Publishing & the College Bookstore

The college bookstore is not like Barnes & Noble.  The economics are different.

Publishers and book sellers often operate under some peculiar economics. Sarah Hoyt got me to thinking some more about this, after first going there after reading comments on John C Wright’s blog. The following is some informed speculation on the economics of Tor and Barnes and Noble, and the book publishing and selling business in general, based on a few minute’s of web research. I have no background in this in particular, but a lot in business in general.

Image result for books & money
Not…really. 

Many people, with great justification and on the side of the angels, would like nothing more than to boycott Tor books into bankruptcy and oblivion. I wrote in a comment on John C Wright’s blog on why that’s unlikely to happen:

Think of it this way: Your purchases of Wright and Wolfe are not going to keep Tor afloat. There’s even a (theoretical) possibility of humiliations galore. In a free market, when the forced liquidation of Tor takes place, and the bankruptcy valuation people are pouring over the books, they’ll determine positive value – meaning, they think real people would pay real money – to the Wright, Wolfe, and Flynn rights, while counting all the money Tor spent on rights to almost all other current SFF authors as unrecoverable sunk costs to be written off. Tehe!

At least, in the real world, something like this is what would happen. In the phoney world of publishing – and here I speak only of the business model, not of any other fantasies that may be clung to by the people in the industry – Tor is owned by MacMillan, which makes a good chunk of its money by selling wildly overpriced textbooks into a completely rigged market. Tor is a pimple on the hindquarters of the beast. The ‘buyers’ are ‘educators’ immune to market forces (market forces = normal people behaving normally). Educators have open contempt for classics or even merely competent literature, and hold math and science to be social constructs of the Patriarchy. No, really. The publisher works hand in hand with the educators to produce ‘good’ books into a gamed market that forces purchases on the ultimate customers.

Further – and here it gets even murkier – MacMillan is owned by a privately-held German company, so I’m not sure how available or reliable overall revenue numbers would even be. I’m guessing that it’s far, far more profitable to sell $175 psychology books that will be outdated and need replacing in three years by the thousands to colleges that then force their students to buy them than to sell one novel at a time at $20 to people who can spent their money as they please. At the very least, it’s easy to see why a textbook publisher would try the same approach to bookstores: we’ll produce ‘good’ books full of right-think, and you make the students/customers buy them.

Just as a poser such as myself can support my writing Jones with my day gig, the owners of companies can support their publishing hobby – publishing books that make them feel good, but don’t make money – with other activities that do pay. A certain sort of billionaire will buy sports teams to be cool; literary imprints can be owned to stoke the egos of a different sort of rich person. That a particular publisher within the holdings doesn’t make money may just not enter into it, especially if it is a tiny part of the whole enterprise.

Further, as mentioned above, if I can sell expensive textbooks to college bookstores by the dozens or hundreds at a pop, and have the purchase decision made by one or few people who then push down the ultimate purchase to a captive audience – students – I’ll do that. For one thing, sales are almost perfectly predictable. Then, once I’ve got that model up and running, I’d try to see if I could expand it to other markets. Thus, big chain bookstores were treated largely like college bookstores, where numbers of books were ordered and shipped based on the assumption that the middlemen could then force them upon a captive audience. This approach could kinda sorta work – until an Amazon comes along. Once that happens, you need to sell single copies of relatively inexpensive books to one person at a time. That’s a different mindset altogether.

With this in mind, let’s take a look at the current Big Five from a business point of view. (source)  (and another source)

Hachette Book Group (or Lagardère Publishing)

Hachette Book Group (HBG) is a division of the second largest trade and educational book publisher in the world, Hachette Livre. Hachette Livre is based in France and is a subsidiary of the French media company, Lagardère.

Financial: 2015 sales: 2.21 billion EUR; #4 in the US. Wholly owned by Lagardere, with had 2015 sales of  7.19 billion EUR.  So: its entire publishing arm accounts for less than a third of annual revenue. Less than 13% of revenue comes from the US – didn’t see how much of that is books, I would assume much less than all.  Arnaud Lagardere, current family member leading the group, has a net worth of about $2.4 Billion

Education sales accounted for 16% of total sales, illustrated books comprised 17%, Partworks represented 11%, and other sales were 16%. This only adds up to 60% – the other 40% isn’t publishing? Couldn’t tell from the available info.

