Don’t Pity the Publishers

It’s not easy being a book publisher. In most other media businesses, high demand gives you pricing power. You pay full-freight to see a movie on the opening weekend and top dollar for hot concert seats. But with books, the best properties are used by retailers as loss-leading door-busters. That trend only got worse this last weekend as Amazon, Wal-Mart and Target all joined into a price war on select blockbuster books that introduces $8.99 into the equation.

Disaster, right? Publishers certainly think so:

The combination of slow sales and squeezed margins is enough to make any publishing executive queasy. Perseus CEO David Steinberger explained it to the Wall Street Journal: “If you are taking margin out of the supply chain, it will eventually put pressure on everyone in that chain.” Publishers are afraid that if Wal-Mart, Amazon, and Target can make that $9 price stick, they’ll be forced to lower their wholesale prices. They don’t think the big writers will take less money up front. So they’re freaking out that the lower price point will come out of their profit margin. Publishers need that margin to pay off all the overpriced advances that lie like a dead hand on publishers’ profits.

But lower hardcover prices could finally give publishers some leverage to re-structure their business model. Rather than fight the increased sales–which are subsidized right now by the retailers–publishers should start chipping away at the super-sized advances they pay. I won’t bore you with my argument here but, if you’re interested, you can read the rest at The Big Money.


It’s the End of the Book World As We Know It: And Publishers Should Feel Fine
The Big Money, October 2o, 2009

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