Tag Archives: market share

Should Books Be Discounted?

Should Books Be Discounted? Image from businessblog.winweb.com.

I had a call the other day from David Streitfeld, who often covers the publishing business for the New York Times. He wanted to know if Amazon was discounting the books that IPG distributes at a lesser rate than they used to. There has been widespread concern in the publishing community that Amazons’ game plan is to steeply discount everything until the competition is wiped out, at which point they could put prices way up and start coining money.

It is true that Amazon has discounted very aggressively, and has been content to accept a very low profit margin if this would mean a rapid increase in market share—which it has. If titles are now being discounted less, this might signal that Amazon is turning to Part Two of its strategy, the part where the prices start to go up. In the article that Streitfeld published in the NYT on the 4th of July, one of his sources expressed the view that the discounts were in fact decreasing, especially on independent press and scholarly titles, which would be disastrous for sales.

My take on this issue is quite different. I have no inside information whatsoever about Amazon’s game plan, but I know what I would be doing if I were in their position: I would be experimenting with discounts and mining the sales data to see what effect different levels of discounting would have on the sales of various kinds of books at each stage in their life cycles. Streitfeld quotes me as saying:

“‘They [Amazon] are wondering, “If we knock off only 10 percent as opposed to 35 percent, where do we come out ahead?”‘ Mr. Matthews said. ‘They don’t care how many books they sell. They want to know how many dollars they get.'”

My grammar is regrettable, but the idea is from Business 101: Find the place where the price and volume lines cross on the graph, the balance that yields the most dollars.

Many people are offended by the very idea of discounting books.  After all, books have a list price printed right on the jacket flap or back cover.  Almost no other products have the price printed on them during manufacture. Doesn’t this mean that, for books, the list price is somehow the right price? And aren’t discounted products usually cheap knockoffs of better things? Perhaps Amazon has done a disservice to the special stature of the book as a cultural icon; perhaps all this discounting has convinced many consumers that paying list price for a book means you are a bit of a chump, like the little old lady who pays full sticker price for a new car. Or, it may be that the book is not quite the cultural icon it used to be—for reasons that have little to do with discounting.

I will confess that I was a happier book buyer in the days before they were routinely discounted. The printed list price assured me that the title I wanted would cost the same in any bookstore, and that no one would get a better deal than I did. But perhaps a lower price justifies putting up with a little low-level anxiety of that kind.

Tagged , , , , , , , , , , , , , , , , , , , ,

What Does the Random House/Penguin Merger Mean for Independent Presses?

Of course it is early to speculate about the effects of this merger, but if we think about it as the latest step in a process that has been moving forward for the last decade or so, it will not seem very surprising.

A place to start is with the lead sentence in last week’s article in the New York Times:

The book publishing industry is starting to get smaller in order to get stronger.

This is the sort of press coverage that drives indie presses crazy. It perpetuates the utterly false notion that the Big Six publishers are all that counts in the book business. In fact, they account for only about 50% of bookstore sales. I think many assume their share is much larger.

If we accept the spurious notion that the Big Six publishers and the “book publishing industry” are the same thing, then it is true that the book publishing industry is “starting to get smaller;”  actually has been getting smaller for years. Unit sales for the Big Six as reported in point-of-sale data are 23% less now than they were in 2007; these numbers actually understate the decline, because the number and kinds of stores included in the point-of sale data have increased over time.

However, the sales of all the other publishers captured in the point-of-sale data have only declined 18% compared to 2007, or 5% less than the Big Six publishers’ sales have fallen. This, of course, means that the market share of the “others,” the non-Big Six publishers, has increased. But how about unit sales in absolute terms? Indie presses depend more on sales made outside of the book trade than big publishers do, and these sales, which go mostly unaccounted for in the available point-of-sale data, have grown much faster than sales inside the regular book trade. Gift stores, museum shops, and specialty stores in general are natural customers for the niche titles independent publishers mostly produce.

Such sales are very hard to track on a national basis, but at IPG, we have seen dramatic increases in sales to such non-standard book trade customers—in actuality, much greater increases than in the regular book trade. So it may be that sales of indie publishers have increased, not just in terms of market share, but also in terms of total units sold.

