Fixing the business

by Jessica

Publishers Marketplace ran a link to the Harvard Business School Working Knowledge interview with former Random House CEO Peter Olson, whose class at HBS uses the publishing industry’s hype/hate relationship with the e-book as a semester-long case study.

The whole article is worth a read, but one passage struck me as particularly noteworthy. With regard to the price skirmishes over e-book pricing, Olson points out that the customer has not been given much of a say. He continues: "I don't know of many successful examples of pricing a product based not on what it costs or what people want to pay for it, but based on another format that is completely different, just because you want to keep that format alive." Youch.

Publishing is a peculiar, and some might say, poorly conceived business. I’ve often thought it would be interesting to issue an invitation to assorted big-thinkers, (economists, management consultants, authors, agents, editors, plus all the students in Peter Olson’s class) for their plans to “fix” publishing—redesigning this ad-hoc business into something self-sustaining, or at least, an industry whose death is not forecast on a daily basis. Of course, I realize such schemes might or might not have any bearing on reality. Back when I worked at a publishing house that was part of a larger entertainment conglomerate, the sleekly suited management consultants from McKinsey and Co. favored us with several visits; in each case our role was to answer their questions, then speculate among ourselves how much they were being paid.

I was flat out amazed at how little our well-compensated interlocutors seemed to know about publishing. Perhaps their ignorance was in fact their strength, and they could see, de-Toqueville style, the assets and liabilities we local yokels failed to perceive. Without knowing how things are done, how things have always been done, they were free to critique our ways, and offer comprehensive recommendations. My favorite being “Publish more bestsellers.” I recall that one consultant asked me what I could tell him about market testing. My mouth hung open for a moment before I replied “only that publishers don’t do it.” So far as I know, focus groups are not convened on behalf of books. What might this look like? AOne could create one easily enough on-line, and indeed, the book-to-blog phenomenon is the closest that publishers come to “market testing,” ascertaining that there is some quantifiable readership for a given subject.

Now that Harper Studio has been shuttered, I wonder if their innovative idea of attempting to do away with returns will vanish along with it. Returns are, of course, a prime example of the way in which how things are done seldom reflect best practices. As you probably know, booksellers can, at pretty much any time, return unsold stock for a full refund from the publisher. The return system was dreamt up during the Great Depression to entice booksellers to stock shelves that might otherwise have remained empty; knowing that the books came with a money back guarantee lowered retailer’s risk and essentially propped up their business. Now, however, some 70 years later, the same system is in place. Abolishing it makes good common sense, but it would send shockwaves through the industry. Booksellers would certainly reduce their buys, and likely demand a deeper discount. But we might move closer to a tenable model…

So, I’m throwing open the doors to the big thinker among you. Any ideas to reform the whole (or even a part?).

Anyone, anyone?