The Book Publishing Game
Welcome to the Toughest Business on Earth
April 11, 2006: Vol. 2, Issue No. 28
IN THE NEWS
AMAZING TUGS by the Crowley Corporation
Every once in a while a book comes along that captures the imagination of kids and adults who are young at heart. The Crowley Corporate Communications group has published a children's book about tugboats entitled AMAZING TUGS.
—MarEx Newsletter, April 7, 2006
According to publishing guru Dan Poynter, a survey by the Gallup Organization found that 82 percent of the population believe they have a book inside them. Six million people have already written a manuscript.
That means millions of manuscripts are making the rounds of publishers and agents.
Normally, the review in a professional e-newsletter of a new children's book on tugboats--the first children's book ever published by a 112-year-old maritime company--would be nothing more than a minor curiosity.
But as a result of last week's discussion of book publishing and how Print on Demand is changing the centuries-old book-publishing model, a number of e-letters arrived with questions and comments.
And this little children's book—just 18 pages with a $5 price tag—is a fascinating illustration of the topsy-turvy world of 21st century book publishing and what it means to would-be authors.
Paul Wilbur wrote:
I read a lot, both for work and for pleasure. I probably average upwards of $250 a month for personal reading, and have largish spikes over the year for business reading. I presume that I would be a worthy member of the publishing world's target audience ... So how come the publishing world can't reach me? Have there been any creative ideas to reach their audience recently? Ever? I buy used books from bookstalls--those guys reach me. But new books from major publishing houses? Never.
(Click on "Readers Respond & Debate below for Wilbur's full text.)
The answer to Paul Wilbur's questions requires a quick, down-'n'-dirty look at the economics of advertising and promotion--not just for books but for any business.
The Absolute Necessity for Repeat Customers
When I was running Target Marketing magazine, I would get at least two phone calls a week from folks who had a product that they wanted to sell by direct mail. What advice did I have?
"What else have you got," I would ask.
"What do you mean?"
"What other products do you have to sell?"
"I don't have any other products."
"How much does your product sell for?"
"How much does it cost you?"
"You don't have a direct mail business."
"What do you mean?"
I would then take the fledgling entrepreneur through the arithmetic. Let's assume that the price will be $9.95 plus shipping and that shipping is a breakeven proposition—a wash.
Gross profit is $5 ($9.95 revenue minus $4.95 cost of goods sold).
A direct mail package costs roughly 50 cents—printing, postage, lists and lettershop. At $500/M, breakeven response is 10 percent. (100 orders X $5 pays for the $500/M mailing cost.)
A 10 percent response is absolutely impossible.
In the old days of direct mail, the benchmark response was 2 percent or 20 orders per thousand. The reason for that ballpark number was that the typical direct mail test cell was 5,000. A 2 percent response to a mailing of 5,000 will bring in 100 customers—enough to be statistically valid in terms of tracking their future performance.
In most cases, marketers actually lose money acquiring new customers but will make it up later through additional sales. Magazines, catalogs, continuity offers, financial services companies—all lose money in the acquisition process and must wait for months—sometimes years—to start making money.
Going back to the person on the phone who wanted to sell a $9.95 product by mail, a 2 percent response would bring in 20 orders per thousand. With a $5 net revenue, the total would be $100 net revenue vs. a cost of $500/M or a loss of $400 for every 1,000 pieces he mailed.
With no other products in the hopper to sell, his fledgling business was DOA.
"Don't you want to hear about my product?" the person would ask plaintively.
"There's no point in hearing about your product if you don't have a business."
"What do I do?"
I used to suggest the design and testing of some small space ads in magazines or newspapers to see whether the product had legs. A number of catalogers built huge businesses this way—Lillian Vernon, John Peterman, Richard Thalheimer of Sharper Image and Mel and Patricia Ziegler of Banana Republic to name a few.
Why This Model Cannot Work for the Book Business
When a book is purchased in a bookstore, at Amazon.com or at the local Wal-Mart, neither author nor publisher knows the name of the customer.
That means every new title is a new product in search of a new reader.