There are multiple reasons to explain the growth of the indies, but a main one is that the big houses can no longer make a financial success of midlist titles. Their overheads are too high to even think of publishing a book that might only sell 3-5,000 copies—but such titles are the bread and butter of small and medium sized houses, and book buyers, who really want special interest and niche titles. So much so that the number of publishable niches is proliferating right along with the explosion of interest groups we see reflected on the internet.

The Random House/Penguin merger is just the first step in the consolidation of the Big Six and I think that their share of the market will continue to decline. Of course “the suits” say otherwise. According to the New York Times article, one spokesperson stated:

The merger would not result in closing redundant imprints and less editorial independence. The idea of this company is to combine the small company culture and the small company feeling on the creative and content side with the richest and most enhanced access to services on the corporate side.

Right—except every one of the things that will not happen will happen, quickly, right after the merger is completed. Heads and imprints will roll right and left.

Indie publishers do not have to pretend they have a “small company culture” or “editorial independence.” They come by these desirable traits naturally. As the room at the top contracts, there will be more room in more markets for us.

Curt Matthews
CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

Tagged , , , , , , , , , , , , , , , , , , , ,

When It Comes to Authors: Part I

Many people believe that in simpler times authors wrote the books, publishers touched up the spelling and punctuation, designed a suitable package, and published them. The truth however is that you can add books to the famous collection of things that you don’t actually want to see being created, along with laws or sausages.

An author’s manuscript is usually just a promising first draft. All sorts of marketing questions need to be asked and answered even before the editing—which is likely to be extensive—begins. Who is the book for? What is this audience really interested in? Are illustrations needed? What is the right tone, the right length, the right price?

Occasionally, the author’s views on these matters are exactly correct; far more frequently the author’s very closeness to the subject prevents him or her from having an objective, balanced assessment of the material and the market for which it is intended. Most manuscripts need to be cut back here, augmented there, lightened up or made more serious, reorganized or restructured—in short, extensively rewritten by the author according to ideas insisted upon by the editor or publisher.

Some authors object to this process, but anyone who has been at publishing awhile knows that it is usually the new and inexperienced authors who believe that every word they have written is sacred. Experienced authors in fact insist on strong editorial guidance; they often follow suit when their strong editors switch publishing companies.

Independent presses, of course, often publish new authors and have to contend with their inexperience. The time to explain that every word is not sacred, and that extensive revisions will probably be needed, comes before the author/publisher agreement is signed. If the author is uncooperative during this initial phase, find another author.

Perhaps this advice sounds harsh, but consider the likely consequences of going forward with an uncooperative author. A book that is wrong for its market will not sell well. And if you as the publisher or your editor is forced to rewrite the book, you will have so much time tied up in the book that it will almost certainly be a financial failure even if it does sell quite well.

But what if you have signed up an author and despite your best precautions find you have a prima donna on your hands, or else an author who is simply incapable of responding to editorial direction?

The only reasonable course in such cases is to insist to an author that, if the book is to be published, either the royalty rate must be reduced to reflect the work that the author cannot or will not perform, or else that the royalty must be shared with a ghost writer of the publisher’s choosing. To earn a full royalty, an author must do a full author’s job.

In the low-margin business of publishing, there isn’t a percent to spare.
To be continued…

Curt Matthews
CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

Tagged , , , , , , , , , , , , , , , , , , ,

Should Any Ebook Reseller Be the Custodian of Our Literary Culture?

In the last post to this blog I pointed out that the Big Six publishers have about 51% of the overall market for print books, and that this percentage was just fine. The 49% left over for independent publishers is easily enough to support a vibrant literary culture.

But to what extent do the Big Six dominate the market for eBooks? At this point nobody is compiling reliable numbers, but since print bestsellers and eBook bestsellers are usually the same titles, a good guess is that the Big Six have about 50% of the eBook market too.

This degree of dominance in the eBook market is to my mind also just fine: in addition to the Big Six, there are thousands of independent presses keeping every conceivable cultural pot boiling. No, the real worry is that just two or three online resellers are going to be allowed to dominate the distribution of eBooks, and that they will be guided purely by the crassest sorts of commercial considerations: the desire to achieve overwhelming market share; the ability to set prices; the power to crush competition; and a financial interest in keeping inconvenient or unprofitable content from reaching the market at all.

