The Business Rusch: Third Quarter Blues
The Business Rusch: Third Quarter Blues
Kristine Kathryn Rusch
This past week has been an utterly fascinating one for me. My husband Dean Wesley Smith and Scott William Carter taught a four-day workshop on the New World of Publishing. Professional writers from all over the spectrum (and all over the world) came to learn not just how to indie publish their work, but also how to maximize what they already knew. So this workshop was essentially a mindmeld with people who had some skills, but lacked others. It became an interactive, information-sharing workshop that I got to benefit from because of Dean (he acts as a conduit of the practical stuff for good old dyslexic me) and because of all the conversations that went on at dinners (which I participated in). Even the thirty minutes I sat in on gave me several ideas that I probably wouldn’t have gotten otherwise.
And before you ask, yes, Dean & Scott will teach this at least twice more, once in October and once in 2012. The class they taught six months ago was different than this one, and I suspect so much will have changed that October’s class will be different as well. (E-mail Dean on his site if you’re interested.)
Being surrounded by talented people gung-ho about their work and the various possibilities of indie publishing excited me. We also talked about the benefits of traditional publishing versus the benefits of indie publishing so I was already thinking about that when I heard from my friend George R.R. Martin on a different e-mail list.
George announced that last week his brand new Song of Ice and Fire novel, A Dance With Dragons, became the bestselling fiction book of 2011. Not the bestselling fantasy book. The bestselling fiction book. The distinction is an important one and one that few authors besides J.K. Rowling have achieved. (In addition, Game of Thrones, the HBO series based on George’s book of the same name, got nominated for 13 Emmys that same week. That’s really outside the purview of this little blog post except that I wanted to say publicly, “Go, George! Yay!”)
George’s U.S. publisher, Bantam Books is—and has been—doing everything right with this series. George and I were both at BEA the year that Game of Thrones came out, and Bantam made poor George sit in a gigantic throne while doing some of his interviews and signings. The initial hardcover of that novel had an awful cover, and all the book reps complained about it, so Bantam gave the book a new cover.
George’s editor, Anne Groell, patiently (or maybe not so patiently) nurtured him through each book, getting him from novel to novel. And Bantam did the proper promotion and support when each novel came out (something the very same company was not able to do with my Fey series—partly because I had four different editors on that series before Anne took it over, so there was no consistency in-house).
On George’s series, traditional publishing has worked very well, including all the work the house did this year, with new covers timed and released to coincide with the HBO series. All of Bantam’s marketing efforts dovetailed with HBO’s efforts, which is exactly how it should be and so rarely is. (For example, a different publishing company completely dropped the ball on my friend Rob Sawyer’s novel FlashForward, getting the book with the tie-in cover out months after the TV series premiered and the Hollywood publicity had already ended. Rob saw a bump in sales, but not nearly as good a bump as he would have gotten if his publisher had actually planned ahead.)
I wanted to point out to you how wonderful traditional publishing can be at this megalevel, particularly when everything goes right, as it is for George at the moment. No indie publisher can hope to match all the time, resources, and money that Bantam has put into A Dance With Dragons this year. No self-published writer has these deep pockets. (Although we’ll see what’ll happen if J.K. Rowling decides it’s worth her time to do her print books as well as her e-books. She’ll have the deep pockets to match [or exceed] her publisher’s.)
Traditional publishing doesn’t just handle the multi-multi-million-dollar books well; it can also handle other bestselling titles well. For example, the book whose release I was looking forward to on July 12 wasn’t George’s (sorry, George), but a hardcover romance. The only reason I knew that novel was coming out was because of the publicity the traditional publisher had done on the book’s behalf. I had pre-ordered the book and it had show up, on time, in my mailbox.
In fact, if you’ve heard of an upcoming book and think it sounds interesting, even if you’ve never read anything by the author, then chances are the book is a bestselling (or bestseller-wannabe) from a traditional publisher. When they put their money behind a product and get the books into stores, then the books do well.
It’s the second part that gave me pause this week, however, because as you all know Borders has decided to dissolve. The remaining stores, all 399 of them, and the remaining employees, 10,700 of them, will be gone by September. You’ve probably read a dozen articles on this, but in case you haven’t, here are a few more. (The New York Times, Forbes, Washington Post)
Book publishers have suspected that Borders would liquidate for seven months or more. Some gambled and still sent books into that mess, forcing Borders to pay cash for the books. But others stopped sending books to Borders altogether. Some publishers have managed to get money out of Borders since January, but most haven’t.
The main financial squeeze that Borders will cause to the publishers on already delivered material has already happened. In fact, the pinch occurred in the first quarter, when several of my publishers (from short story publishers to novel publishers) delayed payments as they swallowed their losses from Borders.
But the bigger problem with Borders’ liquidation is upcoming. Some of the articles mention this; others do not.
