Book publishing can be done only by hand, one book at a time, like any custom work or like writing itself, though with respect to writers publishers are mere valets or midwives. Industrial methods come into the work only at the end, when the manuscript has been edited and sent to the printer. But even at this stage books are individualized in countless ways. Should there be illustrations? Should they be in black and white, or in color? Should they be gathered in groups of eight or sixteen pages or should they be placed appropriately throughout the text, a more expensive process? Should the paper be off-white or white? What should the paper weigh?

Though publishing depends on profits, like all businesses, and the balance sheet eventually judges every calculation, the dream of riches is not, or ought not to be, what lures most people to this highly speculative, not very profitable handicraft. The business of publishing general fiction and nonfiction for sale through bookstores, as distinct from textbooks and other institutional publishing, is a cottage industry whose net sales in 1988 were about three billion dollars, the price of two attack sub-marines, or about as much as Americans spent that year on turkeys and apples. Usually what lures recruits to this peculiar trade is a displaced literary impulse, as it was for me and for most other publishers I know, people for whom literature or at least writing had become, at a critical point in their lives more compelling than anything else, including money.

Recently, however, book publishing has attracted a number of professional investors—the visionary Rupert Murdoch and the speculator Robert Maxwell, for example. And for several years such large entertainment conglomerates as Paramount and MCA/Universal have owned publishing companies not only for profit but on the questionable theory that book publishing can benefit their other businesses such as films and television, or that books lend themselves to further use by the “knowledge industry.” But these benefits have yet to show up. Meanwhile book publishing profits continue to depend upon the vagaries of writers and the unpredictable tastes of readers, and throughout 1989 there was talk among publishers and in the press of unusually high losses, with more to come, well beyond the usual ups and downs of this normally precarious industry.

Since the reasons given in the press for these forebodings have been somewhat incomplete I would like to attempt a fuller view than readers have so far had of the industry’s recent problems, which, in my opinion, are grave but temporary. These problems will seriously affect individual publishing companies, but there are no signs, despite the allure of competing media, that the supply of writers and readers has diminished and some evidence that the number of readers may even have grown. There is also reason to hope, as we shall see, that familiarity with sophisticated literature, once an elite and academic privilege, has been somewhat democratized. Eventually the marketplace will suggest new and better ways to connect readers to writers, but in the meantime the industry’s problems are certain to be painful.

There are no economies of scale in the book publishing business. The larger the company, the more expensive and difficult everything becomes. On the other hand, books can be published profitably by the smallest possible organizations, or by a single person. For example, Ravi Batra himself published the original edition of his best seller, The Great Depression of 1990, and turned it over to a commercial publisher only when the details of distribution became too much for him to handle. Even within large publishing companies the actual work of preparing a manuscript for publication, which involves in the first place finding and contracting for the work and then editing, designing, and planning its production, distribution, and promotion is almost always the responsibility of an individual editor working with an author. The job requires the help of various specialists, such as art directors, jacket designers, publicists, marketing experts, warehousemen, accountants, paper buyers, and so on. But these specialists need not be employed by a single company and in the case of small publishers or of individuals like Mr. Batra who publish books by themselves, any of these services can be contracted for independently.

Most of today’s publishing firms began in such small ways and expanded for the usual Darwinian reasons: to spread their bets and stabilize their revenues and then to expand further to support the overheads generated by their original expansion. Though publishers often complain that their lists are too large—by which they mean that too many of their titles lose money (between 70 and 80 percent of each year’s new books end up in the red, according to various estimates)—they are usually unable to reduce their output of titles, partly because they can’t know in advance which ones will fail, but mostly because successful publishing companies tend to stabilize at an optimum size which can be altered only at great risk. The yearning of publishers for smaller lists is probably a nostalgic reference to what the business essentially is, a cottage industry that makes books one by one, but for some publishers this yearning may also reflect an equally quixotic ambition to publish nothing but best sellers. It is this all too human ambition combined with recent changes in the retail marketplace for books that has put publishers in their current predicament.


