Here’s an article that originally appeared in The Blotter literary magazine. If you missed it, it’s still worth a look.

What the Pub?!?! Economic and Tech Trends in Publishing

A long time ago, books were sold in a way that is so shockingly different than how they are sold today that publishers might as well have been operating in a parallel dimension. The big difference between how books were sold a century ago and how things work today is summed up by one word: remainders.

Books are the only product sold on the open market that can be returned if sellers fail to move them. Jeans are made in a stunning array of sizes, lengths, cuts, styles and colors yet manufacturers don’t offer to take back anything retailers can’t sell. Cars require an investment of materials, labor and capital that for most consumers is topped only by the purchase of a home yet there is no giant parking lot in Detroit that takes back unsold vehicles.

Every year publishers spend money to bring in new authors, print the authors’ books, market those books, ship those books. . .then take back any and all unsold copies. If you’ve ever wondered why books cost so much yet advances for authors have been notoriously low for decades, you now have one tiny piece of the answer. No other industry that is expected to earn money has such intensely profit-killing behavior at the heart of its business model. Puzzling, to be sure.

Puzzling behavior becomes downright bizarre when the returned books arrive back at the publisher’s warehouse. Those unsold copies are, in industry terminology, remaindered. That means pulped. Shredded. Destroyed. No one keeps close tabs on the number of remaindered books in America but some estimates have placed the number as high as 65 percent. With publishers producing nearly 300,000 books every year, that means a whopping 16,000 titles. . .titles, not copies. . .could be shredded every month. Very Fahrenheit 451 of them.

It didn’t used to be that way. In that long ago world in that parallel dimension, publishers sold books just like any other commodity. Whatever was ordered by a bookstore was purchased by the store. If they didn’t sell right away, stores found a way to sell them. Then the Great Depression arrived. Lest we believe all the modern media’s comparisons of the current recession to that time, remember that in three years industrial production fell 47%, the GDP fell 30%, and the wholesale price index declined 33 percent. People couldn’t afford to purchase bread or shoes let alone books.

In a desperate bid to keep themselves afloat, publishers offered a deal booksellers couldn’t refuse. They magnanimously offered to ship books for which the stores had not paid, take back books the stores could not sell, and didn’t expect payment for copies that did sell for a month or more. By the time the economy recovered, bookstores were so accustomed to the terms that publishers were stuck with a business model that would be unacceptable during any other time.

Which of course is one of the primary problems publishers face today. Before anyone pillories them for being thickheaded wastrels, imagine a world where jeans manufacturers or car companies shredded, burned or compacted 65% of their inventory every year. Obviously they would rather quickly stop producing quite so many styles or models or colors or types. If the same were to occur in publishing, the world would rather rapidly become a much less interesting place.

Publishing is not just an industry that produces products and manages a payroll and gives publicists something to do between calls from Fortune 500 companies and minor celebrities. Publishers are companies that have boards of directors and retirement plans and stockholders to satisfy, yes. They are also giant machines that disseminate ideas and thoughts and cultural concepts into the hands of anyone. . .anyone. . .who has fifteen or twenty bucks in their pocket. Even people who have no money can access the same books for free at the library. Book publishing is one of the great levelers of our modern world.

We cannot afford to lose that. A world in which publishers produce only those titles that are sure to sell would be a world filled with genre romances and celebrity memoirs. It would be like watching only three channels on TV or being forced to buy ill-fitting jeans that are always too tight in the crotch.

Now you might think that most titles available today already consist only of the ill-fitting, crotch-rubbing type. To a degree, that’s true. It’s so true that both James Patterson and James Frey (he of the discredited memoir and subsequent Oprah stink) have both created virtual sweatshops wherein “coauthors” write books based on the famous authors’ ideas.

Patterson, by the way, justifies his sweatshop by claiming that he has far more ideas than any one person could ever write in a lifetime. The truth is that every author has far more ideas than they could ever write in a lifetime; an important part of the author’s job is to sift through the pile to find only those that are truly worth writing.

But the same industry that supports as-filling-as-popcorn tales and gristmill pulp also supports breakthrough ideas, swooningly ethereal literature, Utopian ideals and fiction that sweeps readers into new worlds. Despite the increasing pressure over the past several decades to reduce publishing costs, the number of titles produced in the United States has increased every year. That 300,000 new books produced every year doesn’t include the ones being churned out in the increasingly popular self-publishing arena.

Unfortunately, to continue along this path, publishers have had to cut costs somewhere. The author, the one who produces the valuable ideas and ethereal fiction, has born a not inconsequential part of the burden. Along with shrinking advances, print runs have also been shrinking. An average contract twenty years ago used to be what I dubbed a standard 5-5 deal: a $5,000 advance and a 5,000-copy first print run. Now an advance could be 5-3 or 3-3 or even 1-1.

