Manager's Journal
Publishers Must
Rewrite Their Rule Book
By JAMES V. DELONG
According to an avalanche of recent articles, "midlist books"--those
that sell fewer than 10,000 copies--are an endangered species. Why? The
book business has become too commercialized. Media barons buy up old-line
publishers and flog editors for higher returns; chains displace community
bookstores; and the obsession with bestsellers squeezes the midlist into
powder. Soon, nothing will be left but Grishams, "Angela's Ashes"
and a bunch of self-help books.
Don't believe everything you read. This turmoil is a classic example
of capitalism's creative destruction, clearing away an antiquated structure
and opening up opportunities for innovation, to the benefit of both authors
and readers. What's needed is more, not less, commercial thinking.
To explain this unfashionable optimism, start with some basic numbers,
sketched out recently by Ken Auletta in The New Yorker. For a book with
a price tag of $25, the cost of the printing and binding is about $2.50.
Another $2.50 goes to the author. The publisher gets $7.50 for overhead,
costs and profit, and the remaining $12.50 goes to the distribution chain--the
wholesaler and retailer.
For midlist books, almost none of this money goes into promotional efforts.
A midlist book is assigned for a time to a publicist, who handles several
books and who may not even have time to read them all. He sends it to reviewers
and to special groups identified by the author, and fields any requests
for information. That's it--no marketing plan, advertising, direct mail,
promotional events or follow-up calls to reviewers. Result: Midlist authors
regard publishers as slothful incompetents; publishers regard midlist authors
as ungrateful egomaniacs lucky to be in print at all. Both views are largely
right, which makes for a prickly relationship.
At the bookstores, a midlist book sits briefly on the new-releases rack.
Then it departs for the nether shelves, retrievable if requested, but not
exactly obvious to the browser. Yet these books collectively are very important
to bookstores. Leonard Riggio, CEO of Barnes & Noble, says that only
about 3% of the books he sells are bestsellers. Fifty-nine percent are from
the "backlist," which means books more than a year old, and more
than half come from a source other than the top 10 publishing houses.
Something is strange about the economics here. Although bookstores and
wholesalers collect half their revenue from these books, they provide little
economic value to the midlist. They perform two basic functions: providing
consumers with specific books at their request, and allowing them to browse.
It's hard to see how these could be worth as much as writing, printing,
editing and shipping combined. Distributors incur costs, of course--rent,
staff, inventory. But adding cost is not the same as adding value.
The current system of selling books works well for a particular type
of customer: people who are looking for "a book," perhaps as a
gift or a way to pass time on an airplane. A bookstore gives them a lot
to choose from. The current system also works for the few books that get
a ton of free publicity because the publishers push them or because of news
tie-ins.
But midlist books aim at customers with more specialized needs. Some
are looking not for "a book" but for something on computers, or
the Civil War, or property rights. Some deal with a subject professionally
and need to know when something relevant is out. One reason for the rise
of the chains is that they do a better job catering to such markets than
community bookstores did. But even so, the existing structure of book distribution
does not work well for these customers, because it does not provide them
with the specialized information they need. Nor does the publishers' blind
reliance on free ink and reviews fill the gap. The more segmented the market,
the less publicity its interests get; and only a small percentage of midlist
books, chosen unpredictably, get reviewed in the general press.
In the midlist marketplace, the problem is precisely a lack of commercialism--a
failure to identify the customers, tell them the product exists and show
them why it meets their needs. But with the marketplace changing and technology
opening up new possibilities, people in the publishing business are looking
greedily at that $12.50 that goes to the distribution chain. Maybe it could
be better used. For $2.50, say, a publisher could deliver books by UPS or
Federal Express, which would leave it with $10 to spend. This could finance
a price cut, or buy a lot of advertising. Or a publisher or entrepreneur
could innovate, creating databases of folks with particular interests and
using fax and e-mail to send them information. Or, taking a page from Amazon.com
and Barnes & Noble, it could set up interactive Web sites.
People are also thinking about how to match bookstores' strengths--browsing
and quick delivery. Chapters and even whole books are going up on the Internet,
on the theory that people will want to buy the real book to read. An alternative
is the "virtual bookstore," a small shop with a single sample
copy and overnight delivery. Another drawing-board idea is to use high-speed
printers to produce books on the spot as they are sold. The only limit is
ingenuity.
Midlist books will continue to be produced--authors' egos and readers'
needs will see to that. But the present system of distribution serves neither
authors nor readers well. So bring on the bulldozers, and let book lovers
cheer the creative force of commercialism.
Mr. DeLong
is author of "Property Matters: How Property Rights Are Under Assault--and
Why You Should Care" (Free Press, 1997).
Copyright © 1997 Dow Jones & Company,
Inc. All Rights Reserved. |
Professor
of Economics J. Bradford DeLong, 601 Evans Hall, #3880