How to Weather the Economic Storm: A Q&A with Eric Kampmann, president of Midpoint Trade Books and Beaufort Books
The current financial crisis has left no industry untouched, including the book publishing industry. According to Eric Kampmann, president and co-founder, Midpoint Trade Books, and president, Beaufort Books, now is the time for publishers to make strategic decisions to place their companies on secure financial footing.
“In my entire publishing career (39 years), I have never seen an economic situation like the one that has hit every level of the publishing industry during the past five months,” he says.
Here, Kampmann offers Book Business Extra readers his insights on steps publishers should be taking now. He also will present a related session, "Strategies to Deal With a Contracting Marketplace and Weather the Financial Storm," at the Publishing Business Conference & Expo in New York City in March.
Book Business Extra: What are some key steps that publishers need to take now to deal with the current recession?
Eric Kampmann: … Stop all unnecessary expenditures immediately. Reduce debt to zero, if possible, but definitely reduce it. Assume the economy is not going to shift back into drive anytime soon, and review every aspect of your company so that you are operating at 100-percent efficiency. It is time to be hard-headed, and the choices you make over the next several months will probably determine how well you will be positioned when the economy begins to recover. Remember, every company faces hard times ahead. Both large and small publishers, distributors and booksellers must make provisions for this crisis. … Lean and mean is the name of the game.
Assume the worst, and then you won’t underestimate the dangers lurking out there. If I were running a large publishing house, I would start with royalty advances and royalty rates. I know this is politically incorrect, but now is the perfect time to remedy a problem that reaches way back into the 20th century. Why are royalties, for example, paid on a fictitious retail price? Are publishers really locked into six- and seven-figure advances? I would also go to all department heads and try to get them to make recommendations for new models of operational efficiency. Harness your assets. There are few companies that do not have managers who have not dreamed of a better way. Find out what they are thinking and put the best ideas to work—now.
Extra: What about longer-term strategies?
Kampmann: During my career in publishing, I have watched many events take place: companies buying companies; divisions coming and going; jobs appearing and disappearing. But through all of this helter-skelter movement, I am not sure I observed any truly revolutionary changes in the publishing community, at least not in the larger companies. On the other hand, I have witnessed enormous change in the world of bookselling. And the engines of these changes are not difficult to identify: Book superstores, national wholesalers, Internet retailers and mass merchandisers all have positively changed a publisher’s ability to reach much wider, national markets.
Publishers have adapted to this new world, but have they really changed? As a result, I would suggest that there is no aspect of the publishing process that should not be examined. The model has grown creaky, and retooling needs to take place.
Extra: What about that old supply chain albatross, returns? Is now the time to try to weaken that practice by putting pressure on distributors?
Kampmann: To understand what makes returns such an epidemic problem, you must trace back to where the problem begins, which, more often than not, is with faulty editorial judgment. When a book is bought for a large sum of money, every financial/publishing decision that follows must proceed from the first assumption. If you make an investment of $500,000 in a particular book, then you are not going to attempt to sell just 5,000 copies. The economics of the royalty advance demand appropriate responses down the publishing line, including advance sales into bookstores and supporting marketing budgets. But are these numbers supported by the realities in the marketplace?
Since the highest returns come from failed front-list titles, it is clear that the numbers game approximates gambling with the house odds weighed strongly against most individual titles. New-book releases resemble first-weekend movie releases, but without research or testing. As the window of opportunity has tightened for new-book releases, so returns have increased because the books do not have enough time to reach their full market.
So where does the fault lie? I would suggest that the endless and futile quest for the next big book is at the heart of the problem. It is a publishing problem, not a retailing problem.
Extra: To paint a silver lining amid the current clouds, what do you believe are the fundamental strengths of the book industry? Are publishers successfully capitalizing on those strengths?
Kampmann: The greatest innovations are occurring in the independent publishing sector. Most of the recommendations I have made here, in many places, already have been implemented. Independent publishers have modified their royalty structures; they have taken the longer view on sales; they have some of the same advantages in sales and distribution that the large publishers experience and they have been innovators in Internet marketing and specialized sales. In other words, they can often compete successfully against the largest publishers. I view this as good news.