US publishing: a turning point?

<p>On 14th January Barnes &amp; Noble, the US' biggest bookseller made almost 100 jobs redundant at its New York headquarters, the first time in its history that the company has resorted to lay-offs. Walk into a B&amp;N superstore and things get worse. Behind the counters, staff can be heard openly discussing the likelihood of their own terminations and store closings, &quot;unless business picks up soon&quot;. Thus far it hasn't.</p>
<p>According to Nielsen BookScan US, in 2008 trade units fell only 0.2% compared to 2007 (with hardbacks down 3.6% and adult non-fiction down 3.9%), but the decrease comes after years of stagnant unit sales and title inflation. The only really positive news from the latest BookScan figures was the children's sector's 11-million unit upswing, courtesy of Stephenie Meyer, who in 2008 sold an astonishing 22 million books for Hachette USA.</p>
<p>The holiday period was disappointing. In the nine weeks ending 3rd January, B&amp;N sales fell 5.2%, with comparable store sales down 7.7%; Borders sales fell by 11.7%, with comparable stores down 13.6%; and third-largest chain Books-A-Million, which did best, down only 2.5%, with comparable stores 5.6% lower.</p>
<p>Welcome to the decimated general retail landscape that President Obama has inherited, with more empty storefronts staring out at more newly unemployed Americans by the week&mdash;and welcome to a book business that anxiously admits it has reached a turning point.</p>
<p>With B&amp;N's troubles and the far more worrying situation at Borders (yet another&nbsp; management team brought in for yet another turnround); with the acceleration in independent and small-chain closings; with the firings and restructurings at&mdash;count them&mdash;McGraw-Hill, Macmillan, Thomas Nelson, Random House, Simon &amp; Schuster, Houghton Mifflin Harcourt, O'Reilly, Oxford University Press and others; and with the 800-pound gorillas named Amazon and Google sitting in the room, the only clear message is that the business is undergoing a sea-change in which no sector, including agenting, publishing, production, distribution and bookselling, will be untouched.</p>
<p>Publishing is a business, and&nbsp; legendary, editorially-driven publishers such as Random House founder Bennett Cerf and Farrar, Straus &amp; Giroux's (FSG) Roger Straus were canny businessmen: their houses would not have survived otherwise. Companies are now using the economic crisis to institute change after years of lax housekeeping, but some good is almost certainly being swept away with the bad. Numbers hold a supremacy in today's corporate paradigm beyond what they've ever had, and the question remains whether a very large corporate scale fundamentally suits the book business.</p>
<p>Even the author's role is changing. Many, if not most, will have to become savvy self-marketers to augment company efforts, and more will become publishers themselves. Yet self-publishing creates its own problems, generating much of the &quot;noise&quot;, says Hachette US chief executive David Young, that makes it increasingly hard for any book to be &quot;heard&quot;.</p>
<p>FSG president Jonathan Galassi, who as part of Macmillan had to lose staff and see separate children's and production departments meld into centralised groups, notes: &quot;It was the concatenation of the economic meltdown combined with changes in the business&mdash;digital developments, changes in reading habits and how people spend their reading lives, the Google and Amazon issues and bookselling issues&mdash;that created a double whammy.&quot; But the sense of doom has mitigated some. There's plenty of gloom, but the end of the year was not a total disaster.</p>
<p>Galassi is far from alone in reckoning booksellers will be squeezed more and more and that only the best will survive. Stores can no longer depend on pumping volume; relationships with customers will be critical. &quot;It's certain that when we get to the other side, the business will be different,&quot; Galassi predicts. &quot;Five years from now, every major publisher will sell from their own site in a real way. The publisher will in one sense go back to his origins, and be a bookseller again.&quot;</p>
<p>Simon &amp;&nbsp; Schuster chief executive Carolyn Reidy still prefers to emphasise the marketing, rather than the sales potential for publishers' use of the internet. S&amp;S has just launched a new website (the UK will be integrated into it by June). &quot;It's very clear we have to operate strong in two worlds at once. There's shrinking review space and coverage in traditional electronic media. To date we haven't had enough success with online marketing. We need to invest more time, and experiment more, to figure out how to reach more &shy;consumers.&quot;</p>
<p>Hachette, courtesy of Meyer, James Patterson, a cat named Dewey and others, bucked the downward trend, yet David Young says: &quot;We experienced toughness with a number of key authors whose sales were lower than previously. The industry has to hope that people continue to recognise books for the wonderful things they are, in terms of entertainment value and how they function as gifts. Books are not high ticket items, which is a good thing in this economy.&quot;</p>
<p>Everybody has known for a long time that too many books, especially too many with little justification in quality and consumer demand, have been churned out in an attempt to gain market share. Now, titles will be far more closely scrutinised and slimming will take place. <br />
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<b>Cultural change</b></p>
<p>&quot;The first thing we have to do is to make every book relevant to consumers,&quot; asserts Reidy. &quot;We have to know why every book is on the list, and we have to know how to publish it, and we have to keep marketing it. Amid a shifting change in the culture, we have to keep books in the forefront of consumers' minds.&quot;</p>
