If you’re reading this, you probably care about books and you’re likely to care passionately.  Books will do that to a person.

Not just books, of course.  Movies and paintings and music will stir passions, as well, and for similar reasons: because, when they rise to the level of art, they evoke empathy.  Which is to say, they connect us to the world in a way we hadn’t been connected before we experienced them.

Oh, my.  So we love not just the feelings they give us but the fact that they enable us to feel.  It’s a form of intimacy that they evoke in us, isn’t it?  And for this reason many people just can’t stand the idea that book publishing is a business.

But it is a business.  Grown-up authors and readers don’t allow themselves to fret about that — at least not too often — because you might as well fret about the sun coming up.  When goods have to find their way across the earth, business arises to carry the freight.

If, as part of this process, your work one day gets “put in the back in the discount rack like another can of beans,” there isn’t much to be done about it but write a song like Billy Joel did…or read or write another book.

Yet it’s worth noting that those practices that surround the necessary business of publishing books weren’t handed down by God.  (If they had been, it would have been Apollo — no? — in charge of beauty, music and poetry.)  They were created by fallible man.

We had our reasons, of course.  We always have our reasons.  But they’re not necessarily good reasons, in retrospect, or reasons that stand the test of time the way, say, Hamlet has.

To be or not to be a viable business?  That is the question. If you’re looking for a free school vending machine service, visit Royal Vending’s website.

As usual, I don’t claim to have a monopoly on the answers.  But there are changes afoot in the book industry, as everyone knows.  While we’re all considering how to play it, why not also reflect, in no particular order, upon:

The 10 Craziest Business Practices of the Book World

1.  Selling returnable.

When I was an agent I represented a book called Pour Your Heart Into It by Howard Schultz (published by Hyperion).  Wherever you stand on the competition between Starbucks and your local barista, one must admit that Howard is a business genius by any measure.  I’ll never forget walking down the streets of Manhattan with him past a Chock Full o’ Nuts.  “They could have done what I did,” he said, at a time when Starbucks “only” had — if I recall correctly — a few hundred stores.  “Now it’s too late.”

Over lunch, Howard asked me to explain the book business to him.  “The first thing you have to understand,” I said, “is that books are sold returnable.”

The business genius looked at me dumfounded and — I swear — said: “What do you mean?”

I explained it patiently in more detail.

He remained incredulous.  “How do you run a profitable business that way?”

How indeed!

Every major manufacturer in the world must eat crow now and then and pull merchandise from its distributors.  None of them does it on the entire product line, with no reasonable expiration, and as a general business practice.

There are historical reasons why books are sold returnable.  So what?

The record business used to do this (although, even then, not in such an open-ended fashion) and we all know how that’s ending.  Newspapers and magazines do it, with significant time limits, but they really have nothing in common with books besides words and paper.

Taking returns on your entire inventory every day is the business equivalent of low self-esteem.  People who run a business this way shouldn’t be in business.  They should be in therapy.

2.  Co-op dollars.

This practice isn’t as crazy as taking returns (nothing is), but it’s not great, either.  The way this works, on the simplest level, is that publishers pay chain retailers to put certain books on the front table, in the window or on end-caps.

The grocery business calls this a “slotting allowance.”  But in the case of a grocery store, that bribe is being paid to get a brand established on the shelf — a brand that might live forever.  In the book business, the bribe is being paid to create visibility for, at best, a few weeks.

Might this money be better spent — say on marketing to likely purchasers of that book?  Honestly, I don’t know.  But the co-op system seems a little zany.

3.  Suggested retail prices.

Books aren’t the only things in the world with a suggested retail price.  But they’re one of the few where the suggested retail price has been permanently imprinted on the product.  This is just crazy.  It disadvantages independent booksellers by enabling the big chains and Amazon to trumpet discounts — as in, 40% OFF THE COVER PRICE!  More important, it takes critical decision-making power from those closest to the end user.

