Image of a coffee cup, piping hot!
Featured Author
Jim C. Hines’ latest book is The Mermaid’s Madness, his 5th book with DAW. He hangs out online at www.jimchines.com
Featured Book
From Peacekeeper to Vigilante… Sometimes Ariane Kedros has
to do whatever it takes to protect her comrades and coworkers.
Speakers’ Bureau
Request a SFWA Author to speak at your school, library, or public event. (learn more)
Nebula Awards®
Awards for excellence in genre-themed writing and dramatic media. (visit site)
Search Site
Posts Tagged ‘Nuts and Bolts’
How Thor Power Hammered Publishing
Wednesday, January 5th, 2005
Many of us know that publishing has changed considerably over the last 15 years. More titles see print every year, but the average title sells fewer copies, and goes out of print more quickly, than its late ’70s counterpart. Advances and royalties have dropped in inflation-adjusted terms. More books become insulation and other recycled-paper products earlier than ever before.
Many of us also know that one of the causes of this change was the Supreme Court’s 1979 ruling in Thor Power Tool Company v. Commissioner of Internal Revenue.
Still, over the last 14 years I’ve encountered a number of statements that demonstrate a profound failure to understand either the ruling itself, or its implications for the publishing industry.
The most common such statement says, “Thor Power puts a tax on inventories.”
This is not true. An inventory tax, like a property tax, imposes a certain number of cents in annual tax for every dollar of inventory, regardless of corporate profit or loss.
The Thor Power ruling does involve inventories as they relate to corporate income taxes, but it does not tax inventories.
A Little Background
Companies pay income tax on their profits. Put simply, taxable profits are what’s left after subtracting all legally deductible expenses from gross revenues. The tax that must be paid is a percentage of taxable profits.
Gross Revenues
- legally deductible expenses
------------------------------
Taxable Profits
x tax rate
------------------------------
Income Tax Due
Clearly, higher deductions result in lower profits and, therefore, lower taxes.
One legally deductible expense is “COGS” (cost of goods sold) — the amount the company paid for the items that its customers bought. To determine COGS, many companies use some form of this equation:
Yearopen Additions Yearend
COGS = Inventory + To - Inventory
Value Inventory Value
American tax law lets a company set a dollar value on its inventory of either its actual cost, or its market value, whichever is lower. When the market value of an inventory item drops below its actual cost, the company can “write down” the value of its inventory to reflect the new lower value. This increases COGS, and thereby reduces taxable income.
Let’s put some numbers into the COGS equation. Assume you (1) start the year with $100 worth of goods in inventory, (2) buy $250 worth of stuff during the year, and (3) end the year with an inventory that cost you $200.
Yearopen Additions Yearend
COGS = Inventory + To - Inventory
Value Inventory Value
= $100 + $250 - $200
= $150
Now assume a different set of market conditions. Assume that even though you paid $200 for what you have in your warehouse on December 31, you can only sell it for $150. In this case, the law lets you write down your inventory. Doing this increases COGS:
Yearopen Additions Yearend
COGS = Inventory + To - Inventory
Value Inventory Value
= $100 + $250 - $150
= $200
Because COGS is a legal deduction, increasing it like this reduces taxable income by an identical amount.
Prior to Thor Power Tool, companies would often write down the value of slow-moving inventory, even when its market value had not dropped.
Their reasoning went like this: “We have 100 widgets in inventory. Each widget cost us $2. That sets the inventory value at $200. However, at the rate we’re selling them, we’ll only sell 75 widgets before they become obsolete. So, the real value of this inventory is $150 (75 x $2), because 25 of the widgets have no value at all.”
By writing down inventory, they increased COGS, and thus decreased taxable income.
The IRS did not like this, because lower taxable income means lower tax receipts. The IRS said, “Look, you still have 100 widgets. They cost you $2 apiece. The market value is over $2. Therefore, your inventory is worth $200. We will let you value it at $150 only if either (a) the market value of each widget drops to $1.50 or (b) you throw 25 of the widgets out. You can’t have 75 worth $2 and 25 worth nothing. Period.”
