After several stark years in which stores like Cody's in San Francisco and Davis-Kidd Booksellers in Nashville closed and the nation's second largest chain is teetering more than ever, publishers and booksellers are looking for new ways to work together. Some are proposing new business models, like selling nonreturnable or on consignment. But one area that has largely been ignored is co-operative advertising, even though it provides thousands of dollars, or millions in the case of chains, to retailers' bottom lines.

Introduced to help booksellers and publishers make it through the Great Depression, co-op has changed little over the eight decades leading up to the Great Recession. And it continues to be governed by byzantine rules, even with HarperCollins's introduction of paperless co-op five and a half years ago. Few but the largest stores have the staff to ferret out how much co-op they have accrued per publisher—co-op is based on a percentage of the previous year's buys—much less spend it. "I think co-op is lovely when we get it," says Elaine Petrocelli, president and cofounder of Book Passage in Corte Madera, Calif., and the Ferry Building in San Francisco. "It takes a lot of skill and staff time on all ends. I'd love it if some other system were developed." Adds co-op director Luisa Smith, "It's very complicated and it's different for every publisher." Some publishers require a paper trail showing exactly how the money was spent. Others are more flexible, allowing electronic submissions as long as the account can provide paper proof if necessary. Still, Book Passage does its best to spend every penny it earns on 700 events a year and a bimonthly newsletter, which is mailed to 40,000 customers.

Some booksellers have watched their co-op reimbursements decline. At Nonesuch Books in Biddeford and South Portland, Maine, which uses co-op for events and to meet discounts from other retailers, co-owner Jon Platt has seen his co-op cut in half between 2005 and 2010. "We are in fact filing the same amount of claims," he says, noting that the drop has cost a lot of operating margin. "Publishers, with a few exceptions like Random House, have decided that the best way to run their business is to let the retailer absorb the increasing costs of promotion, advertising, and discounting."

"Co-op may not be the best way, but it is definitely a good way to promote books," says Steve Bercu, CEO of BookPeople in Austin, Tex. Bercu's wish list for improving co-op includes simple e-forms or e-mail that cover all the information publishers require to award co-op. "Of course," he says, "having a standard set of co-op rules and a central filing location might be too much to ask for." At Devaney, Doak & Garrett Booksellers in Farmington, Maine, owner Kenny Brechner spends most of his co-op on displaying a handful of titles in the store each week and highlighting them in the store's weekly e-newsletter. Brechner is also one of the few booksellers averse to the idea of replacing co-op with a bigger discount. "I like the idea of sifting through the titles and rewarding them with promotion."

Although publishers acknowledge co-op's imperfections, many support it as the best way to co-promote books. "It makes as much sense now as ever," maintains Dan Koenig, director of sales planning and operations for Macmillan. Sophie Cottrell, v-p, communications director at Hachette, agrees: "While it seems old school, co-op has proven to be a very effective way to draw customers to our authors' work." And Beacon Press has increased the money it allocates to co-op, reports Tom Hallock, associate publisher, director of sales and marketing. "If somebody wants to shine a light on our books, we want to do it," he says.

Late last month Indigo in Canada flexed its bookselling muscles by announcing that it would wrest control of its co-op in 2011 by having publishers pay co-op on all titles, not just designated ones, out of a pool based on 4% of sales. Some U.S. booksellers applaud the decision. "I'd much rather see a percent given to us to promote books in our store as we see fit," says Chris Morrow, general manager of Northshire Bookstore in Manchester Center, Vt. "At some point, publishers have to have faith we know how to promote our store."

Random House is one of several publishers that continue to look for fresh ways to use co-op collaboratively. "One initiative we are working on, in-house cross-divisionally," says senior v-p, sales director Jaci Updike, "is developing online consumer-marketing vehicles, which could be underwritten from an account's co-op fund, with overall administration by Random House." Consumers would be directed to the specific originating retailer.

Despite the drawbacks, most booksellers don't want to see co-op go away. As Tattered Cover's manager of operations, Neil Strandberg, points out, "Booksellers and publishers are interdependent, and co-op dollars are baked right into the business model. We look with concern on any scheme that might serve to lessen that particular ingredient."