ARTS & FARCES internet

The eve of Book Expo America is an appropriate time to survey the state of independent publishing. It sucks. The end. (But consider reading on; it’s getting even worse.)

“Returns” is one of the biggest problems facing independent publishers. It’s a system for generating more waste than value. For the uninitiated, books are traditionally sold on consignment to what’s called the “channel.” The channel is the chain by which publishers sell to distributors who sell to wholesalers who sell to bookstores who sell to you. At every link in the chain except the last, the books are usually fully returnable.

ARTS & FARCES sells its titles to the channel on a non-returnable basis. Books we sell to you are fully returnable, for any reason, for thirty days. We don’t actively court the channel; we’d rather talk to and trade with you directly. I’ve written previously about our alternative publishing model (“Way New Publishing” Part 1 and Part 2).

Returns, we are told, are a cost of doing business and are the sole responsibility of publishers. This is hammered into our pointed heads until they are flattened. Our trade associations tell us this, as do many of our fellow publishers. Books wouldn’t sell, we’re told, if they can’t be returned.

The April 1999 issue of the newsletter of the Publishers Marketing Association (PMA) carries a front page article entitled "Returns -- The Publisher's Responsibility" by Michael Taylor, a publishing consultant.

Taylor's article starts off with a stunning rationale for returns in the publishing industry: "It's only because books are returnable that so many books make it to the shelves of retail stores. ... This sets up a system of winners and losers, just like the lottery." Well thanks very much, I always wanted to know my chances for success in this business were about that of winning the lottery.

Independent publishing does not have to be a zero-sum endeavor, with winners and losers. There's no reason why authors, publishers, and readers can't all win in this game.

Taylor tells us that "returns should be considered a marketing cost," in order to see if the book is going to sell. Whenever I hear this kind of crap I am reminded of something one of my former publishers told me: most publishers make books like spaghetti; they throw a bunch of stuff out there and what sticks to the wall pays for what falls on the floor.

Turns out most publishing companies themselves are like spaghetti too; the publishing house in question has been bought and sold several times in almost as many years and no longer exists. Can you say pig-in-a-poke? Zero-sum publishers like that are unfortunately probably here for the foreseeable future because of advice they receive from the likes of Taylor.

Taylor thoughtfully provides a breakdown of "who makes what percentage of the money in book publishing:"

I'm at a loss to explain where Taylor gets his figures. They certainly don't jibe with my experience as either author or publisher. Let's consider an ordinary trade book like Information Eclipse: Privacy and Access in America, which carries a cover price of US$25.

By Taylor's reckoning, the revenue breakdown for each book sold would look something like this:

This is voodoo economics at its worst. I spent the better part of three years of my life in a protracted arbitration, as an author, against one of those spaghetti zero-sum publishers, and I discovered -- much to my amazement, dismay, and finally amusement -- that there are lots of "creative" ways to determine a book's profitability, especially when the author is being paid on "net receipts." Turns out that overhead items like rent and heat and bottled water and equipment as well as employee salaries and bonuses can and have been used to "buy down" the publisher's "net receipts" cited by Taylor.

In my experience, the typical US$25 trade book project shakes out something like the following in terms of legitimate gross revenues:

All of the 27 publishing agreements I've signed as an author were strikingly similar. None of them called for payment on cover price, but instead on the publisher's net receipts. Similarly, I've been presented with a few wholesaler agreements, and I've seen what terms other independent publishers offer the channel. But that's okay, let's take Taylor's numbers on their face, just for the sake of argument.

In Taylor's Panglosian world, a US$25 trade book yields a total "profit" of US$5.00 to the publisher and author; US$1.75 "profit" to the bookstore; and US$0.75 "profit" to the distributor and/or wholesaler. If you think this sounds unfair, ask yourself who took the risk and did the work to get the book to market? Wholesalers and distributors move boxes at no risk; everything's returnable, remember. Same with the bookstores.

Taylor's point is that publishers have to take returns because authors won't and the channel can't afford to. This, on its face, is absurd. Authors don't get paid on returns, and neither do publishers. When a book is returned, complete with coffee stains and cookie crumbs, it's cheap bait for the recycler, not added value, kids. The author doesn't get paid for that copy and the publisher can't resell it. It cost the channel close to nothing to return it.

Taylor conveniently ignores the game of return roulette played by the channel. Some publishers have been convinced that they actually benefit from this game. Here's how it works, using an actual case recently recounted -- with pride -- on the Publishers Forum mailing list.

A publisher sends out books to the channel. More than 400 come back from one vendor. Within two weeks, the vendor re-orders 500 books. If you're keeping score that's 400 books coming in and 500 books going out to the same vendor, resulting in a phantom gain of 100 books. Except that the books were probably returned because payment on them was due and with the re-order, a new 90 - 120 day payment clock starts. Think of it as the equivalent of the shot clock in professional basketball. Oh, and that gain of 100 books is indeed a phantom because it doesn't include the cost of shipping each way (borne by the publisher), or the loss of hurt books (coffee stains, greasy cookie crumbs, broken spines, scuffed and torn covers), or the time value of the publisher's money the vendor held for however long it took to decide to ship back the 400 books. And let's not even talk about true costs including the environmental impact of producing and throwing away all those unsold books.

Tell me again why returns are good for independent publishers?

Taylor tells us "the rate of return is a result of the publisher's expertise in selecting, editing, and marketing the books." While this is true, of course, it begs the question that returns are more likely a result of inept distributors, wholesalers, and booksellers who overbuy. Again, who benefits from returns? Certainly not the authors and publishers. Therefore it's a safe bet that publishers are likely more mindful of what they publish than the channel is about what it collectively buys.

The solution, according to Taylor, is for publishers to do better research by using the search engine on amazon.com. Market research, Taylor insists, is easily accomplished in "two or three hours" by browsing amazon.com's subject categories to find the top fifty selling titles and constructing a "grid that shows page count, publication year, price, and major features." This should be followed up, Taylor advises, with a field trip to your local chain superstore to get a "good idea of how easy or difficult it will be to get your proposed book into distribution...."

Unfortunately, this is sage advice for producing spaghetti books, but not much else. Market research is best done either intuitively (you "feel" the book is right) or by a lot more in-depth and diverse research than what Taylor advocates.

The rest of Taylor's story (more than half of the entire article) is devoted to analyzing a publishing house's sales by subject category and distribution channel. Taylor presents his methodology as something he calls "The Returns Index," which is the same as the method used to compute the cost of living index. The equation is straightforward: "divide the category returns percentage by the total returns percentage, then multiply this by 100."

But why bother? If you're getting any returns, you're getting too many. And Taylor's methodology is flawed because it fails to account for the true cost of returns (hurt books that can't be resold, shipping costs, cash flow impact, environmental impact, and the time value of money for instance).

What I find most troubling is PMA's timing of publication of Taylor's article. This comes hot on the heels of the controversial closing of the PMA-L mailing list, fierce criticism of PMA management, and only a few weeks before the publishing industry's largest trade show.

PMA purports to be "the largest non-profit trade association representing independent publishers of books, audio, video and CDs." By the time you read this PMA will have had its required annual meeting and board election. Funny thing about the way PMA runs its annual meeting: It's presided over by the association lawyer for the sole purpose of installing the board of directors (who are neither nominated nor elected by the membership). There is no call for new business, and there is no room for dissenting voices.

Tell me again whom PMA represents?