So they went to court.
The Supreme Court’s Decision
“In (Thor Power Tool Company v. Commissioner of Internal Revenue)…the IRS negated Thor’s practice of writing down the value of its spare parts inventory which it held to cover future warranty commitments. Thor contended that, although the sales price on the individual parts did not decline over the years, the probability of all the parts being sold decreased as time passed, and thus so did the net realizable value of the inventory as a whole. The IRS contended that a decline in inventory values for tax purposes must await actual decline in the sales price of the individual parts. The Supreme Court indicated that for tax purposes, the lower of cost or market method was to be applied on an individual item basis and that if no decline in sales price occurred, no loss should be permitted.” (Intermediate Accounting, Kieso & Weygandt, 4th Edition, John Wiley & Sons, 1983, pp. 392-393)
The Aftermath
Most everyone knows that Thor Power has had a major effect on publishing. Unfortunately, too few people know how and why the ruling changed the industry.
The short answer: Thor Power eliminated a tax dodge, and thereby made it more expensive for publishers to carry inventory from year to year. As a result, publishers have cut print runs in order to minimize inventory. They have also become quicker to dispose of inventory — i.e., pulp it — before the end of the fiscal year.
The long answer involves an example. Assume (purely for the sake of using round numbers) a publisher prints 80,000 copies of a book at cost of $1.00 per book. Assume the publisher sells 50,000 copies of that book at $2.00 apiece (we will ignore the problem of returns, here). Assume the publisher pays federal, state, and local income taxes at the rate of 40%. Remember that
Yearopen Additions Yearend
COGS = Inventory + To - Inventory
Value Inventory Value
Before Thor Power, the publisher would have said, “Well, we have 30,000 copies in the warehouse. We’ll never sell those at full price. Some, yes, but we’ll have to remainder some at 50 cents a pop, and we’ll have to pulp the rest. So really, on average, they’re only worth 50 cents each. That’s a year-end inventory value of $15,000.”
Since Thor Power, the publisher has had to say, “Well, we’ve got 30,000 copies in the warehouse. Each is worth a buck. That’s a year-end inventory value of $30,000.”
===========================================
SIMPLIFIED INCOME STATEMENT
PRE-THOR POST-THOR
Inventory
Year Open 0 0
Additions + $80,000 + $80,000
Year End - 15,000 - 30,000
------ ------
COGS $65,000 50,000
Revenues = $100,000 $100,000
-COGS 65,000 50,000
------- --------
Pretax profits = 35,000 50,000
x Tax rate .40 .40
------- --------
Taxes = 14,000 20,000
------- --------
After-tax profits $21,000 $30,000
===========================================
But wait! Isn’t the publisher doing better under the Thor rules? After all, it’s now making $30,000 on a $100,000 investment, whereas before it only made $21,000.
Well…not really. It earns that $30,000 profit only if it manages to sell every copy in the warehouse for $1 apiece. From a cash-flow point of view, that book’s first year looks like this:
========================================
CASH FLOW STATEMENT
PRE-THOR POST-THOR
Revenues $100,000 $100,000
Expenses
Printing (80,000) (80,000)
Taxes (14,000) (20,000)
------------ ----------
Change $ 6,000 0
========================================
In other words, under Thor, the publisher has had to spend $6,000 more in the first year than it would have before Thor. Instead of showing an operating profit, it just breaks even.
On the balance sheet, it looks like this:
=======================================
BALANCE SHEET
PRE-THOR POST-THOR
ASSETS
Inventory $15,000 $30,000
Cash 6,000 0
LIABILITIES 0 0
EQUITY $21,000 $30,000
=======================================
Again, one’s first reaction is, hey, Thor raised the publisher’s equity, so all the shareholders are a little richer. Isn’t this good?
