Business Musings: Supply and Demand (2020 in Review)

Since I’ve decided to take on a review of 2020 and its impact on the publishing industry, I have been reading many articles I bookmarked but skipped during this long horrible fall. Some of the information is, as I thought, overwhelming. I haven’t yet begun to synthesize it all. (I will. I promise.)

I’m starting the in-depth pieces with the supply chain because, in a discussion at the Bookseller’s online FutureBook conference, the CEOs of the Big Five publishers in the U.K. stated categorically that the biggest challenge of 2020 was the supply chain.

Okay, I get a bit squidgy when I write that sentence because seriously, the biggest challenge of 2020 was keeping people from getting ill and dying. But I have to remember that we’re talking about the industry here, not Real Life. (Sigh.)

I suppose those CEOs are right, on some level, but as usual, traditional publishing misses the big picture. Let’s talk supply chain first, though.

Traditional publishing is a B2B  business—meaning that their sales model is business to business. They’re selling to retail outlets, from Amazon to the local independent bookseller to the remaining department and grocery stores that take books. Traditional publishing has not been a business that sells direct to consumer for more than 100 years.

So when they say the supply chain is or has collapsed, they mean they cannot get their product to the business that will put their product on the market for the consumer.

Indie publishers (and by that I mean self-published authors and people who are publishing their own works as a business) are, for the most part, B2C businesses. They sell direct to the consumer.

Hence the understanding of supply chain is different for indies, which I will deal with later in this piece.

But let’s talk overall supply chain for the moment. It’s shredding everywhere.  Yesterday, I overhead a phone call Dean was having with a furniture company here in town. We bought a new sofa and loveseat in September, along with two ottomans. We took the sofa and loveseat off the store’s floor. The store promised to get us the ottomans within 30 days.

Exactly three months later, Dean was on the phone with them again, only to have the manager tell him, again, that the problem is with the manufacturer. Apparently, furniture sales are up 30% around the country (we weren’t the only ones who decided to make our living room a bit more comfortable), and production is down due to the virus. More sales, less product equals a massive supply chain slowdown.

The morning I write this was the day that Tom Cruise’s rant about COVID procedures on the set of Mission Impossible 7 went viral. What I find striking about this is not his tone. (We can argue appropriateness of an out-of-context expletive-laden burst of anger another time.) What I find striking is the underlying panic in the fury.

The supply chain has broken terribly in the movie industry. As I write this, we’re ten days away from Wonder Woman 1984’s premiere in theaters and streaming. Theaters were the supply chain for first run as recently as ten months ago. They might never be again.

For a while it seemed like the supply chain for books might have been similarly broken. Bookstores (which I will deal with in a later post) closed in March and April, and some are still closed. As I write this, the bookstores in many European countries are closed. Paris’s mayor, Anne Hidalgo, wanted bookstores declared essential services, and she asked that stores remained open. Some authors wanted to pay the fines of bookstores that defied COVID rules and didn’t shut down.

Should COVID lockdowns begin again here in the U.S. (and frankly, I’m startled they haven’t), bookstores will be shuttered here as well. Any bookseller who hasn’t pivoted to online sales is in trouble now.

But the supply chain isn’t just about shipping books to bookstores. There’s the manufacturing side. The number of printers who handle large book orders (such as a bestseller) has dwindled to next to nothing. It got so bad that Bertelsmann, the parent company of Penguin Random House, bought Quad Graphics Book Manufacturing facilities at the end of October.

Like every other manufacturing business, though, the production of paper books has slowed dramatically. Covid procedures in every single manufacturing industry mean that fewer people are taking more time to create whatever the product is—because things need to be revamped or swabbed down or built behind plexiglass or whatever a particular industry needs.

The traditional book publishing industry, which really didn’t have enough book manufacturers or retail outlets, found itself caught between a printing press and a bookshelf.

Even if traditional publishing wanted to get a lot of product out, it couldn’t. And when it did, the shelf space was not available.

Almost a decade ago now, traditional publishing got into trouble with the U.S. Justice Department for price fixing. The then-CEOs of the major publishers got together and decided to keep ebook prices high so that readers would be more likely to buy hardcovers. That’s why ebook prices for traditional books here in the U.S. are ridiculously overpriced, even now.

Traditional publishing bet everything on keeping books in paper only, and that bet bit them in the ass in 2020. Ebook sales are through the roof because people are not able—and not willing—to go to bookstores. Even late adapters are picking up ebooks now, because it’s easier to get the next book in a favorite series tonight through an ebook than it is to wait weeks to get the paper version…without venturing into a bookstore.