The cost of elaborate sales, production, accounting, and other service departments with their tendency to expand has always been a drain on publishers’ profits, especially in large publishing companies where these functions tend, as in all bureaucracies, to become elaborate and autonomous. It is sometimes dismaying to think of the number of support staff within a publishing company whose livings depend upon the unpredictable muse of this or that writer or the mysterious arrivals and departures of fads and authors’ reputations. This is especially true now when profits from the continuing sales of books from previous seasons—so-called backlist sales—traditionally the main source of a publisher’s stability, are increasingly at risk to finance the large guarantees made to authors as publishers compete with one another to acquire potential best sellers.

Some of these best sellers are so expensive to acquire and promote that they create huge losses even when they sell hundreds of thousands of copies. James Clavell’s Whirlwind, for example, a novel about Iran, was acquired by its publisher in 1986 for a five million dollar advance against royalties. Whirlwind was on the New York Times best-seller list for twenty-two weeks, four of them at number one. Even so Clavell’s sales were not enough to cover his publisher’s bet. According to industry gossip the publisher lost well over a million dollars on Whirlwind, a serious blow in an industry whose profit margins are usually thin and in which a major publishing imprint will record sales of between fifty and sixty million dollars a year.

Losses on individual books of a million dollars or more resulting from publishers’ overguarantees are now common in the industry. None of the major houses has been able to avoid them and there is general agreement among publishers that there are worse to come.

Though publishers have begun to resist the demands of best-selling authors and their agents for excessive guarantees, this resistance is likely to falter whenever a publisher confronts the loss of a major, best-selling author or the chance to acquire such an author from a competitor’s list. This apparent irrationality arises not from an inherent flaw in the collective judgment of book publishers but from a structural malformation, a temporary kink within the retail marketplace whose effect has been to lend what is essentially a cottage industry the misleading appearance of mass production, capable of generating predictably larger profits from the rational application of standard techniques to predictable materials. The result has been speculative investment in illusory growth followed by inevitable and often severe losses. The few publishers likely to be spared are those that have stuck to their cottage-industry origins, resisted expansion, and shunned the costly acquisition of risky books.

The ultimate source of the structural malformation within the publishing industry which has led to these costly gambles is demographic, the shift from city to suburb beginning with the end of the Second World War, when retailers followed their customers out of town and reconstituted themselves horizontally as shopping centers. As this migration progressed, many of the old downtown booksellers, with their large, often eccentric inventories and their owner-managers familiar with their stocks and the interests of their customers, eventually disappeared. Of the thousand or so full-service booksellers that existed in the 1950s, only a handful survived into the Eighties.

A particularly regrettable case was the demise of New York’s Eighth Street Bookstore, with its spectacularly complex and sophisticated inventory in every conceivable intellectual and cultural subject. Eighth Street succumbed in 1979 when a chain opened a branch on the same block and began selling current books at a discount. When Eighth Street’s employees made matters worse by striking for higher wages, the proprietor liquidated his inventory, rented his premises to a store that sells music, and retired on the proceeds. For several years thereafter New York was virtually without a bookstore that catered to a widely varied intellectual clientele.

By the mid-Seventies most books in the United States were sold through such nationwide chains as B. Dalton and Waldenbooks, the first created by Dayton-Hudson, the second by Carter, Hawley, Hale, two of the country’s largest general retailers. Since these book chains, most of whose stores were in suburban malls, paid the same rent for the same traffic as the shoe store next door, they adopted the same merchandising strategies: they maximized turnover by limiting their inventories mainly to bestsellers and reducing their overheads, which meant centralizing such functions as purchasing, marketing, and so on: in other words they would follow the pattern set by the fastfood chains and concentrate on a relative handful of products that could be sold in large numbers by unskilled sales people to customers whose tastes were uniform, predictable, and malleable.


The effect of this new marketplace on book publishers soon became apparent as the sales of best sellers sharply increased, while the decline in the 1960s and 1970s of independent booksellers made it difficult to sell more specialized titles or to keep them in print beyond a season or two. The book chains, which by the late 1970s were adding hundreds of new outlets a year, created a substantially new market, concentrated mainly on a small selection of hardcover best sellers, a market that would eventually add over a billion dollars a year to publishers’ sales. But these sales would ultimately prove to be a mixed blessing, if a blessing at all. To some extent, this new market pre-empted and reflected the limitations of the one that had long existed for paperback reprints of last year’s best sellers, cheap editions that usually appeared a year or so after the original hardcover versions and were sold mostly at newsstands and in supermarkets.

