Compared with the revenues earned by other mass media industries, the steady growth of book publishing has been relatively modest. From the mid-1980s to 2013, total revenues went from $9 billion to about $27.01 billion. Within the industry, the concept of who or what constitutes a publisher varies widely. A publisher may be a large company that is a subsidiary of a global media conglomerate and occupies an entire office building, or a one-person home office operation using a laptop computer.

Ownership Patterns

Like most mass media, commercial publishing is dominated by a handful of major corporations with ties to international media conglomerates. Mergers and consolidations have driven the book industry. For example, one of the largest publishing conglomerates is Germany’s Bertelsmann. Beginning in the late 1970s with its purchase of Dell for $35 million and its 1980s purchase of Doubleday for $475 million, Bertelsmann has been building a publishing dynasty. In 1998, Bertelsmann shook up the book industry by adding Random House, the largest U.S. book publisher, to its fold for $1.4 billion. Bertelsmann’s book company subsidiaries include Ballantine Bantam Dell, Doubleday Broadway, Alfred A. Knopf, and the Random House Publishing Group. In 2013, Random House merged with Penguin Books (owned by Pearson PLC, a British corporation), creating Penguin Random House and gaining control of about one-quarter of the book industry (see Table 10.2).

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Penguin Random House, Simon & Schuster (owned by CBS), Hachette (owned by French-based Lagardère), HarperCollins (owned by News Corp.), and Macmillan (owned by German-based Holtzbrinck) are the five largest trade book publishers in the United States. From a corporate viewpoint, executives have argued that large companies can financially support a number of smaller firms or imprints while allowing their editorial ideas to remain independent from the parent corporation. With thousands of independent presses competing with bigger corporations, book publishing continues to produce volumes on an enormous range of topics. Still, the largest trade book publishers and independents alike find themselves struggling in the face of the industry’s digital upheaval and the dominance of Amazon in the distribution of e-books.

The Structure of Book Publishing

A small publishing house may have a staff of a few to twenty people. Medium-size and large publishing houses employ hundreds of people. In the larger houses, divisions usually include acquisitions and development; copyediting, design, and production; marketing and sales; and administration and business. Unlike daily newspapers but similar to magazines, most publishing houses contract independent printers to produce their books.

Most publishers employ acquisitions editors to seek out and sign authors to contracts. For fiction, this might mean discovering talented writers through book agents or reading unsolicited manuscripts. For nonfiction, editors might examine manuscripts and letters of inquiry or match a known writer to a project (such as a celebrity biography). Acquisitions editors also handle subsidiary rights for an author—that is, selling the rights to a book for use in other media, such as a mass market paperback or as the basis for a screenplay.

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As part of their contracts, writers sometimes receive advance money, an early payment that is subtracted from royalties earned from book sales (see Figure 10.4). Typically, an author’s royalty is between 5 and 15 percent of the net price of the book. New authors may receive little or no advance from a publisher, but commercially successful authors can receive millions. For example, author J. K. Rowling hauled in an estimated $7 million advance from Little, Brown & Company/Hachette for The Casual Vacancy (2012), her first novel after the Harry Potter series. Nationally recognized authors, such as political leaders, sports figures, comedians, or movie stars, can also command large advances from publishers who are banking on the well-known person’s commercial potential. For example, Sarah Palin received $1.25 million for her book Going Rogue, and George W. Bush got a $7 million advance for Decision Points, both released in 2010.

After a contract is signed, the acquisitions editor may turn the book over to a developmental editor, who provides the author with feedback, makes suggestions for improvements, and, in educational publishing, obtains advice from knowledgeable members of the academic community. If a book is illustrated, editors work with photo researchers to select photographs and pieces of art. Then the production staff enters the picture. While copy editors attend to specific problems in writing or length, production and design managers work on the look of the book, making decisions about type style, paper, cover design, and layout.

Simultaneously, plans are under way to market and sell the book. Decisions need to be made concerning the number of copies to print, ways to reach potential readers, and costs for promotion and advertising. For trade books and some scholarly books, publishing houses may send advance copies of a book to appropriate magazines and newspapers with the hope of receiving favorable reviews that can be used in promotional material. Prominent trade writers typically have book signings and travel the radio and TV talk-show circuit to promote their books. Unlike trade publishers, college textbook firms rarely sell directly to bookstores. Instead, they contact instructors through direct-mail brochures or sales representatives assigned to geographic regions.

To help create a best-seller, trade houses often distribute large illustrated cardboard bins, called dumps, to thousands of stores to display a book in bulk quantity. Like food merchants who buy eye-level shelf placement for their products in supermarkets, large trade houses buy shelf space from major chains to ensure prominent locations in bookstores. Similarly, publishers are required to pay (co-op payments) for featured treatment on Amazon, as mentioned in the opening of this chapter. Publishers also buy ad space in newspapers and magazines and on buses, billboards, television, radio, and the Web—all in an effort to generate interest in a new book.