Because the other stupid bet that traditional publishers made, and are still making, is to consider Amazon something other than a retailer. Traditional publishers actively try to keep their books overpriced on Amazon. (Amazon’s algorithms don’t allow that.)

So as we all huddled in our homes, unable to go out and unable to find anywhere to go if we did want to go out, we ordered books off the internet.  Most of us in the U.S. ordered off Amazon. And because of the ecosystem that Amazon built for its indie writers, readers discovered a whole new group of writers whose books were easy to find and reasonably priced.

Put a pin in that thought for a moment, though, because there’s one other aspect to the supply chain, and I just mentioned it above.

Shipping. Even if the Trump administration hadn’t tried to break the U.S. Post Office, shipping would have been an issue this holiday season. The Boston Globe reported that 76% of the people it surveyed about holiday plans said that they ordered their gifts online this year. That means all of those packages have to be shipped. And shipping delays are adding up.

Once again, COVID procedures mean that shipping companies have to have fewer people working slower to make sure no one gets ill. Many companies have added workers, but don’t always have the facilities to handle the uptick.

Study after study after study has shown that people who finally venture into online ordering will stick with it. The convenience is one aspect, but the other aspect is the ease. Not everyone likes the experience of shopping. I miss the bookstore visit, but I sure as hell don’t miss going to clothing stores.

So if you’re into paper books—or you want to prop up your business model with paper-only books—then you’re running into a triple threat from 2020. Closed bookstores, slow manufacturing and slow shipping.

Readers want to read the next book now. That means ebooks. Ebook sales are a bright spot in 2020. In the early weeks of the pandemic lockdowns, Open Road Media saw its ebook sales increase 50%. According to the Association of American Publishers, which tracks the traditional publishers who make up the majority of their membership, overall ebook sales were up 16.5% in the first ten months of 2020.

That’s for the overpriced ebooks, not including most of the indie books.

I can’t quickly find how much ebook sales have increased overall (indie and traditional) in 2020. I do know that our publishing company, WMG Publishing, has seen a 30 to 40% increase in our ebook sales. Some of that is successful new releases and creative marketing, but much of that is the response of readers to the pandemic.

At WMG, we’re working harder than ever, and we’re not alone. Every indie publisher with a big inventory has mentioned how they are working harder than they have in any previous year. I’m getting wonderful letters from readers, asking for more stories in this series or that series, because the readers have finally had time to read more.

It’s not just ebooks, though. It’s the entire system. Indie publishers use print-on-demand services to publish their books, and while those services have been slow as well, they’re not handicapped by massive orders for thousands of copies of the same book. As one writer friend noted, indie books are available on bookshop.org, but backlist traditionally published books are all on back order. This is anecdotal, sure, but it’s true for my work. My traditionally published books (all backlist) are on back order, but all of my indie books are available right now.

When you’re running a B2B business, you have a serious problem when your product can’t get to market in a timely fashion. Traditional publishers have kinda sorta solved that problem for their biggest bestsellers—anticipating the sales and working ahead more than they have before—but not for their midlist and new writers. You can’t guess what the sales will be for those titles, so those writers are (yet again) getting screwed.

Indies are doing well here. Yes, many of us are selling B2B—my paper books are in many independent bookstores as well as Amazon. But you can also order paper books through WMG Publishing’s website. The bulk of my writing now is available direct to the consumer.

The bigger companies are trying to cobble together a direct-to-consumer model, but they’re anti-ebooks and they don’t have the website capacity to do so either. It takes a lot of work to get books up on websites—not as much as in the past, mind you, but enough that we have to give it a heck of a focus to make it happen.

The supply chain challenges will cause changes in the larger publishing companies, although I’m not sure what those changes will be, other than a bit more promotion of ebooks. Supply chain issues are not the major story for indie writers this year. I’m not sure what the major story is for us.

As with much of this 2020 review, I’ll have to give the major story for indies some thought. I suspect indies are grappling with something more personal than the supply chain or the local bookseller.

Going back to my original metaphor for all of 2020, I think we will see a lot of rubble surrounding the traditional publishing industry from 2020. I’m already seeing comments by agents who are talking about the way that publishers are “weeding out the talent.” (Meaning the writers. Sigh.)

I think if we do the next few years right, though, business-minded indie writers will be able to step into the void that will inevitably occur because of the problems in traditional.

More on that as I discuss the future in the 2021 posts. (And let’s hope I’m more prescient for 2021 than I was for 2020.)

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I have a lot of topics to cover as I try to grapple with this earthshattering year. I’m going to try to write all of these posts in the same week or so. You’ll be able to read all of them on my Patreon page in the next few weeks, or one per week here on the website.

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“Business Musings: Supply and Demand (2020 in Review),” copyright © 2020 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / digitalgenetics.