Why should publishers cede all of this power to these new players in the book business? It is obviously true that producing good content is the hard part of making a good book, no matter how that content is captured. How much credit do we give a printer for manufacturing a book we enjoy? Some credit surely, but nowhere near as much credit as we give a book’s author and the editorial team that polished the text. Is the important thing about an eBook the fact that it turns up on the latest new device? The distributors of eBooks have gotten way ahead of themselves when they suggest that their systems or devices are more important than the content they deliver. This is the tail wagging the dog.

We should also keep in mind the danger of censorship. In the case of printed books we have been over this ground time and again. Do printers control what books are printed? Do booksellers decide what ought to be sold? No, they do not, although at various stages in our history they tried to. Should an electronic distributor be allowed to restrict what we read? As a society we have faced these censorship issues again and again, and in all instances we have said NO except for very extreme cases involving pornography or the protection of children.

The real danger may be even more prosaic. Those of us little guys who have had to deal with large corporate entities know that getting inadvertently stepped on is the serious problem. If you are a mouse sharing a stall with an elephant, at some point that elephant will need to scratch its rump against the rough boards of its stall and you may be in the wrong place at the wrong time.

Nothing personal about it, you’re just squashed.

The eBook distributors of this world may intend no evil, but then again they intend no particular good either—except perhaps to generate favorable profit margins for their stockholders and senior executives. But books are not widgets, and a purely commercial standard of corporate virtue is just not good enough when the viability and vitality of our literature and culture are at stake. No monopoly is ever a good thing, even in the case of widgets. A monopoly on book content, whatever the intentions of the monopolist, would be a cultural catastrophe.

Photo: Curt Matthews, CEO, IPG/Chicago Review Press, Incorporated. Courtesy of The Chicago Tribune Curt Matthews
CEO, IPG/Chicago Review Press, Incorporated
Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

Tagged , , , , , , , , , , , ,

Market Share: You’d Be Surprised What The Big 6 Controls

Independents v Big 6 Market Share
(Based on Nielsen Bookscan Data)

How Much of the Total Market for Books is Controlled by the Big Six Publishers?

I have not seen any sort of figure, hypothesis, or guess in any article or blog about this question, which is odd, because the extent of the market domination of these giant publishing houses is a crucial factor in understanding the issue of the Agency Model versus the Wholesale Model for eBook sales.

There is a quite complete account of this issue previously posted on this blog under the title “At What Discount Should Publisher Sell EBooks to Resellers,” but the short version is that the Big Six used their market power to compel Amazon and other resellers of eBooks to accept 30% of sales while all the other publishers have so far had to give Amazon and most of the others 50% of sales (Apple deals with everybody on agency terms). Obviously, the extent of the market dominated by the Big Six is a fact we need to know.

A week or so ago, I logged on to the Bookscan website (this is a subscription only service, provided by Nielsen to the book industry, that tracks point-of-sale data gathered from most of the booksellers in the US.) I added up all the year-to-date unit sales of the Big Six, and then divided by the year-to-date unit sales for all of the publishers tracked by Nielsen. The answer to this curious math problem turned out to be roughly 51%.

How reliable is this percentage? There are of course many experts who will find fault with any straightforward assertion; the Truth, they will tell you, is always far, far more complicated than you think. Here are some sample objections: Yes, this 51% is units rather than dollars. Yes, many companies that sell books as a sideline are not tracked by Bookscan. Yes, it is probably true that some professional books and text books get counted.

But let’s not allow the perfect to be the enemy of the very good. The Nielsen data is based on sales to consumers, not on shipments by publishers to stores, which used to be the only data we had. The actual market share of the Big Six may well be some points higher or lower than 51%, but so what? All we need here is a reliable generalization.

Is 51% a large share or a small one? I think it is about right. The book industry needs some very large players with big marketing budgets and high-profile authors to keep the American public excited about books. And if the big guys have 51%, that leaves plenty of room for some quite big and well-established independents such as Norton; for quite a few middle-sized prosperous ones like Chicago Review Press; and for the thousands of small houses who are prospecting for the new authors and subjects that will feed our intellectual life in the future.

So if these independents have 49% of the market, isn’t that enough for them to find a way to get a fair deal with the resellers, a deal that does not keep them at such a tremendous competitive disadvantage to the Big Six?

Curt Matthews

CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

Tagged , , , , , , , ,
%d bloggers like this: