Last Chance for Publishers to Level the Playing Field

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

The returnability of books is a cancer that has been consuming the publishing industry for decades. Publisher after publisher has succumbed to its relentless arithmetic. Yet, book people cling to the belief that they are not vulnerable to the forces that destroyed their predecessors. In all the commentary about the merger of Random House and Penguin I have seen nothing written about the consignment model of bookselling that has doomed countless publishers over the past fifty years.

The merger offers the captains of those great companies an opportunity to change that model. If they are sincere about leveling the playing field against Amazon, the abandonment of a returns-driven business model may be the only way to do so. I have no illusions that that will happen, but I feel it incumbent on me to remind my industry colleagues of why the field is tilted against them.

The essay you are about to read was written in January, 1992. It was drawn from a guest editorial I wrote for Publishers Weekly. With few exceptions (some improvement in royalty reporting) it could have been composed today.

The American trade book industry is undergoing the most serious recession in its history, and though it has rebounded from other down cycles in the past, anyone who thinks it will return to boom times is living in a fool’s paradise.

Trade book publishing has been in decline since the end of World War II. Industry boosters cite increased sales volume over that period to support the view that all is well, but much of the growth can be attributed to normal population increases and inflation. For the real story, one has but to look at the long roll call of publishers that have been forced to sell themselves to conglomerates, merge with larger publishing houses, or go out of business entirely. I am not speaking about mom-and-pop publishers operating on a shoestring; I’m referring to giants like Simon and Schuster, Doubleday, Bantam, Putnam, Macmillan, Scribner, Penguin, St. Martin’s Press, and Harper and Row. Today, we are left with only seven or eight major trade book combines. Presumably, in this publisher-eat-publisher jungle, these survivors are the fittest. But are they any healthier than the weaklings they acquired?

From the viewpoint of literary agents, whose jobs include monitoring the fiscal well-being of publishers, the answer is a resounding no. Most of the agents I have spoken to confirm my observation: The current economic downturn has revealed that just about every major American publisher is hurting. And what they’re hurting for is cash.

There’s not enough cash in publishing. There never has been, and there never will be. Why? Because the consignment system of selling books is bleeding the publishing industry to death. Try as they might, the smartest people in our field have failed to find a way to make money under an arrangement that makes books returnable to publishers.

Publishing is one of the few industries that sell merchandise on a fully returnable basis. The custom was initiated to overcome booksellers’ wariness toward the work of authors who were unfamiliar to them. If the customers didn’t buy those books, booksellers had the right to return the merchandise for credit. The practice was eventually extended to all books, whether by new authors or old, and it really took off with the paperback revolution. Paperback publishers discovered that the easiest way to ship their books was through magazine distributors. As most periodicals are monthly, the distributors simply collected unsold books along with unsold magazines at the end of every month.

Perhaps this setup worked a decade or two ago when returns were more modest, but with returns of 50 percent or more as the norm today, it is virtually impossible for a publisher to earn profits in trade books, or at least earn them on a sustained basis. Despite decades of ruinous experience, it still doesn’t seem to have sunk into the minds of many publishers that returns are a form of currency. Like any other kind of currency, returns can be manipulated. All bookstore people understand this concept perfectly: When times get tough, stores that don’t have cash “spend” their returns, buying new titles with credits on books that aren’t moving fast enough in order to keep cash flowing. Publishers, like anybody else, can only live so long on credit—then they start to bleed.

Large houses can afford to hemorrhage longer than small ones because they seem to have more cash. But that’s only an illusion: their losses are obscured on the balance sheets of their conglomerate owners. How long will those owners be willing to go on infusing their ailing publishing divisions with cash? As a rule, sick companies get dumped by healthy ones, and in a recession, sick companies get dumped faster. What never fails to amaze me, though, is why anyone would want to buy into an industry founded on such lousy economics. Though statistics are hard to come by because accountants for conglomerates don’t always separate the profits of their publishing divisions from those of their other divisions, the average return on investment in trade books seems to be 2 or 3 percent.

