A lack of consumer feedback, the proliferation of used books, and retailers' publishing operations have beset—and will continue to beset—publishers, according to a comprehensive new study.
The report, presented at the Association of American Publishers' annual meeting last week by Kosmo Kalliarekos of the consulting firm Parthenon Group, painted a grim statistical portrait of an industry in which sales are flat and book-buying households are decreasing. But Kalliarekos also urged publishers not to accept the status quo, saying more consumer research is a key to improving results.
"My argument to you is: we don't necessarily have to take low margins as a given," Kalliarekos said. Without consumer feedback, he said, the industry is too much of a "production engine," churning out books without knowing who might want them.
His presentation was not entirely embraced by publishers in attendance. In a later panel, Richard Sarnoff, Random House president of the corporate development group, questioned the value of such research. "The data we get from consumers is not that useful to anticipate demand in three or four years," Sarnoff said. Other publishers, in private conversations, agreed with Sarnoff; one wondered if publishers' role might be more to lead than to listen.
Kalliarekos also offered an unusually direct warning about the dangers of booksellers, such as Barnes & Noble, doing their own publishing, citing a possible loss of revenue of between 5% and 7% for publishers. After Kalliarekos's presentation, Larry Kirshbaum, president of Time Warner Trade Group, who was moderating a followup panel, said that Kalliarekos's comments made him want to "go upstairs and jump out a window," a remark that elicited laughter from the audience.
During Kirshbaum's panel, in which retailers reacted to Kalliarekos's presentation, both Borders and Sam's Club representatives described their growing desire to use segmentation to sell books. For example, Borders's v-p trade books marketing Phil Ollila described the typical reader of Walter Isaacson's Benjamin Franklin (S&S) as "the wealthy old male binge history buyer." Sam's Club's Doug McMillon said that the company knew that many Nora Roberts readers also bought cigarettes and that Suze Orman fans preferred salmon, but then told publishers the retailer wasn't sure what to do with such information.
McMillon told publishers that book sales at Sam's rose "in the high single digits, and we aren't that happy with it." He called for publishers to make more of an effort to find creative ways to boost sales.
Also on that panel, Lyn Blake, v-p vendor group, at Amazon. com, noted the e-tailer's new emphasis to push publishers to concentrate more on sell-in than sell-through; she even said the company would begin tracking the sell-through record of sales reps. She also told the audience that the titles in Amazon's Search Inside the Book program, which now has about 400 participating publishers, sell considerably better than books that are not in the program.
In other news to come out of the conference, the AAP's Trish Judd described the organization's efforts in fighting piracy overseas, particularly raids in many parts of Asia. Michael Jacobs, who continues to head the Get Caught Reading campaign following his departure from Scholastic, outlined new spots featuring various notables, ranging from the New York Giants' Tiki Barber to Abe Lincoln. And Lynn Cheney, author and wife of vice president Dick Cheney, gave a patriotic speech decrying students' ignorance of American history and emphasizing the importance of education.
The issue of used books also flared up; when Sarnoff asked co-panelist Will Pesce, CEO of John Wiley, what lessons the trade could learn from the education market, Pesce replied: "Don't do what we did," alluding to price hikes. Pesce added that publishers "missed opportunities" to work with retailers to mitigate the damage of lost sales.
The conference was also rife with quips. In talking about the changed retail environment, Kirshbaum noted, "When I do my daily prayers I don't face Mecca; I face Bentonville, Arkansas"—home of Wal Mart.