If a publisher can create the equivalent of a best-selling brand (e.g., Harry Potter, James Bond, Dan Brown, Agatha Christie, Nancy Drew), it is economically feasible to promote the brand in the hope that satisfied readers will hear about the newest book by that author or in the series.
But with 100 million households in America, the challenge of finding a likely reader for one title is daunting—and economically impossible.
Book reviews result in sales. But with 200,000 new titles published each year, the book editors at Publishers Weekly, Library Journal, The New York Times and the Chicago Tribune receive somewhere between 500 and 800 new books each day. Unless a book comes in from a major publisher, is written by a celebrity author or a high-priced freelance publicist is cashing in a marker, the chances of getting a review are zero to none.
The Answer: Affinity Publishing
An 18-page children's book about tugboats could never have been brought out by a mainstream publisher for a retail price of $5. But the author and illustrator were lucky to have found Crowley Maritime Corporation, a huge shipping and logistics company with a Web site and a company store that sells all kinds of nautical and other consumer goodies—clocks, safety equipment, golf accessories, office and automotive items and beverage ware.
Not only is a maritime organization the logical publisher for a book on tugboats, it had pull with the MarEx Newsletter, which gave it a nice review.
The book will not be a best seller and at $5 retail will not make much money. But it will make some kids happy and give the author and illustrator bragging rights to a published book.
The tugboat book is an anomaly. For starters, trade journals and business publications do not review children's books.
But a review copy of a book about architecture should go to the editor of architectural magazines; a horse book should be sent to horse publications; and the editors of poetry magazines should see books of poetry.
Alas, unknown writers and publishers of fiction are pretty much out of luck.
The Book Business by the Numbers
I attended a book publishing summit in September 2005 and Infinity Publishing president Tom Gregory put up this chart, which I copied down—book sales by quantity in the United States for one year—probably 2004:
|SALES PER TITLE|
|Of the 1.24 Million|
|ISBN* titles in print|
|10 titles sold||1 million or more copies|
|22 titles sold||500,000 999,999 copies|
|324 titles sold||100,000 - 499,999 copies|
|767 titles sold||50,000 - 99,999 copies|
|23,000 titles sold||5,000 - 49,999 copies|
|67,000 titles sold||1,000 - 4,999 copies|
|202,300 titles sold||100 - 999 copies|
|948,00 titles sold||1 - 99 copies|
|Average sale per ISBN||15 copies|
|(Based on BookScan-Sales from 4,000 retailers, excluding supermarkets)|
|*International Standard Book Number|
In Answer to Paul Wilbur ... You've Got to Beat the Bushes
As a book person, Paul Wilbur will very likely hear about the first three categories of 354 titles in the chart above—those books that sell enough copies to give the publisher a decent return on an investment in promotion, publicity and advertising.
With regard to the other 199,600 new titles published each year:
Authors have to beat the bushes to find a publisher (or pony up some money and be a self-publisher).
Publishers and authors have to beat the bushes to find readers.
Readers have to beat the bushes to find books they are interested in.
In short, book publishing is tough on everybody.
Takeaway Points to Consider
- One of the most valuable assets of a business is the customer list.
- Without customers, a business does not exist.
- Book clubs and book continuity series have customer lists and repeat sales, but for the general book publisher, each new title is a new product in search of a market—the equivalent of a start-up—making it a very dangerous business.
- Beware of any business model that is not easily able to offer additional product to existing customers. For example, Peggy and I own a 1999 Saab. With just 50,000 miles on it, hopefully this will be our last car. F.C. Kerbeck, the dealer from whom we bought it, should not expect us as a car customer again. But Kerbeck makes plenty of money off us on maintenance, repairs and replacement parts (e.g., tires, filters, etc.) because the service department is superb.
- "One book is an item. Two is a line."
—Richard L. (Dick) Simon, Founder of Simon & Schuster
- All books sold to the trade are fully returnable for full credit, so the entire industry is basically a giant consignment operation, which means that publishers are de facto bankers to booksellers.
- Bookstores are lousy places to sell books."
Web Sites Related to Today's Edition
Maritime Executive/MarEx Newsletter
Crowley Maritime Corporation