Um…it would be — if it were true. But is it? Can the publisher actually sell all those copies for $1 each? (Maybe.) And even if it can, is $1 received in the year 2000 worth as much as $1 received today? (Absolutely not. Think Net Present Value — or compound interest in reverse.)
From the writer’s point of view, another danger lurks there: One measure that Wall Street uses to judge a company is Return on Equity (ROE — profits divided by equity). If the publisher’s ROE is low, by industry standards, then its stock price goes down. By raising net worth (equity), Thor has forced the publisher to earn higher profits just to keep its ROE (and its stock price) constant. Publishers thus become even more averse to “risky” books — like first novels, or works of high art and low sales.
So how have publishers adapted to Thor Power? By setting print runs closer to the level of advance orders, and by purging inventory. Here’s how the numbers look when a publisher prints 60,000 copies (instead of 80,000) and pulps the 10,000 it couldn’t sell before year’s end:
===========================================
SIMPLIFIED INCOME STATEMENT
PRE-THOR POST-THOR,
FULLY ADAPTED
Inventory
Year Open 0 0
Additions + $80,000 + $60,000
Year End - 15,000 - 0
------ ------
COGS $65,000 60,000
Revenues = $100,000 $100,000
-COGS = 65,000 60,000
------- --------
Pretax profits = 35,000 40,000
x Tax rate .40 .40
------- --------
Taxes = 14,000 16,000
------- --------
After-tax profits $21,000 $24,000
===========================================
By printing fewer copies, and physically destroying any it couldn’t sell, the publisher has locked in a profit of $24,000 and reduced future costs (primarily warehousing, but also including sales, distribution, and accounting). It has sacrificed potential profits, to be sure. On the other hand, it has improved its cash flow:
========================================
CASH FLOW STATEMENT
PRE-THOR POST-THOR
FULLY ADAPTED
Revenues $100,000 $100,000
Expenses
Printing (80,000) (60,000)
Taxes (14,000) (16,000)
------------ ----------
Change $6,000 $ 24,000
========================================
By reducing print runs and inventory, the publisher has deposited an extra $18,000 into its checking account. It has also strengthened its balance sheet with hard cash, as opposed to hard-to-move inventory.
========================================
BALANCE SHEET
PRE-THOR POST-THOR
FULLY ADAPTED
ASSETS
Inventory $15,000 0
Cash 6,000 24,000
LIABILITIES 0 0
EQUITY $21,000 $24,000
========================================
And now comes a real kicker for writers: Because this book is out of print, the publisher has an opening on its list, more cash to invest, and a serious need to replace the steady (if small) income stream that book would have generated. So the publisher must release not only the new title it would have published anyway, but a second new one, to make up for its lack of a backlist.
This results in title proliferation, which itself promotes both lower advance orders on the part of major buyers, and a higher return rate. That means writers must write more, and sell more often, in order to survive.
Is There A Solution?
Although rewriting the tax code to permit writedowns of slow-moving inventory would make maintaining a backlist slightly more attractive to publishers, we cannot return to the old ways. Title proliferation, competition for rack space, and a product life cycle measured in weeks have forced publishers to focus their resources on the future. Only a savage, industry-wide cutting of new releases and strong consumer demand for backlist titles will change things.
I am not optimistic.
____________________
Kevin O’Donnell, Jr. has been selling words since he graduated from Yale in 1972. Periodicals ranging from Alfred Hitchcock’s Mystery Magazine to OMNI have printed more than seventy of his shorter works, a number of which have also been anthologized, both in the United States and overseas. A member of the Science Fiction and Fantasy Writers of America, he has published ten books in America, and has been reprinted in Britain, France, Israel, the Netherlands, Spain, and West Germany.
Copyright © 1993 by Kevin O’Donnell, Jr. First published in the Bulletin of Science Fiction and Fantasy Writers of America, Spring, 1993 (Volume 27, Issue 1; Whole Number 119).
