From Digital Book World:
The returnability of books is a cancer that has been consuming the publishing industry for decades. Publisher after publisher has succumbed to its relentless arithmetic. Yet, book people cling to the belief that they are not vulnerable to the forces that destroyed their predecessors. In all the commentary about the merger of Random House and Penguin I have seen nothing written about the consignment model of bookselling that has doomed countless publishers over the past fifty years.
The merger offers the captains of those great companies an opportunity to change that model. If they are sincere about leveling the playing field against Amazon, the abandonment of a returns-driven business model may be the only way to do so.
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Trade book publishing has been in decline since the end of World War II. Industry boosters cite increased sales volume over that period to support the view that all is well, but much of the growth can be attributed to normal population increases and inflation. For the real story, one has but to look at the long roll call of publishers that have been forced to sell themselves to conglomerates, merge with larger publishing houses, or go out of business entirely.
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There’s not enough cash in publishing. There never has been, and there never will be. Why? Because the consignment system of selling books is bleeding the publishing industry to death. Try as they might, the smartest people in our field have failed to find a way to make money under an arrangement that makes books returnable to publishers.
Publishing is one of the few industries that sell merchandise on a fully returnable basis. The custom was initiated to overcome booksellers’ wariness toward the work of authors who were unfamiliar to them. If the customers didn’t buy those books, booksellers had the right to return the merchandise for credit. The practice was eventually extended to all books, whether by new authors or old, and it really took off with the paperback revolution. Paperback publishers discovered that the easiest way to ship their books was through magazine distributors. As most periodicals are monthly, the distributors simply collected unsold books along with unsold magazines at the end of every month.
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I have spent years advocating the abandonment of the consignment system. For one thing, it is a horrifying waste of paper and other resources. For another, it has forced all of us into negative, defensive, and ofttimes bizarre ways of speaking and thinking about books. Nobody talks about how many copies of a book were sold, but rather how many did not get returned. Royalty statements are designed to deceive by the omission of critical information. Returns data are buried in a column called “Cumulative Net Sales,” and the concept of holding back royalties against returns is so inflammatory to authors that publishers have built their royalty statements around hiding that information.
Worst of all, the consignment system is the principal cause of hostility between bookstore and publisher, and between publisher and author. Publishers condemn bookstores and chains for their profligate ordering. But why should bookstores restrain themselves? They have, after all, nothing to lose, as they can always invoke the privilege of sending back what they can’t sell. To meet the demand of these bloated orders, publishers have no choice but to overprint. Then, when the books fail to move out of the stores, the publishers are compelled to eat huge returns.
Link to the rest at Digital Book World and thanks to Karl for the tip.
One of the problems with a bad business structure is that other participants in the ecosystem build their businesses around the bad structure.
Whether correct or not, Big Publishing sees itself in a death-match with Amazon. PG doubts Amazon sees things the same way.
Big Publishing’s only unique advantage is physical bookstores most of which are having a very difficult time keeping their doors open. The end of the consignment/returns system would sink bookstores, including Barnes & Noble, in droves (in PG’s indubitably humble opinion).
In some ways, Big Publishing/bookstores reminds PG of Ahab tied to the whale.