From veteran publishing consultant, Mike Shatzkin:
In 1990, three zero years and three decades ago, the universe of books available for a person to buy or for a store to carry was pretty much defined by “Books in Print”. This annual compilation, at that time primarily delivered as a book itself, passes along the aggregate of what publishers say is available. At that time, the total was in the mid six figures, not more than 500,000 titles. BIP contains duplicates, so the number of available titles was probably less than that, but that’s a reasonable working number.
That means each new book brought out by a publisher was competing against a universe of half-a-million other books.
As we begin 2020, Ingram’s Lightning Source has about 18 million titles in its Lightning print-on-demand database, ready to be printed and delivered to you tomorrow. Of course, there are duplicates to consider and some junk in there too, so let’s say that there are actually 15 million discrete titles. There are also more than 750,000 titles in stock in Ingram’s warehouses, most of which are not reflected in the POD database, which tends to collect titles after their prime sales life has passed.
So each new book brought out by a publisher today may be competing against 15 million other possible titles. The competitive set has grown by as much as 30 times.
When substantial commercial publishers or university or academic presses with real sales organizations published new titles 30 years ago, they routinely sold at least a couple thousand copies of almost every title. Stores that carried 125,000 titles were proliferating at that time, which was about a quarter of the theoretical possibilities and well over half of the titles that had any real commercial appeal. That meant both that the consumer was likely to find what s/he was looking for in one of those giant stores and that the publishers with real access to the retail network could count on a measurable sales result for everything they did.
This is no longer true in the 15+ million title and heavily online retail world we now live in. There just aren’t as many bookstores as there were back then and the ones we have are much smaller. Today it is not uncommon for titles on a major publisher’s list to sell almost nothing, low hundreds of copies or even less.
The difference is critical. Sales of, let’s say, 2000 copies of a hardcover book will deliver about $25,000 or more in sales revenue for the publisher. If the advance was modest and the publisher didn’t wildly overprint, that would probably cover the out-of-pocket expense of delivering the books required to produce that revenue. In other words, most books published by most substantial publishers in those days didn’t cost the publisher out-of-pocket cash.
. . . .
When Thomas McCormack was CEO of St. Martin’s Press, which he was for about the last three decades of the 20th century, he exploited that understanding to the max. McCormack saw that the true revenue picture meant that the more titles he published with the same corporate overhead, the more money his company would make. St. Martin’s relentlessly expanded their title count year after year. And they grew consistently.
The key insight was that overhead is mostly fixed, not variable. And calculations that pretend that it is variable lead you to very erroneous conclusions.
Another important reality of the new title economics that existed then was that the backlist grew steadily. Not every title that recovered its costs would sell for a long period of time, but many of them did. Others produced additional revenue from rights sales: foreign, paperback, book clubs. So the short-run economics that encouraged title count growth also created companies that were constantly expanding their asset base to produce future revenues.
The predictability of a substantial minimum sale from established publishers back then was the result of two things that have since changed. One is the number of titles effectively competing for sales all the time, the explosion from half-a-million choices to 15 million. But the other is that the sales base shifted. Thirty years ago, the sales came mostly from a highly disparate retail network, which did have some big customers but also had hundreds of smaller ones that had to be addressed individually, preferably by a human being who showed up to “present” the title choices. Big publishers had tactical advantages to employ for both the chains and the individual accounts.
The major accounts naturally gravitate to the major suppliers. They are important to each other. The big publishers have the biggest books, the biggest budgets to spend on marketing and promotion, and the authors whose store appearances will pull in the most customers. But everybody, large or small, put their books in front of the big chain accounts. Thirty years ago that meant both the mall chains, Walden and Dalton, and the expanding superstore networks of Borders and Barnes & Noble.
But the vast array of independents, several times larger than it is now in numbers of stores and even more dramatically larger than today in shelf space, depended on visits from local reps to know what to stock. And there the smaller publishers were much more variable. Many didn’t cover individual bookstores effectively.
So with bigger stores, a smaller number of titles, and filters that favored placement of the larger publishers’ books, the net result was that big publishers achieved a pretty high minimum sale right to the bottom of their list. And the ultimate consumers chose from the books that were in stores, not the entire universe, and publishers with real sales organizations had a significant advantage.