Most businesses that make things allow retailers to price them however they wish.  This way, the entity closest to the consumer can respond to the demands of the marketplace.  So why the heck is some guy in New York telling an independent bookstore in Denver what to charge its customers?

4.  E-book royalty splits.

Publishers have been treating e-books as incremental business since their invention, yet those same publishers structure e-book royalties as if they’re actively marketing this format.  They’re not actively marketing them, though, not in the way they push paper books.  So the (typical) 25% royalty on net e-book proceeds is a little like telling an author that the publisher is taking 75 cents from that dollar the author just found on the floor.

I won’t go into the technicalities of royalties, which would bore everyone to tears.  But the splits aren’t fair, and in a world where barriers to entry are falling rapidly, authors treated unfairly will be tempted to find new business partners.  Rip-off e-book royalties are a very shortsighted strategy for those publishers who want to be in business ten years from now.

5.  Paying big advances to unproven talent.

The only people who like big advances are the few authors and agents who get to cash the checks — or those who think they’ll become those authors or agents one day.

When you’re an author whose books consistently sell lots of copies, that big check is really what it calls itself — an advance against future earning, which is to say, a non-recourse loan.  But paying $1 million advances to unproven talent is nuts.  The main reason it happens, as indie publisher Richard Nash points out, is that — by the strange logic of Manhattan —  it confers status on the editor who signed up the book.

How about paying more reasonable advances to more first-time authors and finding another way to confer status on editors, say with a medal ceremony every Christmas?  Just asking.

6.  Making authors write the marketing plan.

Near my home there’s a small company that makes lots of stuff.  You may have heard of it: DuPont.  Say you’re a chemist at DuPont and you give it your all in the lab and — lo and behold! — invent Teflon.  So the CEO calls you into his office and says, “Nice work.  Now come up with a marketing plan.”

Make sense?  No, it doesn’t.  Why not?  Because the characteristics of a good chemist aren’t necessarily the same as the characteristics of a good marketer.  Yet here we have the book business increasingly ceding the field of marketing to its authors.  “Hey, nice job writing that romance, kid.  How we gonna sell it?”  Puh-lease!

I’m not suggesting, by the way, publishers not putting the author out there as the “face” of the book, the person who goes on Oprah, etc.  But, think about it: in any sane world is the spokesman generally the guy who came up with the plan?  Don’t these tasks generally require different skill sets?

7.  Rarely selling direct to consumer.

An interesting thing happened on the way to Jeff Bezos’ fortune.  Many people may not recall that his original plan was to pass orders along to publishers and have the publishers ship books directly to customers from their warehouses.  Pretty soon Bezos realized that putting another entity between you and your customer is bad business.  A year or two in, he dropped that plan like a hot potato and started building his own distribution facilities.

Yet putting others between themselves and their customers is what most book publishers have reduced themselves to.  They’re so dependent on the selling channel that half the time they don’t even know who their end user is.  This has all kinds of implications, some of them good for booksellers and many of them bad for publishers.  Having ceded the field, now, whenever publishers do try to sell direct to consumers, the bookstores accuse them of competing with their own customers — i.e. their “channel partners,” the bookstores.  But when those channel partners get into trouble — as many have — where’s Plan B for the publisher?

8.  Not adding value on the highest priced merchandise.

If publishes could dictate to the marketplace, they would decree that books should be hardcover all of the time, because that’s where they get the most revenue and margin.  Likewise, no doubt, Mercedes would like everyone to buy its biggest sedan, thank you very much.

In the marketplace, however, people must be induced to “pay up.”  When you buy the biggest Mercedes you don’t only get more space, you get more bells and whistles.  The price is higher, but so is the perceived value.

Publishers, in fairness, have finally begun to experiment with adding bells and whistles — sometimes quite literally — to higher-priced e-books, but so far with only a handful of titles.

