RicDay on Publishing

A little over 30 years ago, I was in Switzerland visiting watch industry executives and government officials. What does this have to do with books? A lot, I believe, so bear with me.

For nearly two weeks I criss-crossed the country, visiting manufacturers and enjoying meals with top industry executives. I also talked with government trade officials, and had an interesting session with top people in the Swiss National Bank in Berne. We were all talking about the future of the wristwatch industry.

Solid-state electronics were starting to have an impact on the industry. Battery-eating red LED displays had given way to efficient LCDs (a technology developed in Switzerland which no one wanted; it took Casio and Sharp in Japan to commercialise it). Japanese watch makers were rolling out batter-powered wristwatches at very competitive prices. Should the Swiss be worried?

A Fad Which Will Fail

Pretty much everyone I spoke with in Switzerland assured me the electronic watch was no more than a fad. It will fail, they said. Watches, they insisted, were artisan jewellery. Skilled workers produced  beautifully crafted watch movements using a minimum of machinery. The watches were self-winding, used analog displays to show the hours, minutes, and seconds, and some could display the month and day and phases of the moon.

"No one," I was told, "will sell those electronic gadgets." The speakers were talking about the traditional retailer of watches: jewellers. Jewellery shops employed qualified watchmakers and were there to service your piece of timekeeping jewellery when the springs needed tightening, or the mechanism needed a dab of fine oil. To cover the cost of providing adjustment and cleaning services, jewellers used what the trade called "keystone pricing" — their retail prices were double their wholesale cost — a 100% markup.

A couple of weeks later I was in Tokyo, hanging out at a very prestigious university club with a friend, the head of worldwide marketing for the Seiko group. Over some (lots of) quite wonderful sake from a microbrewery in the village where he had been raised, the conversation drifted from his years in New York to Casio's plan to blister-pack LCD watches and sell them in supermarkets and drugstores in America. "If Casio succeeds, everything we stand for will have been wrong" was the last thing he said as we parted on the sidewalk, him going to his home in the burbs, me hoping I could explain to the cabbie how to find my tiny place in Ueno.

All Change

Within a couple of years, the world of watch making and selling had changed utterly. Almost every maker in Switzerland (excepting the "Geneva brands" like Rolex, Raymond Weil, and Jaeger-LeCoultre) were in receivership and the guys I had met at the Swiss National Bank were propping up the companies and working to bring in new blood to an industry they realised was out of touch with the times.

In Japan, Casio and others were relentlessly driving down production costs for electronic watches. Component parts were rationalised down to a very few. Assembly was moved offshore, to lower-labor-cost areas like Korea, Taiwan, and Hong Kong. In a very few years, Hong Kong became the world's largest maker of watches. As production costs were reduced, retail prices in America and elsewhere dropped.

By the mid-1980s, a men's watch with an LCD or an analog dial, and a stainless case and band, could be purchased from a Hong Kong factory at an FOB price (on the ship, ready to sail to the buyer's port of delivery) of US$1 or a little less. Adding the costs for shipping, insurance, customs clearance, and on down the supply chain boosted the cost to the consumer in a discount store or drug store to an impulse buy $5.

Switzerland's industry survived mostly because of the Swatch: initially a colorful plastic case-and-band watch with an electronic movement. It was priced a little higher than the cheapest Asian imports and good marketing together with consumer fears of "cheap Asian products" helped it succeed and (just) save the industry.

Books, Finally

Okay, back to books. When the first Penguin paperbacks were launched in 1935 the established industry insisted they would not succeed (and tried hard to keep them out of "real" book stores which sold "real" hard-bound books).

I see some of the same denial in our industry today. Publishers are trying to protect their margins by "windowing" the release dates of new titles: the hard-bound version first, the digital version some months later, around the time the trade paperback version is launched. I can almost hear these people saying, "If ebooks succeed, everything we stand for will have been wrong."

If there is one thing I have learned over the years, it is this: production efficiencies which help reduce costs to consumers trump any beautiful, artisanal craft 99 times in 100. Digital trumps mechanical (printing) in this regard. Windowing is a broken idea. If book stores do not survive the changes, mass market printed books may also be a broken idea.