I have spent years advocating the abandonment of the consignment system. For one thing, it is a horrifying waste of paper and other resources. For another, it has forced all of us into negative, defensive, and ofttimes bizarre ways of speaking and thinking about books. Nobody talks about how many copies of a book were sold, but rather how many did not get returned. Royalty statements are designed to deceive by the omission of critical information. Returns data are buried in a column called “Cumulative Net Sales,” and the concept of holding back royalties against returns is so inflammatory to authors that publishers have built their royalty statements around hiding that information.

Worst of all, the consignment system is the principal cause of hostility between bookstore and publisher, and between publisher and author. Publishers condemn bookstores and chains for their profligate ordering. But why should bookstores restrain themselves? They have, after all, nothing to lose, as they can always invoke the privilege of sending back what they can’t sell. To meet the demand of these bloated orders, publishers have no choice but to overprint. Then, when the books fail to move out of the stores, the publishers are compelled to eat huge returns. The only people who prosper from this insane process are the remainder jobbers or the shady characters who illegally sell stripped paperbacks. In their frenzy to keep stores from returning books, publishers are compelled to offer incentives, politely referred to as “slotting allowances,” “display fees,” and “co-op contributions,” that border on institutionalized bribery.

Most of the resentment or suspicion that authors and agents feel toward publishers stems from royalty accounting based on returns. Authors, outraged that creative bookkeeping permits publishers to hold excessive royalties in the name of reserves against returns, consider the system fraudulent. Their viewpoint is easy to understand when you remember that returns are a manipulable form of currency. The temptation to manipulate them intensifies in recessionary or inflationary times when publishers seize upon royalty reserves as the most obvious source of cash to relieve their liquidity problems or earn some extra interest. Publishers cannot with impunity stop paying their printers, their landlords, their paper suppliers, or their employees. But by a stroke of the pen, raising the holdback on royalties from, say, 50 percent to 75 percent, a publisher can liberate enough cash to meet the urgent demands of all those other creditors – at the expense of authors. How, then, could authors, suffering liquidity problems of their own, not feel bitter? Nor is their mood improved to see their remaindered books, on which they receive little or no royalties, selling briskly in used-book stores.

Are there solutions to this dilemma? There are, but they all call for radical changes in the way we think about books, sell them, and account to each other for them. For any plan to succeed, it must: (1) allow publishers to print only as many copies as are necessary to fill orders, (2) put distribution on a nonreturnable basis, (3) enable publishers to make a profit, (4) encourage bookshops and chain stores to make money remaindering books on their own premises, and (5) provide authors with honest, easy-to-understand accounting. That’s a tall order. Some gratifying attempts have been essayed, but they all failed because they were not radical enough, nor were they adopted on an industry-wide basis.

As a student of publishing history, I’m aware of all the “death-of-publishing” prophecies that have proven false in our time. But I don’t think I’m risking much by stating that the publishing industry cannot endure much longer the way it is being run. The need to change our ways is particularly acute in light of revolutionary developments in electronic publishing.

In the coming era of “demand” publishing, we will see direct electronic delivery of text to reader-users without dependence on distributors, or even on paper. The technology for producing portable electronic books containing or accessing whole libraries is now at hand. By the start of the twenty-first century, thanks to computers, Nintendos, and Gameboys, a generation of children completely at ease with electronically delivered literature will make handheld electronic books the device of choice for reading. The awesome memory capacity of CDs, storing scores of volumes on miniature discs, may make bookstores and libraries obsolete. Thanks to the multimedia and interactive features of the new breed of computers, tomorrow’s electronic books will entertain readers with audio and video displays that will make traditional books look as crude as cuneiform writing on stone tablets. Gone will be the disgustingly wasteful system of merchandising books, along with the creative bookkeeping that permits publishers to hold authors’ money for years. Authors will be credited a royalty for each use of their property, and the purchase of books will be transacted by electronic debiting of consumers’ charge accounts.

Until that day comes, we still have an industry to save. I have offered one option to reverse the downward spiral that has wreaked so much damage on our profession. If it is unworkable, I invite the industry to find one of its own. But find one it must, for at the rate we’re going it’s only a matter of time before we read in these pages that the remaining behemoths of the publishing industry have succumbed to the same fate as all the others.

Richard Curtis

Expert Publishing Blog
Richard Curtis

About Richard Curtis

Richard Curtis is a leading New York literary agent ( who foresaw the Digital Book Revolution and launched an e-book publishing company early in 2000. E-Reads ( is one of the foremost independent e-book publishers in the industry, specializing in reprints of genre fiction by leading authors in their fields. Curtis is also a well-known authors advocate, author of numerous works of fiction and nonfiction including several books about the publishing industry, and prolific blogger – see his hundreds of other blog posts here.

