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Along with David Shanks, our Person of the Year, we also profile a group of Notables of 2011 who changed the publishing business this year.

In a time of tremendous turmoil in the book publishing industry, the role of the established large trade houses has been called into question by analysts and commentators inside and outside of publishing. Yet the Big Six publishers, by adapting to the changing circumstances, continue to operate profitably, while publishing award-winning books. No executive within the industry has done a better job of balancing the often conflicting demands of supporting an existing print infrastructure with investing in digital businesses than Penguin Group (USA) CEO David Shanks, PW’s Person of the Year.

Penguin Group (USA) followed up record financial years in 2009 and 2010 with a host of initiatives in 2011 that includes the official launch of two imprints, David Rosenthal’s Blue Rider Press and the company’s Spanish-language imprint C.A. Press, as well as the fall announcement of InterMix, an e-book imprint headed by Berkley Publishing president Leslie Gelbman that will publish its first titles in January 2012.

The new imprints are a byproduct of one of the first strategic decisions Shanks made when he and Susan Petersen Kennedy, president of Penguin Group (USA) were named to succeed the legendary Phyllis Grann as head of Penguin in October 2001. “We decided we wanted to grow organically,” Shanks says. Penguin’s imprint strategy follows two lines—launching imprints in areas where it wants to grow (Portfolio to reach the business market, Sentinel for conservative readers, for example), and hiring high profile publishers and/or editors when they become available. “We don’t have a hit list,” Shanks says about bringing new executives to Penguin, “but we’ll take the right person if they become available.” Penguin’s most notable imprint startup is arguably that of the Penguin Press, started in 2004 under the direction of Ann Godoff after her departure from Random House. Penguin Press has been consistently profitable, and the imprint has also had a string of award-winning titles including the 2011 Pulitzer Prize for Biography, Ron Chernow’s Washington: A Life.

Penguin’s ability to attract what Shanks says is “powerful personalities” is a tribute to the publishing system he and Kennedy have established. “Everybody plays by the same rules,” Shanks explains, with the golden rule being that no Penguin imprint can bid against another.

Shanks and Kennedy divided up their duties early on, with Kennedy directly responsible for the adult imprints, while Berkley and the children’s group report to Shanks along with the business sides of the company. “Susan has been a great partner,” Shanks says. “We complement each other really well. I can’t imagine anyone spending any time in a room with Susan and not learning how to be a better publisher.” Kennedy in turn, appreciates what Shanks means to Penguin. “David embodies everything a great leader is: wise, forward-looking, someone who motivates, someone who inspires, someone who is accessible and has a warm sense of humor, and someone who always looks at everything with an acute and original eye. He knows our business inside and out, and he has a clear vision for where our business is going.”

The division of labor gives Shanks the opportunity to focus on the business decisions that are shaping the new publishing landscape. Like other trade houses, Penguin has seen e-book sales soar, with sales more than doubling in the first six months of 2011. Helped by the boost in e-book sales, the profit margin for the entire Penguin Group inched up slightly in the first six months of 2011 to 9.2% from 8.9%, despite the debacle at Borders that Shanks says “took far too long to be resolved.”

While the retail situation is now a bit more stable, Shanks is not expecting sales to increase in that channel over last year; with Borders gone, finding ways to keep the bookstore market vibrant is a priority. To that end, Shanks met with representatives of the ABA to look for ways Penguin can better work with independent booksellers. “We want to help,” Shanks says, “but whatever we do needs to work for both of us.” While Shanks says he was intrigued by the possibility of selling some titles on consignment, the lawyers vetoed the idea due in part to concerns about what would happen to its titles if a retailer went bankrupt. Penguin and the ABA have instead begun various dating experiments with 14 stores and if any proves successful, Penguin will roll it out to more outlets.

The future of sales reps that call on those retail accounts is one of the many questions raised by the growth of e-books sales; at Penguin’s November sales conference, Shanks informed his field reps that they will be getting a title change, from district sales manager to district sales and marketing manager. The title switch, effective at the beginning of 2012, is meant to tap into the knowledge the sales force has of Penguin’s list. “These [people] have been great at getting people to buy our books, but sales forces need to change given the retail realities,” he says. By expanding the reps’ responsibility to include marketing, Shanks hopes to marry the needs of continuing to sell to brick-and-mortar stores with getting books discovered in the crowded online and e-book marketplaces.

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