The problem is the decreased shelf space. Think it through, my reading friends. Suddenly 399 bookstores are vanishing, with no replacement in sight. I asked Dean, my math guru, how many book slots were disappearing. A book slot is the place on the shelf that takes books. It’s easiest to see in grocery stores. Those little racks that show books face out hold five copies of a 100K novel or 2-3 copies of a fat novel like George’s (that’s why books that are significantly longer than 100K either have teeny tiny type or a higher price or sometimes both. You have less room to display the copies). With Borders disappearing, all of its book slots are going with it. All of them.
Dean looked at me when I asked the question, frowned, and said, “Are you kidding? I don’t know. Lots and lots.” Which for my technical former math major husband was both incredibly imprecise and terribly expressive at the same time.
Lots and lots of them.
Here’s the problem beautifully stated on Twitter by Kathleen Schmidt, a book publicist: “Here is how the Borders closing will impact publishers: Say you have a bestselling author and you usually do a 1st printing of 100K books. Out of that 1st print of 100K, B&N/Amazon would take a large quantity, then Target, maybe Costco/BJs/Walmart, then Borders, then indies. If you’re an author with a 1st print of 30K (a lot), you prob don’t have price clubs or Target. You have B&N, Amazon, Borders, and indies. Now, take Borders OUT of the 1st print equation. Also consider that B&N is conservative with numbers these days. That 30K turns into 15K.”
I found this quote in a good analysis piece on NPR’s book blog. As Rachel Syme, the author of the blog, added, “Granted the reduced print runs for books doesn’t mean fewer books will sell, but Borders closing does have a huge effect on how many physical copies will be out in the world….There is no other outlet big or solid enough to absorb the blow; there is nowhere else for all those paperbacks and hardcovers to go. The most logical thing to do is to stop printing them.”
All good points. But the third quarter of 2011 is going to be worse than most traditional publishers realize. As I said, all of the traditional publishers started to prepare for Borders liquidation in January. It may not have been a conscious preparation—I’m sure some companies firmly believed that Borders would end up getting purchased, or make some sort of sweetheart deal that would take the company into a reorganization bankruptcy instead of a liquidation bankruptcy. But that didn’t happen.
The third quarter will be bad for one reason no one is considering: the debt limit negotiations. Right now, Americans are fully aware that their Congress critters are fiddling while Rome is burning. Retail sales (and other sales) across the board are down while everyone pauses to make sure Rome isn’t going to be leveled. We remember the downturn in 2008 too clearly to make that mistake again. Folks are hanging onto their cash right now.
This after the high gas prices in the spring tightened spending as normally disposable income went into fueling the car for the commute to work.
Those things, however, would be a blip on the publishing radar if it weren’t for something that is happening this month that most people in traditional publishing don’t even know about.
Barnes & Noble issued an order from its corporate headquarters that it wants its stores to once again decrease the number of paper books the stores are going to carry. I got this Facebook message from a Barnes & Noble employee in Minnesota on July 10.
“We were notified at our B&N location this week that in the next couple of weeks we will be receiving a ‘massive returns download.’ To coincide with this outflux of books we will be adding 3 more of the massive toys and games displays, as well as expanding gift and the digital presence.”
This B&N employee isn’t the only person who notified me of this, but he is the one who gave me permission to use the quote, and (I assume) his name. But I’m holding his name back because jobs are hard to come by these days, and I don’t want someone at B&N corporate to jump all over him if he’s not supposed to be talking about this.
I told this to a group of pro writers shortly after he contacted me, and these writers didn’t get it. They didn’t understand that “a massive outflux” of books will probably include theirs, as well as those of many, many, many bestsellers.
What this means is that in the third quarter, just as traditional publishers are absorbing and dealing with the last of the Borders blow from the winter, they will get hit with a massive number of returns from Barnes & Noble.
For those of you who don’t know about this little quirk in the book industry, a bookseller can return a book for full credit to a major publisher. Generally, to deal with this quirk, traditional publishers print two books expecting to sell one. (To understand how this returns system came about see my post “Challenges For Big Publishing”) Suddenly, in July, both books will get returned—the expected return (book number one) and the planned sale (book number two).
So expected revenue will decrease dramatically, not counting the decreases from the price clubs (Target, Walmart, Costco, etc) because of the tight-fisted consumers this summer.
And, to make matters worse, this one-time outflux of books from B&N includes a decrease in shelf space. I have no idea how many book slots will be lost, but I can tell you that it’s a significant number of them. B&N already looks like something other than a bookstore. Now books will be a peripheral product at best. (See my post “Bookstore Observations” and the comments to understand more on what’s happening here.)
Yes, yes, as everyone is saying, this will drive more readers to digital and for me, and writers like me, this is a good thing. But remember that 70% (at least) of all readers want paper books instead of digital books. Those readers will have fewer and fewer outlets to find those books.
One article I read said this will drive readers to used bookstores. Sure, it will, but it won’t solve the problem mentioned by Kathleen Schmidt above. There will be fewer paper books coming from traditional publishers. This means that there will be fewer paper books traded in at used bookstores.
Instead of 30,000 copies of your favorite midlist writer’s favorite book, the traditional publisher will only print 15,000 (to use Schmidt’s numbers). That means that there are only 15,000 to spread to all of the used bookstores in the nation when the initial purchaser is done reading. And we readers all know that we trade in some books, but we keep others. So in reality, for a really good book, there will be only 8,000 to 5,000 copies available in used bookstores.
