Author’s note: This is way too long. And there’s math down there. But I’ve been having all these incredibly compelling conversations with writers and editors and publishers about issues in the industry, and I wanted to invite you into them. So skim past the math, if you like. But I do hope you’ll join in with your thoughts.
To my knowledge, there is only one type of retail in which a store orders stock, hangs onto that stock for however long they like and, if it doesn’t sell, sends that stock back to the distributor or manufacturer for a full refund of the wholesale price: Books.
What I don’t understand is how this came to be, and why it remains a convention of an industry seemingly desperate for reduced expenses and/or increased revenue. Surely Target, CostCo, WalMart, etc, would be inclined to pull their book sections. But it seems entirely reasonable that the industry would negotiate separate systems for those retailers in light of the amount of revenue they generate industry-wide.
Would a special deal for major non-book retailers be fair to independent bookstores? No. But come on: Life’s not fair.
It’s not fair, for example, that small bookstores are notorious for ordering book stock they don’t intend to pay for and for ordering ill-planned quantities of books that they then dump back on publishers and/or distributors. Business isn’t fair.
As the publishing industry grasps straws to figure out the future of the book, many things are going to change. One example: A number of big New York presses are now using the same print-on-demand technology–and the same POD company–many small presses rely on to streamline production and gain access to the largest distribution channels. (There’s a telltale sign you can recognize if you’ve seen it before, like the tattoo of the familiars in a Blade movie.) Another: One imprint of a big New York press has contacted small presses hoping to unload paperback rights of their titles. Any number of other examples could probably be discovered with a little bit of digging. None of the straws being grasped represent particularly bad ideas; presses are offsetting the higher cost of POD by increasing cover prices, and it allows them to keep books in print indefinitely, for example.
I found these efforts to alter the big press processes and landscape relatively surprising, since I’m inclined to see that landscape as a big dinosaur stuck in a tar pit, until my friend and fellow editor Bryan Furuness (Booth; On Earth As it Is) pointed out that big business always follows small, innovative companies once their approaches are demonstrated effective.
And I don’t know if those POD books are returnable. They probably don’t need to be, since they’re backlist, most likely to sell to people specifically seeking out the titles and authors, which means they’re most likely to be purchased via Amazon or special order, for those readers especially devoted to their independent stores. Through the POD model, the returnability demanded by book retailers large and small is cost prohibitive for most small presses, because we refund the full wholesale price of each returned book with little chance of turning that book immediately around to sale; further, bookstores take the liberty to return books after store patrons have all but blown their noses in the pages. It’s very common for publishers to receive returns that they could not possibly pawn off on a customer, their condition being so poor.
I suspect, despite the likelihood that many independent bookstores and perhaps Barnes & Noble will be dramatically impacted by such a sea change, that the days of risk-free bookstore returns are numbered. I can’t figure out how they’ve survived this long.
Let’s do a little math. For a word nerd, I love–love–math.
Simon & Schuster has brought EB author Debra Monroe’s spectacular 1996 linked story collection A Wild, Cold State back into print using the POD model. The cover price when I bought it sometime around 1996 was $11. The current cover price is $18.95. (Go buy it. Worth every penny and much more.)
To persuade bookstores to order stock, publishers generally have to discount that cover price 55%; the lowest discount most will consider stocking is 40%; to play in Amazon’s yard the minimum discount is 30%. Since Amazon is not offering a customer discount on A Wild, Cold State, I’m going to assume Simon & Schuster is only offering the minimum 30% discount–remember, since this is backlist, they needn’t play along with bookstores’ demands for discount.
So, originally, the paperback priced at $11 would have carried a wholesale price of $4.95. I don’t know what royalty they paid (I’m definitely not rude enough to ask), but it was probably somewhere between 10% and 15%. Let’s say 12%, just to hang out in the middle. So $1.32 per copy would go to the author, or be deducted from remaining advance funds. That leaves $3.63 for production & profit. I don’t know how much it cost to offset print a sizeable run of paperbacks in 1996, but $1 seems reasonable, no? So the press makes around $2.63/copy for each paperback sold.
