I don’t write many posts about hoodies but I found a quote from American Giant CEO Bayard Winthrop in this Business Insider post interesting enough that I wanted to comment on it:
“One of the great unspoken, dirty secrets about the apparel industry is that brands for the last 40 years have been investing a tiny amount in the product to sustain huge marketing and huge distribution costs,†Winthrop said. “In American Giant’s case, we do almost the exact opposite of that.â€
He’s decided that American Giant is in the apparel business, not in retail or the store management business and he’s also decided to diffentiate his product based on quality and suitability to task.
I don’t think this problem is limited to apparel. If you look at the balance sheets of, say, pharmaceutical companies you’ll find that they’re actually marketing and lobbying companies that do a little medical research on the side.
What business is Apple in? I’d say that it’s primarily a retail and supply chain management company that has used savvy marketing to create mystique and brand loyalty. It’s possible that when Steve Jobs was around he could make the argument that it was a technology company but I’m not so sure that’s still the case.
I can’t help but remember Peter Drucker’s remark to the effect that most managers don’t know what business their companies are in.
People generally have a very hard time formulating goals and fitting means to ends. It is really kind of amazing to me. Writers in particular will jump through all kinds of hoops to avoid acknowledging that they are in the business of selling manuscripts to publishers. They’ll prattle on about the beauty of language, and shaping young minds, and all the usual self-aggrandizing rot but when you press them it turns out what they really want, the thing which will make them happy, is a fat advance check.
“Did you ask for a fat advance?”
“Nope.”
“Why not?”
“Because I really just want to ‘get published,’ and everyone was being so friendly and nice. . .”
“Well, good luck spending all that niceness.”
Why do I get paid more than I deserve? Because I know what damn business I’m in, and I know what I’m after and I ask for it. I create manuscripts and I sell them for money. Duh.
For anyone who might read Michael’s comment I want to underscore his diction: he’s in the business of selling manuscripts to publishers not readers. Most publishers don’t sell to readers, either. They sell to wholesalers or, possibly, retailers. Retail book dealers sell to readers.
The automobile companies are not in the business of selling cars to people who drive. They’re in the business of selling to auto dealers, a group whose number is proscribed by state law. That’s why there will never be a great $10,000 car. No margins.
Exactly.
Now, as it turns out, selling to readers has also become increasingly the writer’s job. I’ll have spent 20k on book trailer, web site, various rights, advertising and travel to promote my current book by the time I’m done. And that’s not getting into the time suck of Twitter and Facebook and email and school visits. And that is, precisely because, as you point out, publishers don’t sell to readers – they sell to B&N, Amazon and Indies. You would cry if you saw how little publishers know about their end users (readers.) Publishing is a data-free zone.
I know. McGraw-Hill used to be a client of mine. I had to speak to them in words of one syllable.
Let me start by saying I don’t know anything about the book business, although I get the gist here.
My questions are two fold.
1. Since the author is the design, or the content, why are they not defacto selling to the reader, with publishing simply being a combination of “manufacturing” and finance, and the retailers (or Amazon) just distribution.
2. Doesn’t the reader define what the publishers and booksellers demand from the authors?
In a manufacturing environment, contract manufacturers would be clueless as to the marketing positioning etc to the final user, just viewing themselves as widget makers. (Which is why its a crappy, low margin, swing capacity business)
Guarneri:
It’s getting more that way, especially with digital self-publishing. But while I certainly need to keep the end user very much in mind, the person I have to sell to is KT (probably shouldn’t use her name.) KT buys my stuff because she thinks it’ll sell-in to B&N and the Indies. (Amazon doesn’t need to be sold on a book, B&N does.) But she also buys my stuff because she likes me and we get along, and because I’ve established a long reputation for turning in a clean manuscript, and because she doesn’t want me heading uptown to Scholastic or Macmillan or Random.
So in effect my primary relationship is with her. The reader doesn’t care whether I hit my due dates but KT does. The reader doesn’t care if I hand in a clean (requiring minimal editing) manuscript, but KT does because it impacts her schedule, her hiring, etc… The reader doesn’t care if I work for Harper or Random, but it looks bad if I jump to another house. And, too, there’s the fact that even when my stuff doesn’t sell especially well, my work is always good enough that I don’t embarrass KT. She doesn’t have to go into a meeting and justify giving XXX dollars to some putz. So there are all these issues, these small-bore motivators involved in my relationship with her, quite apart from my relationship with readers.
But as I stare the reality of book tour in the face starting this weekend, and as I glumly note that I’m booked into a Doubletree, and practice the presentation I had to pay my kid to help me with, featuring the video I wrote and paid for, and the site I wrote and paid for (http://frontlinesbook.com/), and as I pimp my public appearances on Twitter and Facebook, I do at times ask myself just what the hell it is the publisher does. And then I look at my advance check and think, “Oh yeah: they give me money.”
The reader gives money to the retailer, the retailer gives money to the publisher, the publisher (KT) gives money to me. By my math that means I work for KT.
Isn’t part of the issue that if a book doesn’t sell, the retailer can return it to the publisher for a full refund? (In some cases, the retailer only needs to receive the stripped cover and a promise to destroy the remainder) To me that means the publisher is on the hook for a book not selling, which I think makes it different than many retail transactions.