7 thoughts on “Last Chance for Publishers to Level the Playing Field

  1. Chris

    Richard – Fantastic piece. In a sector of infinite opportunity and very finite (and increasingly scarce) resources the battles being fought must be carefully chosen.

    When you realize the severity of the challenges at the industry’s DNA, it makes it (almost) laughable that such huge debates rage about enhanced ebooks v. regular ebooks and other such trivialities.

  2. Eva van Loon

    Oh, how much that protest against the consignment model needed to be aired again! It is indeed the cancer of the book world.

    Our two little publishing houses do NOT engage in consignment sales except with bookstores in our own community which we know and trust to do a good job of the bookkeeping. In a world where we publishers are happy to provide one book at a time if a bookstore so wishes to hedge its bets and readers can try out a book online for free, consignment is a ridiculous idea and immensely disrespectful of the author.

    Our big indy bookstore in our town of 20,000 souls is doing so well, by the way, that it needs no advertisement. Literally, it doesn’t buy ads. How does it do it? It sells tickets to our non-profit events at no charge to the non-profit, it holds book launches at no charge except its share of the book sales, it offers a few discreetly placed computers for public use at cheap rates, and–most of all–it serves tea, cappuccino and home-made goodies in a congenial atmosphere. Re-think the bookstore–that’s the answer. Think of it as a community hub where books are honored, and the light in the publishing room suddenly brightens.

    Eva van Loon
    Powell River, BC

  3. Seeley James

    In the ’80s, computer MFGs sold computers to resellers with “price protection”. Something just as wacky as the publishing industry’s return system. There was a down turn in the early ’90s and three MFGs remained standing. The FIRST thing they did was repeal price protection. Resellers had to think before ordering, and they had to actually sell the stock they ordered. A much healthier reseller industry evolved.

    The same thing can/might happen to the publishing industry.

    Getting rid of the return system will:

    1) force B&N and indie bookstores to know the books they’re selling and therefore have recommendations at the clerk level.

    2) encourage some form of direct sales by the publishers themselves (James Patterson, Lee Child, etc can be pre-ordered directly without stores) thereby making the surviving publishers more responsive to readers and more willing to take risks on new authors and/or innovative titles.

    Peace, Seeley

  4. Gunnar Fox

    Wonderful piece that grasps one of several nettles that seem destined to determine the fate of the publishing industry (and its interrelationship with Amazon) in the next five years. I will not even speak of the ten-year timeline because it is likely to yield something radically unrecognizable from what we observe today, especially if Amazon continues to introduce aggressive business model innovations designed to dominate the market.

  5. Katja

    It would also save lots of trees! Eva your store sounds wonderful! Our little book store in our small town closed two years ago when the owner retired, all the bookstores in the closest city (20 minutes drive) closed or went out of business. Now we have to order from Amazon or drive more than 50 miles one way to find a book store. Your idea of combining publishing with a bookstore and a cafe/teashop is wonderful!

  6. Claude Nougat

    Combining bookshops with a community center/tea shop/coffee shop etc is definitely the way to go for bookstores if they want to survive the onslought of the Digital Revolution – and that’s done very successfully here in Italy where I live and I know of other such successful places in France and Germany (but of course the Digital Revolution is still a baby rebellion here in Europe…)

    What I don’t understand at all is why Big Publishers don’t fight Amazon on its own ground: in particular, why don’t they move to a POD model? That would get rid immediately of the consignment/returns difficulties. At one stroke, with the setting up of a POD machine in the bookstore to print out on demand all the books a publishers publishes, the problem would be solved! Sure, such machines are expensive (and still somewhat clunky) but while customers wait for their book, they could drink their cappuccino and chat, listening to music, couldn’t they? And all you need is some sort of financial arrangement to set up a POD machine for every bookseller…

  7. Richard CurtisRichard Curtis Post author

    @ Claude Nougat

    Absolutely agree. See Publishing 3.0: A World Without Inventory, Part 1 and Part 2) Publishers must accept that the future of book distribution is POD.



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