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Exploring the Problem

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Act 1:

Launching the Book
Let’s say you’ve written a really great book that you acknowledge is appealing only to a select niche audience, and you decide to publish it yourself in order to make it available to those few. Your interest is more in sharing knowledge than in commercial success; nonetheless, you have a really limited budget, and you’d like to at least come out even on your investment. You investigate the expenses involved, and you realize that just to have your book printed in a run of 2,000 copies is going to cost you around $7,000, or $3.50 per book. (This is a conservative estimate for a book of 250 pages.) You price the book at a current market value of $16.95, and assume this leaves a good margin for profit.
Think again. In the good old days, you could sell directly to independent bookstores at a 40% discount, but the days of selling directly to bookstores are long gone. Most of the independents have been swallowed up by the big guys, and all of them buy only through recognized Distributors. Nowadays, therefore, you must promote your book to a Distributor, who, if you’re lucky, takes on the book at a 55% discount. Then there’s the cost of shipping the books to the Distributor’s warehouse, fees for advertising in their catalog, not to mention the costs of advertising and promotion to the public in order to insure sales of the book. Still, it’s not impossible to accomplish all this on a limited budget.
Act 2:

Working with “Master Distributors”
Suppose that sales through such a Distributor are less than you anticipated, and you decide to pursue the sales of your book through a “Master Distributor” with a sales force and the clout to place your book with retailers and a number of smaller Distributors. Now, in addition to the 50-55% discount which they grant to these retailers and smaller Distributors, you must forfeit the Master Distributor’s additional fee of 25% of what’s left after the 55% discount is deducted. That $16.95 book which you paid $3.50 for is now worth $5.71 to you. However, the Master Distributor will likely charge you a “set-up” fee of $450, a catalog ad fee of $125, microfiche fees, warehouse storage fees, book show display fees, and any other kind of fee they can come up with. Then comes the big surprise: Even though your book sells reasonably well, you receive no money at all, and your statements detailing the sales which were made three months earlier (statements will regularly be three months late) show that 25% of your yearly sales is held back as a “Reserve” against returned books. Most likely, in the first year of your book’s sale, you will receive nothing at all-unless, of course, it becomes a runaway best-seller.
It’s important to understand clearly that Master Distributors are in business to make a profit. Their profit is made, not from the Distributors and retailers to whom they sell your books, but from you, the publisher. Without your books, they have no product to sell. They cannot charge more for the books than the retail price you have set; they make money by taking as much of a cut as possible from what they owe you. And they can be very creative in finding ways to do that. After all, they have a staff to pay, and are generally in arrears because the large and small book Distributors to whom they sell are consistently late in paying them. Their problems translate to your problems, and it is not inconceivable that you will find that you owe them money even after they have sold all your books for you. Then, of course, you must come up with another $7,000 for an additional print run.
Let’s suppose that by this time you realize that you are getting the short end of the stick, and you decide to terminate your contract with the Master Distributor. You realize this is going to cost you a great deal of money, not only in the cost of shipping your books from your Master Distributor’s warehouse back to you, but in the loss of customers already established by your present Distributor. Still you are dissatisfied with the way they are treating you, and you give notice of termination. This puts them on notice that they have six more months to sell your books; they retaliate by increasing the “Return Reserve” to 100%, holding back all payments to you in order to cushion their reserve.
Your contract specifies that at the end of eight months following your termination, they are to return all of the remaining inventory of your books which they hold. They do not. You complain, but receive no reply. Your contract also stipulates that they have another six months in which to accept returns, and a whole year before they are required to pay you the inflated amount held in “Return Reserve.” Then, when that long year is up, they complain that they are not being paid by their creditors, that they have a cash-flow problem with the large retail and wholesale conglomerates, and they cannot pay you at this time.
What are you to do? Sue them? This would entail a large expenditure for legal fees, travel to their location, and a great deal of time and effort spent; and besides, you only stand to force them into bankruptcy, in which case you would be left with nothing. So, long after the deadline for their settling of accounts with you, you are calling, faxing, and e-mailing in order to convince them that you want not only the books that they say they can’t find in their warehouse, but you want the money that was allegedly held in “Reserve.” But, in actuality, there is no separate Reserve account; all moneys are held in the company’s account, and they need that for their own salaries. And so, as the months and years pass, you are basically at their mercy to receive what is owed you.
