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Richard Curtis on
Publishing in the 21st Century

by Richard Curtis

PART ONE
AT THE END OF THE MILLENNIUM
(first published in Backspace
http://www.bksp.org)

Like a world held between the gravitational pulls of two stars, the publishing industry is suspended between two great paradigms. One is the familiar industrial model built around tangible objects: bound volumes of paper manufactured on printing presses, warehoused in depots, transported in vehicles and sold in stores; the other, newly born, can be described as virtual. The sun of traditional publishing and bookselling has illuminated and warmed us for a millennium, but it is unquestionably fading, while the other, fueled by the prospect of direct communication between authors and readers independent of physical means of manufacture and distribution, scintillates with possibilities. In the balance lies the fate of one of civilization’s most precious artifacts, the book.

How is the transition from one system to the other affecting authorship today? What challenges can writers expect in the next few years? Is it possible to plot a course using coordinates that are not yet precisely fixed? In this series of articles I would like to describe the old and new models and speculate on how the roles of authors, editors, literary agents, booksellers, and even readers are changing – or must change – to adapt to evolving conditions.

A Dying World

The best way to understand the differences between the two paradigms is to analyze the ways that traditional texts are distributed versus electronic versions. Looking unsentimentally at the publishing process, it is essentially one in which the writer’s text is delivered to the reader by means of a distribution medium. The process adds value to the work, converting a collection of words into a product for which money can be charged.

Printed books today are published and distributed through an industrial complex consisting of brick and mortar editorial offices, printing plants, warehouses, and retail stores. After being edited, the author’s text is printed and bound. The physical object called the book is then transported from station to station in fossil fuel-powered vehicles. These peregrinations add cost to the original text and they are supposed to add value.

Whether they add value any longer has become debatable.

The distribution model of the book industry is a consignment one. Books are returnable to publishers for full credit, meaning transportation of books back through the chain of brick and mortar stations from whence they came. This practice was originally created as an admirable incentive for booksellers to take chances on new writers. Most other manufacturing processes place the burden of disposing of unsold goods on the retailer, such as in-store sales at increasingly high discounts. Not so for publishers.

For most of the twentieth century a modest and stable rate of return stimulated the book industry’s growth. In the 1980s and ‘90s, however, the return rate for trade books (fiction and nonfiction of general interest) began to soar to unprecedented levels of fifty percent and even higher. One does not need an advanced degree in business to perceive that it is almost impossible to make a profit selling one unit of a product for every two manufactured, especially when the manufacturer is compelled to fully refund the purchase price to the customer. Indeed, it is hard to imagine a less efficient delivery system.

As cash grew shorter and shorter, publishers developed strategies to raise more of it. One was to pursue branded authors who could guarantee profits. This strategy seemed sensible in theory but failed in practice as shrewd agents demanded and got huge prices for their household-name clients, guaranteeing only that that many authors would get rich while their publishers lost money or at best broke even.

Other publishers sought mergers with larger houses or rich conglomerates in the hope of becoming major players in the bidding for those household-name authors. Like many a chemical reaction, this approach generated much light and heat, but as time went by the new entity found itself hobbled by the same cash flow problems that had triggered the merger, only on a larger scale. This insatiable hunger for capital led to a new round of acquisitions, and this time not of marginal presses but of giants like Simon & Schuster, Doubleday, Macmillan, Putnam, Warner, Harper, and St. Martins.

In the process, the unique personality and culture of each company that succumbed were destroyed. Those executives fortunate enough to survive the acquisition found themselves in a surreal corporate culture that seemed to have little to do with the values that got them there. Editors became disenfranchised as they lost touch with the wonderful and mysterious process by which art and literature are created. Many left the industry, to be replaced by editors whose mandate was to acquire books and authors that would guarantee high sales. This emerging culture can be characterized by what was aptly described as a blockbuster mentality. It has become the prevailing one in today’s book business.

Authors, too, became disenfranchised as they confronted a world that rewarded bestsellers prodigiously while giving short shrift to newcomers and modest performers. Publishers could no longer afford to carry promising new writers until they justified the investment with a breakout book. Authors were now expected to hit the ground running with perfectly crafted, highly commercial hits. An agent I know, asked by a brilliant but penniless author how he was supposed to support himself until he completed his breakout opus, advised him, “Drive a goddam taxi.”

Had the plethora of mergers and acquisitions that shrank the number of publishers to a handful of behemoths achieved a literary renaissance, perhaps we could rationalize that it was worth all the turmoil. But it did not. After each consolidation the patient continued to hemorrhage. It became obvious that gigantic publishers hemorrhage the same way that tiny ones do; it’s just that gigantic publishers have more blood to lose and the losses can be disguised in the financial reports of their parent companies.

Like many a dying patient, publishers have lived in denial about the underlying cause of their chronic losses. Yet, the reason has been in plain sight all along: the returnability of books is killing the business.

A New Form of Currency

Fear of provoking Federal antitrust prosecution inhibited publishers from combining to combat the practice of returnability, even though it was draining the vitality of the industry. What was worse, the vested interests of the retail bookstore business insured that the system would never change. Powerful chain store entrepreneurs shrewdly recognized that returns are a form of currency and found a way to systematically manipulate them. Instead of paying cash for new titles, the chains simply returned slow-moving stock and applied the credit toward the purchase. No money changed hands – just paper.

