HarperCollins Decides Thursday Is A Good Day For Radical Announcements

April 3rd, 2008 · 15 Comments
by Kassia Krozser

There are sacred cows in publishing. Lots and lots of sacred cows. You have the “smell of books” people. You have “the publishing business model ain’t broke” people. And you have the “advances are divine rights” people. Suggest that advances are not written-in-stone obligations on the part of publishers and you’re considered naive. Ill-informed. Nutso.

HarperCollins has proposed a radical shift in the business.

Yeah, well, I was accused of all that and more when I suggested that publishers, if they could, stop paying advances to authors. The genesis of my speculation came on the heels ofGuy Hands, the new head of EMI’s musing that one way to cut costs for the company was to cut advances or at least be more selective about what money is being paid. Seems to me that it’s a no-brainer to think that publishers might think that way, too.

While you can argue this way and that about how publishing houses make money (or don’t), the facts are that publishers are upside-down on a book until a few months (or a lot of few months) after it’s published. Naturally, there is the advance paid to the author, the overhead dedicated to getting the book to print, the actual printing/shipping/marketing/etcetera costs. Until retailers send nice little checks — and actual returns! — publishers don’t make money on your individual title.

(This is where someone out there grumbles that while this is factually correct, there’s all this other money flowing in and out that makes the individual loss not so painful. As you all know, all that flowing money doesn’t impact the issuance of your royalty statement, so it doesn’t impact you.)

In what is surely the biggest news to hit publishing since, I’d venture, Gutenberg, the Wall Street Journal breaks the news of a new venture at HarperCollins. Publishing veteran Robert Miller will head a new unit. The new unit will be doing business in new ways and trying, trying, trying to push publishing in to this century. Here are a few key points, as outlined in the WSJ piece:

  • No advances to authors. Instead, authors will engage in a sort of profit sharing.
  • No returns — this is more of a dream ticket item than a reality, but returns are expensive and if you don’t try, you never know what you’re going to get.
  • No wasting money on “prime” store placement. I applaud this as co-op type expenses are driving up costs to consumers.

I’m guessing that three or four of you felt your heart stop beating at point one, got all excited by point two, and unless you’re working for a publisher, shrugged and figured point three doesn’t apply. And depending on how costs are calculated in this new profit sharing scheme, maybe it will, maybe it won’t. Experience suggests that there were will be various calculations of “profit” as this idea matures.

And by profit, I am saying “bigger royalty”. I’ve seen speculation that the author’s share would be as high as 50%. Of course, the question is “Fifty percent of what?” Yeah, I asked it so you don’t have to. The devil is indeed in the details, and I’d guess the details are still being carefully considered. It’s enough that HC made this big bombshell announcement — having all the i’s dotted and t’s cross can wait.

While one goal of this new scheme is to reduce unrecoupable advances (I have to say that typing this article feels an awful lot like working at my former job!) while maximizing cash flow, Miller has one other idea:

Mr. Miller said that many authors who currently receive large advances won’t be interested in the new model. However, he thinks he will attract major authors who have a book in the desk drawer that doesn’t fit their image, as well as up-and-coming writers.

I think it will be a long time before an effective “no returns” policy can be implemented. After all, how do you get everyone past the gloating “1,000,000 units shipped” announcements? That’s gonna take some serious weening. If HC can pull this off, it will restore my faith in humanity. In a low-margin business, it just makes sense for everybody. And now that printing presses are moving ever-closer to true on-demand printing, the crazy process of overprinting in anticipation of theoretical demand can end.

Finally, we have the co-op. How crazy is it that publishers have to pay for decent placement in stores? Everyone’s paying, everyone’s shoving other houses aside. There is a wild idea out there that it’s in the interest of the bookstore to give certain books — individual titles, themed displays, certain authors — premium placement.

That being said, it’s also going to be a tough change for this new imprint. They’re helping themselves by concentrating more on Internet sales that retail outlets.

Now I like this plan, but I know a lot of people are going to hate it. I don’t think it will end up in the same place it starts. These are radical notions. But if the money for the authors makes foregoing the advance worthwhile, it might just work.

[tags]robert miller, robert s. miller, hyperion, harpercollins, publishing, publishers, print-on-demand, pod, royalties[/tags]

File Under: The Future of Publishing

15 responses so far ↓

  • Nicola // Apr 3, 2008 at 10:06 pm

    I read the WSJ article and I can’t stop smiling. I’m also taking bets on how many writers will freak out at the notion of no advance.

    This is inevitable. Or print publishing will die–epublishing will eat its lunch.