The version available now, priced at $18.95, would cost $4.44/copy to print through the POD system S&S appears to be using. At a 30% wholesale discount, Amazon, et. al. would pay $13.27/copy to the publisher. Let’s stick with a 12% royalty, for consistency’s sake, so $2.28/copy should be heading the author’s way, a lovely improvement. In this model, then, the publisher makes $6.55/copy sold of A Wild, Cold State. So far, so good, yes?
Unless the book is returnable. It’s worth noting here that if you’re not working with brick and mortar bookstores, or you’re only doing so through special orders, you’re not going to see measurable returns. This seems obvious, yes?
But for the sake of argument: generally speaking, a print run of a new release produced through conventional means sees 10% or more in returns. If this were the case with the current release of A Wild, Cold State (which it isn’t, but bear with me), S&S should expect to pay out around $1330 in returns per thousand copies sold, leaving them with $5220, or $5.22/copy in profit. This still looks pretty good.
But let’s look at that original, new release pricing scheme. The wholesale price, remember, is $4.95/copy. But if we can expect 10% returns, for every thousand copies sold, the publisher is writing $495 in checks to retailers who have lacked the foresight to order carefully or failed to sell their stock effectively. They’ve only pulled in $2630 for those thousand books ($2.63/copy, see above), so now we’re at $2.14/copy in profit. Less appealing.
Small presses using POD processes lie at the intersection of the worst elements of this math. We tend generally to carry the highest production cost in order to take advantage of the distribution packages available via POD companies, yet if we want to take full advantage of that distribution–if we want to get our books into bookstores–we usually need to accept full returns and discount the wholesale price by 55%. In this scenario, the current release of A Wild, Cold State would generate $1.81 in revenue after the discount, production cost, and royalty. If we see 10% returns, that means we would bring in $1629 for every thousand copies sold, or $1.63/copy. Hard to get by on that, don’t you think?
Fortunately, publishers using POD see something closer to 3% returns, according to a few books I’ve read, because we don’t have huge piles of stock we thrust into booksellers hands at every possible turn. On the other hand, $18.95 isn’t a very reasonable cover price for a paperback book unless you’re looking specifically for that title; would you pay it for a paperback you stumbled upon in a bookstore? But if we were to price the same book at a more reasonable level, $14.95, we’re now making only 50 cents/copy after production and royalties. So for every thousand copies we sell, we make $500. Then, after 3% returns, we’ve got $292 left. How, exactly, will books be marketed, will editors be paid, if this is the future of publishing?
Part of the answer, of course, is that it’s not.
For one thing, eBooks help offset things a bit. Let’s call $6.99 a fair price for a full-length eBook, one that is deeply discounted from paperback retail but doesn’t devalue the work. And let’s say the author’s royalty for eBooks shoots up to 30%, which is not uncommon among small presses, reflecting a more equitable split of profit. For every eBook sold at that cost at Amazon, the author makes $2.10 and the press makes $2.75; at the NOOK store, the royalty is the same, and the press makes $2.44; Google eBooks’ payout is considerably worse…awful in fact. For eBooks sold through their IndieBound program, the press would make $1.05 (again, the author’s royalty is stable here). But that’s the end of the outlay. eBooks don’t get returned.
Another part of the answer is that the current POD & distribution model is not sustainable for a small press that doesn’t receive considerable grants via nonprofit status. It is, perhaps, not meant to be sustained. But the distribution channels, like so much else in publishing, serve as stern gatekeepers. Ingram won’t even consider your application until you’ve produced 10 titles.* So it has to be a starting point, a place where a small press can go to get off the ground, if that press wishes to offer its authors wide distribution and even a shot at showing up in bookstores. But when you shift back to offset printing in measured runs, you’re back to 10% returns.
It’s hard to see how an industry that’s throwing everything it’s got at the wall, just to see what sticks, can continue the practice of accepting returns from retailers who could just as well order carefully and discount stock, just as a clothing retailer would. It’s hard to believe that publishers haven’t banded together already to just say no. It’s clearly on everyone’s minds, as demonstrated in countless conversations I’ve had, but also in this interview with Algonquin Books Executive Editor Chuck Adams (scroll wayyyy down, past the elephants). Killing the practice of accepting returns would have a nasty impact on book retailers. But isn’t it better than pushing an already struggling (by its own hand, surely) industry further toward its worst practices, like ignoring solid literary work for shitty celebrity memoirs? I can’t help but think that in the larger scheme of things, when there are fewer good books published, there are fewer to sell.** That can’t be good for anybody.
