Running a big publishing house is not as much fun as it used to be

From Mike Shatzkin:

The idea that general trade publishing and general trade publishing houses were going to have to change or die was first floated here in a post in 2007 and then expanded upon in a post called “The End of the General Trade Publishing Concept” in 2019. The announcement this week that Madeline McIntosh, a very good person and a very competent publishing leader, is stepping down from Penguin Random House, undoubtedly the world’s biggest trade publishing house, makes it relevant to update the analysis and predictions from those two prior posts.

The book publishing business in which I have spent my working life since the early 1960s is disappearing. Of the Big Five (Penguin Random House, HarperCollins, Simon & Schuster, Macmillan, and Hachette), three have lost their CEOs within the past few years. With the government having decided that PRH acquiring S&S constitutes too much concentration, it is now an open question whether any merger among them will stand regulatory scrutiny.

Since the Big Five now account for the lion’s share of the commercial publishing business (they having acquired many of the larger companies below their size over the past few decades), this means that their growth from now on has to come organically, rather than by acquisition.

That’s a problem. From here it looks like general trade book publishers of scale can’t grow organically anymore. (Small niche publishers sometimes can, but they don’t add up to enough to become elements of a strategy.) The business has transformed around them and it is really no longer possible to do that. Two massive changes over the past 25 years in the way the industry is and works assure that.

One change is “where the books come from.” It used to be that all the books came from publishers who were “in the business” of delivering books to consumers. These days, publishing by entities that are not primarily commercially-driven — from self-publishing authors to entities that live in some other world but which can use books to the benefit of their main enterprise — is responsible for the vast majority of what is perhaps a million new titles a year hitting the marketplace. (Only near the end of “the good old days” did that number reach six figures.) So the commercial publishers — and every title they issue — have a lot more competition from other new titles hitting at the same time than they ever did before.

And on top of that, the old books don’t die anymore, thanks to print-on-demand. So a new book issued in 1990 would have competed with 500,000 other possible titles for a sale. Today the number of competing titles is about twenty million. And some smart people put it substantially higher than that.

The second big change is how the customers for books find and acquire them. In 1990, sales of consumer books were overwhelmingly in bookstores and mass merchant retail locations. That meant that only a serious publisher who committed to “covering” the stores (a sales force) and “providing service” to them (a reasonably efficient warehousing and shipping operation) could compete for those sales. Today, it is likely that fewer than 30 percent of physical books are purchased in retail locations. They are transacted for online, as are all ebook sales. So the moat that kept the path to readers in the control of real publishers is gone. Online sales venues are available to anybody, including a 1-book author. And when the potential purchaser sees the “page” for a book on her computer or phone, it is pretty hard to tell which ones belong to a big publisher and which ones don’t. (If the potential reader even cares…)

The shift in the marketplace and its economics has good news and bad news for big, established publishing houses.

The good news is that they have gold in their extensive backlists. Their revenue is no longer limited to the titles they have placed in stores, as it was in the past. Short publicity breaks triggered by an author dying, a new book coming out that recalls an older one, or a set of circumstances in the world that make an old backlist book newly relevant (however briefly) can and will result in sales.

The bad news is that it is harder and harder to publish new titles profitably and establish them in the marketplace. Organic growth is an artifact of a prior time. It doesn’t happen anymore for a general trade house.

The financial impact, so far, has been that sales remain pretty flat or slowly declining but profits are, so far, holding up well. New titles require risk. The margins on older titles can be reduced if the copies sold today are printed on demand, but they remain strong if old inventory is being sold off (particularly if no further royalties are due) or if ebooks are what is sold today.

But if big houses can’t grow organically, there are very few smaller houses to acquire, and anti-trust prevents them from combining with each other, they are doomed to a long, slow, decline. That’s where we are, and it is not a happy place.

. . . .

In the new world (forest) of book publishing, the big publishers are becoming extinct. They can’t grow. Their backlists will inevitably decay. They will be managing an asset base that will produce profits for a long time but will support less and less of a company. That’s no fun to manage at the top, and it means that the job at the top isn’t nearly as attractive as it was when all those execs entered the business. So the big publishing house just isn’t the environment it used to be.

The fact that new title lists are being cut will be increasingly obvious.

Link to the rest at Mike Shatzkin

4 thoughts on “Running a big publishing house is not as much fun as it used to be”

  1. That there was ever supposed to be a “fun” component to top management in this little corner of the world, inherently involving author-wrangling, says volumes. Pun intended.

    • Maybe the headline should’ve used “satisfying” instead of “fun.” Because let’s face it, it is inherently less satisfying to manage decline rather than manage growth.

  2. Authors were ‘discovered’ by important people, who could then crow about it and the importance of the writing without actually having to write it themselves. And represent their publishing house at awards banquets and such, where they, insiders, knew ‘all the right people.’

    I would guess that the best authors for this would be introverts who were grateful and a bit awkward in public. Less so would be those who were now becoming a little TOO self-confident, but it was okay, as long as they still brought in the sales.

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