  • Andrew Wheeler // Apr 4, 2008 at 7:17 am

    Let’s take those “key points” in order…

    #1 — Not new at all; Miller is re-using off the concept of the Perseus imprint Vanguard Books (ably run by a very savvy publisher, Roger Cooper). It’s a plausible concept, but let’s not pretend it sprung full-formed from the head of Bob Miller.

    As you note, the devil will be in the details; Hollywood has spent the last century poisoning the well in this area. It remains to be seen how many writers to be willing to wait for “profits.”

    #2 — There have been plenty of “no returns” schemes over the years; some work and some don’t. The ones that don’t work founder on the shoals of “we need to get lots of copies of this really great book into stores,” at which point the stores rightly point out that they won’t shoulder all of the risk.

    #3 — From inside the business, this looks an awful lot like “we’re only going to publish small, marginal books.” Miller will have to fight to change that perception, particularly by spending money on other kinds of promotions.

    Paying for placement is ubiquitous in retailing; it’s not something special to bookselling. The supermarket world is much more rapacious, as well — it’s fairly common for every planogram slot to be bought and paid for.

    Also, this may have been the biggest publishing news of the day, but it’s still well below Borders for the year so far…and the year is still early. Comparing it to Gutenberg is silly — this isn’t even in the same class as the Kindle.

  • Allison Brennan // Apr 4, 2008 at 7:35 am

    I have to agree with Andrew on point 3. Even if I accept the idea that no advances are a good idea (I don’t, but I’m conceding the point for a minute), if readers can’t find books in the stores, they aren’t going to buy them. So like Andrew said, the publisher (or . . . the author? Hmm?) will have to spend money on marketing, money that they don’t have because they haven’t been paid an advance. And while I don’t know the actual hard cost of co-op, I do know that it’s usually done as incentives and discounts and not hard cash. Advertising in newspapers, magazines, even online is expensive.

    So what this looks like to me, on the surface, is an idea to publish books giving no money to the creative side of the endeavor unless buzz happens and the book sells and then the author may get more money than he/she would have if they’d received a traditional advance/royalty structure. But to generate that buzz, the author is going to have to spend money out-of-pocket for marketing and publicity campaigns because the books aren’t going to be noticed in the bookstore.

    I don’t see how this is good for anyone.

    On advances, the advance is an investment. It’s like any other business who invests in their future. Some work, some don’t. Without advances, there would be few or no full-time authors. We couldn’t afford to write a book for nothing and not see royalties (or profit-sharing) for 12-24 months. And without the co-op and publisher support, I don’t see how we’d see enough of a profit to support writing additional books.

  • Carolyn Jewel // Apr 4, 2008 at 7:39 am

    I’m an author and my heart did not stop at #1. For one thing, for many of us, advances are so low it’s not like we’d be giving up all that much. I can’t help but think, however, of complaints of Hollywood Style accounting, in which profits never materialize. Acquiring a book is a cost of publishing. Paying the author absolutely should not wait until there are profits. Authors should be paid for each and every book sold. I’m open to new ways of structuring that payment, but the possibility of a publisher paying me nothing shouldn’t be in the mix.

  • Kassia Krozser // Apr 4, 2008 at 9:39 am

    Okay, I am going to defend Hollywood accounting (g). I spent much of my professional career in participations, and it is simply not true that proceeds (not profits, that’s an incorrect characterization) do not materialize. They do, and they can be quite lucrative.

    The difference here is that the HC model deals with primary compensation, while the Hollywood participations model deals with contingent compensation. Talent is paid a salary upfront. They also get paid residuals. While it all seems very unfair to outsiders, there’s a reason that actors who move up the ladder to the point where they’re offered a chance to participate sign the deal — nobody forces them to be a participant!

    I do not believe that “nothing” is an option unless we’re talking about expenses run amok! If the cost of the book exceeds what it makes, then the publishing industry business model is truly scarier than I thought.

  • Kassia Krozser // Apr 4, 2008 at 9:47 am

    Andrew — I suspect the “no advances” model goes back further than Perseus. It seems to me (and I could be wrong) that long before publishing was entrenched as an “industry”, advances weren’t necessarily paid, at least not as we perceive them today.

    I do see this as radical due to the high profile nature of the process. Will they get good authors on board? I think so. I also think that to do so, there will be a lot of tweaking of how authors are paid. I believe this is a first salvo in what is going to be an increasing trend; while I don’t see advances disappearing altogether, I can see them shrinking and shrinking over time. Allison might see her advances as part of her business and use them to manage cash flow, but publishers see them as upfront expenses and a way to save all-important cash.

    I think the co-op thing really does need to be reigned in — let’s be honest, it supports relatively few authors compared to the dollars spent — there are surely better ways to market books to customers (especially since the entire co-op model depends on a customer being in the right store and the right place at the right time — yes, an oversimplification, but you know what I mean). Why not redirect these dollars to more effective venues?

