Sunday, April 06, 2008

What's Going on at HarperCollins?

Tuesday's New York Observer had a story about the new president and publisher of Collins, an adult trade division of HarperCollins. "Steve Ross . . . had been given a mandate to turn what had been a quiet, humble operation known mainly for reference, business and self-help books into one of New York City’s most powerful publishers of narrative nonfiction."

Then Shelf Awareness reported another tidbit about HarperCollins. "[N]ext Tuesday, all of Beverly Cleary's books will be available as e-books, making her 'one of the first children's book authors to make all of her books available in up-to-date formats'."

But those stories were just the appetizer to the entree that followed.

On Thursday, HarperCollins surprised the industry with an announcement that Bob Miller, the founder and president of Hyperion (an imprint of the Walt Disney Company) would be taking a new job at HarperCollins.

Publishers Weekly (PW) said, "Miller will be heading up a 'publishing studio' that will do 25 titles a year." He will report directly to Jane Friedman, the HarperCollins CEO. For her part, Friedman was quoted as saying, "I can't think of anyone better to build a new publishing model for today."

A new publishing model?

PW continued:

The new division will produce titles in various formats, including digital ones, which will most likely be priced under $20. Miller said an early focus will be short hardcovers with which he has had great success at Hyperion (Mitch Albom, Steve Martin), while also experimenting with tying different digital elements to print editions.The studio will also look to move away from traditional advance/royalty deals with authors in favor of profit sharing agreements. Miller said that while established authors were unlikely to be tempted by such a deal for their traditional titles, an author looking to experiment in a different format may have an interest. Newer authors who are looking to break out of the pack are likely to be a prime target for his new approach, Miller added. He is also eager to try new things in distribution "to cut down on all the waste of returns." Selling nonreturnable and selling directly to consumer are two avenues Miller will explore.

Friday's New York Times said:

The new unit is HarperCollins’s effort to address what its executives see as some of the more vexing issues of the book industry. “The idea is, ‘Let’s take all the things that we think are wrong with this business and try to change them,’ ” said Mr. Miller, 51. “It really seemed to require a start-up from scratch because it will be very experimental.”

The last line of the New York Times story said: "At HarperCollins, Mr. Miller said he was considering offering both e-book and audio editions of the hardcovers at no extra cost to the consumer."

Friday's Shelf Awareness reported:

. . . Robert P. Gruen, executive vice president for merchandising and marketing at Borders Group, said in a separate Times story, "We generally support the idea of looking at potential solutions to a return system that is not working well for the industry as a whole."

Jeffrey A. Trachtenberg, my favorite Wall Street Journal reporter, had a story on Friday, too. It began:

Marking a radical departure from traditional book-publishing practices, HarperCollins Publishers says it will launch a new book imprint that won't accept returns from retailers and will pay little or no advances to authors.
To be headed by veteran publishing executive Robert S. Miller, the imprint also likely won't pay for more desirable display space in the front of bookstores, a common practice. Instead, the as-yet-unnamed unit will share its profit with writers and focus much of its sales efforts on the Internet, where a growing portion of book sales are shifting.

The new venture is aimed at improving the economics of book publishing, which has long been hobbled by the need to pay for space in stores and take back unsold books from retailers at full price. The practice of paying authors advances -- offset against future royalties -- also can be costly for publishers when books bomb.

Back on May 20th of last year, I said on this blog:

The traditional print houses have become so accustomed to "owning the game" that they have not yet realized the Internet and POD technology may mean the end of their control over publishing. The move by Simon & Schuster to demand indefinite rights to books is a perfect example of that arrogance . . .

Amazon already owns a POD company and is developing an e-reading device capable of using different formats. Google already has its search engine for marketing and digitizing equipment. Either one could easily produce both print and e-books.

Remember, the reason traditional publishing gained all that power was because they were the only game in town.

Moving to electronic publishing offers other powerful financial incentives to traditional publishers beyond merely keeping up with its migrating reader base.
E-publishing frees them from costly print runs, warehousing and shipping expenses, and the headache of bookstore returns . . .

I'm not convinced that traditional print publishers understand that, as they continue to move toward e-publishing, they lose their competitive edge and, more importantly, their bargaining power. On the electronic playing field, they face lots of competition. Competition that offer higher royalties.

If the big seven aren't going to offer higher royalty percentages, they need to offer writers other incentives--more promotion, more marketing, more service, more formats. If they don't, they're going to find those writers deserting them for other companies who WILL sweeten the pot. The question is whether those companies will include an Internet giant like Amazon or Google.

Trachtenberg's WSJ story picks up where I left off:

. . . the book industry -- both publishers and retailers -- is under intense economic pressure. HarperCollins's operating income fell slightly in the six months to Dec. 31, News Corp. reported in February, on lower revenue. This year is expected to be tough for book sales. Both Barnes & Noble and Borders Group Inc. have warned investors that their results will be affected by the economic slowdown. Borders last month put itself up for sale, warning it faced a potential cash crunch in coming months. The retailer Wednesday delayed filing its annual report with the Securities and Exchange Commission because it is in new financing discussions intended to address its liquidity issues.

"Other publishers have tried to sell their books on a nonreturnable basis in the past, but this might be the right time," says Lorraine Shanley, a partner in consulting company Market Partners International Inc.

Mr. Miller . . . said in an interview that booksellers are also unhappy with the returns system. "There's so much inefficiency in our business, so much waste, that it's time to at least experiment with approaches that can eliminate waste," Mr. Miller said.

The Wall Street Journal approached Barnes and Noble for comment:

A spokeswoman for Barnes & Noble Inc., the largest U.S. book chain by sales, said the retailer will need to learn more about the plan before commenting. Several years ago, Barnes & Noble Chief Executive Steve Riggio said in an interview that he would like to be able to mark down books rather than returning them. Eliminating returns, he said at the time, would "revolutionize the book business and revitalize the book business."

Friday's Publishers Lunch had this to offer:

On some of the specific intentions of the new line, a 50/50 profit share with authors (and minimal advances) is a central tenet. But the idea of selling everything on a non-returnable basis was overstated in a WSJ report. Miller says "I definitely want to sell non-returnable if possible" particularly since that maximizes the profits to be shared and "the goal is to try and stop wasting money on things that don't actually help sell books." But he recognizes that conversations with retailers are an essential element of such a plan and that the process may "evolve after we start."

As Miller notes, publishing today is "a race for margin" and "the current model is pretty broken," adding that "it's too tempting not to try" to improve on that paradigm.

Publishing is in flux. With both traditional publisher and bookstore profits falling, it's time to consider changing the model. Smart writers are paying attention so they can be prepared for what comes next.


Stephen Parrish said...

Any model that seeks to correct inequities in the publishing process should provide an avenue for unagented authors.

Maya Reynolds said...

Stephen: That would be another enormous change because, right now, the agents are doing the bulk of the vetting of books. Publishers count on agents to bring the gems to them.

Publishers would need to hire a whole lot more staff than they currently have if the agent system wasn't in place.

Doug Lang said...

This would be great for the publisher -- and poor for the author. Most books never earn up to the advance. Cutting out advances puts all the risk on the author and almost none on the publisher, basically screwing the writer by expecting him to work for a small cut of the earnings while taking a huge part of the risk. That being the case, with POD books becoming easier by the day, we're likely to see more and more authors going directly to the reader and selling via, bypassing the big publishers all together if they decide to try this trick. Oddly, with only beginners wanting to go with taking all the risk for a tiny bit of the income from a big publisher, this may create a reversal of the current situation where readers expect quality books from big publishers and so-so from self publishers. Perhaps we're seeing the death of the publishing dinosaurs here.