Tags: Kevin O'Donnell Jr., Nuts and Bolts, Thor Power
Posted in Editors and Publishing Houses, Information Center, The Business of Writing | Comments Off
1998: The State of Publishing
Tuesday, January 4th, 2005
by Eleanor Wood
Julius Epstein, who co-wrote the screenplay for Casablanca and has not received a cent of royalties over the past 54 years, recalls something the producer Irving Thalberg is purported to have said. Writers, confided Thalberg, are the most important people in film, “and we must do everything to keep them from finding out.”
As decisions that affect writers and editors increasingly seem to be made at remote corporate levels, it’s no wonder that many authors, including some science fiction and fantasy writers, suffer from a sense of helplessness. A publisher’s freeze on buying new books, decisions on whether to keep your backlist titles in print, the size of your next book’s print run, or — given the recent cancellation of over 100 books by a major publisher — whether your novel under contract will even be published: these variables can leave writers feeling like very small cogs in a very big and intimidating machine.
This state of affairs is, of course, one of the big reasons for an organization such as SFWA. For all the legal paperwork, a publishing house or corporation is essentially a collection of people whose power comes from working in a cohesive fashion towards certain commercial goals. So too can SFWA derive power from working collectively. It was through this “collective power” of SFWA, for example, that we were able to persuade Simon & Schuster/Pocket Books to pay each author a compensation fee on English language export copies of past Star Trek titles and to insure that the publisher will pay a percentage on English language export sales for future Star Trek books. The agreement was worked out in an amicable fashion, to the benefit of all parties involved.
And it is precisely because the voice of a collective body carries weight that I agreed with those who thought it important to raise objections with the publisher when Star Wars royalties were threatened.
But let’s return to the “State of Publishing” theme: what’s the book market like these days? For me, the short answer is: better in ‘98 than it was in ‘97 — and surprisingly healthy, considering 1) the staggering devastation of the wholesale market for paperback books; 2) the mergers which have led to downsizing lists as well as people; and 3) foolish financial and marketing decisions made by publishing managers who focused on celebrity books and ignored both midlist and backlist, which in truth represent the backbone of American publishing.
Well, the short answer isn’t much fun, but now I get to give the long answer.
If the question is, are people still reading in large quantities, still buying books, my answer is yes. According to The Wall Street Journal, from 1991 through 1996 annual book purchases rose to $26.1 billion from $20.1 billion, an increase of about 30%; Barnes & Noble sales for October ‘97 were up over October ‘96. It’s a natural tendency for people to recall the past as a Golden Age, to mourn that publishing isn’t what it was 6 or 7 years ago. Has the market for books declined? according to the publisher-supported Book Industry Study Group, the annual number of book units sold peaked in 1994 and has declined since then. Still, the number of book units sold in ‘96 is higher than that sold in 1991 (substantially higher for paperbacks, about the same for hardcovers). Book unit sales were highest in 1994, but the paperback revenue in 1997 (actual dollars received from paperback sales annually) climbed a slight 1.8% (excluding children’s books) from ‘96 to ‘97. Hardcover sales revenue for ‘97 fell 4.4%. Let’s consider these two figures separately, first the mass market paperback’s slight revenue increase, then the hardcover revenue decline.
The paperback market’s revenue increase is reassuring if a bit surprising, when you factor in the damage done to wholesale distribution by consolidation: over 250 small distributors, who knew their local markets (e.g. where to stock romances, where to stock science fiction) were thrown out of work. Solid writers who are not regular NY Times bestsellers — which would include many sf and fantasy authors — saw their print runs cut in half. This way of introducing an author to new readers has been severely curtailed, as supermarkets, drug stores, one-stop shopping stores and the like now carry less variety and display books by fewer authors. I’d mentioned the ID consolidation in last year’s Nebula speech: now here are a few specifics from a recent Wall Street Journal article to bring home the human cost in terms of lost jobs: “During the past couple of years, Kroger Co., a Cincinnati-based chain of roughly 1300 stores, has gone to 5 distributors from 95; Albertson’s Inc., a Boise, Idaho chain of 800 supermarkets, to 7 from about 100, and Walgreen Co., a Deerfield, Illinois company that has more than 2,000 drugstores, to 6 from more than 100.” The fact that mass market revenue climbed at all during this period of upheavals shows the strength of American readership, the success of well-run bookstores, and the success of online ordering.
