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THE SUBSCRIPTION REVOLUTION
HOW PRINT ON DEMAND WILL SAVE THE PUBLISHING INDUSTRY

By Richard Curtis

It’s me with another crackbrained prediction about the future of publishing. (We’ll ignore the fact that every crackbrained prediction I’ve ever made has come to pass.) And the one I’m going to make today is going to come to pass, too.

Let me start with a question or two. How many of you check on your amazon.com ranking? And how many of you are aware that unpublished books are also ranked on amazon? That is, as soon as your forthcoming book is listed on amazon, it begins getting ranked. Even though it’s not scheduled for five or six months, an eagerly anticipated book may post a strong ranking. Now, how can that be? How can a book show up in the rankings when it hasn’t even been published?

The answer is, people are ordering it now! They’re putting their money down today for a book they won’t get for months. They’re subscribing to it. If you look at the amazon listing for any unpublished book, you’ll read the following: “This title will be released on [publication date]. You may order it now and we will ship it to you when it arrives. Ships from and sold by Amazon.com.”

Why should we be excited about this? After all, the stodgy old subscription model has been around for ages, in the form of book clubs: you pay a minimum fee in advance and you get a certain number of books. In fact, you’ll soon be hearing about Zooba.com, an online book club, kind of Book of the Month Club Meets Netflix. So, subscription is in the air. Nevertheless, and by a wide margin, we buy books in brick and mortar stores.

What’s wrong with that model? Well, just about everything. But for anyone who has not read my slavering diatribes over the last twenty-five years, let me summarize why.

Early in the history of publishing in the United States, publishers made a Devil’s bargain with bookshops. The booksellers didn’t want to get stuck with unsold inventory, especially inventory of first novels and other marginal books. So they told publishers, “We’ll take those books on the condition we have the right to return unsold copies for full credit.”

For a long time that system worked fairly well because returns were held to about 10%. But after World War II, for many and complex reasons, the return rate began to rise, occasioning Alfred Knopf’s classic remark, ”Gone today, here tomorrow.” Though publishing seemed to be booming in the 1960s, 70s and 80s, the boom was in good degree illusory. By virtue of printing economics, publishers can make a profit on a bestseller even if thirty or forty percent of the copies are returned. But when the return rate continued to rise to 50%, 60%, or even higher in the 1990s, the chickens came home to roost and publishers started losing money.

What did the publishers do in response? They succumbed to the blockbuster mentality, spending heavily to acquire bestsellers that presumably guarantee profits. And still they lost money, tons of it, because no one had attacked the root of all evil, the system founded on the right of booksellers to return unsold stock for full credit. To better compete for bestsellers, dozens and dozens of cash-starved publishers, with classic names like Doubleday and Knopf and Scribner and Little, Brown were forced to merge with better financed houses or sell out to global conglomerates, companies that made bathroom cleansers and pantyhose and other products that fit synergistically with books. Oops, there I go again.

But look, you don’t have to be a Warren Buffet to figure out that you can’t make money producing two units of something and selling one. Has that stopped publishers from doing it anyway? Look at your royalty statement for the answer to that one.

Okay, publishers are human, they make mistakes, we all lose a billion dollars from time to time, right? But – in 1994 something really important happened: amazon.com. And we realized there was a new way to distribute books, one that had nothing to do with bookstores. Publishers shipped copies of their books to amazon’s airplane-hangar sized warehouses, from whence they were mailed directly to customers ordering them online; customers prepaying for them with credit cards. The rest is history: amazon revolutionized bookselling. Does that mean the revolution is over? Scarcely. In fact, it’s just begun. What’s the next phase?

For the answer to that one, let’s return to those listings on amazon, the ones for books that have not yet been published. As I prepared these remarks, I visited amazon to check on the ranking of a Random House book scheduled for publication two weeks hence: it was # 17,577. This morning, ten days before its release date, it’s #11,384. How can an unpublished book be #11,384? Obviously, it’s being ordered by customers. Now, let’s say for the sake of argument, five thousand customers pre-order this book on amazon. How will amazon fulfill those orders? Random House will deliver five thousand copies to an amazon warehouse, where they will be dispatched to the people who ordered them.

