PW: A Changing Landscape

The Aftermath of Consolidation
Ginee Seo, editorial director of paperback books at HarperCollins Children's Books, addresses this issue from her own experience. "Mid-sized companies, like Harper used to be, are being dwarfed by big conglomerates," she says, "and now Harper is among the biggest," after its acquisition of Morrow a year ago. In a large house these days, according to Seo, it's more important than ever to make the bottom line. "When you're part of a big corporation that demands X% gross every year, and as a division that's part of that corporation," she says, "you have to meet that gross."

One change Seo has seen as a result of the Harper/Morrow merger is that "we have much more clout with the chains now," and there are more "superstars" on their list than ever before. But, she says, "wishful-thinking publishing that used to go on is no longer happening at the larger places. And because the lists are so big now, it's harder to focus and do tailored marketing. There are ways around that, but it's more of a challenge than before. You have to think creatively to get marketing attention for non-superstars. That's a perennial challenge, but it's now more intense: what do you do with new talent you want to develop, since now there's less time to do it? And a poor sales record really counts against an author, since sales records can be tracked much easier these days."

With the growth of a superstar mentality for the larger children's houses, it's more difficult than ever to make authors feel you are paying attention to them, publishers say. A major issue is that authors and illustrators who used to be leaders of the list are now relegated to B status. "Smaller houses say that they can provide a more tailored, personalized approach for authors," Seo says, "but sometimes there is virtually no marketing for them. With big companies, at least some marketing is automatic. There are fewer players now to buy rights, too--things are more competitive right out of the gate."

But corporate life has its advantages, she points out. "Big companies can pay more, can invest in careers, and they have more marketing clout," Seo says. "And they can apply the resources of smart people in a lot of areas."

Stephen Roxburgh left "big-city publishing" five years ago when he started his own small children's book company, Front Street Books of Asheville, N.C., and he maintains a distance from the continuing trend toward industry mergers and acquisitions. "Macmillan, Knopf, Harper & Brothers, Simon & Schuster were founded by people," Roxburgh points out. "Simon was a guy, Knopf was a guy. 'Viacom' is not a guy. It's gotten so big that these companies don't seem real. Now there are what, five or six companies? What will happen when it's two or three? I don't know."

Charlesbridge associate publisher Mary Ann Sabia, whose mid-size house publishes 20-25 new children's books a year, says she hopes the business d s not end up with just a few key players. But she d sn't believe there would be decreased competition as a result, if consolidation continues. However, Sabia postulates, "If the mergers continue, two or three houses could have such a share of the market that they'd control pricing and discounts."

Speaking for one of the larger houses, Alan Smagler, acting publisher of Simon & Schuster Children's Publishing (which includes all the former Macmillan imprints, absorbed into S&S back in 1994), acknowledges one of the more immediately obvious drawbacks to having a big list: longer-than-ever sales calls. "Our reps definitely have more in their bags," he says, "both our titles and the lines we distribute. It's a challenge, but one of adjustment. We're definitely hearing that sales calls are very long. But with a handful of the very large publishers, booksellers know you have to spend the time."

The emergence of new technologies may alleviate this situation to some degree down the road. "Having catalogues on laptops, and sending those out in advance" would help matters, Smagler believes, "perhaps with suggested orders right on those pages. But it's still a matter of a rep making a call, getting feedback, sending back a report."

Craig Virden, president of Random House Children's Publishing, says that to create a bit of a "smaller house within a larger house" feel for his division, he treats the publishing directors of the various imprints autonomously. "The Bertelsmann ethos is to let managers run their businesses as individual entrepreneurs," Virden says. "There may be fewer opportunities for unknown writers to be published these days, but on the other hand, because we're such a big operation, we can afford to take more chances. Small and medium-size companies can't afford to make mistakes."

Virden believes that the profusion of mergers "will force the creation of boutique publishers who will publish into niches," as he puts it. In fact that is already happening. David Jenney, publisher of Northland Publishing in Flagstaff, Ariz., which publishes eight to 10 children's books a year, says that corporate mergers have been wonderful for his company. "It has opened doors for us to reach more authors we never could before, the ones who have become disillusioned by big houses." And, often at the request of their clients, agents are submitting bigger-name authors to small publishers now, he is finding. "Books like we publish--regional books--are going from niche to national." He d s acknowledge the realities of the situation, however, commenting that because they lack the resources of big corporations, "small publishers have to do a lot of things well to succeed."