These books had traditionally been distributed by magazine wholesalers which shipped the latest paperbacks to newsstands and other outlets in monthly batches along with current magazines, took back millions of unsold copies at the end of the month, and replaced them with the latest batch of magazines and books. The bookstore chains were now treating hardcover books in much the same periodical way: stacking this month’s bestsellers in great piles or in cardboard fixtures called dumps during the first few months of publication and returning the unsold copies, often in very large numbers, as new best sellers arrived from the publishers.

Books by business heroes and by sports and film stars; cookbooks, diet and exercise books by authors who could promote their cures and recipes vividly on television, and well-told novels of romance and adventure that conformed to traditional formulas flourished in the chains, which by the early 1980s had begun to sell their hardcover editions at increasingly large discounts. This meant that readers could now buy current hardcover best sellers for only a few dollars more than the paperback reprint for which they would have to wait a year. Though publishers continued to sell millions of copies of paperback reprints, hundreds of thousands of readers by the 1980s had been converted by chain-store discounts to hardcover buyers. Dickens and Twain would have been huge best sellers had there been such chains in their day. So would Horatio Alger and Fanny Farmer, but not Proust or Faulkner or Elizabeth David.

The effect on publishers of these greatly amplified hardcover best sellers was electrifying, but like any stimulus that seems to alter reality it would prove debilitating. An immediate problem, and a major source of today’s losses, was the great quantity of unsaleable books left over in the chains when a best seller had run its course or the even larger number of leftovers when a would-be best seller failed.

Because publishers have always asked booksellers to risk their capital each time they agree to carry the work of an unknown author, publishers have traditionally agreed to take back for full credit whatever the retailer can’t sell. This tradition of selling books to retailers on consignment extends as well to books by established writers, where the publisher’s first printing can be a hundred thousand copies and in some cases as many as a million or even more, and where the retailer takes no risk unless he chooses to order more copies than he needs. But even when he takes more copies than he needs, he takes no risk since he can always return what he can’t sell. Because the chains depend so heavily on the sale of best sellers, and cannot afford to be out of stock when such books are selling briskly, they routinely protect themselves by ordering far more copies of potential best sellers than they expect to sell and keeping large stacks of them on hand until the sale peters out. The leftover stacks are then returned to the publisher.

When a potential best seller does poorly, these returns can amount to 40 or 50 percent or more of the initial shipment, but even in the case of successful best sellers returns of 20 percent or more are normal. This is a serious problem since publishers ship millions of copies of such books to the chains each season. Hardcover books cost two dollars or more to print, and the effect of these returned copies is to increase the publisher’s unit cost—the manufacturing cost of each copy he prints—by the proportion of books returned to those initially printed. In other words, if it costs two dollars to manufacture each copy of a book and a publisher manufactures two copies but sells only one, his effective unit cost will be four dollars, not two, and his profits will be reduced accordingly.

Twenty years ago, a return rate of 10 or 15 percent was normal for the industry. Today it approaches and sometimes surpasses 30 percent. Since publishers are afraid to alienate readers by raising their retail prices, and the remainder market cannot absorb such vast numbers of leftover books, nearly the entire cost of these unusable returns is charged against publishers’ profits. By converting the market for mass paperbacks into a market for discounted hardcovers, the chains have greatly amplified publishers’ sales of hardcover best sellers, but at the cost of much larger returns.

Returns are the smaller part of the problem. The larger part is the new relationship between publishers and their bestselling authors that has resulted from the impact of the chains on the sales of bestsellers. Traditionally the difference between a best seller and the rest of a publisher’s list was a matter of scale, not of kind. Twenty years ago, before the chains dominated the marketplace, a best seller was simply a book that sold more copies than other books, and its author’s royalties reflected this difference. A hardcover book that sold 150,000 or 200,000 copies was a joyous event but most publishers could not count on a predictable supply of such books. They depended instead on their well-established cookbooks, children’s books, and dictionaries, and on their lists of standard authors to pay the rent. But in the highly concentrated marketplace created by the chains, best sellers that might once have sold a few hundred thousand copies now sell a million copies or more, quantities that have become the basis for the huge advances made by publishers to their star authors. These guarantees are enormously risky, but when a best seller performs according to plan it can support a publisher’s entire operation, including the accumulated losses of the year’s other titles.