Meanwhile, what does the purchaser of most hardcovers get versus the purchaser of the same book in paperback or e-book?  Well, er, she gets hardcovers.  Hard covers. So what!  Unless I’m a book collector — maybe five percent of the market — where is the VALUE proposition?  Thinking you can consistently charge more for something just because you really need the money is a little crazy.

9.  Keeping the New York Times Bestseller Lists so scarce.

If the Lords of Marketing held a competition for Most Underutilized Brand, would the New York Times Bestseller List not make the Top Ten?  Here is one of the most recognized brands in America: the editors give it a few pages in the Book Review once a week and a small spot in the Business section.  How do you take a brand like that and not leverage it more throughout the newspaper?

The New York Times should publish a hundred lists a week — every book genre in every book format — and plaster them all over the paper and all over the Web.  It would be good for the newspaper and good for the business of publishing.  Why?  Because people need filters and they like to read things they know are already popular.

Not leveraging one of the greatest brands in the history of books is just nuts.

10.  Barring advertising from books.

Most book contracts have specific clauses saying the publisher won’t run paid advertising inside the book.  Understandably, authors don’t want publishers to generate income from their work without compensation.  Also, there is posterity to take into account.

This brings to mind the Woody Allen routine where he gets a phone call one day from someone asking him to do a commercial.  If I recall his response correctly, it is, “No.  I’m an artist.  I don’t endorse products.  And if I did, I wouldn’t endorse your product.”

The person on the other end of the line says, “That’s too bad.  The photo shoot only takes half a day and it pays $100,000.”

“Hold on,” the Wood Man replies.  “I’ll put Mr. Allen on the phone.”

Do you think that publishers might persuade authors to change their position by offering something radical like, I dunno, money?

Sergei Brin and Larry Page will be selling ads next to Google e-books before long and pocketing the change.  Brin and Page could already buy the entire publishing industry with a year’s worth of GoogleAds revenue.  Not seriously considering paid advertising in books isn’t just crazy.  It’s foolish.

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J.E. Fishman, a former Big Six book editor and former literary agent, is author of the thriller Primacy, which Publishers Weekly called "appealing" and Kirkus called "good, boisterous fun." His mystery novel, Cadaver Blues, was serialized in 2010 on TNB and you can still find it here if you dig deep enough. It's now available in ebook and paperback. His financial thriller, The Dark Pool, was published this year, and his new series of police thrillers, Bomb Squad NYC, will be published in February 2014. He blogs here and at the Huffington Post. Please visit and follow him at his very fancy and expensive official author website.

48 responses to “The 10 Craziest Business Practices of the Book World”

  1. Ronlyn Domingue says:

    Regarding big advances, I wonder how many of the authors worry about earning out. I felt like I was in serious debt until I did–and I didn’t get $1 million +.

    Thanks for the mention about marketing plans. It DOES take another kind of thinking to do that.

    I learn something new every time I read your posts. Thank you.

    • J.E. Fishman says:

      Well, of course, you know you weren’t in debt, even if it felt that way. There’s no moral issue underlying an author advance, earned or unearned. It’s just a business arrangement, entered into between two parties. Some agents love to see their authors earn out and others think they left something on the table if their author earned out. Of course, this is why writers have agents…to do some of the worrying for them!

  2. Greg Olear says:

    Why in the hell are you not running a publishing house?

    • J.E. Fishman says:

      Ha! Well, I may be trading for my own account soon, so to speak, which means I’ll have to put my money where my pixels are.

  3. Zara Potts says:

    Another interesting and thought provoking post! I love this series.

  4. J.E. Fishman says:

    Thank you, Zara. The lists, I hope, will get more inspirational as I go.

  5. jonathan evison says:

    . . . another great post, mr. fishman!

  6. dwoz says:

    “Selling Returnable” and the NYT Bestseller list are kinda intertwined, in a faustian sort of way, do you think?