Consolidation among publishers has been "great" for Charlesbridge as well, according to Sabia, "because we benefit from the negatives at huge houses, like lack of individual attention for authors. Also, with consolidation there are often cutbacks, both in terms of the house's list and also in staff. Editors are displaced, and so are their authors in many cases. We're finding that authors and illustrators are looking for a stable home, and that's what we have to offer."

And as Seo at HarperCollins points out, this isn't a situation that's likely to change anytime soon. "The divide will only get deeper," she predicts, "as small places stay small and big places continue to get bigger."

A Changing Retail Environment
As Sabia at Charlesbridge notes, children's books have gained more sales outlets in the past 10 years, like special markets, mass markets and the Internet. "The retail marketplace is bigger now," she says, "and there is more being replicated on the Internet, so opportunities for selling have increased."

S&S's Smagler agrees. "Space for children's books may have grown somewhat," he observes. "Barnes & Noble and Borders are offering more space, and online there is unlimited space." But he points out an emerging reality. "The life of a book is definitely shorter these days," he says, "which makes it harder for a frontlist title to become a backlist book. That's a challenge we've had to face."

Some children's-only retailers have gone out of business in recent years, in the face of competition, but others have "weathered the storm," as Roxburgh puts it. Lisa Holton, publisher of Disney Global Children's Books, notes, "Even with Amazon and other on-line merchants, the market has said 'We want Toad Hall and Hicklebee's.' There's still an incredibly important place for the independent bookstore. That's a really positive thing. I spoke to a lot of independent booksellers at BEA last month who said they were having a good year."

Despite the changing climate, or perhaps because of it, alternative retail markets are cropping up. "As some independents have closed," observes Doug Whiteman, president and publisher of Penguin Putnam Books for Young Readers, "other types of retailers have emerged. Despite the doomsayers, quality children's books are still finding their market."

But it's still a rapidly fluctuating market. As Smagler at S&S says, "The warehouse club market has changed; it's much harder to be successful in that environment. They continue to increase their weekly sales requirement, which makes it much harder for lower-priced books. We're probably at the point where the mall store decline has leveled out. There is certainly still a legitimate place for the mall bookstore. With the Internet, it's hard to see if there are more incremental sales as a result, or if it is just taking sales away from someone else."

There are more books on the market than ever before, and as Harper's Seo says, "At really big bookstores it's hard to know where to look. The atmosphere can be confusing and even disorienting. In that respect, smaller bookstores have an advantage, since they're generally less overwhelming and their stock is more selective. The challenge for the chains is to maintain a smallness within the bigness."

Impact of New Technologies
A whole wave of new technologies is currently or will soon make its mark in book publishing. But as Marc Aronson, editor at large at Henry Holt and managing editor of Zooba.com, says, "In my day-to-day work I'm not affected at all, other than in ancillary ways, such as books being sold over the Internet and participating in listserves, which allows me much more contact with librarians and booksellers. If people look carefully at how Internet access has affected things, it has affected things a lot, but in dealing with traditional books. There's been a lot of real change but it's all about traditional books."

In many respects, the Internet has served to level the playing field for smaller publishers. Roxburgh at Front Street contends, "The Internet allows me to be a global publisher." Prior to Amazon and B&N.com, he says he had more difficulty getting attention or respect from buyers at the chains. Now, however, Roxburgh believes that from on-line merchants, his books get the same attention and presentation as those from big houses. Front Street's Web site gives the company visibility and is an effective marketing tool, better than print catalogues, according to Roxburgh. "The Web site makes our storefront look like everyone else's," he says.

Northland has an on-line catalogue in an expanded format, Jenney reports. He considers their Web site a great resource for customers, and says it saves the company costs, too, since they don't have to pay for printing and mailing as with a regular catalogue. Both Jenney and Sabia, though, report that they're not seeing many sales through this channel.

Developing strategies for marketing on the Internet is an area that many publishers are giving a lot of thought to these days. Disney's Holton comments, "Already we're seeing in terms of Internet marketing that it's an incredible way to reach kids that we've never had before. They have a voice in reviews and giving feedback." Aronson, who concentrates on publishing books for young adults, points out, "This generation of teenagers is the first in history to grow up with full Internet access. We haven't figured out how to reach the teenage market as much as we need to, though I do feel like we've made progress. Everyone has discovered teenagers as a Web market. The Web is our ally here." And Smagler agrees, saying, "There's a huge public out there, and it's always a challenge to reach them, even on the Internet. We haven't yet figured out how to use the vast resources of the Internet to market books."