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Selling Books: Brick-and-Mortar Stores, Clubs, and Mail Order

Traditionally, the final part of the publishing process involves the business and order fulfillment stages—shipping books to thousands of commercial outlets and college bookstores. Warehouse inventories are monitored to ensure that enough copies of a book will be available to meet demand. Anticipating such demand, though, is a tricky business. No publisher wants to be caught short if a book becomes more popular than originally predicted or get stuck with books it cannot sell, as publishers must absorb the cost of returned books. Independent bookstores, which tend to order more carefully, return about 20 percent of books ordered; in contrast, mass merchandisers such as Walmart, Sam’s Club, Target, and Costco, which routinely overstock popular titles, often return up to 40 percent. Returns this high can have a serious impact on a publisher’s bottom line. For years, publishers have talked about doing away with the practice of allowing bookstores to return unsold books to the publisher for credit.

Today, about 15,000 outlets sell books in the United States, including traditional bookstores, department stores, drugstores, used-book stores, and toy stores. Shopping-mall bookstores boosted book sales starting in the late 1960s. But it was the development of book superstores in the 1980s that really reinvigorated the business. Following the success of a single Borders store established in Ann Arbor, Michigan, in 1971, a number of book chains began developing book superstores that catered to suburban areas and to avid readers. A typical Barnes & Noble superstore stocks up to 200,000 titles. As superstores expanded, they began to sell music and coffee. Borders grew from 14 superstores in 1991 to more than 508 superstores and 173 Waldenbooks in 2010, but the company declared bankruptcy and closed its last brick-and-mortar store in 2011. Since the shuttering of Borders, Barnes & Noble is the last national bookstore retail chain in the United States, operating 647 superstores and 724 college bookstores, but closing its smaller B. Dalton mall bookstores in 2010.

The rise of book superstores (and later, online bookstores) severely cut into independent bookstore business, which dropped from a 31 percent market share in 1991 to 4.3 percent by 2011.16 The number of independent bookstores dropped from 5,100 in 1991 to about 2,100 today. Independent bookstores and superstore chains are being squeezed from multiple sides: online and e-book sales; discount retailers such as Walmart, Sam’s Club, Target, and Costco; and specialty retailers like Anthropologie and Urban Outfitters that sell “lifestyle” books.17 But many independent stores continue to thrive by offering stronger service and special events.

Book clubs and mail-order services are two other traditional methods of selling books. Originally, these two tactics helped the industry when local bookstores were rarer and the Internet did not yet exist.

The Book-of-the-Month Club and the Literary Guild both started in 1926. Using popular writers and literary experts to recommend new books, the clubs were immediately successful. Book clubs have long served as editors for their customers, screening thousands of titles and recommending key books in particular genres. During the 1980s, book clubs began a long decline in sales. Today, twenty remaining book clubs—including the Book-of-the-Month Club, the Literary Guild, and Doubleday—are consolidated by a single company, Pride Tree Holdings, which also owns DVD and music clubs.

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Mail-order bookselling was pioneered in the 1950s by magazine publishers. They created special sets of books, including Time-Life Books, focusing on such areas as science, nature, household maintenance, and cooking. These series usually offered one book at a time and sustained sales through direct-mail flyers and other advertising. Although such sets are more costly due to advertising and postal charges, mail-order books still appeal to customers who prefer mail to the hassle of shopping or to those who prefer the privacy of mail order (particularly if they are ordering sexually explicit books or magazines). Today, mail-order bookselling is used primarily by trade, professional, and university press publishers.

Selling Books Online

Since the late 1990s, online booksellers have created an entirely new book distribution system on the Internet. The strength of online sellers lies in their convenience and low prices, and especially their ability to offer backlist titles and the works of less famous authors that retail stores aren’t able to carry on their shelves. Online customers are also drawn to the interactive nature of these sites, which allow readers to post their own book reviews, read those of fellow customers, and receive book recommendations based on book searches and past purchases.