*The Library of Congress won’t even give you CIP data until you’ve worked with more than 3 authors, in another demonstration of the establishment’s death grip on the industry.
**Yeah, I know. There are more books published now than ever in history. I’m not concerned with sheer volume, but with the quality of that material; I happen to believe, very strongly, that the best literature gets selected and rigorously edited, not just shot out into the world in its infancy by the person who birthed it.
Great post, Victoria — thanks for opening up the conversation about this. We’re struggling with this at Ashland Creek Press, too — the notion of Just Saying No when it comes to returns. It’s most important that our authors get their books into the bookstores they want … but then again, we want to be there for these authors in the long term, and accepting returns means much less revenue, which isn’t a lot to begin with. It seems that one of the upsides, for authors and publishers, of a no-return policy is that bookstores will order only the copies they need (not dozens more, as often happens), then work a little harder to hand-sell whatever books remain after an event — all of which seems cost-effective and beneficial on several levels, especially in developing relationships w/ readers, authors, and publishers. But perhaps that’s overly optimistic…?
One thing I’ve noticed lately among author friends from small, POD presses is that they do more events at venues other than bookstores (libraries, art galleries, community literary centers, etc.) — they can sell their books themselves and make more money than they would in royalties … better for authors and publishers, but not at all for indie bookstores.
Thanks again for a great post — looking forward to an ongoing conversation about this and other issues!
Thanks, Midge. I think there are as many solutions/alternate outcomes to these problems as there are writers and small presses, so discussions of those ideas are especially productive.
And the returnability thing has only enhanced our culture’s next-hot-item fetish. If a book doesn’t sell in three months, just ship it back and put out the next new hot item. But a book that’s worth anything close to its cover price is worth selling long after that initial window has passed. Truly good books age well, either because they are timeless or because they represent a look into a particular time. (This is less true with non-creative nonfiction, but not untrue.)
It’s part of the reason for the sheer number of titles that are out now, and why books have so much trouble gaining traction in the marketplace, because there’s no reason for booksellers to try try and sell any particular title.
It’s always seemed like an odd model, even when talking to some of my bookseller friends. Some of them feel pressured because they don’t get the time to really learn their stock, and titles can disappear before they’ve had the chance to get to know them.
Midge: We, too, have been setting up more events outside of traditional book retailers, precisely because it’s easier to focus on a target audience and authors make a lot more money from those sales. A lot of them will buy a carton or two at their author discount from us and sell direct to consumer. We have had some luck with independent stores in our region stocking our titles for at least three months before and after events, but even that feels like too short a window.
Yes! The rush-to-sell and returnability problems are self-reinforcing. And the rush-to-sell problem is ugly and irrational, too. That policy is bad for everyone.
(That was supposed to be @Marco.)
Look! More math!
Am I going too far if I point out something that may be obvious? That when you buy a book that’s been listed with a 55% retail discount and you pay full price, the bookstore’s take is 55% of the cover price (or whatever amount corresponds to the wholesale discount)?
So for a $14.95 paperback with a full discount, the bookstore’s take is $8.22. As we established, the author’s is around $1.50 to $1.80; the publisher’s, in the case of a POD situation, varies, but is about a buck before returns. That’s why B&N can give you those lovely 30% discounts off cover price: They’re still making $3.73 a copy after that markdown.
I’m all for everybody making money, and I love bookstores and want them to prosper. But I’m made so uneasy by retailers’ huge cut in this industry. Of course, in the case of big presses and offset printing, the publisher’s take is closer to $4 or so. So everybody wins in the old power systems except the authors, but even in that case, a bookstore selling at full price still beats the publisher’s take 2x over, and the bookstore isn’t responsible for marketing the book, paying the author an advance, editing the book, etc.