Book Publishers Scramble to Rewrite Their Future

Tuesday, March 26th, 2013

Publishers fear cultural irrelevance:

“The fact is that people don’t read anymore,” Steve Jobs told a reporter in 2008, blurting out the secret fear of bookish people everywhere. But consider this: In one week, people who don’t read anymore bought about half a million copies of a really long book called Steve Jobs. In the past year, Vintage has sold one book from the Fifty Shades of Grey trilogy for every six American adults. The Big Six publishers — Random House, Penguin, Hachette, Macmillan, Simon & Schuster, and HarperCollins — all make money, and at profit margins that are likely better than they were 50 years ago.

Meanwhile, readers have an unprecedented array of options. E-readers have gotten consistently cheaper and better since the first Kindle shipped in 2007, giving customers instant access to millions of titles. For a couple of dollars you can buy a self-published sensation or a Kindle Single rather than a full-length book. Add it all together and you have a more vibrant market for literary material than ever before, with nearly 3 billion copies sold every year. Amazon likes to point out that new Kindle buyers go on to purchase almost five times as many books from Amazon, print and digital, in the ensuing year as they did in the prior one. “I believe we’ll look back in five years,” says Russ Grandinetti, VP of Kindle content for Amazon, “and realize that digital was one of the great expansions of the publishing business.”

For all the digital optimism, not even Amazon is ready to declare the traditional model dead. In May 2011 the company announced that it was going head-to-head with the Big Six by launching a general-interest imprint in Manhattan, headed by respected industry veteran Larry Kirshbaum. It signed up celebrity authors, paying a reported $850,000 for a memoir by Laverne & Shirley star Penny Marshall and winning over best-selling self-help author Timothy Ferriss. Tired of being undersold by Amazon and wary of its encroachment into their business, many brick-and-mortar booksellers refused to stock the titles. The boycott has worked so far: Marshall’s book flopped, and Ferriss’ undersold his previous offering. Ferriss says he doesn’t regret his experiment with Amazon Publishing, but he allows, “I could have made more money — certainly up to this point — by staying with Random House.”

Still, it’s not clear that traditional publishers are well positioned to own the digital future. They are saddled with the costs of getting dead trees to customers — paper, printing, binding, warehousing, and shipping — and they cannot simply jettison those costs, because that system accounts for roughly 80 percent of their business. Ebooks continue to gain ground, but the healthiness of the profit margins is unclear. J. K. Rowling’s latest book helps illustrate this bind. At a rumored advance of $7 million, Little, Brown essentially backed up an armored car to Rowling’s house to pay her before seeing a nickel in revenue. The publisher then paid highly trained people to improve the novel and well-connected people to publicize and market it until it was inescapable. Little, Brown’s landlord in Manhattan occasionally asks for rent too. If a reader can buy the Kindle edition for $8.99, the public might eventually find it absurd to pay $19.99 for a printed version, let alone the $35 that Little, Brown wants for the hardcover.

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