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The New Face of Distribution

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Editor’s Note: This article consists, in part, of material assembled by Schwartz for an article appearing in the August issue of “ForeWord” magazine.

Three major moves into Books on Demand printing were announced at Book Expo which will change forever the face of book manufacturing and distribution.While the technologies that were stitched together have been around for some years, what is new is the attachment of a digital text library to a manufacturing and binding line that goes right into order-processing, fulfillment, a/r collection, and disbursement. You can place your title in this digital library either by having an out-of-print edition scanned and digitized, or by furnishing your digitized files. Any common file format will do, thank you.Bertelsmann (through its Dallas, Pennsylvania division, Offset Paperback Manufacturers [OPM] ), Xerox (out of its Waltham, Massachusetts facility), and Ingram (through its LightningPrint subsidiary in LaVergne, Tennessee) are making big time commitments and investments that should alert every book manufacturer, master distributor, wholesaler, bookseller, librarian, and publisher that the old boundaries that divided their functions and industry sectors are transforming into new links.Twenty years ago, the pre-press industry emerged when desktop publishing, and the digital imaging technologies that followed, integrated the functions of word-processing, editorial production, design, typesetting, paste-up, camera, color separation, stripping, and platemaking into a seamless electronic process culminating in a disk-with its various modular elements able to be managed by any author, publisher, or vendor willing to make the investment.Two whole industry sectors were almost completely wiped out (except for specialty niches)-composition and art production. The rest barely resemble their origins.It is mind-boggling to contemplate that what we thought up to only a few years ago was Twilight Zone thinking is now on the threshold of reality. In the not too distant future, I expect to be able to walk into a bookstore, browse a blurb and a first chapter on a Muze kiosk, order the book to the credit of the bookstore, and walk over to a neighboring Kinko’s where the finished product will be waiting for me. Or maybe the bookstore itself will have a print line in the basement-when the current huge investment, and the management burden that goes with it, simplifies and reduces itself.As things now stand, Xerox is ready to attach its service to an e-commerce technology called Publiotech. It is a complete online publishing management system. As described by Xerox, it includes tools and services for Web site design and hosting, document registration, digital storage, and custom publishing. It also has a graphical user interface for searching and browsing, a virtual shopping cart; Internet commerce transaction software for ordering, credit-card clearance and payment; and gateway modules for back-end integration with accounting, fulfillment, and publishing systems.At the moment, Ray McClure of Xerox tells me they are limiting services to publishers projecting $50,000 or more in annual volume. This is an invitation, it seems to me, for small clusters of literary, scholarly, and self-publishers with complementary direct markets to form collaboratives and go electronic all the way.Xerox, remember, has long experience by now in operating 16 document centers throughout the US and abroad.Ingram, on the other hand, will eventually clone its LaVergne facility at its three major regional distribution centers. They will now be able to economically distribute for smaller publishers who will not have to maintain inventories at their warehouses.And Bertelsmann, which has a network of manufacturing plants throughout the US, can readily install clones in other regional centers when their OPM operation takes off.And any of the foregoing, if they wanted to, could forge alliances with Muze or Kinko’s to extend the reach of their digital libraries, manufacturing, or distribution know-how.Of course, we are now talking about toner transfer technologies, 17-18″ webs or sheet widths, with black-ink-only interiors and four-color paper covers (although hardcover and jacket bindings are also being offered by Xerox on an outsourced basis, and presumably could be offered by the others as well). But this is only the beginning.The economics of this process are what enables the breakthrough. The major new entries in the market are talking bound book costs, depending on page count, of from .013 to .020 a page, plus around .90 per unit for the cover, using dry-toner transfer technologies. Out-of-print books and their four-color covers can be scanned into a vendor’s digital library at a cost of $150 or so. If the publisher furnishes the files, the entry cost per title is considerably less. Keeping the title permanently available in digital storage for demand printing can run from $1 to $1.75 per month. Publishers should inquire directly to the vendors for exact pricing.I took a look at some familiar trade paperbacks whose backlist potential typifies what I think are the possibilities for active trade titles (as opposed to the out-of-print market and high-end scholarly and academic titles). The titles are: Kirsch’s Handbook of Publishing Law by Jonathan Kirsch (Acrobat Books), $21.95, 288 pp.; Publishing for Profit by Thomas Woll (Fisher Books), $24.95, 304 pp.; and The Complete Guide to Self-Publishing by Tom and Marilyn Ross (Writer’s Digest Books), $18.99, 432 pp. See the chart for how the numbers break down.