<p>Most publishers agree that there will likely be changes in the publisher-agent-author dynamic. Galassi notes: &quot;The relationship between author and publisher got weakened, and the publisher has to become more of an impresario again.&quot;</p>
<p>If that means reclaiming some of the role ceded to agents&mdash;a role traditionally played by publishers when houses were smaller&mdash;so be it. The agent population, swollen in recent years, is likely to diminish as the dynamic shifts.</p>
<p>Reidy says it is &quot;inevitable&quot; that publishers will do &quot;a more realistic analysis of what they can pay&quot;. Big money will still be paid for big books when houses see a way to make the numbers work from past models. At the same time, most publishers think that even well-known authors may experience difficulty when their contracts come up for renewal. A downturn in sales will mean a lower advance. More midlist authors will have to migrate away from big &shy;houses to find a contract for a second or third book.</p>
<p>When Young arrived in New York, he and his senior team went through the lists &quot;and agreed what the ideal numbers were . . . We are lean already, and get our market share from publishing far fewer books in relation to our competitors.&quot; One area where he does see opportunity for improving the numbers is &shy;pricing.</p>
<p>&quot;Price points can't come down; the US is still the cheapest place in the developed world to buy a book. One of the biggest problems is that price points haven't risen in line with production and overheads&mdash;I am not talking advances here. We'll try to push prices up where we can, and there will be resistance. You've also got to be brave where you can. We priced <i>Dewey: The Small-Town Library Cat</i> . . . carefully, at $19.99 &mdash;and we've sold 800,000 copies.&quot;</p>
<p>The rise of e-books complicates the pricing issue. In one month, November 2008, Hachette sold more e-books than it had sold in all of 2007. &quot;The Kindle was dominant, Sony significant, and the other platforms emerging quickly,&quot; Young says. Yet e-books still account for less than 2% of Hachette's business, and he doesn't see e-books altering the dynamics of the industry substan&shy;tially over the next three years.</p>
<p>The challenge is: &quot;How do you make the text available in multiple formats and still be a viable commercial enterprise?&quot; asserts Galassi. &quot;If Amazon is selling at $9, at a loss, to create a market for the Kindle, what does that mean for your beautiful hardcover? That will drive change.&quot;</p>
<p>S&amp;S increased e-book prices on 1st January, &quot;to have them mirror paper prices&quot;, says Reidy. With the effects of the economy, the company &quot;will probably experiment by &shy;pricing some paper books downward, although we still feel that when &shy;people really want a book, they'll pay whatever it costs.&quot;</p>
<p>One area where publishers are looking to make savings is tighter reprint control, whether through closer monitoring of sales or by way of print on demand (p.o.d.). Fuelled by the &quot;Twilight&quot; movie, &quot;we had to manage outrageous demands&quot; for Meyer's books, Young recalls. &quot;There was the potential for massive over-ordering. Our sales department was the &lsquo;sales prevention department' in November and December.&quot; During the past year,Hachette has doubled its titles using p.o.d., and is now considering colour p.o.d.</p>
<p>More attention will be paid to the supply chain in general, as Reidy asserts: &quot;To get the right book in the right place. We need to figure out how to get the chain to move more quickly, given the geography we are dealing with.&quot; Technology can help. It's no accident that Young, a strong &quot;systems&quot; advocate, was keynote speaker at a recent conference &shy;devoted to the benefits of XML.</p>
<p>Savings will come from a closer analysis of expenses across the board, including the level of participation at book fairs. &quot;Frankfurt became ridiculously expensive so publishers put more into London, but now LBF is very expensive, as is BookExpo America. The usefulness has eroded, but there is still that value of the face-to-face encounter,&quot; says Reidy.</p>
<p>The area where US publishers see the promise of growth is the children's market, particularly books for young adults. &quot;The only people who don't believe there's a recession on are teenagers,&quot; Reidy laughs. And, as J K Rowling and Stephenie Meyer have shown, what starts out as a kids' phenomenon can spill over into the adult market.<br />
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<b>Fears over Borders</b></p>
<p>The biggest worry right now, all agree, is Borders US. Everybody is exposed, and nobody wants to lose the nation's second largest chain and end up with a homogenised main street. Ousted Borders chief executive George Jones had been moving in the right direction, getting back to the chain's original core market as a destination store for serious book buyers. But although Jones was correcting retail problems, he was slow to address underlying financial problems. The new team has been in New York to meet with publishers. Fingers are crossed tightly.</p>
<p>On 20th January, for an hour, most Americans literally stopped whatever they were doing. Even major corporations allowed their employees to come together in front of screens in order to watch Barack Obama take the oath of office and speak to the nation. He has inherited a horrendous situation, but for the first time in a long time, America has a leader, and one who to a significant extent was formed by books.</p>
<p>In his inaugural address, Obama laid out the country's problems and emphasised there would be no easy solutions. But he maintained that there would be solutions, arrived at communally, with the kind of thoughtfulness, creativity, sense of responsibility, and connection to reality&shy; that's been missing from so much American life these many years.</p>
<p>Publishing would do well to heed Obama's words. The book, that perfect invention, demands no less.</p>