Trade hardcovers had a decrease in sales, and returns were 35% (up from 32% the previous year). One recent article commented, “It has been a bad year overall for book publishers, which have paid multimillion-dollar advances to star authors, many of whose books have not sold well.” A film studio executive who became chairman of a major publishing conglomerate stated categorically, “You don’t build books anymore.” As one reporter noted, “That Hollywood-style approach — in which books that don’t ‘open’ big are quickly abandoned — is whipsawing publishers and wreaking havoc on their finances.” I am hopeful that after so many financial baths, with heavy hardcover returns, those publishing houses who have strayed from long-term nurturing of talent and supporting their midlist, will return to their core business.
Publishing has always required flexibility, and the role of imaginative publishers and editors is often overlooked. The force of the personalities involved, not just national economic indicators, tell us how healthy the publishing market really is. Bookselling can flourish in hard times, as it did during the 1930’s Depression, when Bennett Cerf was building his Modern Library list and founded a new line called Random House.
If you’ll bear with me, I’d like to take a moment to note and to honor the first printer and publisher of books in the English Language: William Caxton.
Caxton was born in Kent around 1422, studied and apprenticed in London, where he rose in the merchant’s guild and became a successful wool merchant. Appointed by the guild to a governorship in Bruges, Caxton traveled to several European cities where he learned about the movable type developed by Gutenberg. Caxton bought a printing press and published the first book printed in the English language: his translation of the Recuyell of the Historyes of Troye in 1474, followed shortly thereafter by his translation of The Game and Play of Chess.
Caxton returned to England with his printing press and soon set up shop near Westminster Abbey under the heraldic banner “The Sign of the Red Pale” — the closest we can come to the name for the first English language publishing house. There he published the first books printed in England, including the first dated book (1477), The Dicts and Sayings of the Philosophers, translated from the French by his friend and patron Anthony Woodville, Earl Rivers, brother-in-law to Edward IV. The next year Caxton published another translation by Woodville, as well as Christine de Pisan’s The Moral Proverbs, the first printed book in the English language by a woman author. That year he started publishing works by his favorite English writer, Geoffrey Chaucer — the first printed edition of The Canterbury Tales. Caxton had a passion for books. Oral language, he noted in one of his Prologues, is “perishing, vain and forgettable,” but “writings dwell and abide permanently.”
This was a time of horrendous bloodshed in England. Caxton’s patron Anthony Woodville was beheaded at the order of Richard III for trying to secure the crown for the late Edward IV’s son. To have survived these violent times with his printing press unharmed and his head still attached to his shoulders, was a feat in itself. In an age that had not yet evolved the novel but enjoyed French “romances,” Caxton published a large amount of fiction, including The Chronicles of England in 1480. Filled with fantastical stories of Merlin and King Arthur, of Albion and her wicked sisters, the Chronicles falls largely into what we would call the fantasy genre. Caxton reprinted both the Play of Chess and the Chronicles in 1482 — meaning that a fantasy genre work is likely the first English language book — and certainly the first English language book of fiction — ever to go back for a second printing.
What an exhilarating time for that first English-speaking generation able to buy and read stories, poems, histories, books on medicine, etiquette, philosophy! Thanks to William Caxton, English language publishing was set on its fiery course.