Conclusion: financially, selling non-educational books in the US is not a significant enterprise for Lagardere, which is a media conglomerate. The subset that is SFF is a line item on the scale of office supplies, only smaller.

HarperCollins

HarperCollins Publishers is a subsidiary of News Corp, the global media company led by Rupert Murdoch.

Financial: News Corp, Murdock’s holding company, had 2015 revenues of $8.633 billion; Harper Collins piece was $1.67 billion, about 20%. Murdock’s net worth is estimated at $13.1 billion.

Conclusion: SFF is, again, some tiny fraction of the activity of News Corp. Murdoch probably spends more each year on yard care.

Macmillan Publishers

Macmillan is a global trade publishing company, which is owned by the German Company Verlagsgruppe Georg von Holtzbrinck, with imprints in the United States, Germany, the United Kingdom, Australia, South Africa, and around the world. Macmillan publishes textbooks, journals, monographs, professional and reference works in print and online. Oh, yea, and some other books, too

Financials: As a privately-held company, Holtzbrinck doesn’t have to tell you much, and so doesn’t. 2014 revenues were 1.73 billion EUR; surprisingly, of that 1.64 billion EUR came from publishing, with 39% from North America.

Conclusion: Again, while books make up a bigger piece of the pie for Holtzbrinck than for others, it’s still unlikely SFF rises to anywhere near the top of their concerns – they’ve got that locked-in textbook/technical journals market to think of first.

Penguin Random House

Penguin Random House is owned by Bertelsmann, a private company, controlled by Germany’s Mohn family. It publicly discloses some financial data. It is one of the world’s largest mass media companies and also active in the service sector and education, worth about $30B by my rough estimate.

Financials: Didn’t come up with any hard numbers after a couple minutes of googling around, but it’s safe to say that SFF is not a major source of revenue for this gigantic company.

Conclusion: Elisabeth Mohn is worth $4.4B, and sits on the board of the Bertelsmann Foundation, which controls about $20B more. She ain’t sweating SFF sales.

Simon and Schuster

Simon and Schuster is currently the publishing arm of the media company CBS Corporation, and does adult publishing, children’s publishing, audiobooks and digital books. CBS has interests in commercial broadcasting, publishing, and television production, with most of its operations in the United States. (Aside: this curiosity: “The stories swirling around Sumner Redstone these days make Rupert Murdoch look like a boy scout.” Nope, not gonna bite. Nope.)

Financials: CBS had $13.88 billion in revenue in 2015. Google was not being very cooperative in digging  up Simon & Schuster info in the limited time I had to search, but it appears they have annual revenues in the $750M-$800M range across all their businesses – not bad. I would imagine a comparatively tiny portion of that is SFF.

Conclusion: Sumner Redstone, the major owner, is worth $5.5B. He’s not sweating SFF sales.

A logical cool-headed business person would be thinking of dumping traditional publishing investments, as the long-term prospects of even the education/technical side are grim. Selling may not be possible for any reasonable price – it’s a buyer’s market, which is another way of saying that there are not very many potential buyers, and those who do exist are looking for a bargain. Crunching the numbers might suggest – and I suspect it does – that simply running the current publishers into the ground and writing off the wreckage is the least bad solution, financially.

Meanwhile, a prudent business person will be asking: What’s next? Can we get in on it early? Problem is it seems Amazon is what’s next, and they own every desirable piece of real estate they’ve noticed, and are well equipped to buy any they spot in the future. But hope springs eternal – you don’t get into business unless you are an optimist.

Mostly put this together so that I’m not completely ignorant of the topic, as it is a big deal in one way or another among several authors and commentators of some blogs I follow. The only thing left to say: eventually, in an open market (however imperfect) what cannot go on will stop. Hemorrhaging cash is not a viable long term strategy, although it can go on for a long, long time if it is a) small enough, and b) important enough to the owners. I will say with little fear of rebuttal that millions have been and are being spent by business types in order to figure out how to work this new state of affairs.  So far, the evidence suggest they have not got a clue: Amazon is eating their lunch, indie writers and small presses are doing well, and the last of the big chain bookstores is watching the pretty trail in the sky left by that asteroid heading for the Yucatan.

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Author: Joseph Moore

Enough with the smarty-pants Dante quote. Just some opinionated blogger dude.

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