It may be that you find another Master Distributor with whom you place your books, based on recommendations from those who say they are in the know. But you find that your new Master Distributor is even worse than the one you terminated. You have exchanged one exploiter for another who treats you even more unfairly. Such is the current situation in book distribution that is driving many independent publishers to seek other alternatives.
What’s the Solution?
So what is a publisher to do? Is there another way to place books in the marketplace? This is the question that small independent publishers are trying to answer today, and a number of inventive solutions have been offered.
One of the possible answers to the question is the direct book sale of your books on the Internet through an independent Web site and/or through large online booksellers like Amazon.com and Barnesandnoble.com. But the publisher must still do the work of promotion and pay out huge amounts for advertising in order to direct the consumer to the firm’s books on the Web, and this is outside the capability of many small publishers.
Another option is the new technology of “Print-on-Demand” publishing, presently being offered by companies subsidiary to several of the large book distributing houses like Ingram and Baker & Taylor who provide an outlet for both on-demand printing and widespread distribution combined. This publishing option came into being as a means of avoiding many of the problems associated with the conventional way of publishing and distributing books, and was designed especially for those books which enjoy minimal sales, but which the publisher wishes to keep in print and available to his select audience. The book, including its cover, is transferred to an electronic disc, using a format called PDF. From this electronic file, the book is printed out in rapid fashion one at a time, bound, and shipped out as ordered. This eliminates the need for the large initial expenditure required for printing a quantity of thousands of books such as is done with the conventional offset printing of a title. The cost of converting to a PDF file is minimal, and books are printed out as they are ordered, thus eliminating the cost of storing a large inventory, and, most importantly, eliminating the additional discount demanded by Master Distributors. The price and wholesale discount is set by the publisher, and while the per unit costs increase slightly, he receives the full amount of the retail price minus only the wholesale discount. And as these books are sold on a non-returnable basis, there is no “Return Reserve” deducted from his earnings.
It is an option that is very appealing to many publishers with backlisted titles who wish to keep a title in print but are unable to afford to print it in large quantities. It is also appealing to a small niche publisher with a new title that is anticipated to sell only a handful per month over a long period.
As wonderful as “Print-On-Demand” publishing sounds on paper, there are still some glitches in this process. The rapid growth of “Books-on-Demand” has caused a log jam of sorts in the infant industry due to the ever-increasing submissions by publishers, resulting in some unsatisfactory delays in production and delivery. A book printed on an offset press can take less than a month from submission to delivery, whereas a book submitted to a “Print-on-Demand” jobber has been known to take up to nine months for delivery. This handicap will no doubt be remedied as the technology is streamlined. But we may look for these large Distributors with Print-on-Demand capabilities to gradually increase the publisher’s costs of production as well.
This technology has already begun to revolutionize the book industry. Conventional book Distributors stuck in the old technology of warehousing large inventories are feeling the heat and some are envisioning their immanent demise. It has been suggested that before long a customer will be able to browse a bookstore-a real one or one in cyberspace-choose a book title, and have it printed out and bound for him by the time he reaches the check-out counter. The Distributor as go-between will be superfluous and extinct. No book, old or new, will ever go out of print; but, however obscure, however unpopular, will enjoy instant retrievability for so long as it exists on file in an electronic disc format. For publishers who wish to make titles available without incurring unsustainable losses, this is a happy prospect. And for authors who are concerned about the continued availability of their contributions and the endurability of their legacy, this is indeed a comforting thought.

Stan Trout is the President of Atma Books which publishes manuscripts he has written under the pen name of S. Abhayananda. One of his titles, “History of Mysticism,” was a recent selection in the Book-of-the-Month Club and One Spirit bookclub and is a perennial textbook in college classrooms around the country.

This article is from thePMA Newsletterfor April, 2000, and is reprinted with permission of Publishers Marketing Association.

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