Book Clubs and Other Cannibalization Scares

From Publishing Perspectives:

Out of the blue recently, I received a message by email, one that reminded me of Book Club Associates, which had its heyday in the 1970s and 1980s.

Stan Remington was the head of Book Club Associates, the biggest and arguably almost monopolistic direct-mail bookselling group in Britain and Australia.

“I’m writing on behalf of my father, Stan Remington, who is delighted to see you have set up your own publishing operation.

“He is still reading around three books a week and living in Oxfordshire. He keeps a keen interest in the world of publishing if only from the sidelines. He fondly remembers so many business lunches at Oxford. And what they led to.”

Well, I’m glad and proud that the lunches led to much new business for Oxford University Press.

In the days of retail price maintenance in the UK, Book Club Associates was the only significant place to buy bestsellers cheaply and have them delivered to your door. A reader had to commit to buying a certain number of titles every year. It worked. At its peak, more than a million households in the United Kingdom subscribed and the program’s database held the names of as many as 4 million book purchasers.

My lunches with Stan were focused on establishing whether Book Club Associates could enhance the sales of Oxford University Press books, which were rather different in content and status from the usual book-club fiction fodder. We did come up with some pretty good ideas in his and my opinions. But some at the publishing house thought we might be lowering standards or cannibalizing existing sales.

That was the first time I came across the concept of cannibalization in publishing.

The argument went that any book we sold through the book club would be one fewer we sold through bookstores, and at much lower revenue and margin. In other words, we’d be cannibalizing our own business. In the phrasing of Evelyn Waugh’s Mr Salter to his boss in Scoop (Chapman & Hall, 1938): “Up to a point, Lord Copper.”

. . . .

Mass-market book clubs are a thing of the past in the English-speaking world, defeated by changing technology and business models, but their contribution to reading, writing, and publishing should not be underestimated. How we’d like to enjoy a bit of their form of cannibalization today.

. . . .

Cannibalization can be defined in many ways. According to my edition of the Oxford English Dictionary (1988) cannibalization means to take parts from one unit for incorporation in, and completion of, another of a similar kind. The first citation is 1944 and it relates to the breaking up of old aircraft and using the parts in new ones. Far from being a pejorative, it would seem that cannibalization was a forerunner of today’s environmentally friendly recycling movement and to be encouraged.

So my publishing tip of the month is to stop worrying about one channel for selling books potentially cannibalizing another. Instead, embrace every opportunity to reach a new audience or serve an author by saying yes first and worrying about the consequences later.

Link to the rest at Publishing Perspectives

PG will limit himself to two points:

A. During a meeting with a group of very good and well-compensated marketers many years ago, discounting from list price to access a new sales channel was under discussion. Someone (not PG), said something to the effect that we would be cannibalizing our own product if we did that.

The response from one of the more experienced people in the meeting was quick and concise, “If we don’t cannibalize our sales, someone else will.”

Meaning that if the price of a product was perceived by consumers as being too high, a competitor would offer a lower price and steal business.

If you successfully set an optimum price for a product, you will maximize both sales and profitability. The highest price you think the market will bear is seldom the optimum price.

B. The fact that this ancient misconception is still floating around the publishing business and requires mild correction by the author of the OP is an indication that really talented marketers coming out of college or graduate school have been and will continue to almost universally choose to use their talents in places other than traditional publishers.

Alternate employers will pay higher salaries for talent, provide an environment in which that talent will blossom and grow, and increase compensation quickly to retain the truly talented as they develop their talents.

PG finds it difficult to believe a marketing major from a quality business school would ever consider working for a traditional publisher.

Yet another reason why the field is ripe for smart indie authors.

7 thoughts on “Book Clubs and Other Cannibalization Scares”

  1. SFBC was great for learning a genre. Ditto for Mystery Book Club. Even the nebulous Literary Guild.
    Until they were bought out and Book Club editions were replaced by high price BPH returns.
    Then ebooks and the eternal backlist emerged…
    Book clubs could be modernized but Amazon is powerful enough as it. 😉

  2. There are two other problems with the cannibalization meme:

    (1) It assumes that the only competition for a list-price book is the book club. Umm, not since the Walkman was introduced has that been true; and certainly not now with on-demand video. Indeed, the rise of internet piracy is one of the best examples: Customers perceived that the premium being demanded for “legal” copies was far too high compared to the admittedly lower sound quality free MP3s “offered by” Napster et al. So those who had been CD buyers moved their entertainment money to other activities (like premium cable subscriptions, and yes there is substantial statistical support for this inference). Look what has happened: The revenue stream hasn’t been reduced, it has entirely departed. Sound familiar?