Why does this matter? 70% of readers read paper, remember, and they need that gateway drug, some book to introduce those readers to that writer. With fewer and fewer copies in new bookstores, and fewer and fewer copies in used bookstores, how will the bulk of readers discover an author who is new to them? Not a new author. But an author new to the reader.
Let’s go back to Bantam Books, Game of Thrones and my Fey series. Why did the consistency of editor matter? Because I got orphaned (lost my editor) again between books 3 and 4 of the series. Book 4 never went back to press when its initial print run sold out. Once notified of this, an editor would have made sure the book got another printing. But because no editor knew, there are fewer copies of Book 4 of a five-book series than any other title in that series. What did that mean for Book 5? Lots and lots of potential readers never got to it because they couldn’t find book 4. How do I know they even wanted book 4?
Because within six months of Book 4’s publication, the five-dollar paperback was selling used for twenty dollars and up. For a while, Book 4 was selling for $400 online. That means there’s demand for the book, demand that the publisher wouldn’t fulfill. Because there were only a small number of copies, each one became precious to the reader and the book became hard to find.
Because the book was hard to find—and it was in the middle of the series—the series died.
Something similar is going to happen to midlist series authors over the next two years. But it’s also going to happen to all midlist authors who are working through traditional publishers. Some traditional publishers will account the loss of Borders in their calculations for next year’s print runs (something they’re doing now). But most won’t factor in this massive return and loss of shelf space from B&N, nor will they look at what’s going on in the overall economy. They will blame the author.
(Think that doesn’t happen? I know of a bestselling author who had to rebuild her career because her book debuted on September 11, 2001. Her book appeared, but for some reason she was bumped off all media that week (duh) and there were no book reviews. The book sold one-tenth of what her books usually sold. Her publisher blamed her for writing a crappy book, decreased her advance on the next book, and it took her career three years to recover—for something that came in from the outside, that had nothing to do with her or the quality of her book. These things happen all the time, just not as dramatically as they happened to her.)
So I was going to write a piece this week about how traditional publishing is getting it right for George and for others like him. But with all the events this week, I find myself wondering if George’s record—being the bestselling fiction title of 2011 might translate into 2012 and 2013 as well. He might hold the record for a while, not just because his books are good, but because of the flux in the industry.
By 2015, the shake-out will be complete. We’ll have new (and different) brick and mortar places to buy paper books. We’ll sell a lot of e-books. We’ll be comfortable in the new normal, whatever that may be.
We will see a lot of change in the industry between now and then. We’re already seeing it. I didn’t even mention the two smaller publishers I know of who are telling their authors and employees this week that the house is going out of business or the publisher I know that is having such severe financial troubles that I don’t expect that publisher to be in business at this time next year.
Publisher’s Weekly published a list of the top publishing companies in the world in 2010—and, by the way, there were more than fifty of them on that list, not that stupid Big Six thing people always talk about—and in that article, also listed the profits the companies made. I suspect profits will be down considerably in 2011, and the list PW publishes in 2012 will be quite different than the 2010 list.
Some publishers will survive, and some won’t. And some might vanish because of circumstances outside of publishing altogether. For example, if I were a HarperCollins writer right now, I’d be closely watching the Murdoch scandal. HarperCollins is part of the Murdoch Empire. If that scandal results in a break-up of the Murdoch empire, and HC isn’t making a good profit, HC could get sold off or closed as part of the break-up. Just sayin’ now’s the time to pay attention.
If you’re a traditionally published author, expect a disappointing royalty statement for the six months covering the third quarter of 2011. Expect to hear doom and gloom from your traditional publishers. But remember, things are changing—and they’re changing for everyone. If your publisher blames you for the decline, look at that statement with a jaundiced eye. Realize that everyone will sell fewer copies through traditional venues in this quarter.
It’s a tough summer, but we’ll get through it. In the meantime, a lot of good books just hit the stands. If you’re worried about your favorite author making it through this quarter, buy her books. And give some away as gifts.
Because really, that’s what it comes down to—book sales. If we can afford it, we need to buy the books from our favorite authors—and keep looking for new authors to read. Just because you can’t buy the books through your usual outlets any more doesn’t mean you should give up reading. It just means you might have to change your habits.
Borders and B&N are forcing us out of box stores. So go to the independent stores. Order online. There’s a bunch of new ways to find books. We readers just have to be a bit more proactive now than we were in the past—and that’s probably a good thing.
The observant among you probably noticed that I hadn’t had a little italicized section for the last few weeks. I was experimenting. I wondered if people would continue to donate if I didn’t point out the donate button. And while a few folks continued to donate (thank you!), the donations dropped off significantly. So I’m back to remind you that I make my living as a fiction writer, and each Business Rusch post I write takes time away from my fiction writing. So please, if you’re getting something out of the blog, help fund my nonfiction habit. Thanks so much.
“The Business Rusch: Third Quarter Blues” copyright 2011 by Kristine Kathryn Rusch.