Sales Down, Profits Up
If you are a book publishing junkie, you probably already subscribe to Michael Cader’s www.PublishersMarketplace.com. It’s the equivalent of The Daily Racing Form for publishing.
As many in the business before and after him, Michael started his career as an editor and then left the corporate fold to branch out as a book packager. Packagers are like movie producers. They put together book projects from soup to nuts, often from their own ideas, and deliver final printable files to a publisher for a fee. Sometime around 1996 (not positive on that date but I’m sure it was way before the ubiquity of the Internet), Michael started a daily e-newsletter called Publishers Lunch, which he dutifully delivered via email to interested subscribers just before the industry stepped out for its daily business nosh.
But before he began PL, Michael asked one of his mentors—his former boss, a brilliant but mercurial figure with a remarkable ability to predict market trends—what he thought about the prospects for an electronic news service for publishing. Did the uncanny tea leaf reader think that Michael would one day be able to make it a sustainable, scalable business? Not one to mince words, his old boss told him he was crazy. It would never catch on. The Mentor estimated that there were at best 200 book publishing professionals who would even remotely care about insider book news. Don’t waste your time. Keep packaging books.
Michael took half of his advice. He kept his packaging company active, but on the side, he started to deliver the days’ inside publishing news to subscribers for free. Not boring hype filled PR announcements, but the stuff editors, agents, sales people, marketing people, publicists really wanted—the inside scoop about the state of the business.
Michael serves as PL’s editorial voice, the curator of the news. If an editor leaves one house for another, Michael hears about it. He then confirms the gossip and “prints” the move in Publishers Lunch. If an agent sells a book for a big advance that was the talk of editorial meetings around town, Michael reports it.
Slowly, from one insider recommendation to another, Publishers Lunch became a de rigueur read, so much so that Michael found himself burning his days feeding the beast which took time away from his revenue producing packaging operation. He realized that he had to either scale back the service or figure out a way to make it profitable. But he also intuitively knew that he would alienate his core subscribers by suddenly demanding a fee for what they’d been getting for free.
Instead, Michael created a premium service for those wanting even greater inside access. www.publishersmarketplace.com was born. It wasn’t a huge sensation when it started, but over time (close to ten years of hard work, not overnight) he’s built it into an indispensable tool for anyone serious about the business of books.
One innovation he came up with was posting a “deal of the day” on the front page of the blog. As there is no shortage of big ego players in books, agents and eventually editors begin submitting their deals to the site, vying for that “deal of the day” distinction. Michael now has a decade long database of deals that you can easily search by editor, title, publishing house, agent etc. It’s a great resource for anyone curious about specific editorial tastes. He also has agency listings, submissions, and on and on. He’s constantly considering new material for the site and takes none of his success for granted.
But what was really smart is that he continues to give away Publishers Lunch. So if you just want to test drive his service, all you have to do is subscribe to the free portion. (Full Disclosure, I do not have any financial interest in PL or PM.)
I bring Michael’s site up because I’ve noticed something interesting in his reports over the past months. Something struck me that never would have without Michael’s service. He reads the mind numbing press releases so you don’t have to. Boiling down three verbose pages into a paragraph is value squared. Here’s a paragraph from August.
Bertelsmann reported sales for the first half of the year, and Random House’s results followed the pattern of other big houses in recent months: sales were basically flat (down 4 million euros) but profits rebounded significantly, up over 70 percent.
I then dug deeper online and found the specifics. In the first six months of 2010, Random House Worldwide had revenues of 791 million Euros and a profit of 40 million Euros. But this year RH’s revenues were 787 million for the same period, but its profit was up to 69 million Euros.
How can a publisher’s sales go down and its’ profit go up? Isn’t book publishing in deep trouble with the death of The Borders Group, rumors of Barnes and Noble being on the block, and the daily announcements of independent stores closing all over the country?
Only taking a deep dive into that mystical document, the P and L, will reveal the answer.
TO BE CONTINUED