    (2) It assumes that the marketplace in question is truly fair, free, and undistorted by non-Ricardian rents charged by oligopolists. That absolutely doesn’t sound familiar: The entertainment industry historically relies upon multiple layers of non-Ricardian rents charged by oligopolists to attract outside investment (and enrich the distributors*). Publishers form one layer; bookstores form a second. Libraries are only a partial defense, but they completely expose the poor thinking of the “genius” marketing consultants in PG’s point A: For many readers, and especially for readers who don’t already have the disposable income of the highly paid marketing consultants (like, say, kids, and ask the tobacco companies how important reaching kids is), the library is their primary point of access to reading material not assigned in class.

    * BTW, the entertainment industry demonstrates that Marx and Engels were wrong in a fundamental way, due to the nature of the 18th and 19th-century economies. It is not concentration of “means of production” that is inherently dangerous (consider just how “dangerous” the Intel/AMD axis has proven); it is concentration of the “means of distribution to end users” that is inherently dangerous. Which is not to say that concentrated means of production can’t be willfully abused, or that concentrated means of distribution can’t be fairly priced even in the face of oligopoly power; it is only to put a 52-kg thumb on the scale.

    • By now Marx and Engle are as quaint as phlogiston chemistry.
      Control of the means of production?
      Control of distribution, likewise.
      The new age is defined by control of *consumers*.
      (Think: Prime. And even Prime pales before the newer models coming to digital.)

      Marx and co were looking at very immature economies limited to material goods and their ideas were already obsolete by the turn of the century. Their theories would’ve floundered trying to deal with Henry Ford’s paternalism and their brains would’ve exploded at the sight of Silicon valley startup options. And digital content? Literally inconceivable.

      Modern capitalism with its sophisticated mechanisms of coopetition, open systems, open source, coops, subscriptions, etc can’t be shoehorned into their simplistic worldview any more than modern neurology can be forced into Freud or Jung’s musings.

      Corporate TradPub hasn’t even internalized early 20th century retail economics, much less the more recent Platform practices. And those are already being displaced.

      They’re not alone, though.

      Lots of other content business practices are being left behind by the more advanced business models of subscriptions and scale that are taking over. Netflix last week raised eyebrows when they announced they are producing an action flick costing $200M as the first installment of a movie franchise that will never see a movie theater. In its own way it is as impressive as Amazon paying a cool billion just on the rights for a new Lord of the Rings series, plus budgeting around two more for production. Both are practically assured of making comparable sums in profits.

      A delightful dance is taking place right now between Sony and Microsoft around the introduction of their next generation gaming consoles, with both camps playing a game of chicken around pricing the new hardware, but for different reasons. It’s going to be a while before the pundits realize it but Microsoft is playing a very different game from traditional console (and Sony’s) practices. Microsoft is playing a game of sleight of hand more than a bit resembling Amazon’s Prime ecosystem that has boxed in Sony. And Nintendo. And Google.

      While everybody looks at their new high end hardware, they are building an entire cross-platform ecosystem that’s already raking in $2B a year and is well on its way to moving the center of gravity of gaming from discrete game sales for proprietary hardware to ongoing subscriptions supporting multiple platforms. One could call it Netflix for games but that would be a massive understatement. They are currently reported to be crunching numbers on paying $4B to buy all the gaming studios and gaming IP owned by WarnerMedia. That is in addition the fifteen studios they bought over the past two years.

      The old rule that it costs money to make money is being amended to “it takes big money to make bigger money”.

      Trying to apply 20th century economics or even last decade platform economics to the subscription ecosystems is a losing proposition. 18th century thinking? Laughable.

  3. The OP is at least sparked off by the guy who ran Book Club Associates in the UK. IIRC this was basically a forerunner of Amazon, in so far as it bought hardback books in bulk and thus at reduced prices and sold them by post to it’s semi-captive audience at prices which undercut the b&m bookstores. Its business model required a minimum number or purchases per annum from each customer and this caused many problems with customers who had signed up for the cheap books in the introductory offer and found little else they wanted to read.

    However, before this the reprint book clubs had thrived and these – along with the local library – provided most of my pre-teen and teenage reading. My parents belonged to two or three such clubs and I read everything they bought.