Beguiled by the prospect of such profits, publishers have guaranteed millions of dollars not only to established best-selling authors but to political and other celebrities whose famous names can attract chain-store customers to their books. In keeping with this increased volume publishers expanded their operations, partly by acquiring smaller houses with their valuable backlists, and assumed that sales in these magnitudes were normal for the industry. What they discovered in fact was that their expanded operations now required cash flows that only a regular supply of major best sellers could provide, a dependency that soon put them at the mercy of their most popular authors. The agents of these authors could now demand ever larger advances, knowing that for the publishers, with their large and inflexible overheads, the cash generated by such books was essential. The increased sales through the chains of best-selling authors have become so disproportionate in the last five years as to create a new publishing category—a group of authors whose names are so well known to chain-store book buyers that publishers no longer serve their traditional function for them.

Traditionally a publisher risks his capital in the hope of finding an audience that will justify his investment in an author. But if the author has his own audience of chain-store book buyers, then the publisher is no longer an entrepreneur risking his capital but a distributor, shipping copies of a brandname product to a market eager to receive it. The allure of an author’s name and the impact of a publisher’s promotional effort had once been an indistinguishable mix in which neither could claim the larger share or challenge the traditional division of the spoils. Now, thanks to the chains and their dependence on huge best sellers, it is clearly such names as Danielle Steel and Stephen King that sell books, no matter what the publisher’s editorial and promotional contribution may be. These authors have thus become part of a star system and like their Hollywood counterparts they—or their agents—have reshaped the publishing industry. These best-selling authors have, in effect, become their own publishers, using the nominal publisher’s editorial and promotional facilities as well as his capital, and expecting the publisher to assume the entire risk, but demanding most of the proceeds.

The agents of these best-selling authors demand this larger share not through large outright fees or direct participation in profits, as film stars do, but as royalty guarantees in excess of what the author can reasonably expect to earn. In this way the traditional royalty-based relationship between publisher and author stays formally intact, though in substance it has changed radically. Thus if an author’s anticipated sale, based on past performance, is, say, 500,000 copies and if his royalty rate is the normal 15 percent of a twenty-dollar retail price, his predictable royalty earnings will be one and a half million dollars. His agent, however, may ask the publisher to guarantee the author three million dollars as an advance payment against royalties, effectively raising the author’s royalty rate from 15 to 30 percent, assuming his sales remain at 500,000. Since the royalty is calculated as a percentage of the retail price, of which the publisher receives slightly more than half from the bookseller, the best-selling author has actually increased his share of the proceeds from just under 30 percent to just under 60 percent. Of the 40 percent remaining to him, the publisher must pay the printer somewhat more than half and apply the rest against costs of distribution, advertising, and the overall expense of running the business. Should the publisher resist these terms, the agent will put the best-selling author up for bids, gambling that another publisher, in the frenzy of an auction, will be willing to risk both principle and profit for the sake of adding such an author to his list. Wall Street promoters of leveraged buyouts will understand the manic optimism that makes such auctions possible.

Meanwhile publishers must also maintain their costly editorial staffs and other overheads and risk their capital in the traditional way for authors who are not yet best sellers or who, because of what they choose to write, will probably never produce a profit for their publishers, much less a best seller. On the rare occasions when such authors do write financially successful books, their agents protect their clients’ interest by demanding an excessive guarantee for their future books, as if their success were not exceptional but normal and on the assumption that their now famous names will make their future work welcome at the chains. Should the publisher resist this assault on his future earnings the agent may threaten to switch publishers.

What held this impossible business together was the continuing growth of the bookstore chains. As they added new outlets year after year and thus expanded the market for best-selling authors, what might have seemed an excessive guarantee when the contract was signed often turned out to have been a wise investment when more copies were sold through an expanded chain. But by the mid-1980s the chains began to reach the limits of their expansion. Sales within individual chain outlets were always more or less level, and now the prospect was for relatively fewer new malls in which to open new stores and locations that promised to be increasingly marginal.

A further problem arose from the excessive inventories that these chains were obliged to carry. Their turnover rate—that is, the ration of sales to inventory over a given period, a standard measure of profitability—was dangerously low. In the mid-Eighties Dayton-Hudson and Carter, Hawley, Hale sold their bookstore chains and the new owners of B. Dalton reduced both their administrative overhead and the number of marginal shops in the chain, thus reducing the number of books they sold. Waldenbooks, now owned by K-Mart, continued to expand but by the end of the Eighties its sales had begun to level off, and there was much talk within the industry of its uncertain future.