Of course, Random will also be distributing copies to bookstores and chains, and we hope for the author’s sake that the stores sell every copy. But if history is any guide, after some months about forty or fifty percent of the stock will be returned to Random House, a shameful waste of paper, fuel and manpower. By contrast, how many copies will amazon return to Random House? Does the word Zero resonate with you? Now let’s see, zero returns versus fifty percent returns, which one is better…?

Now you can understand why the prospect of a subscription-based bookselling model is so alluring. But wait – it gets more alluring than that. Last year, amazon.com acquired a modest little printing company called BookSurge. The news didn’t make much of a splash, except in my brain. Because BookSurge is not just any printing company, it’s a print on demand printing company. Do we all know how print on demand works? You create an electronic file of your book and store it on a server. If someone wants to buy it, they order it online. They prepay for it with a credit card; it’s then manufactured and shipped directly to the customer, shipped without ever touching a bookstore.

I pondered – why would amazon buy a print on demand press? I didn’t have to wait long for the answer. A few months ago, they launched a service aimed at helping publishers keep their books in print. When the stock of a book runs low, amazon takes the publisher’s file and reprints the book at amazon’s own plant and fulfills back-orders. How do publishers feel about outsourcing their printing and fulfillment? What’s not to be thrilled about? They’re making money at no cost to themselves whatsoever. It’s all done virtually, and everybody makes money, including you the author.

But remember, so far, all we’re talking about is a service aimed at helping publishers keep books in print when stocks run low. But why stop there? Let’s let our imaginations run wild. Let’s revisit that Random House novel. Right now, in order to satisfy those subscription orders on amazon, Random House has to print five thousand copies at its printing plant and, ship them to amazon’s warehouse. Well, that’s perfectly fine if you’re in the twentieth century. But this is the 21st, and publishing is becoming virtual. How about this alternative: amazon prints all five thousand copies at its BookSurge plant in Charleston, South Carolina. Booksurge then ships the books directly to the customers who pre-ordered them months ago.

Pretty sexy, yes? Neither Random House nor amazon are out of pocket for the printing cost, because it’s covered by the price of the book; nor is there any shipping cost to the publisher, because shipping is paid by the customer. Nor is there any warehouse cost, because there are no warehouses! I used the term “virtual;”we know that in a digital world, all middlemen become impediments. I say unto you categorically that direct bookselling to the consumer, with no middlmen, is the way of the future. And here’s something more to think about: as stupendous as amazon is, it is only a middleman for book publishers. Is there any reason why publishers have to outsource their fulfillment to amazon? None that I can think of. Once the Random Houses of the world see the profitability inherent in the subscription/print-on-demand model, if they’re smart -- a condition we cannot always take for granted – but if they’re smart, they’ll realize they can do it themselves.

Actually there are impediments to the Random Houses and HarperCollinses and Penguins selling books directly to consumers. One is internal: their books are sold by commissioned sales reps whose noses tend to get out of joint when their companies cut them out of opportunities to make commissions on store orders. The other impediment is external. Direct bookselling cuts out the major bookstore chains, and Barnes & Noble tends to get cranky when publishers go into competition with them in the retail marketplace. (That hasn’t prevented B&N from competing in the publishing marketplace – the retailer publishes its own books, and its “store brand” often undercuts similar titles supplied by traditional publishers.)

Those obstacles notwithstanding, selling directly to customers is the only way that the book industry will find its way back to profitability. And just think how profitability will liberate publishers and enable them to return to their core competence: publishing books of lasting cultural value. Like, THE APRHODISIAC COOKBOOK. And HOW TO MAKE SOCK MONKEYS. And I HATE MYSELFAND WANT TO DIE: THE 52 MOST DEPRESSING SONGS YOU’VE EVER HEARD.

Thank you.

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