    Whatever the university presses may have thought, I don’t believe that the mainstream UK publishers were worried about cannibalisation. Selling to BCA was a bit like selling to Amazon whilst the earlier reprint clubs were a core part of the publishers’ marketing strategy for both fiction and non fiction. Basically they put out the hardback – which sold a shedload of copies for popular fiction authors like Mary Stewart, Georgette Heyer, Alistair MacClean, etc., and also nonfiction writers like Paul Brickhill– then passed some of them to a reprint club which had a captive market that sold a lot more hardbacks. (These were more cheaply printed but still good quality where it counted – the binding was sewn not glued). Finally, the book was sold on to a paperback imprint like Pan or Fontana, where the best sellers got a much wider distribution as they ended up on the circular book racks in a multitude of small shops (though here they had to compete with “paperback original” genre titles).

    As well as the actual books sold, the clubs were a great for marketing as they could drive both backlists sales and – if you really liked the author – get you to buy their next hardback when it was first published.

    I suspect that cannibalisation as such has rarely been a problem in the book business (as long as copyright is enforced) though competition for time and money within the entertainment industry can eat into books’ market share. I guess it’s a depends on your definition whether this counts as cannibalisation.

    However, cannibalisation is common elsewhere. Despite the cogent advice that PG reports: “If we don’t cannibalize our sales, someone else will” it can be surprisingly difficult to get this accepted. When I was working for an insurer’s planning department and could foresee that our motor insurance business was going to be eaten by the direct marketing companies that had entered the market, trying to convince our marketing department to make changes was a bit like banging your head against a brick wall. All they could think about was that the insurance brokers who they thought of as their customers would be pissed off and take their business elsewhere. The real customers meanwhile deserted the brokers and bought from the direct sale companies.

    • Some times self-cannibalization means leaving short-term money on the table to ensure long term health (which companies on quarterly financials are scared of) and some times it involves channel conflict.
      The Case Study for the Ages of the latter problem is Britannica (and World Book, etc) and tge Rise of Encarta.

      Short version: no encycopledia company dared annoy its door to door sales corps when Bill Gates came looking for a non-exclusive license to their text for a CD ROM Enciclopedia to promote MULTIMEDIA PCs. The money was good but nobody wanted the risk of channel conflict. Gates ended up buying the text of the Funk and Wagnalls “supermarket” encyclopedia as a seed and hiring an enture staff of writers and editors, most had been recently downsized by the traditional encyclopedia publishers. ENCARTA was born. At its peak it brought in more than all the pbook encyclopedia publishers combined. Later as Wikioedia was starting to erode tge market for Encarta, MS pawned it off to a non-profit. As the sing says ” You gitta know when to hokd’em and when to fold’em. ”

      Textbook cannibalization.

      It’s hard getting it right but if you don’t obsolete yourself, somebody else will do it for you.

      Today, look at SpaceX.
      Their Falcon 9 is the cheapest and most advanced launch system on the planet. And mostly reusable.
      Their Falcon Heavy is the most powerful. And mostly reusable.
      Last year, they stopped building new ones (they have a warehouse full) and put all their efforts into the human-rated capsule and their next launch system, the totally reusable, larger and cheaper STARSHIP. At a time when they’ve obsoleted tbeir competitors’ *next generation* they are looking to obsolete themselves.

      Tesla is doing the same: they’re the biggest electric vehicle vendor, with an admitted two year lead in battery tech over tbeir cloeest competitors, and next month they’ll be unveiling a new generation of cheaper and more durable batteries. The talk is of a million mile battery pack.

      Modern business has become a Red Queen’s Race.

      • Very true, and good examples, though I have my doubts about textbook cannibalisation. For most paper textbooks, no changes are actually needed and the main aim of a new edition is to make sufficient trivial changes (for example in page and section numbers) to obsolete the prior editions available in the second hand market. My cynical view is that attempts to replace paper textbooks – with newer or digital versions – are aimed to kill the second hand market and force this year’s students to pay out for new versions of what is essentially the same text. This kind of precludes cannibalisation by the introduction of superior products because the current product is more than good enough.

        • The real threat to the textbook scams is the OpenTextbook movement. Too much of the market can be safely fed with open source content for business as usual.

          Unless they are singularly clueless they have to know they can’t raise higher education prices too much or too often…or even at all, without driving more customers to the free books.
          The K-12 market is still subject to the usual lobbying and brown bagging corruption but if the economies really tank that too will be in danger.
          Business as usual can easily lead to no business.

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