The E-Book Emerging
One of the most discussed emerging technologies these days is the e-book. Publishers know it's becoming an issue in the field of children's books, but the whole issue is a big question mark at this point. Virden at Random House says, "None of us exactly knows what it's going to mean to us, but it's something we have to deal with. There's really not much information out there about it, and editors are afraid of jumping into it and then possibly selling their author short." As a result, there's been a tendency--particularly in children's publishing--to reject it or at least to put it on the back burner. Plus, Virden points out, "the technology itself is not developed enough yet--especially for a four-color picture book."

Most children's publishers we spoke with say that their companies are currently holding strategy meetings about e-publishing. "Like everyone else," Holton said, "We're in the process of talking to the various players, and we're discussing a Disney e-book strategy." Whiteman, like most of the publishers interviewed, didn't want to give specifics, but said Putnam's will be a "company-wide plan," and a "significant aspect of the children's book division in the not-too-distant future."

"In terms of the e-book revolution," S&S's Smagler says, "children's publishers are not playing a whole lot. We're beginning to go after it. There has to be some familiarity for the public to be comfortable with it. We'll need a big children's name to jumpstart the children's arena. I think it will catch on with older kids first, but I can't see younger kids sitting on Mom and Dad's lap with an e-book reader."

According to Smagler, S&S is considering putting both original material as well as some backlist onto e-books, especially fiction. "Everyone wants to play so you don't want to be left out," he says. "You know it's going to change and will continue to change, but you can't sit on the sidelines. You're going to make some mistakes but you have to jump in."

Still, he says the technology needs to continue improving, calling it "still in its infancy" in terms of trying to show interior spreads. For companies to be able to show picture book proofs to bookstores on an e-book reader (one possible use for the technology that several publishers brought up), Smagler states that booksellers still want to see the entire picture book before buying it. And attempting to show them a picture book electronically "is still not the same as picking up a picture book and thumbing through the illustrations."

E-books have two distinct possibilities for development, Holt's Aronson believes. First is the notion of taking text that could be a printed book, and delivering it via e-book. "That would make teenagers' backpacks lighter," he says, "but it d sn't inherently change how we go about our business. And I don't know if teenagers are clamoring for it. I don't know if they're saying, 'I won't read it as a book, get it to me as an e-book.' "

The other avenue, as Aronson describes it, is the ability to deliver text and art in a way that takes advantage of the new technology, which could only take place in a digital environment. He suggests that the creation of an entirely new format is possible. As he points out, "It's efficient to print picture books in 32-page books; an entire form has been created. There's a physical reason why a story ends where it d s. But if you take the same 32-page book and deliver it electronically, there's no physical reason for it to stop. Even if you can create something that feels like turning a page, you might feel cheated." Aronson postulates that reading an e-book may eventually be more like viewing animation, for example, or another kind of visual experience. "I'm excited by the possibilities," he says, "but not dazzled by them. I'm excited but cautious."

One possible future use for e-books is to provide booksellers and librarians with advance copies of novels; Smagler, for one, believes that electronic distribution of galleys "may come down the pike soon." He says this could be "an extremely cost-effective and speedy way for us to distribute galleys. We constantly get cries from the sales force, 'We need more galleys!' To make those available more readily and more widely would be tremendous."

Jenney at Northland d sn't believe that e-books will have much of an impact on the children's sector of the business until a device comes along with an expanded memory that would be capable of displaying a picture book. "It all depends on the development of the technology," he says. "E-publishing has huge potential, but it also has huge potential to be a quagmire." And of course, as several publishers reiterate, an e-book can never hope to replicate the physical experience of reading a book with a child.

"The book comes first" was a phrase that all of the publishers we spoke with kept coming back to. "At the end of the day," Roxburgh says, "people want content." S&S's Smagler agrees, saying, "What's always going to win is a good book. I don't want that to get lost. Whatever you do, whether it's a picture book, novel or a tie-in to a brand or license, the product has to be good." In fact, given the rapidly evolving technologies and new realities in the marketplace, in Ginee Seo's words, "It behooves us all, now more that ever, to pursue great books."

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