The expansion of the chains, rooted in the postwar migration to the suburbs, has finally peaked, depriving publishers of the incremental growth in the marketplace by which they had until now been able to cover their increasingly risky bets on best-selling authors. But this growth has left the industry with the structural malformations that I have described: a mature marketplace too narrowly concentrated on a handful of titles and a daunting accumulation of excessive advances payable to their authors.

Of the twenty-five leading fiction best sellers of the 1980s, six were written by Stephen King. In 1985 King’s Skeleton Crew sold 720,000 copies. In 1987, as chain-store volume was peaking, King’s Tommyknockers sold 1,430,000 copies. Two years later, only 1,550,000 copies of King’s new novel, The Dark Half had been shipped to retailers, some of which will be returned to the publisher. With no further growth in the chains, sales of The Dark Half cannot possibly exceed those of King’s previous novels at anything like the rate at which sales of Tommyknockers exceed those of Skeleton Crew. After returns are accounted for, The Dark Half may, in fact, sell fewer copies than its predecessor. Yet for The Dark Half and his next three novels, King’s publisher is said to have guaranteed between thirty-five and forty million dollars. These are sums that presuppose a continually expanding market, but without continued chain-store growth this large guarantee may prove to have been a poor investment even after income from the paperback reprints of King’s four novels is taken into account.

The distortion created by the chains has also been a kind of miracle, for it has brought thousands, perhaps even millions, of Americans into bookstores, many of them for the first time. What these chain bookstores lack in the depth and sophistication of their inventories, they compensate for with accessibility. They make it easy for buyers to select books in ways that traditional bookstores, with their awesome and unfamiliar inventories, did not. Furthermore, the best sellers they offer are reassuring to those buyers who in making cultural choices do not want to venture beyond the popular genres they have enjoyed in the past.

Occasionally, however, the best sellers readers find in the chains are works of real complexity which get to the bestseller lists entirely unexpectedly, through spontaneous popular acclamation, to the great surprise of their publishers. The book chains, which normally shun such books, agree to carry these unanticipated best sellers only after they have achieved popularity through the mysterious and unpredictable samizdat that creates best-selling authors in the first place, the same process that moves plays from downtown to Broadway or films from art houses to general distribution.

In the case of books, it is the few hundred independent bookstores that have reemerged in scattered parts of the country over the past ten years that provide the setting for these surprises to occur. The great and unexpected success of such books as Oliver Sack’s The Man Who Mistook His Wife for a Hat, or Paul Kennedy’s The Rise and Fall of the Great Powers and the even greater success of Stephen Hawking’s A Brief History of Time—a book of overwhelming complexity that has been bought by more than a million Americans—suggests a growing independence among American bookbuyers.

But these unpredictable best sellers have also added to the troubles of the publishing industry, for they have encouraged publishers to hope that other, equally unlikely books can also become best sellers. Thus publishers in their incorrigible optimism have extended their excessive guarantees to authors whose potential sales are entirely speculative, on the theory that if Professor Y becomes a best seller, why not Professor Z?

The success of such books nevertheless indicates a robust yearning by many readers to confront the world through the complexity found only in books, and to exercise greater control over what they read. As the chains approached the end of their growth in the late 1980s there emerged a handful of independent booksellers whose inventories are unprecedented in their breadth and variety, revolutionary in the authentic and undiluted cultural environment that they provide. The success of these stores, scattered throughout the United States, with their tens of thousands of titles in literature, philosophy, history, the sciences, and so on, is worth much contemplation by theorists of American culture and professors of merchandising.

The parallels are obvious between such bookstores and the fancy foodshops that are now common in America, with their eight varieties of smoked salmon, their twenty brands of olive oil, and their multitudes of cheeses; or with the proliferation of television outlets and video cassettes; or with the more than three hundred makes and models of cars available to American buyers: in other words, with the historically unprecedented demand, not only in the United States but in such places as Soweto and Prague, for extensive choice and thus for more control over one’s life.