All of this began to change with Amazon’s arrival in 1995. Online sales grew relentlessly, but slowly at first. Twenty years ago Amazon was still a single-digit percentage of the total book business in the US. Today it is probably more than half.
. . . .
[F]rom the consumer perspective, shopping at Amazon (or any online retailer working with the Ingram database, which includes other big brand merchants) gives them the choice of any book, whether the publisher has a good sales force or not.
With more titles competing for sales and the advantage of blanket coverage by the big publishers diluted, it is no longer true that every title on a big list achieves a substantial minimum sale. Big publishers are having the experience of three-figure unit sales — and sometimes even less — on books they issue, and not infrequently.
The net result is that new title publishing has become much riskier and more expensive for all publishers. They naturally react to that by publishing fewer new titles, and that describes the tactics of just about every publisher in the business over the past decade. And a smaller percentage of those titles go on to become enduring backlist.
. . . .
If this analysis is right, the inevitable result is that commercial trade publishing will (continue to) shrink. (And it will also consolidate. The big publishers today substitute for new title production by buying other people’s backlists.) The number of titles entering the marketplace might not shrink, because self-publishing authors and other entities that see benefit to putting out books will continue to add titles. Those publishers are not primarily motivated by profit. But publishers who are primarily motivated by profit will keep seeing, as they have, that the financial risk of putting out a new title keeps growing.
Publishers have found ways to turn the new world into an advantage for their backlist (which is why they find acquiring others so attractive). They can capitalize on a break more readily than they used to because an increasingly-online marketplace does not require inventory to be “in place” for sale.
. . . .
What could be deceptive is that the new world of less new title production and the shift to online sales is making profit growth attainable, almost routine. Cash investments go down and overheads go down (less shipping and billing and warehousing). Returns, which are expensive, also go down.
But, unlike the growth that came from an expanding title base 30 and 40 years ago, today’s growth can not be sustained on the present course. (In fact, the new audio growth is itself a delayed benefit from the old title base expansion!) Backlist title decay — lower sales in each format for most titles year after year — is still a fact of life; a backlist beating last year’s sales is only an occasional event. There will be an end to audio sales growth for publishers as the available backlist is exploited and those available to be acquired also are diminished in number.
And the non-commercial portions of the business will continue to churn out new titles to compete with the output of publishers. The growth of the competing title base will not stop.
Link to the rest at Mike Shatzkin
PG has always been interested in Mike’s discussions of the inner world of publishing, in part because of his perspective arising from decades in the business. The role of backlist in the long-term profitability of a publisher, as described in the OP was interesting and reflects the thoughts and experiences of indie authors with large backlists. It also explains why, although the author is receiving a pittance in royalty payments, some publishers are so resistant to reverting rights to the authors (which behavior helps the parts of PG’s business involving “persuading” publishers that it’s a good idea to revert rights instead of having the existence of some very poorly-drafted boilerplate in the client’s publishing agreements as well as every other author’s publishing agreements signed during the same period of time).
(It will shock many of you that publishers sometimes publish editions of books for which they hold no rights under the terms of the contracts they drafted and signed. And sometimes, publishers get mixed up about how royalties should be paid to the author according to the publishing contracts. PG has never seen a publisher which paid more royalties than the author was entitled to, however.)
Back to Mike’s thoughts. Perhaps he is wrong, but, to PG, it appears that, since his retirement several months, Mike’s posts have become more pessimistic (realistic?) about the future of the traditional book business.
With respect to relying on backlist titles for a significant and predictable portion of a publisher’s income as described in the OP, PG will note that many indie authors experience the same thing. Also, each successful new book an author publishes reaches new readers who then explore the author’s backlist for other books they will enjoy.
For authors who are seeking to pursue the traditional route to publication of their books, there is a credible alternative to mourning over rejection slips. The stories from earlier decades about a talented author who was rejected by 30 publishers before finally finding one who would publish the book will, in PG’s superabundantly humble opinion, become more and more rare.
Even if indie publishing is not her/his first choice (as it is for a growing number of savvy younger authors), the existence of remunerative indie publishing as an alternative to dealing with the flavor of the month attitude in New York City and London is going to attract more and more authors with important/entertaining stories to tell.
One lovely thing about writing and reading is that we’ll never run out of stories.