The first step in saving publishing is to understand what’s wrong with it, and many insiders say the way in which books are printed is the fundamental problem. “Ever since Gutenberg started printing books centuries ago, the book-publishing industry has been based around the simple idea that you print the book first and then you try to sell it,” says David Taylor, president of Lightning Source, the world’s leading print-on-demand and distribution company. Headquartered in Nashville, Tenn., Lightning Source aims to turn publishing around by allowing publishers to sell books before they print them. Publishers currently use economies of scale to reduce the per-unit manufacturing cost of producing a title by printing books by the thousand and then shipping them to bookstores and warehouses all over the world. That means for every title you see on a bookstore shelf, someone essentially had to guess how many copies the world might want. Of course, many factors help in determining the size of the print run (such as past performance of similar titles and advance orders submitted by wholesalers), but ultimately it’s a crapshoot.
The cost of manufacturing is just one factor that contributes to the book’s suggested retail price — and anyone who has bought books recently knows that suggestion is often ignored — especially by large retailers. Jason Boog, editor of the GalleyCat blog on Mediabistro.com, recently had a front-row seat to last fall’s pricing war between Amazon.com and Walmart. “Walmart lowered the price of prerelease copies of what they anticipated to be best-sellers to below $9.99, which is an unthinkable price for a hardcover book,” says Boog. Amazon.com responded by lowering their prices even further, and then it became what Boog calls “a shooting war.” The prices bottomed out around $8.99, he says, for a product that publishers recommend sell for around $25.
High-volume retailers like Amazon.com, Barnes & Noble, Borders and Walmart can sharply discount books because they often buy more copies (and at a volume discount) than independent booksellers do. Since everyone plays his or her cards close to the vest, it’s unclear how these discounts have affected publishers, but the practice is hitting small bookshops especially hard. Boog speculates that the chains are using the discounts to attract shoppers, hoping that they’ll buy other items while they’re there. And independents have started offering even lower prices on used books. In the past, Powell’s sales tended to split equally between new and used books. These days, new-book sales account for only 40 percent of their business. The lost 10 percent is from high-margin sales, and although used-book sales have grown — and at a better margin — there is still an impact on the bottom line.
Experts also point to the industry’s unique “returns model” as publishing’s most critical problem. After books are shipped to stores, sellers are allowed to return unsold copies to the publishers, absolving themselves of much of the risk associated with stocking books. This Depression-era contrivance was originally devised to encourage stores to stock books they couldn’t otherwise afford. But over the last 80 years, the practice has gone mainstream, and it’s now a publishing-industry standard. When unsold books are returned, they’re resold to discount stores for pennies on the dollar — or worse, they’re pulped.
“The returns model is crazy for book publishers, and everyone has always said it was crazy,” says Esmond Harmsworth, a literary agent who has represented authors for more than 15 years. “Whenever someone comes from another industry and becomes the head of a major publishing company, they’re always shocked that that’s how everybody does business.”
With the exception of the recent price wars, this is how publishing has operated for decades, despite the technological advances. The reason for this, says Richard Nash, is “terrible inertia” and a “profound aversion to change.” An editor turned publishing consultant, Nash runs a blog (www.rnash.com) that has the ear of the industry. And he’s backing up his talk with a startup venture called Cursor, which intends to build a portfolio of social, niche-publishing communities. “The old supply chain of publishing is disintegrating, basically collapsing under its own weight,” he says. “But if you’re willing to do something new and different and to take some risks, it’s a fabulous time to work in publishing.”
Nash isn’t alone in capitalizing on the opportunities. Forrester Research estimates that device manufacturers sold three million e-readers in 2009, with 30 percent of sales coming in the holiday season alone. Meanwhile, more books than ever are now being printed on demand through companies like Lightning Source, which prints more than 1.4 million books a month, and most of them are single copies. “The changes hitting the industry are the biggest since the invention of the paperback,” says Harmsworth, “but people are not exactly sure what the big change is.”