During the past decade, publishers have fallen into the habit of producing only half the agreed-upon number of copies for the first print run. (Yes, it’s a breach of contract but try enforcing that when you’ve received a puny $1,000 advance and the publisher has an entire floor of its building filled with attorneys.) Why manufacture something that is just going to be remaindered? Which brings us back to the nasty little expectation that has burdened publishers for over a century: remainders.

The practice of returns has to be changed. Slowly it is changing. In recent years, a few of the top publishers have taken tentative steps toward eliminating returns. Their efforts have often been met with a strong backlash from booksellers who of course don’t want (and who often can’t afford) a business model that eliminates one of the few things in their favor.

Yet technology is also playing a hand. Small publishers are rapidly converting to print on demand (POD) technologies because they can no longer afford traditional offset press processes (and all those remaindered books they’re going to create through offset printing). POD books are created one at a time as needed. Since publishers don’t generate a first print run that is stored in some warehouse, there is no warehouse to which the books can be returned.

There are thousands of small publishers compared to only six very large publishers. If booksellers have customers who want to buy something more captivating than the latest sweatshop title or more interesting than thoughts geared toward the lowest common denominator, they have to buy at least a small number of non-returnable titles.

This explains why more bookstores offer discounts on new releases, deeper discounts on books that have passed the ninety-day sales window, and remainder bins with bargains ranging from $5 down to as little as a buck. Like viewers who decide where in the distribution cycle they want to see a movie (at the theater, through their cable’s on-demand service, or on DVD), readers who want the latest book pay full price and those who catch on later or who don’t mind waiting pay the discounted price.

“Ah,” you say craftily as you heft your twelve-ounce electronic reading device and stare with superiority at the vast shelf space available in your home because you no longer buy print copies, “what about e-books? Aren’t print books already dying a slow death?”

Well, no. Again we have only to look back a hundred years to see how the exact same dynamic impacted the entertainment industry. It used to be that entire families gathered around radios every night to listen to the news and be thrilled by audio plays. Movies were supposed to entirely supplant the need for radio. Later, television threatened the movie industry with exactly the same doom’s day prediction.

Yet not only do we now have more radio channels than ever before, a hefty percentage of us actually pay for specific content or channels that are free of advertising. Most of us pay for television channels that offer better content than the free channels. Movie studios produce far more titles today than ever, and Indie studios are a living part of our culture. Rather than replace any specific format, new types of media simply forced the industries to shuffle their approach. They ended up with less attention from individual consumers than before yet they all survived and even thrived.

The same dynamic is currently taking place in publishing. In addition to e-books, printed books are also competing with the free content available on the internet. . .which includes entire books. This shift is industry wide and impacts all print forms from books to newspapers and magazines. As history shows, publishers will most likely survive and even thrive. The advent of e-readers that can handle newspaper and magazine formats are generating new profit streams for the nearly defunct mags and rags. E-books now represent as much as 35% of top publishers’ revenues, which is injecting much-needed cash into their bottom lines.

Still, the short-term upheaval is painful. Publishers continue to produce and heavily promote the fluffiest books. The world doesn’t really need yet another celebrity memoir or, more disheartening for readers of every generation, children’s picture books written by the glitterati. But think about what those fluffy books are really telling us: people buy them. In droves. In barbaric hordes. In mind-numbing, stampede-at-the-rave numbers.

And thank goodness they do. Without those titles to pad their bank accounts, publishers wouldn’t produce beautiful books or thoughtful books or life-changing books. We would have no categories that serve the elusive young male reader because female readers vastly outnumber their counterparts in every age group. We would have no books that present the lives and goals and desires of immigrant or ethnic populations because their demographics are too small. There would be no risk-taking novels that go against the established religious or political or jingoistic or governmental authority, no GLBT voices, no stories of the poor or disadvantaged. We would have nothing to inspire us, no characters who share some of our own experiences, no tales that reveal how similar we all are regardless of race, beliefs, nationality or age. There would be no magic.

Publishing isn’t a perfect industry. Every company in every industry has to balance their profits against their goals. But in this arena, there tend to be more individuals who want to make the world a better place. They want people to understand how difficult it is to grow up biracial in America, they want underserved voices to sing as clearly as those of the majorities. Considering that there are already too few corporations that have any redeeming value, publishers almost look like they are riding white horses. Their mounts might be gelded and a little grimy but by god, they’re still in the battle.

So, of course I will continue to cringe whenever I see yet another big-name title about how hard life is as a celebrity or how much being rich sucks. And I will never begrudge the publishers the money they make from those sales. I can’t. I’m one of the authors those glitterati titles support.

Author bio

Laine Cunningham has been a publishing consultant for nearly twenty years. Her company, Writer’s Resource, guides authors of book-length fiction and nonfiction through the publishing process from creation to contract. In addition to ghostwriting, rewriting and editing services, Laine provides in-depth assistance with query letters and book proposals. Her opinion has been sought by CNN, Canada’s BNN, Media Bistro, and other international media on issues ranging from The Oprah Effect to the end of the Harry Potter series and Sarah Palin’s ghostwriter.