The big problems that publishing has are distribution/number of vendors, which has gotten too small, and publicity methods. Word of mouth sells books, especially fiction, but first off, people need to know the books exist. Trade publishers are very bad at this unless the people whose attention they are trying to attract walk into a bookstore. Traditional advertising is expensive, sure, with low return, but publishers have been reluctant to come up with other ways to market books and to use the Internet. Nothing is really a niche in trade publishing — every book can have a fair amount of general appeal — if publishers can harness media and have the book out there where people actually encounter it.

Of course, then there is the the returns issue for print books and the difficulty of invading an electronics market that doesn’t want book publishing for e-books.

Good points about capitalization and stability. As David and Gina have shown, small without a solid financial base can be difficult. Heck, we’ve seen this lack of solidity on the part of e-only publishers (this makes me wonder on whole new levels). There’s a need to, first, be realistic about your market and your goals — and then everything else.

Interesting about the bulk of the Borders returns being received. That has to help everyone’s books (financial, not necessarily reading).

Borders & Indie presses. We’ll be OK, provided that Perseus has to capacity to absorb the hit. Distributors absorb credit risk for the publishers. We’ve pretty much absorbed a good chunk of the potential hit already, since Borders has been returning all year. Also, the inevitable Chapter 11 will mostly be focused on getting expensive leases canceled.

Start-ups. I’ve talked to a couple of folks who’ve been laid off and suggested that they EVENTUALLY consider starting up a new press. I’d advise against it right now because retailers and wholesalers are shifting all the inventory risk they can onto publishers, and there’s just not enough revenue from electronic publishing to compensate. When it reaches 15% of trade book sales, somewhere in the next 2-5 years, that non-returnable, net 30 day, zero marginal cost of reproduction cash flow will be all it takes.

Big advantages over small. Primary advantage is capital to absorb inventory risk. That will increase in the short run and not diminish until said risk is reduced with electronic publishing. All the other advantages are declining at various rates — manufacturing economies of scale will become less relevant; capacity to pay for placement in bricks and mortar less relevant as customers become less obedient; general corporate infrastructure economies of scale will either decline are or fairly trivial.