Every so often, writing styles and publishing undergo rapid changes, and the connection with adventurous publishers is no coincidence. Skipping ahead about 400 years, we find a colorful group: the publishers, editors and tramp printers of the Old West. There were successful ones like the pistol-packin’ editor Colonel Dan Anthony (brother of Susan B. Anthony), interesting failures like the tramp printer Alfred Runyon (father of Damon Runyon). These printer/publishers/editors delighted in tall tales, sentimental stories and, most assuredly, the hyperbolic insult. Their insults make some of the recent skirmishes in the Forum regarding Star Wars royalties look positively civil. For example, an 1889 Kansas newspaper called the editor of a competing paper a “lop-eared, lantern-jawed, half-bred and half-born whisky-soaked, pox-eaten pup who pretends to edit that worthless wad of subdued paper known as the Ingalls Messenger.” A gubernatorial candidate lambasted his opponent in print as “a servile, self-asserting and stupid upstart,” and the editor of The Kansas Constitutionalist called his colleague at a rival paper “cross-eyed, crank-sided, peaked and long razor-nosed, blue-mouthed, … soft-headed, long-eared, crane-necked … squeaky-voiced, empty-headed, snaggle-toothed filthy-mouthed, box-ankled, pigeon-toed, hump-shouldered” — among other names.
In this century, of course, the Western frontier gave way to the frontier of space, and those of us who have followed the ups and downs of the science fiction and fantasy market can marvel at the way a few energetic editors and publishers have made a profound impression on the sf market. Any crystal ball gaze at what publishing will be like in the near future must acknowledge that the direction and scope can be altered unexpectedly and dramatically by individuals: how could you predict ahead of time the influence of John W. Campbell or the founders of Del Rey, Baen or Tor Books?
So, barring the unexpected, what will publishing be like as we slouch towards the millennium? Well, I think we’re seeing a lot of shifting of roles in publishing and changes in bookstores. On-line author and publisher links to stores — both to giants like Amazon or Barnes & Noble, or to the specialty stores — facilitate the process of buying books and are creating a brand new kind of book browsing experience in cyberspace, not to mention chat rooms, clubs, and hangouts like Callahan’s Bar. Random House currently offers on-line ordering, and Bertelsmann has been touting its soon-to-be-unveiled cybermall. For out-of-print backlist titles, a few stores have stepped into the breach. The Poisoned Pen in Scottsdale, Arizona has published worthy out-of-print mystery books. Recently the owners of Hungry Mind Bookstore in St. Paul, Minn. have started publishing books they’d like to sell. Another bookseller who has also turned printer is The Rue Morgue Bookstore in Boulder, Colorado. The number is doubtless increasing.
In the science fiction and fantasy fields, I’d like to see the large publishers pay more attention to specialty stores. I’ve heard grumbles from publishers that half these stores are behind in paying their accounts. Well, that means half are not behind: the glass is half-full, not just half-empty. These specialty store owners for the most part have the kind of dedication that helps keep this business alive. In the long run, no bookstore or publisher can be truly successful if run by an accountant whose only oracle is his computer’s sales data. Our business needs practical folk but also booksellers fired with a love of books, people who recognize the profound cultural need served by good stories. The proliferation of printer booksellers, small presses, specialty bookstores and online marketing by the giants are all good signs for a diverse and flourishing book business.
A glance at recent fiction hardcover bestseller lists show you that just about half the titles involve historical themes. Scratch the surface of almost any science fiction or fantasy writer, and you’ll find a history buff or even a full-fledged historian. Science fiction, of course, is history — future history, alternate history, a futuristic story based on an historical analog or a fantasy that evokes a bygone age — which is one reason why the sf backlist has always been strong. Popular demand for your stories, your histories and worlds, makes you, as individuals and as a group, the dynamic repository of historical perspectives: past, future and, if you will, sideways.
I hope SFWA, in the year ahead, can help achieve more general recognition of science fiction and fantasy and will continue to benefit its members. For example, the SFWA-inspired project of the Grand Masters volumes, edited by Fred Pohl, that Tor Books will be publishing, should attract significant attention and bring together in these volumes the legacy of this SFWA achievement award. A portion of the royalties goes to SFWA’s emergency medical fund.
In one of his epilogues where he justifies printing so much fiction, William Caxton wrote, “The terrible feigned fables of poets have much stirred and moved men to pity and conserving of justice.” Your stories provide pathways to empathy with different, sometimes alien views, perspectives that weigh the moral balance — William Caxton’s pity and justice. That is part of what — collectively and as individuals — you offer the world, and it is no small thing.
