the publisher had to scale back its introduction. In some cases it might be wise to sample opinion from B&N even before entering into a contract with the author, in which case the book might not be published at all.

     This was roughly the situation when Amazon sold its first book on the internet in 1995. It’s important to remember that at its inception Amazon was entirely a bookseller. No jewelry or pantyhose or garden rakes could yet be found on its website. But it offered the book consumer something that no bricks-and-mortar store could match—almost every book in print, delivered to your door within a few days, at discounted prices.

If publishers could sell to Amazon at roughly the same discount they were giving booksellers and wholesalers, why shouldn’t they be delighted with Amazon’s spectacular growth? Yes, it may have spelled doom for the remaining few independent bookstores and maybe even some smaller chains, but what price progress? Publishers, hardly thinking twice about what this portended for the future of their business, and lacking any consistent marketing strategy for the industry as a whole, were all in with Amazon.

     It wasn’t long before Amazon was big enough to start pushing the publishers around, asking for promotional commitments and in particular a percentage of a publisher’s annual sales on Amazon that would be applied to advertising—on Amazon. If Farrar, Straus, say, had sold $10 million in books on Amazon the preceding year, Amazon would ask that, say, 7.2 percent of that figure be paid to Amazon for advertising in the following year. Of course negotiations would ensue, and the percentage would usually be lowered; but the contributions would persist. Since Amazon book sales are in the hundreds of millions of dollars, this is a nice piece of change.

     Whatever the outcome of Amazon’s current battle with Hachette over splits on e-book sales (of which Amazon now controls some 70 percent of the market), does it matter? If publishing houses are eventually sent packing by Amazon, and bookstores wither, won’t authors still be able to publish through Amazon or self-publish through many internet sites? Isn’t that what the internet is all about anyway—democracy and the repudiation of authority?

     Yes, but. If authors and publishers can no longer earn enough money to sustain their work (consider the music business), who will determine what kind of literature we have or whether a cookbook is worth its salt before being published? If you want an idea of what you’re in for in such an event, just look at the growing number of full-page ads in the New York Times Book Review for listings of new books that are essentially self-published through xlibris, iuniverse, Trafford, and other new-style vanity houses. This is almost entirely junk; the exception proves the rule. In some businesses and professions, gatekeepers are important if we hope to maintain any standards at all.

     Book publishing is no longer a gentleman’s business, and loyalties among its many players are rare. But one would think that the hustlers and conglomerates that have taken over most of the business would have a sharper, more energetic response to the dilemmas of distribution that have plagued American book publishing for more than a century. Instead they have ceded this territory to Amazon and may now look forward to their own demise. I’m inclined to think they deserve it.

                                             –Robert Aitken