The Economics of
“Book-at-a-Time” Technologies
 Single copy sales 288@

Kirsch Woll Ross
Mfg cost using 8x formula 2.75 3.125 2.375
Unit from Mfrs price list
(1M copies printed)
3.04 3.17 5.50
Book-at-a-time @ .015/pg
plus .90
5.22 5.46 7.38
Reseller (bookstore) outcome
40% discount 8.80 10.00 7.60
Book-at-a-time mfg cost 5.22 5.46 7.38
Royalty @ 10% net 1.32 1.50 1.14
Gross margin to publisher 6.66 8.04 2.88
Hypothetical distributor
28% of net after discount
3.70 4.20 3.19
Net margin to publisher 2.96 3.84 (0.31)
Direct sales outcome
(P&H paid by customer)
Book-at-a-time mfg cost 5.22 5.46 7.38
Royalty @ 10% net (list) 2.20 2.50 1.90
Gross margin to publisher 14.58 17.04 9.72
Hypothetical Digital
Library Agent’s Fee (5%)
1.10 1.25 .95

Now we have to remember that the use of “demand” or “book-at-a-time” technologies requires no inventory to be maintained. This should result in significant reductions of distributor overhead-especially if we are dealing with nonreturnable backlist sales-and, one would like to think, chargebacks to publishers.The hypothetical library agent’s fee that I have shown presupposes an emerging industry service to satisfy the requirements of this new digital library market. The IBM, Xerox, and other digital library management systems-with capacities for 100,000 titles per server-introduce a whole new level of requirements for maintaining integrity of content, insuring against copyright piracy, monitoring business arrangements, making the files available to various vendors, etc.Self-publishers in particular, as well as a consortia of independent publishers, are likely to find it convenient and cost-effective to turn over the management of these digital logistics to specialized agents. It is important to bear in mind, also, that committing a title to these digital libraries is not a rights transaction-it is the cyberspace version of furnishing camera copy, film or, these days, digital title files with a manufacturer. On the other hand, these digital libraries will bring together an enormous base of intellectual property-and the potential applications and their rights implications have yet to be considered.Every vendor in the manufacturing-distribution food chain should start looking at the transformative opportunities that these new developments can bring. And authors and publishers should be doing the same.Sources Interviewed for this Article

Lightning Print (Ingram), La Vergne, TN. Russ Pottle. Phone 615/287-5505, fax 615/287-5588, Web site www.lightning-print.com. Open for business since BookExpo America. IBM web Info Print and Info Color printers. Five trims. 60# cream with a true white available soon. Will ship one or more copies to bookstores with next Ingram shipment. Will ship min. order of 25 copies to publisher. Service is open to publishers whose titles are otherwise not kept in stock at Ingram. Initial facility is at La Vergne. Additional print lines may be set up later at other regional super warehouses.

OPM – Offset Paperback Manufacturers (Bertelsmann), Dallas, PA. Randy Xenakis, VP Marketing and Sales. Phone 717/675-5261, fax 717/675-8714, e-mail Rxenakis@gateway.opm.com. Opened for general business in July. Will have a selection of trims and paper stocks, to be announced. Will drop ship or handle order fulfillment to any customer base or to publisher. Print runs of from 50 minimum to 2,000.

Xerox Books in Time, Waltham, MA. Ray McClure, Product Marketing Manager, Xerox Corporation. Phone 716/265-7285, fax. 716/265-7285, e-mail Ray.mclure@usa.xerox.com. Facility opened in July for general business. Docutech printing line and Publiotech Web-based e-commerce featured. Will handle any quantity from one or more and ship to any customer. Initially requires projected $50,000 in annual printing volume from publisher. Will drop ship and order fulfill on order. Choice of two kinds of stock and standard trims. Will bind hardcovers, minimum of 25. Arrangement with Libri in Germany for European distribution. Potential expansion to document centers throughout the US and the world.

Gene Schwartz, an editor-at-large for “ForeWord” magazine, is a former PMA board member. He is a management and business consultant to publishers. He is a specialist in business and new product development, out-sourcing, and marketing and distribution strategies for both print and multi-media. He also furnishes financial planning, acquisitions, and capital formation services. He evaluates and helps to structure business deals for strategic alliances, publication, packaging, and distribution agreements. Schwartz can be reached in Bearsville, New York at 914/679-8867, e-mail Eugenegs@aol.com.

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