[Special thanks to Penninger's Caxton's Chronicle Histories, Edmund Child's William Caxton: A Portrait in a Background, and David Dary's Red Blood and Black Ink: Journalism in the Old West.]
Tags: Eleanor Wood, Nuts and Bolts, Publishing
Posted in Editors and Publishing Houses, Information Center, The Business of Writing | Comments Off
1997: The State of Publishing
Tuesday, January 4th, 2005
by Eleanor Wood
It has become a tradition at these annual meetings for SFWA’s agent to speak on “the state of publishing.” Publishing is in an intense state of flux–which means no one has a clear handle on how to best publish books, what distribution will be like in two years, or what unexpected corporate shifts and mergers will transpire.
Most of you have probably heard how slow the market is, about cutbacks in the number of science fiction and fantasy titles per month. Some may have been affected by the skittishness of editorial heads and marketing people if the returns on your latest book were unusually high. Bookstore chains cut back on initial orders–Waldenbooks, which used to make initial orders based on an estimated eight weeks of sale, has shaved that to three!
Some of you may know the Safeway story–how one large Seattle based customer triggered a desperate free-for-all which decimated the number of independent companies that distribute books to non bookstore outlets such as drug stores, supermarkets, etc. (the so-called ID sales). Stated briefly, Safeway announced it would no longer do business with its numerous book wholesalers–only one distributor would now handle its book business. This meant breaking the “exclusive territory” franchises distributors had respected. The rules were broken, and other major accounts soon followed suit, some selling their book rack space to the highest bidder. Smaller companies were forced out, and one publisher told me that whereas there were 350 ID distribution companies in 1995, now there are less than 70. That means, for the moment, publishers can’t count on the level of ID sales they had in the past, and so print runs for most paperbacks are now smaller.
Between the ID disaster and merger mania, which after more than 15 years shows no sign of abatement, it’s no wonder that authors–and agents–look at “the state of publishing” with some degree of trepidation.
Despite the upheavals, I take an optimistic view and see present and near-future changes that are both exciting and profitable.
First, let’s look at some encouraging statistics: total sales of books in this country are up. From 1990 to 1995 total book sales rose 32%, from $19.04 billion in 1990 to $25.04 billion in 1995. Bookstore sales rose 4.1% in 1996 to $10.69 billion, according to the U.S. Census Bureau. Barnes & Noble and Borders have reported substantial increases in net income for 1997. This sales increase is led by its superstores, where sales have risen 38%. Borders gave a 12% gain in earnings in ‘97. According to Publishers Weekly, this increase is due to the superstore division.
Superstores are opening at a fantastic rate. Barnes & Noble plans to open 90 each year. Borders is opening about 40 annually. According to a Prudential Securities analyst quoted in The Wall Street Journal, this growth should continue at least through the year 2000, and the U.S. can support at least 1500 such superstores. And while Barnes & Noble and Borders are engaged in turf wars, both chains are profiting from what one journalist described as America’s “surging appetite for books.”
It’s true some small independent bookstores have suffered, and the chains, starting in 1994, now account for over half of publishers’ bookstore business. But one reason for the superstores’ success can be traced to growing changes in the nature of book buying. Bookshopping for many is no longer a dry transaction of finding the book you want on the shelves, paying for it and leaving. An increasing number of stores have made buying books part of a larger social experience–a pleasant place for browsing, for stopping with a friend for coffee and enjoying a delightful cafe atmosphere. Many stores feature book-related events which amount to evening socials. A recent article on Long Island and dating–called “Your Bookstore or Mine?”–is indicative of this rising trend.
It is, actually, a return to one of the earliest forms of commerce for books–the circulating libraries of 18th century England, where people paid a fee to rent out a book. These circulating libraries also sold small items such as trinkets, lottery tickets and so forth, and people came to them as a means of social interchange–in our parlance, to “hang out.” In fact, these places grew to be such fountains of local gossip that English playwright William Sheridan remarked, “A circulating library in a town/Is an evergreen tree of diabolical knowledge.”