    • J.E. Fishman says:

      I’m afraid your point requires further explanation, dwoz.

      • dwoz says:

        One of the interesting things about sales…”copies shipped” are sales. Bestsellers are books that have “sold” in large numbers.

        So Sarah Palin’s book is a “bestseller” because hundreds of thousands of copies have shipped.

        Now…returns take a long time to come back.

        In essence, you can BUY a slot on the NYT bestseller lists. Or at least, you used to be able to.

        Same thing happened in the record industry before SoundScan. A record went platinum because it shipped 1MM copies to retail. Of course, returns were later, and didn’t come into play.

        • J.E. Fishman says:

          Actually, the bestseller lists are not measures of units shipped to bookstores. They measure “actual” sales. The reason I put “actual” in quotation marks is that the lists are based upon surveys, so they’re extrapolating only from a representative sampling of stores. Still, the books they purport to measure will not be returned. They have gone out the door.

  7. I was lost at my first big “marketing” meeting with the publisher. Clueless, I muddled through but not with any confidence. That said, a lot of genuinely wonderful writers who didn’t know me at all offered support and advice and gave me access to a community I needed. I did what I could to get the book out there — but I know I could have done more. Will I be able to do it better the next time? I don’t know.

  8. This could have easily been titled “10 great reasons to publish independently.”

    Not sure about number 6, but then again, that’s probably because I’ll complete my MBA in marketing in May. Which I earned because I figured, you know, a writer should know business. The more I read about publishing and its “business practices,” (and I put that in quotation marks to corroborate Howard Schultz, because no sane business person would consider publishing’s practices viable) the more convinced I become I was right about that.

    I’m really looking forward to January, when Apple will most likely announce its next iPad. I’m looking most forward to the beginning of Jobs’ presentation, full of delicious numbers concerning numbers of apps sold, numbers of songs downloaded, number of games introduced. Mainly because I wonder how many books the iBookstore has sold. I have a feeling Kindle’s cross-platform app is cutting into the number, but I still think it’ll be way more impressive than anything any of the giant conglomerate publishers have announced during the past decade or so.

    I’d love to know how many Kindle’s Amazon has sold, and how many Kindle book’s its subsequently sold. I swear, since purchasing my Kindle in September, I’ve spent several hundred bucks more on books than in previous years. It literally makes me sad to put my Kindle away.

    • J.E. Fishman says:

      All writers are entrepreneurs (subject of a future post), and the sooner they acknowledge so, the better. I think you’re right, Will, that old-line publishers need to get their house in order (pardon the pun) or be prepared to watch future talent find its own way.

  9. MH Media says:

    Love this article, and for my 2cents worth I’d ask “so how about the Rights Issue“?

    As far as I can make out, it’s a business designed to create employment for lots of people who couldn’t make it as lawyers, and its only purpose is to annoy people who’d really like to buy that book (generating revenue), but can’t because they live in the wrong country. Heh, it works for Hollywod so wy shouldn’t it work for books.

    Yes of course that’s a simplistic interpretation, but surely businesses are in business to sell things to people that want to buy things?

    • J.E. Fishman says:

      Many moons ago I tried to create an online marketplace to bring efficiency to rights trading. It sank like a stone and cost me a pot of money. I learned that people prefer to do things the way they always have, even when it no longer makes sense to do so.

  10. Chas Griffin says:

    How about this? I’m about to self-publish a paperback of my ebook, but find that the UK near-monopoly retailer will want a 40% commission; plus it will want it delivered, not by me to one of its branches, but by an Official Distributor, who, guess what.. will want another 30% Or is it 40%? Either way, given the high unit price I must pay for a preliminary short run of my book, I calculate that every book they sell for me will lose me between £1 and £2. Have you ever heard of anything so daft? Or so counter-productive? Or so greedy? So short-sighted? So…publishing?

    • J.E. Fishman says:

      Ah, the beast must be fed.