Deprived of capital, publishers developed their own way of manipulating the currency of returns. They achieved this by withholding royalties from authors. They figured out that they could defray their overhead by holding author money for long periods of time in order to offset possible returns. The higher the percentage of royalties “reserved” against returns and the longer those reserves were held, the more interest publishers could earn.

The returnability of books was originally created as a good will gesture. Since then, the currency of returns has been debased, pitting booksellers against publishers and publishers against authors in an atmosphere of distrust and anger. In short, the old system has become corrupt and dishonest.

The New World

Towards the end of the twentieth century, advances in computer technology and telecommunication offered thrilling vistas of a new way to produce and deliver texts to reading audiences. The maturation of digital word processing, email correspondence, Internet commerce, cell phone communication, and miniaturization of computers provided a climate in which development of e-books could go forward vigorously. A generation comfortable with computers and Internet navigation had evolved for which the idea of electronic books seemed like a natural step. The meteoric ascent of amazon.com provided an attractive business model for online bookstores.

Although development of a viable handheld e-book reader proved more challenging than visionaries had projected, the eventual perfection of such a device and its adoption by the mass market was taken for granted by most futurists. Their optimism was bolstered by growing investment in research and development fueled by the economic boom of the 1990s. Towards the end of that decade these streams converged, and if any year could be celebrated as the official start of the digital book era, it is 1998.

In that year, breakthroughs in two initiatives were announced.

E-Books

The first introduced to the public a prototype of the portable electronic reader, the Rocket Book. Though crude (it would eventually be succeeded by far better devices and delivery systems) the mere thrill of downloading a text from a remote server and “navigating” it on an “e-book” had a galvanizing effect on authors and publishers alike. When, not long afterwards, bestselling author Stephen King self-published a novella and offered it for sale on the Internet, any publisher still in denial about the potential of e-books as an alternative publishing model woke up with a start.

Though initial giddiness about an e-book revolution was to prove premature as technological problems and business realities plagued progress, the impression nevertheless was indelibly imprinted on the consciousness of anyone connected to writing and publishing: a day would come when books would be read on a palm-sized reader.

Until that day, the reading device of choice was still the traditional book, and with all its faults there was still money to be made in publication of the good old bound and printed version -- if only a more efficient way could be developed to distribute it. Enter the second technological marvel, the process called print on demand.

Print on Demand

Until the introduction of “POD” in 1998, the basic process for printing books had not varied from the model that prevailed for many centuries. Speculating on customer demand for a book, publishers printed a certain number of copies, distributed them through booksellers, and warehoused the unsold stock until the time came to replenish bookseller supply through another printing. As the book trade developed in the twentieth century, profits on sales were augmented by revenues generated by the licensing of subsidiary rights such as book clubs, reprint editions, and translations.

Though book marketing has never been particularly efficient, post-World War II publishing seemed to flourish and promised to continue flourishing as long as returns were held to modest levels. But returns grew like a cancer. The cure? Print on demand.

How does POD work? Computer-readable files of a book’s text, cover, and illustrations if any, are stored on the printing company’s server in such formats as Quark or PDF. Unlike traditional books requiring print runs of thousands of copies and storage in warehouses, POD is capable of printing a few copies or even a single one for specific customers.

In a POD transaction, a customer orders a copy from an online retailer like amazon.com, charging the purchase to a credit card. The book is then printed and drop-shipped to the customer. The sale is final; unless the book is damaged it is not returnable. Though the cost of printing one copy is higher (as of this writing as much as four times higher) than that of a single unit of a conventional print run, there is no waste whatsoever; the “sellthrough” percentage -- the ratio of books actually sold to books shipped -- is 100%.

But it was not just the efficiency that inspired almost hysterical hyperbole among publishers who had seen POD in action at the publishing industry’s annual book expo in 1998. It was the realization that the process enabled them, entitled them, to keep books in print in perpetuity. No longer would publishers have to return to authors the rights to their books on the grounds that it was too costly to issue and warehouse new printings.

Author? What’s an Author?

The technological breakthroughs of e-books and print on demand stunned the publishing community. It was as if the magnetic poles had shifted leaving everyone connected with books utterly disoriented as a new millennium dawned. Suddenly we were confronted by perplexing questions and paradoxes: In the coming age of disintermediation – of direct delivery of texts from author to reader – exactly what function will publishers serve? Will editors have anything to edit? Will bookstores and libraries be necessary? How will readers know what to read? Will agents be relevant? Most disturbing of all, as technology empowers authors to perform all the roles traditionally undertaken by publishers – printing, distribution, and publicity – will they still be able to define themselves as authors?

Many of these questions will be resolved as we progress towards a virtual future. But because we are still controlled by the gravitational pull of traditional publishing, there are far more urgent issues at hand. Can authors succeed in an environment that punishes modest sales performance? How do editors balance their need to nurture literary endeavor against the intense pressure to acquire blockbusters? What strategies are agents employing to introduce new talent into a contracting marketplace?

In the next installment of this series we’ll explore the current ecology of publishing in the twenty-first century. >>Read

All the best,

Richard Curtis

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