The trailblazer is Amazon, established in 1995 by then thirty-year-old Jeff Bezos, who left Wall Street to start a Web-based business. Bezos realized books were an untapped and ideal market for the Internet, with more than three million publications in print and plenty of distributors to fulfill orders. He moved to Seattle and started Amazon, so named because search engines like Yahoo! listed categories in alphabetical order, putting Amazon near the top of the list. In 1997, Barnes & Noble, the leading retail store bookseller, launched its own online book site, BN.com. The site’s success, however, remains dwarfed by Amazon. By 2014, Amazon controlled 41 percent of book sales (print and e-books combined).18

But Amazon’s bigger objective for the book industry was to transform the entire industry itself, from one based on bound paper volumes to one based on digital files (see Figure 10.5). The introduction of the Kindle in 2007 made Amazon the fastest book delivery system in the world. Instead of going to a bookstore or ordering from Amazon and waiting for the book to be delivered in a box, one could buy a digital version in a few seconds from the Amazon store. Amazon quickly grew to control 90 percent of the e-book market, which it used as leverage to force book publishers to comply with its low prices or risk getting dropped from Amazon’s bookstore (something that has happened to several independent book publishers who complained).19 Amazon has done the same in print book sales, where it is also a major player.

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Amazon’s price slashing caused most of the major trade book publishing corporations to endorse Apple’s agency-model pricing, in which the publishers set the book prices and the digital bookseller gets a 30 percent commission. The new agency pricing system for e-books began in 2011; by 2013, Amazon’s share of the e-book market had dropped from about 90 percent to about 60 percent, while Barnes & Noble and Apple each held about a 25 percent market share. When the U.S. Department of Justice ruled in 2013 that Apple and the major publishers had colluded to set book prices (thus denying consumers the lower prices that Amazon’s deep discounts might offer), the booksellers responded that government investigators should be more concerned about Amazon, which has grown to be one of the most powerful players in the publishing industry. Of particular concern to publishers is that Amazon has been expanding into the field of traditional publishers with the establishment of Amazon Publishing, which has grown rapidly since 2009. With a publishing arm that can sign authors to book contracts, the Amazon store’s distribution, and millions of Kindle devices in the hands of readers, Amazon is becoming a vertically integrated company and a too-powerful entity, traditional publishers fear.

Amazon’s biggest rivals in the digital book business are those with their own tablet devices. Apple has its iBook Store, which is available for iPads and iPhones through an app in the iTunes store. Google Play, Google’s digital media store, combines newly released and backlist books, along with the out-of-print titles that Google has been digitizing since 2004. Google also introduced its Nexus 7 tablet in 2012 to promote its store. Barnes & Noble has been less successful in shoring up its flagging brick-and-mortar bookstores with its Nook device and online store. (Barnes & Noble announced in 2014 that it would spin off its Nook Media division as a separate company.) The Kobo e-book device, introduced in 2010 by a Toronto-based company, has become the most popular e-book device in Canada and is making some inroads with independent booksellers in the United States.

Independent bookstores are an increasingly rare breed in the retail book industry. But to support independents, the American Booksellers Association created IndieCommerce, an e-commerce platform to give independent bookstores the ability to offer online service similar to Amazon’s.

Alternative Voices

Even though the book industry is dominated by large book publishers and one big online retailer (Amazon), there are still alternatives for both publishing and selling books. One idea is to make books freely available to everyone. This idea is not a new one; in the late nineteenth and early twentieth centuries, industrialist Andrew Carnegie used millions of dollars from his vast steel fortune to build more than twenty-five hundred public libraries in the United States, Britain, Australia, and New Zealand. Carnegie believed that libraries created great learning opportunities for citizens, especially for immigrants like himself.

One Internet source, NewPages, is working on another alternative to conglomerate publishing and chain bookselling by trying to bring together a vast array of alternative and university presses, independent bookstores, and guides to literary and alternative magazines. The site’s listing of independent publishers, for example, includes hundreds, mostly based in the United States and Canada, ranging from Academy Chicago Publishers (which publishes a range of fiction and nonfiction books) to Zephyr Press (which “publishes literary titles that foster a deeper understanding of cultures and languages”).

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Finally, because e-books make publishing and distribution costs low, e-publishing has enabled authors to sidestep traditional publishers. A new breed of large Internet-based publishing houses, such as Xlibris, iUniverse, Hillcrest Media, Amazon’s CreateSpace, and Author Solutions, design and distribute books for a comparatively small price for aspiring authors who want to self-publish a title, which can even be formatted for the Kindle or iPad. Although sales are typically low for such books, the low overhead costs allow higher royalty rates for the authors and lower retail prices for readers.

Sometimes self-published books make it to the best-seller lists. British writer E. L. James’s blockbuster erotic novel Fifty Shades of Grey was first written as fan fiction, posted to a busy Twilight fan forum beginning in 2009, where thousands read and commented on it. In 2012, Vintage bought the rights to The Fifty Shades trilogy for more than $1 million. Amanda Hocking, a writer in her mid-twenties from Minnesota, wrote several paranormal romance e-books that attracted attention from several publishers, and she signed a seven-figure advance contract with St. Martin’s Press.20 Some traditional publishers are considering the straight-to-e-book route themselves. Little, Brown & Company released Pete Hamill’s They Are Us in digital format only.