Perhaps it’s the ability to buy books wirelessly through e-readers like Amazon’s Kindle. Many experts say that 2009 was the year that the Kindle caught on, says Jason Boog, and this year a broader range of devices, like Barnes & Noble’s Nook e-reader, continue to usher in the long-promised digital-book era. Yet despite e-readers’ success, publishers are still lukewarm about the prospect of switching from paper to pixels. “They’re very excited about the fact that there’s a new wave reaching readers,” says Boog. “But there’s a lot of fear and trepidation as well, because it’s going to change the pricing scheme very dramatically.”
For example, Amazon currently sells best-sellers on the Kindle for $9.99, which is a loss of revenue designed to lure readers to invest in a Kindle. Meanwhile, efforts to sell books on the device for more than $10 have been met with boycotts from customers who refuse to pay the same amount for a digital book as for a physical book. And though e-books currently account for only three percent of copies sold, publishers fear they will cannibalize physical-book sales, which in turn would further hurt bookstores. In fact, last fall, Stephen King delayed the e-book release of Under the Dome to give independent bookstores a better chance to compete with the lower-priced e-book versions. “All the guys in ties want to talk about is whether a new delivery system is going to work,” said King in an interview with the Wall Street Journal. “Nobody seems to care about the book.”
While King’s sentiment is earnest and thoughtful, it isn’t exactly accurate. Nash, for example, describes the hardcover book as a “fetish object,” likening it to vinyl records and the way that audiophiles revere their sound. “The book is tremendously culturally pregnant as an object,” he says.
Also, despite the fact that most print-on-demand books are ordered online, Lightning Source’s Taylor doesn’t see websites deposing brick-and-mortar bookshops anytime soon. “To suggest that it’s going to replace the act of going into a bookstore and finding a book by serendipity … [that’s] not going to happen,” he says. “People still love going into bookstores, and I think people will still do it for the foreseeable future.”
But perhaps no one cares about the physical book more than Jason Epstein, the legendary editor widely esteemed for inventing the trade paperback in the 1950s. In 2003, he paired with Dane Neller to found On Demand Books, a company that, for the past seven years, has been developing the Espresso Book Machine. The equivalent of an ATM for books, the Espresso can print, bind and trim a 300-page paperback book in fewer than four minutes. It’s taken nearly 10 years to refine the machine’s quality, physical footprint and price, but On Demand expects to have 40 machines in operation by the end of this year.
“This year will be a building year for us,” says Neller. “We’re holding the reins a little bit because we want to get the customer happy with the machine, get content, build the platform and not grow too rapidly. But I would say 2011 [and] 2012 will be very important growth years for us.”
Since the first Espresso Book Machine was developed, the machine has gone through two smaller, faster and less-expensive iterations. It has produced books in venues including the Royal Library of Alexandria, Blackwell’s Bookshop in England and the New York Public Library. On Demand has cut content deals with Google and Lightning Source, through which it gained instant access to more than a million titles.
Yet, regardless of how well the machine works, its biggest barrier to adoption is the book industry itself. Readers foot the printing bill when they buy an Espresso book. So, from the publishers’ perspective, says Nash, the Espresso dramatically reduces the amount of capital needed by a publisher to produce a book. The machines currently cost around $97,000 and can be installed anywhere, but the price tag is an overwhelming investment for a small bookstore. “It’s an incredibly cool notion that you can walk into a bookstore and essentially have access to any book ever printed,” says Powell, “but the economics certainly aren’t there yet. … [Publishers] can’t just package their risk and hand it off to someone unless there’s no other alternative.”
Yet if publishers continue as they have for the last year, there may be no other alternative: There may be no more books. Decades of disparity are staring down a slew of possible solutions, and if there is to be another chapter in the history of books, the guys in ties need to find a way to make it work. “Everyone’s role will be questioned,” says Harmsworth, “because nothing will be done as it was before.”