    • dwoz says:

      Great example of “vertical lock-in”, wherein palms become greased and anti-monopoly laws are circumvented.

    • Kathleen O'Bannon says:

      Yes, I have heard of this before. You should have looked into this before you priced your book. My last student who didn’t take this into account lost about $2.00 for every book he sold. I refused to help him get radio interviews because it would have put him in the poor house.

  11. Nathaniel Missildine says:

    Thanks for this clear-minded, very informative piece that I’ll no doubt be returning to as a reference/lantern in the cave. These practices as you illuminate them are indeed crazy, all the more so because some of them, like no paid advertising in books, seem like a fairly easy fix.

    I’m the kind of writer who’s fairly slow to understanding the business side of publishing, in many ways willfully slow, which is why your point about authors doing the marketing particularly grabbed me. The fact that writers need to do the marketing themselves has inevitably affected the content of the writing, where with increasing frequency one gets the feeling a book was written with the packaging in mind first and then the characters and story arc were built from there (of course, movie scripts are farther down this spiral as the money incentives to keep the marketing in mind are even greater). I understand too that an author needs to write to an audience, but I still can’t help thinking some of the heart is taken out of writing when the author needs to keep one eye on the sales pitch.

    • J.E. Fishman says:

      I completely agree that there is an erosion of authenticity when the source of “inspiration” is the market rather than something within the creator. Ideally, one should create without regard to the marketplace and let the marketers worry about how to sell it. Alas, life has come to be more complicated than that.

  12. Irene Zion says:

    Hey Fishman!

    Congratulations on winning the limerick award!
    It deserved to win!

  13. Linda Grenz says:

    Good article. I’m a niche publisher (religious) but see my role more as being the “back office” for authors helping them get good books (and curricula) to the end users — readers and churches. I coach authors, edit, make sure their layout is good and cover is attractive, provide a transactional website, marketing, a reliable brand, visibility at trade shows and conferences, etc. Many of those are things that an author “can do” via a self-publishing vehicle but they get much more credibility going through us and more time to write. That said, I was one of the earlier e-publishers (mid-90’s), do POD, have no office or warehouse overhead so we are ahead of the traditional religious publishers — most of whom are losing money while I’m making money for us and for our authors. So it can be done. Oh, and we don’t take returns, pay advances or print a retail price on our books and we do sell directly to the end users as well as through bookstores. But I’m going to think about advertising in books and adding value….good ideas. Thanks.

  14. J.E. Fishman says:

    It sounds like you’re onto something.

  15. I find a lot of this is true of SOME publishers, but there are so many sweeping generalizations in here that it made me a little crazy. Don’t paint us all with the same brush…

    I’d also like to point out that at Harlequin, where I work, we most definitely actively promote our ebooks. I can’t speak for other publishers, but that statement is not true of us.

    I think this article needs to be a lot more specific about which publishers it is addressing.

  16. J.E. Fishman says:

    Fair enough. And thanks for joining the conversation. The post generalizes because it is about the industry in general.

    In addition to marketing e-books, please feel free to share which of these sweeping generalizations does not apply to your employer.

  17. Andras Nagy says:

    I have over 100 books published…and I concur with the wisdom of this article.
    -Andras Nagy

  18. I’ve been self-publishing since 2006, and I think that traditional publishing is in decline. Authors have gotten savvier– many of us see the mistakes that the big publishing houses are making, and we’ve learned how to avoid them. Technology has made it easier for us to strike out on our own.

    Author Joe Konrath is probably the best example of an author who has crossed over. As a mid-lister, he was ignored, and he decided to self-publish his rejected novels on Kindle. Now he’s making more money than most traditionally published authors.

    • J.E. Fishman says:

      No question that Konrath has been leading the way, along with (in non-fiction) Seth Godin. But I wouldn’t count out the traditional publishers. They are changing, just very slowly…

  19. […] get the full flavor of Fishman’s observations read The 10 Craziest Business Practices of the Book World. Just a word of warning: don’t go into this madhouse without an armed […]

  20. Aaron Dietz says:

    I have SO wondered about many of these lunacies.