PD:
Yeah, it’s a strange business. Though I’d venture a guess that at least some other retail operations must run on a returns policy. I wonder.
There’s a similar problem in a lot of industries, PD. The auto companies have done buy-backs to prevent a cycle of deep discounts that would encourage prospective customers to delay purchases.
Because I’ve never written or sold a book, or a movie manuscript etc I accept what you say. It just seems an odd mindset. Others may underwrite, print and distribute your books. The publisher may take the risk to pay you and therefore the risk of market (reader) acceptance of your work. But without the reader making a purchasing decision it all goes away.
In our business we evaluate the competence of various functions of a business before making an investment – capital raising, procurement, counting, making, marketing and selling. But the most fundamental question is “why do people buy?” It drives a business.
Just a vignette. I had a partner who did not have an operational background who was always enamored with a whiz bang factory. He once announced what a great business he had found because you could eat off the floor. Admittedly, it had great technical capabilities and efficiency. But it’s product line was stale. I finally had to tell him, “that’s nice, but we aren’t opening an Ethiopean restaurant to eat from the floor, it makes paper for consumer products switching to film labels.”
The sarcasm wasn’t appreciated.
I might think the whole stripped cover concept is more unique than it is, but it seems like its a clue about how the publishers see their market. Without offering retailers a full refund, publishers fear that book stores won’t sell books by anybody other than a relatively small number of known writers. The publishers also favor a certain amount of turnover for new products, so it gives the retailer freedom to destroy inventory. Without these arrangements, a bookstore would look more like what we find in an airport, with a few popularly recognized novels dating back several years. The retailer would know that these books will eventually sell through. But overtime the publisher would sell fewer books and be more beholden to the demands of a relatively few number of writers.
To me that all means the publisher is not simply trying to sell the book, which it may end up paying to print, distribute and pay to destroy, but to stock a bookstore in a way conducive to the publisher’s business.
Guarneri:
Well, in that sense every business is about the end user. Absolutely in publishing that’s the reader. But as a practical matter KT is the means by which I reach the end user. If I were to go self-pubbed it would be just me and the reader, but to the surprise of pretty much everyone in publishing, including me, the youth (my market) aren’t going for digital books – they like something they can hold in their hands. So, I need KT’s paper and her trucks and her access to the markets (foreign as well as domestic) and her money, as well as her editors and art directors.
Also, don’t forget that the deal is KT pays me an advance and I keep that advance whether or not the book makes money. In effect I sell her a widget which she then pushes out into the marketplace.
“But as a practical matter KT is the means by which I reach the end user.”
And that can be said of production and distribution in any business. But theres no future in beating a dead horse. It’s apparent that the money risk taking function and decision to move forward on a project resides with the publisher. I guess it’s the same with movies. But don’t you get a piece of the action if the book is a big winner, not just an advance?
Guarneri:
Of course. The advance is theoretically “against” royalties, it’s just that we don’t have to pay back the advance, even if a book bombs.
FYI the way it works usually (for established authors) is a 4 tranche advance. Let’s say I sell a trilogy for 400k per book, 1.2 million total. I get a quarter of that total (300k) up front when I sign the contract. I get another quarter (per book, so 100k) as I turn in the manuscript, another quarter as it comes out in hard, and the last tranche when it comes out in paper. A less-established writer gets essentially the same thing except that they can’t usually sell on concept alone but rather must have the completed first draft before even engaging with the publisher.
Then, in a perfect world, the sales exceed the advance and starts to spill over into my bank account, usually with a rate escalator (starting at, say, 8% of cover, rising to 10% or whatever you’ve negotiated) as you hit various benchmarks.
Then there’s foreign rights money which can be tiny for, say, Latvia, and substantial for the UK or Brazil. And there is (potentially) Hollywood money which comes first as an option – a low-money hold that runs for a specified time like 18 months – and then, if the project is greenlit, they “buy” the rights for a larger stack of money.
Interestingly, Hollywood money often isn’t that big a deal in and of itself, options are in the low thousands and even a movie purchase rarely gets to a million. The real Hollywood money comes from the effect on book sales. I have a TV deal where I think the option is 5k and the “sale” is 150k or so. But I have a creator’s credit and a producer credit, so there’s another 5-10k per episode and diminishing numbers on reruns. All of which is very nice, obviously, and far better than working for a living, but the cool thing is that a successful TV series would probably sell a million additional books, which is 1.5 to 2 million for me and has the knock-on effect of raising my ask on the next book deal.
As a long time quite serious sic-fi/fantasy reader, I find the writer reaching out to and acting like they really want to interact with the readers as mostly kind of hokey. I think it has probably let a few self=published types move up into the big leagues, so I guess it has some value for writers. Maybe this is just stuff the younger generation likes.
Steve
That makes perfect sense to me, Michael, and the “advance against” structure is basically identical to the fee structure in PE. Despite all the criticism over exorbitant fees, there really are none. They are capital draws against the LP commitment that must be repaid to the LPs in the carry calculation. Just timing.
Steve:
I’m baffled by people’s desire to meet authors, but it’s definitely not a youth thing – as the sparse turnouts at my events shows. Teenagers have other things to do.