Reports of Publishing’s Death Are Exaggerated

Posted on Dec 7, 2012

AP/Michael Probst

By Susan Zakin

(Page 2)

What’s a publishing CEO to do? The industry’s problems are easy to understand. The contraption was jury-rigged from the beginning, and the business model is the equivalent of the QWERTY keyboard. Take, for example, the fact that bookstores can order as many books as they want and if they don’t sell, the stores can send them back to the company and get fully reimbursed. This arrangement is a relic of the Great Depression (the one in the 1930s, not the one we’re in now) and is often cited as the most obvious example of the industry’s longstanding structural problems. But there are other oddities. Book contracts are, in many cases, a shell game. The financial arrangement of “advance against royalties” allows publishers to subsidize writers, compensating for royalties that, in standard publishing contracts, can be as low as 8 percent for the first 20,000 copies of a book.

“Sometimes publishers will write a contract for a major author that says we’ll give you 22 percent, knowing it will never earn out,” publishing consultant Mike Shatzkin said. “The sharp agent negotiates a royalty that’s considerably higher than that. These aren’t always mistakes. It’s not a royalty on paper, but an advance that’s essentially a royalty.”

With accounting metafictions and antiquated baggage, how do publishers make money? One might well ask. The glaring inefficiencies of the business are offset by blockbuster sales. In fact, publishers operate very much like writers, who tend to use the last check from their advance to pay off a whopping Visa bill. So far, it’s worked. The Random-Penguin merger was driven not by ledger sheet losses but by the market creep of Apple and Amazon, both of which are far larger than any publishing company. But an overreliance on bailouts by next year’s “Fifty Shades of Grey” creates an atmosphere of fear and frustration that one observer called “toxic.”

It’s hard not to sympathize with corporate executives who are appalled by publishing’s Rube Goldberg business model. But for the last 20 years a succession of corporate players ranging from oil companies to movie studios have applied MBA logic to a business that, at its core, relies on a different kind of thinking entirely. The lifeblood of the book business consists of long-term relationships and the cultivation of talent. But the world of Big Box publishing is driven by stock prices, and if a writer’s first book doesn’t sell, she may not get another published.

“The most important thing that big publishers traditionally offered was transference of risk,” Shatzkin said. “The Big Six, probably 20 to 25,000 times a year, take the risk from an author onto themselves. That means the risk involved in getting the book ready for publication, making it, publishing it, distributing it. What’s happening now is the publisher is saying in this current marketplace I can’t accept this risk for myself.”

Publishers may improve their bottom line by ratcheting down advances, getting rid of the dreaded mid-list (books that sell less than 25,000 copies), and externalizing their costs, but Shatzkin believes this kind of tough love may weaken them over the long run. Publishing isn’t dead—really!—but in a few years, the Big Six (or Four, or the Massive Two, as one pundit predicted) may resemble a wounded mammoth fighting off a veritable Noah’s Ark of more recently evolved predators. These include not only Apple and Amazon, but feisty midsize presses and innovative startups like Byliner, which offer a direct connection between writers and their readers.

For now, most writers need a quicker fix: the credibility and decent-sized advances that only big houses offer. By default, the common wisdom these days is: “You just need to find the right agent,” as if the right agent will miraculously transform a shy introvert into a smooth-talking Master of the Elevator Pitch, plus get said introvert a movie deal. The right agent will find the right editor, the one who will risk losing her job in the next wave of corporate layoffs simply because she loves your book so much.

That’s all true, unless the marketing people use their veto power. If publishing a book is starting to sound like a sex-ed movie from eighth grade starring the plucky single sperm who outraced the other 100 million sperm (and never mind all the things that might go wrong after conception!), that’s not far from the mark.

One of the reasons literary agents have become more powerful than editors is their relative job security, since many are sole proprietors. But agents are realists, not revolutionaries. Book publishing historians consider them part of the problem. The literary agent was invented in the 1920s, an innovation that increased competition while failing to address the industry’s structural flaws. That dynamic intensified in the 1980s, when Andrew Wylie (nicknamed The Jackal) leveraged near-miraculous advances for his clients. Like the housing bubble, big advances were a fleeting high (most books did not earn out their advances) followed by a lengthy and decidedly unpleasant hangover.

These days, literary agents, though invaluable to writers, shore up the publisher’s practice of externalizing risk. They have no choice. As the bar for selling a manuscript has risen, agents do the work of editors, spending as much as a year working with a writer on revising a manuscript. Many are editors who were felled in one of the cost-cutting putsches resulting from corporate consolidation. But they don’t make any money unless the book sells, so it’s no surprise that they’ve become increasingly selective about taking on clients, which makes life even harder for writers. Some writers hire a freelance editor to get their manuscript into shape before approaching an agent. Others attend an MFA program, or perhaps two, since it can take five to seven years to write a first novel.

You could call it trickle down book publishing. Not only are agents taking on the risk of editing a book, but after the book is sold, writers are paying for their own marketing and publicity, as well as niggling things like rights to photographs and indexing. It’s like air travel in the age of print-your-own-boarding pass, and paying $25 per suitcase—standard-issue corporate behavior, circa 2012. But at least one writer who’s capable of adding up a balance sheet isn’t impressed with the results.

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