    And really–I don’t get why they keep doing it. It’s like a person hitting himself repeatedly over the head with a…book…. Are they trying to make it hurt?

    • J.E. Fishman says:

      Most people follow the path of least resistance. Which in business means following the same old practices until you absolutely have to do it otherwise.

  21. Alexander Gerschenkron says:

    Some interesting thoughts here, though I recommend reading an old book – The Truth About Publishing, by Stanley Unwin for the other side of the story as regards things like royalties. Also, if your author is a marketing guru it kind of makes sense to ask her for suggestions about the mythical “marketing plan”…

  22. […] “Hold on,” the Wood Man replies.  “I’ll put Mr. Allen on the phone.” via thenervousbreakdown.com […]

  23. I love these pieces! There’s so informative and–in some cases–validating. In my brief time working for a small press, I thought they were joking when they explained the returnable inventory thing.

    Interested in what you have to say about advertising. I’ve always felt this was the next frontier, for better or worse. Maybe ebooks will get us ready for it…

  24. dwoz says:

    It probably bears stating that in all cases, categorically, no matter what quantity of love and altruism went into the effort, publishing is from a business standpoint an INVESTMENT model.

    And investment models all assume one particular thing, that there will be some kind of return.

    …in the aggregate.

    Book publishing is “selling to wants.”

    Manufacturing a box of breakfast cereal is “selling to needs.”

    Selling to wants is and always has been more lucrative in the aggregate than selling to needs, though selling to needs has always been more stable.

    As long as it continues to be more lucrative to publish books than to grow corn, money will seek out books to support.

    and to the point of big publisher vs. small publisher (or self-publisher)…in the aggregate,(of your title list) the larger the n , the smaller the risk.

    It often COMPLETELY baffles people to hear that a publisher has a mid-list of 50 titles that are (on the publisher side, not the author side) barely breaking even, and only TWO top-list titles that are doing any kind of numbers at all, and how can that possibly be a SANE business model?

    Well, it is. It’s the only place in the world where the phrase “we lose money on every book, but make it up in volume.” is actually TRUE. It’s because that fat underperforming mid-list actually mitigates the RISK of the overall investment.

    It’s a way for the investment to have the SEX APPEAL of a “sell to wants” model, and the risk profile of a “sell to needs” model.

    weird, eh?

    • J.E. Fishman says:

      I’m not at all sure it’s more lucrative to publish books than to grow corn at the moment. Prices of agricultural commodities are going sky high while authors (and publishers) race to the bottom.

      Interesting distinction between selling to wants vs. needs. One could argue that people do need stories…but they don’t have to get them from books.

  25. Tom Hansen says:

    Great post. I both love and hate the absurdity of it all. I think the transformation from the old way of doing things to the new way/s is going to be quite messy. Stand back and watch the carnage

  26. Rich Moser says:

    Actually, Billy sang “like another can of peas,” not beans–from The Entertainer, one of my faves.

  27. Kavita says:

    I’ve been in the business of book publishing for almost a decade, as editor and commissioning editor, and believe this post is as close to the truth as it can get. Yes, it has a few generalizations, but they really don’t matter. Thank you, Mr Fishman, for putting these together (I say this because I feel sorry for some of my authors). You could have also included the insane royalty arrangements.

  28. Clint Greenleaf says:

    Very well said. Frightening how silly our industry is… I’ve felt your “Howard Moment” so many times, trying to explain to similarly brilliant folks just how jacked-up some of our practices have become. But big forces are coming to change us. I hope we’ll all be smart enough to fix as many of these as we can! Thanks for the post.

  29. […] — 10 crazy practices of the world of books […]

  30. […] — 10 crazy practices of the world of books […]

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