    As to Allison’s final point, I think this is a big issue. I find it unbelievable that major publishing firms cannot report more frequently and more timely. Hollywood studios manage to spit out more complex statements on a monthly basis — and they’re dealing with less standardization across contracts. If no advances are to be paid, it makes complete sense that reportings to authors happen more quickly and more frequently, at least in the initial phases of distribution.

  • Allison Brennan // Apr 4, 2008 at 10:17 am

    Kassia, you bring up one excellent point in your response. I think the accounting cycle IS way slow and there should be a better way to tally up books sold. Right now, some accounts report daily, some weekly, some monthly, and some . . . irregularly. So we can get the daily numbers from BN, but not from Walmart (as an example, I don’t know for sure); We can get weekly from walmart, but monthly from drug store distribution. That’s all on the seller end, not the publishing end. I definitely would like to see more accurate numbers earlier! And returns . . . sometimes publishers don’t even know if books have sold. How can that be? It’s enough to drive people batty.

    So I like the concept of better, faster accounting and payment, and if that happened then of course looking at lower advances is always an option. However, that’s not the reality today nor do I see it in the near future.

    Right now, co-op IS the best way to market books. Paying for real estate gets the books in front of buyers. Yes, they have to go to the store, but co-op is not just in brick & mortar stores, it’s at Amazon and BN.com. There are other effective ways to market books, but when people go and buy them, they need to be able to find them, and that means they need to be visible in a variety of venues from bookstores to airports to the grocery to walmart. I, personally, think that finding new and different venues for book sales may be a good marketing technique, ala Starbucks book of the month. Put cat mysteries in pet stores; culinary cozies in restaurants; romance in Victoria’s Secret.

    Anyway, I still hold that advances are an investment by the publisher in that author, as well as the individual book. David Morrell is working off a different model with his publisher, and it’s working for him. Which proves that there is more than one way to get paid writing.

  • Tess Gerritsen // Apr 4, 2008 at 11:23 am

    Re: No advances?!!
    This might work for new authors, midlist authors, and the desperate-to-be-published authors.

    But if Publisher A is trying to woo megaselling author John Smith away from Publisher B, they won’t be able to entice Smith with a “no advances” offer. At the top of the ladder, big advances will still be the norm. Or publishers will see their biggest authors head for the door.

  • Carole Nelson Douglas // Apr 4, 2008 at 12:41 pm

    “Put cat mysteries in pet stores; culinary cozies in restaurants; romance in Victoria’s Secret.”

    That’s a great idea for cross-marketing, Allison, but the way books are distributed, sold, and returned is too complex to make them an appetizing sideline for other-based businesses.

    I once witnessed how well selling cat mysteries in pet goods areas would work, only nobody involved was flexible enough to capitalize on it.

    I was touring a regional chain of grocery/general merchandise stores with my Midnight Louie cat mysteries. There was a smart tie-in: buy a book and get a coupon for so much off a name-brand cat food.

    I was set up for signings in the front of the store
    near entry traffic. A dump of my books was set up in the books section far away at the back of the store, and the cat food grocery section with the coupons was also back and far away at another end of the giant store.

    Sure, we sold some books and cat food during the signings, but an enterprising employee at one of the dozen stores told me that she’d positioned the cat mystery book dump IN THE cat food section before my signing date. The books and coupon offer were rapidly sucked dry and had to be refilled over and over. That wasn’t the case at any other signing.

    I reported this to my publisher’s marketing people, but I already knew this proof of success would fall on deaf ears. When I mentioned this good news to a chain store rep, I learned that what worked to sell books and cat food was a violation of store policy. Apparently each department in this chain was a jealously guarded fiefdom. You were NOT to mix products. I was disappointed to learn that it was better to sell less separately than to think outside the cubicles and cross-market.

    You notice that Starbucks features one book at a time, and it’s a sure-seller. Ordering and stocking and accounting for books sold isn’t easy or worth it for most non-book businesses.

    Now, if books weren’t returnable, like other merchandise, cross-marketing would be a lot easier.

  • Allison Brennan // Apr 5, 2008 at 1:11 am

    Carole, how frustrating!! Thanks for sharing. :(

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  • David Thayer // Apr 13, 2008 at 3:13 pm

    Poor Bob! He’s working for Harper Collins but can’t have any fun. Paying big advances is fun because like a big wedding or an Important Funeral money means nothing ( bear in mind these are US Dollars, almost worthless anyway.)
    What will he talk about during board meetings? His writers take the subway in from the airport?

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