To my way of thinking, this is all to the good, when book buying becomes part of America’s social fabric.
Technological advancements are helping to keep books alive–or at least to enjoy a longer shelf life. A publisher at Avon mentioned how it is now easier to go back to press on a book: whereas before it took at least 2-3 weeks and small reprint numbers were costly, the turn-around now can be as little as 4 days and, at least for the smaller printings, less expensive. Another science fiction publisher acknowledged his reorder numbers were up. Clearly he can benefit from such advances, as can those publishers who have successfully reissued classics in trade paperback and are introducing a whole new generation of readers to works by writers such as Alfred Bester, H.P. Lovecraft and Philip K. Dick.
Another very encouraging sign is the way companies are using computer technologies to track inventory in a cooperative manner. An executive at Ballantine Books explained their cooperative venture with the huge distributor/supplier Ingram. Each day the computers track stock, so that if the copies in stock on a book go down at one of the Ingram warehouses, the information is immediately and automatically relayed to the Random House warehouse, and the order to fill the stock will take place right away–no long waits for the publisher’s salesmen to get around to checking on a title. Effective cooperation with linked computers is fairly new, but as publisher/supplier partnerships grow, our country’s distribution system, often accused of being sluggish, should be improved greatly.
And since Ingram seems to be one of the big suppliers for Amazon.com, that leads me to another heartening portent for publishing: Ordering on-line. As people grow increasingly comfortable about ordering a book over the Internet–including giving your credit card number–the volume of sales will increase. For those couch potatoes who don’t want to put on their shoes and walk or drive to the nearest bookstore, ordering on-line from companies like Amazon.com is about as easy as turning on the tv. An increasing number of smaller bookstore companies (as well as the giants like Barnes & Noble) are setting up shop on the Internet. Bookwire, which you can hop to from sites such as Tor’s or Del Rey’s, provides links to over 40 independent stores on-line where you can browse and shop for books. One Web analyst states that for on-line bookstores and magazines with realistic expectations, the news is good; as one indicator, retail advertising on sites is on the increase. Some publishers are gearing up to offer secure on-line ordering, others are waiting to see how the competition fares. On-line newsletters from several sf publishers describe new books, list author signings, refer you to forums; some link you to sample chapters, author sites, and generally are getting the word out where it wouldn’t have been possible before the Internet. With the disappearance of some outlets for book reviews (Publishers Weekly, for example, now reviews almost no original mass market science fiction), we’re fortunate that Internet postings, chatrooms, recognitions such as Compuserve’s HOmer Award, can serve to alert readers to new books. The financial rewards are just now beginning to sink in for many publishers–and I believe the next few years will find publishers scrambling to set up special accounts for on-line stores and generally paying them the kind of attention currently reserved for the chains. As one letter to The New York Times put it, “We are in the midst of a revolution no less historic–economically, socially and politically–than the one Gutenberg started when he worked out the major bugs in movable type 500 years ago.”
According to Nielsen Media Research, almost one in four people over age 16 in the U.S. and Canada use the Internet (more than twice the number who were on-line 18 months ago); that’s about 50.6 million people on the Internet, about 37.4 million now using the Web. And that, of course, is just on this continent, not the English-speaking world where an estimated 1.4 billion people speak some form of what Samuel Johnson called “our copious and disorderly tongue.”
For all this, we know how difficult the day-to-day efforts to be creative and make a living by writing can be. As one 19th century American writer mourned, “There is probably no Hell for authors in the next world–they suffer so from critics and publishers in this.” Still, I see the “state of publishing” as in a wild and interesting period of expansion, with book buying assuming a vital place in our society.
Tags: Eleanor Wood, Nuts and Bolts, Publishing
Posted in Editors and Publishing Houses, Information Center, Nebula Awards, The Business of Writing | Comments Off