The need to challenge the status quo was one of the themes discussed at Publishers Weekly's second annual Industry Summit. Held April 26 in New York City, the event was sponsored by Phoenix Color Corp. and featured speakers from the publishing, bookselling, wholesaling, manufacturing and distributing areas of the business as well as several consultants who cast a critical eye on the industry's current practices.

Expanding on ideas first espoused at the Association of American Publishers' annual meeting in February, Kosmos Kalliarekos, senior partner with the Parthenon Group, urged publishers to build "a culture of performance" that will help the industry break through its current cycle of low growth and low margins. There is no "structural reason" that publishing can't increase its growth and boost earnings, Kalliarekos said. As he did at the AAP, Kalliarekos advised the industry to understand the needs of its customers better and suggested that editorial decisionmakers should better utilize the information that their partners in the sales channels already possess.

Kalliarekos said that publishers' current practice of "talking to each other and examining the history [of how certain books sold] is not how consumer-oriented companies go about learning from their customers." Trade publishers are "too internally focused" and need to look outward more, Kalliarekos said. He noted that publishers do engage in consumer research in such categories as test preparation, travel and how-to, and urged publishers to broaden that practice.

On the cost side, the greatest "point of pain" for publishers is unearned advances, Kalliarekos said. He estimated that publishers write off $500 million in unearned advances annually. Authors most likely not to earn out their advances are those who receive $250,000 to $1 million up front. Publishers need to be disciplined when considering signing authors to contracts in that range, he said.

Maureen Egen, president of the Time Warner Book Group, agreed that advances in Kalliarekos's target area are "the most problematic. It can be a real crap shoot," she said. Egen noted that editors do need to exercise more discipline in paying advances. "They have to believe that it is asking for trouble to spend too much money on too many books," she said.

Agent Richard Pine, managing director of InkWell Management, defended advances by noting that they are "a recognition of the fact that the locus of creativity, of licensing and of strategy lies with the author and his or her creative team." For Pine, that creative team is assembled by agents who are in the best position to help authors exploit the intellectual property that they create. "The fact is that for us the publisher is just another part of a puzzle," Pine said. Egen countered by noting that it is editors who often turn a manuscript into a readable book and a publisher's marketing team that makes the book a success. Yet for doing all that, publishers usually have no additional rights other than book rights.

One area that Egen, Pine and many other panelists agreed on was the importance of the Internet to publishing's future. Egen said publishers "are not afraid of the Web," observing that Time Warner makes extensive use of the Internet to promote its titles, although she acknowledged that TW could probably use the Web even more to reach consumers. Pine said that part of the future of self-help publishing could be in subscription Web sites. He said that, as successful as Rodale's The South Beach Diet has been, "part of me sees the book as a pamphlet for the Web site."

Indeed, panelists discussing Web strategies suggested that the most effective sites make it easy for customers to move from online to offline and back again. Author Carly Phillips said she thinks of her Web site "as an extension of myself" and a chance to continually connect with her fans, even when she doesn't have a new book. Her site features excerpts, reviews and links to and where her books can be ordered. She said the most popular feature of the site is the "coming soon" button, but added that many fans come to the site to participate in monthly contests; because fans need to register to win a prize, Phillips uses contests to build a mailing list that now has more than 21,000 names.

Phillips said she asks publishers to print her Web site's URL in all her books; powerHouse founder Dan Power said he puts his company's URL on all its advertisements and promotions. His site's front page displays covers of the most recently released titles organized by season, with lots of author information, excerpts and other information available by clicking through each jacket. Power said he favors the "browsing a bookstore" approach in site design, unlike online retailers where everything is neatly categorized. And the site, of course, allows customers to order books. Power said powerHouse sells about $1,000 worth of books a month through the site "without really doing anything."

Ingram's Kent Freeman said publishers should use the Web to "elevate levels of brand awareness"—for authors, book series and imprints. He encouraged publishers to lobby online retailers about branding book publishers. "Usually, if it's there at all, the publisher's name is at the bottom of the page in tiny type," said Freeman. He suggested that if online retailers want to let readers look at publishers' content (in an obvious reference to, maybe publishers should leverage their content to force retailers to at least put the publisher's name in a larger typeface.

With all the talk about Web marketing and selling, will bookstores become obsolete? Not according to Carla Cohen, co-owner of Politics & Prose in Washington, D.C. Speaking from the audience, Cohen said the Internet will never replace traditional booksellers. "The bookstore is more than just a purveyor of a commodity. It's a center for community and discussion of ideas," she said. But panelist Jennifer Lawton, owner of Just Books in Greenwich, Conn., confessed that before buying her store two years ago, she did most of her book buying on Amazon. She suggested that there's a lot to be learned from Web-based competitors. "I think looking at how people buy online, what they buy online and how you reach out to customers online is good for anyone in retail."

A number of panelists offered practical advice on how areas of the supply chain could better work together. Jean Srnecz, senior v-p, merchandising, for Baker & Taylor, said that if publishers were more consistent in providing accurate lead times, her life "would be much easier." Her biggest complaint, however, is publishers' practice of making B&T "invest too much money in books they think we need to have," rather than letting the company invest more money on backlist titles. She also said that while the rise of "the supply-chain guy" is a good development, publishers need to "marry" editorial and sales personnel with supply-chain executives in order to better control inventory.

Phoenix's Lou LaSorsa said he would like to see more publishers use electronic transmission when placing orders. Eliminating paper orders "is one of the last areas where costs can be driven down," he said.

Mark Suchomel, president of the distributor Independent Publisher Group, said that from his vantage point, what publishers want from booksellers is "fairness in co-op. Retailers regard it with a wink-wink.... Publishers want compliance and to get value for their money. They want co-op used more creatively to draw customers into stores. And not just people who already come into the store; they want a new class of reader."

He wasn't quite finished. Publishers, he said, can get books out quickly, "but retailers want long lead times in presenting the book." Publishers, Suchomel continued, want returns "in good shape and they want their own books." Most importantly, he concluded, "publishers want a consistent message from retailers. Retailers say they want different kinds of books, but stores end up ordering the same well-known licensees and the same big names. Retailers say they want something different, but they buy the same things."

Rich Freese, president of Publishers Group West, said that while a discussion of what booksellers want from publishers could be summed up by "higher discounts," there are other areas that could improve sell-through, including more promotions for titles. Avalon chairman and former PGW head Charlie Winton added that booksellers "don't want to be oversold" on a title. "They want realistic expectations," he said.

Several speakers at the Summit advocated greater cooperation. B&T's Srnecz said industry members need to overcome the habit of "keeping things close to the vest" and to collaborate more on ways to improve sales and drive costs down. Richard Pine said there are two types of agents: those who think they did a bad job of negotiating when an author receives royalties and those who see a royalty payment and say, "This is what a partnership is all about." To which Maureen Egen replied, "We can use more types of the second agent."