Friday, January 9, 2009

Book Churning. Why am I not surprised?

Christmas Sales at Bookstores.

Before I get to the "Book Churning" part, here are the bookstore results for Christmas.

From the ICV2 site:

Barnes & Noble's Holiday Sales Drop

"Barnes & Noble, the nation’s largest bookselling chain, announced today that its sales for November and December were down 5.2% over the same period in 2007. Comparable store sales were down 7.7%..."

"While Barnes & Noble’s holiday sales were nothing to write home up about, they were considerably better than those of its chief competitor, Borders, which saw its holiday sales drop 11.7% and same store sales for the Border Superstores decline 14.4%..."

"The most negative note in B& N’s holiday sales report was the news that holiday sales for the company’s online operations declined 11% versus 2007 during a season in which online competitor Amazon is expected to report robust holiday sales. Barnes & Noble reports that at year’s end, it had $275 million in cash on hand and no borrowings under its $850 million revolving credit facility."

We've hired a new management team!

It's hard to see how Borders is going to come out of this. They tried to sell last year when they weren't so far down, and when the economy wasn't in quite so dire shape. Like Gottshalks' hoping a Chinese finance company will come to their rescue, this all seems unlikely. Barnes and Noble has stayed a little further ahead of the bear.

Anyway, the crux of this is that the Publishing Industry is also suffering. There are a couple of funny articles about how editors and publishers can't go on Euro junkets or have to eat in less than 3 star restaurants, or have to --- horrors!-- take meetings at their desk.

But there are also stories of publishers actually not accepting new manuscripts, which as someone else pointed out is like a butcher not accepting meat.

Publishers on the ropes.

I don't feel sorry for them in the slightest. What the hell did they think was going to happen? They had 7500 independent bookstores they more or less heaved overboard in favor of the Big Two. If they think Amazon will treat them any better, they're totally delusional.

Comic publishers following them off the cliff.

One of the more irksome things lately has been the clamoring of independent comic publishers for the death of comic shops. "They don't carry out stuff! Our future is with the bookstores!"

Most of this was predicated on the fact that Manga was selling so well at the big stores.

At first.

Because it was new.

And it has started to fade.

Barnes and Noble is only going to carry best-sellers, guys. Maybe we small comic shops aren't what you hoped for, but I still think you might be better off to keep trying.

Book Churning.

See -- we've been through this before, back in the old days.

From the GalleyCat website. (Highlighting is mine.)

"On Tuesday, Jasmine-Jade Enterprises... filed a lawsuit against the bookstore chain seeking $1 million in damages stemming from what Jasmine-Jade alleges were deliberately "excessive" orders of their books..."

"CEO Patricia Marks described Borders's alleged ordering of more books than it planned to sell, which the publisher claims was intended to " reduce the amount owed [Jasmine-Jade] and produce a credit balance in the account," as "churning." She added, "It's crippling the industry. It is especially hard on small publishers, who can't absorb the staggering costs." You may recall that when Impetus Press was forced to close last fall, the independent publishing company cited the return fees charged by their distributor as the leading cause of their financial downfall, and specifically mentioned Borders as an outlet that was returning substantial numbers of books. You may also recall another book distributor's warning to indie publishers that Borders was anticipating "excessive returns" in the last months of 2008."

No Returns. It worked for comics.

My understanding of the comic biz is that the same thing happened in the mid to late '70's, on the part of newstands. They were getting comics in, tearing of the covers immediately, and sending them back for credit.

The comic industry was on the verge of collapse when an independent show dealer named Phil Seuling approached Marvel and DC and made a deal. He would buy comics from them without returns, but with a higher discount.

Thus Pegasus Books exists, and so does every other comic shop, because of a different model.

I wonder what would happen to B & N and Borders and Amazon if they actually had to BUY THE FRIGGING BOOKS! Might be a bit harder, they might be a bit more circumspect, and independent bookstores might have a chance to come back.

(Ironically, I'm sure the small stores would scream the loudest, but...well, it worked for comics....)


RDC said...

If the business model is one where the publisher sells without restriction and accepts full returns then the fault is theirs. A manufacturer should manage such exposure and track sales and if one of their customers has a track record of a high rate of returns then they should cut back the volumes for that customer. If they are not willing to do that well then they should just plan on the consequences. If you have a model allowing returns, what do you expect will happen during the Christmas buying season. The retail store will buy to make sure that they do not run out (at the high end of projections) because there is no penalty if they over estimate and they run the risk of losing sales if they under order.

so publisher this is the consequences of the business model you embraced so unless there is some potential contract terms that Borders violated then I doubt the suite would have much of a chance.

Sounds more like the publishers last gasp, which has been happening more and more lately. Demand for individual copies of books is decreasing rapidly. Partly due to reading for entertainment seeingly going out of favor and also the increase of people basically swapping books at very low cost on Internet sites.

The book industry is in very very bad shape these days.

RDC said...


Unless you get more for returns then what you pay for the original sale, how can the publisher claim that it was done to reduce debt or to get a credit on their account.

Now what may be happening is that they made some payments, so that when they returned the books the value of the returns was greater then accounts receivable outstanding putting the account into a credit situation, but that is still not what is being claimed by the publisher.

Anonymous said...

It's all quite simple.

Everybody order more than they need, and everybody goes along to show max sales, and the wall st loves this stuff.

Then when the economy implodes everyone trys to return all the stuff they have no hope in hell of ever selling.

Book publishers want to be able to say that 1M of 'title x' went out the door, what they don't tell you is 999k came home.

A small publisher doesn't have to play the game, they just say ALL SALES ARE FINAL. PERIOD, and negotiate the discount.

The fact that small publishers were going along with the BIG-BOY scam, just shows that they were desperate.

Like DUNC says, those that take stupid fucking terms don't survive in the long term.

If all this means that books will be sold direct to readers from publishers or authors so what? We now have the internet, and with the new amazon model, an author can sell direct to a reader.

It's all a numbers game, but as a publisher I would rather have a few sales and get 100% of the GROSS, than get 20% of the gross for a lot of sales, and then have them all come back.

STUPID SHIT, and hard up people who like BIG NUMBERS, and BIG BOXES.

Like dunc says all this BIG shit going to the garbage is going the way of the dinosaur.