From the Wall St. Journal I thought this article was important enough to post to my blog a second time today.
HarperCollins Turns Page in Publishing
New Imprint to Squeeze
Advances to Authors,
Won't Take Returns
By JEFFREY A. TRACHTENBERG
April 4, 2008; Page B7
Marking a radical departure from traditional book-publishing practices, HarperCollins Publishers says it will launch a new book imprint that won't accept returns from retailers and will pay little or no advances to authors.
To be headed by veteran publishing executive Robert S. Miller, the imprint also likely won't pay for more desirable display space in the front of bookstores, a common practice. Instead, the as-yet-unnamed unit will share its profit with writers and focus much of its sales efforts on the Internet, where a growing portion of book sales are shifting.
The new venture is aimed at improving the economics of book publishing, which has long been hobbled by the need to pay for space in stores and take back unsold books from retailers at full price. The practice of paying authors advances -- offset against future royalties -- also can be costly for publishers when books bomb.
HarperCollins's decision to try a new approach comes at a time when book publishers and retailers are battling to generate new sales and attract more readers. "This is the right time to experiment with a new business model," said Jane Friedman, chief executive of HarperCollins. "We have to look at a changing marketplace."
HarperCollins is a unit of News Corp., which also owns Dow Jones & Co., publisher of The Wall Street Journal.
Of all the changes proposed by the new imprint, the end to book returns may be the most far-reaching. The current practice encourages retailers to order huge quantities of potentially hot new titles, sending back those that don't sell. Publishers, keen to snare as much retail space as they can for new titles, are happy to oblige. But it means publishers are printing far more copies of books than they need to -- between 30% and 40% of all consumer books shipped are returned to publishers, according to publishing veterans. Returns are also common in the DVD and music businesses, and affect some videogame titles.
HarperCollins hopes to cut retailers' returns. Above, sale books at a Barnes & Noble in Illinois.
How retailers will respond to nonreturnable books isn't clear. A spokeswoman for Barnes & Noble Inc., the largest U.S. book chain by sales, said the retailer will need to learn more about the plan before commenting. Several years ago, Barnes & Noble Chief Executive Steve Riggio said in an interview that he would like to be able to mark down books rather than returning them. Eliminating returns, he said at the time, would "revolutionize the book business and revitalize the book business."
Eliminating returns has been tried before -- unsuccessfully. Back in 1980, Harcourt Brace Jovanovich Inc. announced it would provide retailers with larger discounts and end returns. Orders fell off, however, and the publisher reversed itself.
Now, though, the book industry -- both publishers and retailers -- is under intense economic pressure. HarperCollins's operating income fell slightly in the six months to Dec. 31, News Corp. reported in February, on lower revenue. This year is expected to be tough for book sales. Both Barnes & Noble and Borders Group Inc. have warned investors that their results will be affected by the economic slowdown. Borders last month put itself up for sale, warning it faced a potential cash crunch in coming months. The retailer Wednesday delayed filing its annual report with the Securities and Exchange Commission because it is in new financing discussions intended to address its liquidity issues.
"Other publishers have tried to sell their books on a nonreturnable basis in the past, but this might be the right time," says Lorraine Shanley, a partner in consulting company Market Partners International Inc.
Mr. Miller, who is stepping down as president of Walt Disney Co.'s Hyperion book publishing arm to run the new imprint starting April 14, said in an interview that booksellers are also unhappy with the returns system. "There's so much inefficiency in our business, so much waste, that it's time to at least experiment with approaches that can eliminate waste," Mr. Miller said.
The new venture is expected to publish about 25 titles a year, emphasizing shorter hardcover titles priced at about $20.
Mr. Miller, 51 years old, said that many authors who currently receive large advances won't be interested in the new model. However, he thinks he will attract major authors who have a book in the desk drawer that doesn't fit their image, as well as up-and-coming writers.
Mr. Miller, who started Hyperion in 1991, will be succeeded at that label by Ellen Archer, who will retain her existing position as publisher.
Write to Jeffrey A. Trachtenberg at email@example.com