This demand for choice has been stimulated and abetted by various electronic innovations, including the computer that permits the independent bookstores to keep track of their huge inventories, to say nothing of the satellite transmissions that once told the students in Beijing what they were missing. It is as if American readers and American cheese buyers, among others, were saying to the suppliers of their culture, don’t tell us what to read and eat. From now on, each of us will decide what we want and if you don’t provide it, we’ll take our business elsewhere.

Denver’s Tattered Cover is the largest bookstore in the United States and among the largest and most comprehensive English language bookstores in the world. The Tattered Cover, a twenty-minute drive from the center of Denver, employs 170 people and is visited on an average day by 1400 customers. Its 42,000 square feet of space hold over 110,000 separate titles, neatly arranged, their spines out as if one were in an unimaginably complete private library. There are no stacks of best sellers but an inventory that has evolved over the ten year life of the Tattered Cover to reflect the interests of its Denver clientele, interests that are so reassuring in their authenticity and range as to make one wonder what kind of place Denver really is. Best sellers represent less than 5 percent of the Tattered Cover’s sales. But Denver is a typical American city of about a million people.

What distinguishes Denver is its economic decline after the failure of the shale oil industry and its 30 percent commercial vacancy rate. This real estate depression has presumably made it possible for the Tattered Cover to occupy this vast space and at the same time maintain such large inventories, for in book-selling as in all retailing there is an absolute trade-off between rent and inventory: the less you pay for one, the more you can have of the other. That the Tattered Cover’s annual sales should be nearly five times the value of this huge inventory—an inventory that routinely includes, for example, the entire Loeb Library of Greek and Latin classics in their original languages with facing translations—suggests something heretofore unsuspected by book publishers about the capacity of typical American readers to take control of their cultural lives and decide for themselves what books to buy.

The chain bookstores, with their monthly piles of best sellers, grew from an earlier, more homogeneous, more predictable America, an America whose culture still dominates but which now spawns multitudinous variations, some more welcome than others. Denver’s Tattered Cover, and such stores as Northshire in Manchester Center, Vermont, Borders in Ann Arbor and Birmingham, Michigan, and elsewhere in the Middle West, and similar stores in Eugene, Oregon, Atlanta, Minneapolis, and Seattle, among other typically American places, reflect a culturally more complex America, whose new technologies have made the materials of culture much more varied, familiar, and accessible than before. As sales through the chains have flattened, these independent stores have flourished. New independent stores open every month in locations where rents are low enough to permit their large inventories. And now the leading chains themselves have begun to open well-stocked stores of their own, modeled after the independents. This expanded marketplace reflects and encourages a more diverse cultural environment than publishers have ever known before, one which suggests new opportunities and new directions for our cottage industry.

The new technologies that enable retailers to maintain their complex inventories also permit publishers to practice their cottage industry more efficiently than before. Manuscripts can now and perhaps soon will be edited, designed, typeset, and made ready for the printer by desktop computer, literally by a single person working alone, a process that has so far required the help of many specialists. Book distribution, whose transformations, as I have tried to show in this essay, shape the industry as a whole, is only at the beginning of technologically driven change. As long as there are shopping malls there will be chain bookstores stocked mainly with current best sellers. But stores like the Tattered Cover have identified a heretofore unsuspected demand for a very wide range of books in many categories.

The problem for such stores with their vast inventories is location. The inescapable trade-off between rent and inventory limits their range, so that in high-rent cities like Los Angeles and New York the inventories of such stores are so tightly compressed into whatever space can be afforded as literally to spill from the shelves. But it is now theoretically possible by computer and already possible by telephone to call up the Tattered Cover’s inventory, or the inventory of any other large depository, from anywhere in the world and receive the book one wants by mail. Location is no longer a limit. I have recently been involved in an effort to make available such a large inventory by means of The Reader’s Catalog,* and no doubt other such annotated book lists from which readers can order by telephone and eventually by computer will soon emerge.

Such annotated directories of thousands of titles in a multitude of categories may greatly encourage demand for a growing volume of serious books in the better-stocked bookshops, not to mention among readers who may order from these lists directly. The practical steps to create this greatly expanded marketplace for a large variety of books are within the means of available technology: the market can be clearly identified and a possible future for publishers and readers appears to be already in view. The opportunities for writers, readers, and publishers seem endless. How quickly and to what degree these opportunities may be realized is, of course, another question.

This Issue

March 1, 1990