From veteran publishing consultant Mike Shatzkin:
A team of independent publishing consultants with broad and deep experience in the industry have produced an excellent report on the effects of the past year’s pandemic on the book publishing business called “COVID-19 and Book Publishing: Impacts and Insights for 2021”. Cliff Guren, Thad McIlroy, and Steven Sieck are real pros and they have been systematic and rigorous in their methodology. The report is free (here) and is bound to be among the most widely-read papers in our industry very quickly.
The notion was to look at the changes that have taken place in the worlds publishing lives in and work back to the impact on the publishers. This approach makes sense. You can’t analyze or predict the future about trade publishing without looking at what is happening in the world of retail. You need to understand what the impact of change is on schools and colleges to gain insight into how publishers will have to adjust. Indeed, that’s how publishers themselves will approach the challenge: they will try to understand the environments they have to live in to formulate their go-forward strategies.
And the authors have captured the reality that the pandemic was not really bad for the book business. In fact, for many publishers it has been a boon. The authors amply document that most book sales have been sustained and that most book publishing operations have managed to shift staff to working remotely and are still able to continue to produce effectively.
One impact of the pandemic on retailing that was thoroughly appreciated by Guren, McIlroy, and Sieck (and seldom remarked on elsewhere) is the rise in importance of the brick-and-mortar “equivalents” to Amazon: like Target, Walmart, and Costco. Those stores have long had the in-store presence of a limited number of book titles but in the online environment, with Ingram in the background, they can sell just about any book except some proprietary Amazon titles. Online non-book consumers can put books in their grocery basket with these retailers as readily as they can with Amazon and more and more of them appear to be doing that. Although it is more likely that many of these new book customers for them were filched from local brick and mortar retail rather than from Amazon, the net effect has been to really grow books in importance to them.
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Discovery that shifts from bookstores to online favors backlist. And publishers have been challenged to deliver new titles with the same marketplace impact in the readjusted book marketplace. Some new title production has continued, to be sure. But there are anecdotal reports of postponements with some publishers choosing to hold back quite a bit until things change.
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“Covid Impacts and Insights” discusses the relative ease with which publishers have maintained their operations without using their offices. Discovering how to work this way is bound to have implications on the future of offices — where they’ll be, how full they’ll be, and what percentage of each employee’s time will be spent in them — in our business. The report notes the fact that a lot of publishers spend big money on Manhattan real estate. In a margin-challenged business like ours, that is bound to come under closer scrutiny as the pandemic fades.
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One is touched on in the Executive Summary at the top and not returned to: the efforts by publishers to compensate for a declining infrastructure of intermediaries (particularly bookstores) with more D2C — direct to consumer — efforts. For well over a decade, even the most general of the general trade publishers have been building those efforts. They all have databases with millions of consumer names that they are able to use with varying amounts of success. This creates subtle distinctions between the sales capabilities of the houses based on their different abilities to reach direct audiences.
So when Penguin Random House acquires Simon & Schuster (assuming the sale is allowed to proceed), the chances are that they will both get some new books that are appropriate for some of their “captive” audiences and, conversely, that they will acquire some D2C reach that S&S developed that can now be applied to PRH books. Not much is known about the specific proprietary D2C capabilities the houses have, but those sales assets, however slowly they grow, become increasingly important as bookstore opportunities shrink. Both the publisher marketing efforts and the brick-and-mortar erosion are accelerated by the pandemic.
There is another change that has been slow and inexorable over the past decade or more and which the pandemic can only exacerbate. Since the center of gravity has shifted away from bookstores, a domain publishers “controlled” and which shielded them from competition from books that had no powerful publisher, it has become increasingly difficult for publishers to make new books “work”.
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How does new title production of the established trade houses today compare to what they issued ten or twenty years ago? (One hint: it is almost certain that the combined new title output of PRH and S&S will be less after the merger than it was before.) And how do sales of new titles compare to sales of backlist? And how much of the new title output survives to become contributing backlist?
This is a tough set of facts to compile, but it is almost certain they’d show that big publishers are living off their backlist and not making it grow like they did in past decades. The “moat” around established publishers was always the bookstores; real publishers could put inventory into them and mere aspirants could not. When there were thousands of bookstores carrying tens of thousands of titles (or even hundreds of thousands) and almost all the books were sold through brick-and-mortar retailers (a fair description of the world before 1995, or even before 2005), the big publishers had an advantage that no number of D2C names can win back for them.
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In pandemic times, when output is constrained in many ways, the ability to print at the point of distribution changes everything. The striking example of how much this matters was a NY Times paperback bestseller list at the end of June which had a majority of the titles being printed and distributed by Ingram.
Having learned the many benefits of being able to meet substantial demand without inventory in place, the publishers aren’t likely to forget it. The fact that a unit costs more to deliver when you print one was always well understood; now it can also be seen that shipping and handling and returns costs are avoided so the difference in profits is not as great as the difference in unit cost. Publishers know this now. It will change things going forward.
Link to the rest at The Shatzkin Files
Mike points out that the ability of traditional publishers to put product into physical bookstores (and the larger publishers could do this more successfully than most small publishers) was important for their success and prosperity. Fundamentally, traditional publishers controlled this retail channel and large publishers paid a lot of attention to large bookstores and even more to large bookstore chains.
However, Barnes & Noble is about the only large bookstore chain still in business. The latest pre-Covid data PG could find was that there were 633 BN physical stores in the US. Books-a-Million was second with 260 stores in 32 states and store numbers dropped quickly farther down the list. These numbers are almost certain to decline when the retail sector can finally open up and have a reasonable expectation of customers entering their stores. PG’s bet is that there will be a lot fewer physical bookstores after Covid than there were before.
A whole lot of readers who purchased their books from physical bookstores pre-Covid have learned that Amazon has everything and can deliver a physical book to their home tomorrow or the next day if they order it as soon as they leave Barnes & Noble. Even early books by current bestsellers may be a special-order item in a physical bookstore. And those readers will quite possibly pay less than if they waited for a BN special order to arrive in a week or two. Smaller bookstore chains may require an even longer wait.
PG was interested in Mike’s observations that publishers’ back list had become a larger contributor to revenue and sales than it had been prior to Covid. He rightly pointed out that the migration of sales from physical bookstores to Amazon and other online bookstores had been a primary cause of this rebalancing.
PG suspects that some veteran authors who were/are traditionally-published may wonder whether it’s fair for their publishers to be harvesting the large majority of the money from these backlist sales when the author’s advance has long been spent and the publishers haven’t devoted any significant amounts of money or effort promoting the author or her books for a very long time, particularly if the publisher isn’t providing much in the way of advances for new books the author has written lately.
You can download the complete COVID-19 and Book Publishing: Impacts and Insights for 2021 HERE. While Mike focuses mostly on the trade publishing business (which is likely the most interesting part of for most visitors to TPV), the complete report includes some information about academic and research publishing which is under pressure because its primary customers – academic institutions – has been severely stressed by Covid.