RicDay on Publishing

The collapse of Borders Books in the US and the failure of H.B. Fenn, one of Canada's largest distributors, speak volumes about the unstable state of publishing today. More signs: Publishers Weekly reported Tuesday that Random House is offering early retirement packages to quite a lot of people, and Facebook pages are carrying a lot of inflamed and angry commentary from staff of at least one Canadian publisher caught in the Fenn mess who has axed some staff and reduced pay for others in the editoral-production nexus.

At the O'Reilly Tools of Change in Publishing conference last week in New York, Dominique Raccah of Sourcebooks elicited gasps from her audience when she revealed a chart showing stunning growth in ebook sales in January. Conversations outside the hall tip-toed around the topic of print versus ebook sales, with industry people asking each other sotto voce about their digital sales. It all started to feel like teens going on with I'll show you mine if you show me yours.

You could see this coming. Last Fall, all the big box booksellers on both sides of the border suddenly announced each was going to place new emphasis on toys and games for Christmas sales. Print books were clearly not priority one for the season, as each had also started carving out more floor space to accomodate ereader displays and customer education facilities.

For 2011, it is already apparent that brick and mortar retailers are being very cautious about print orders. This is going to force publishers to be even more cautious with all aspects of their print programs. Pencils will be sharpened, belts tightened, and there will be a lot of hammering on spreadsheets in attempts to determine just how few copies can be printed. Books around the edges of the list will be scrutinized more carefully than ever, and print decisions on many are likely to be delayed, or dropped.

The news Tuesday from Barnes & Noble that they are suspending dividends and will not be providing sales or earnings guidance for the rest of this year was another signal that physical book retail is in the midst of profound and mostly terminal change.

A number of the largest publishers have clearly taken some serious hits from the Fenn and Borders bankruptcies. And all publishers must now start worrying about their distributors. If publishers and booksellers cut back, and I believe they will, what will be the impact on distributors who generally operate on low-margin, high-volume business models? Train-wreck-nasty, I think.

Now think about the Middle East for a moment. The region is embroiled in political upheaval as young, educated people finally believe they can cast off their medieval governments and form new and better societies. We are already seeing the impact of that instability at the gas pump, where prices are racing upwards. This is not likely to be short-term, and the effects will not help the publishing industry. Higher oil prices equal higher transportation costs (bad for distributors) and higher paper and printing costs (another reason for publishers to be very cautious about print).

Higher gas prices are going to impact the US economy, which is a long way from recovering from its recent bank meltdown. Rising oil prices touch all aspects of every consumer's life, from food and shelter costs onwards. When the cost of living rises, discretionary spending gets hit, and books are not exactly essentials.

The likelihood is, we will see more distributors and more publishers face serious financial difficulties this year. The industry is clearly in the throes of a major, very disruptive transformation and there is no way to prevent it.

We do live in interesting times.