Maintaining Perspective in the Publishing Industry

I joined the publishing industry because I love books, and want to share that love of books with the world. It’s as simple as that. After almost four years working in publishing across two continents, I still get a surge of energy every time I enter a bookstore (especially a new one), start a new book, or think about my “antilibrary,” the term coined by Nassim Taleb currently making the popular rounds for the books in your personal library you’ve yet to read. Books have changed my life, almost exclusively for the better.

The past year or so have not been especially great for books.

A sexual harassment scandal has led to an indefinite suspension of the Nobel prize for literature, the first time the award has not been awarded since 1949. Similar accusations from famous authors and publishing insiders have roiled the industry and shocked booklovers around the world.

In the US, an embarrassing and distracting spat between newly-appointed Barnes & Noble CEO Ron Boire and Chairman Len Riggio led to Boire’s ousting (B&N’s 4th CEO in 5 years) and a messy and publicly-aired wrongful termination lawsuit. Meanwhile, rumors of a buyout of B&N by opportunistic investors (though hardly booklovers) continue to loom.

At a more macro level, the continued movement of book-buying consumers online (i.e., Amazon) has not only has made it more difficult for independent booksellers to compete and sustain themselves, but has also made it harder and harder for readers to discover new fiction, and for publishers to introduce those readers to new authors. As ably recounted in a recent article in Publishers Weekly (What’s the Matter with Fiction Sales? – Oct 26, 2018), amidst shrinking bookstore footprints and the declining incidence of dedicated book review sections in newspapers and magazines, publishers have increasingly few avenues to promote new authors, and an ephemeral leash for supporting non-commercially successful authors. Excluding the success of 2015’s Go Set a Watchman (the opposite of a “new” author), fiction sales have fallen every year since 2013, falling 16% in total from 2013-17. The number of 1M+ unit sales in fiction can be counted on one hand: Watchman (1.6M), Grey (E.L. James – 1.4M), The Girl on the Train (Paula Hawkins – 1.3M), and All The Light We Cannot See (Anthony Doer – 1M).

Think about it: it is easier than ever to find a book about a nonfiction topic of interest, especially written by an author with an established platform, but discovering a completely new author has become more-and-more difficult. As mentioned in a previous post, the messy and unorganized nature of the internet begs for curation – an area where booksellers and the more-biased publishers should readily step in.

Further complicating the consumer book-buying experience, Amazon continues to fiddle with its bookselling algorithm, leading to more and more third party or obscure editions of titles as opposed to linking the publishers’ version (i.e., the version you most likely set out to buy). This type of obfuscation would be impossible at a bookstore, aside from the potential availability of a used copy (readily evaluated via the all-important eye test). See Tyler Cowen’s recent experience trying to acquire a copy of Guillver’s Travels on Amazon (Amazon search is getting worse, especially for classic books – Nov 5, 2018) for reference.

Here in Brazil, my adopted home and publishing market, the past year has been especially grim, also due to changes in the bookselling portion of the publishing value chain. Over the past two months, the two largest booksellers in Brazil, Saraiva (a commercially-focused, 100-location behemoth) and Livraria Cultura (a booklover’s paradise with just 10 stores, but arguably a greater cultural impact) have each taken actions that signal an existential threat to their ongoing bookselling activities.

Over the past few years, both stores have sought to expand their sales offerings, diversifying into so-called “geek” goods (board games, toys, t-shirts, etc.), movies, DVDs, and video games, and most recently, electronics (cellphones, televisions, etc.). Audaciously, Cultura (associated with bookselling for 30+ years) assumed the assets & liabilities of the Brazilian operations of French electronics store FNAC (think Best Buy) in July 2017 – a unlikely, if not outright doomed, marriage from the start, especially considering FNAC’s desire to exit the country altogether.

In both cases, this expansion and movement away from their respective strengths has been catastrophic.

Cultura has now closed all of the acquired FNAC operations (~11 stores) a little more than a year after the change-of-hands was announced, assuming the French retailer’s closing-related costs in exchange for a 14 months of organizational confusion. Cultura has now entered into a Chapter 11-esque process called a recouperação judicial, admitting defeat on their current debts and leaving publishers dependent on Cultura despondent.

Saraiva, citing increased e-commerce competition from Amazon and local players B2W and resulting shrinking margins, has announced a closure of 20 stores (20% of their footprint), and a formal exit from the electronics market as well. A cursory glance at their publically available financials tells a dire story: increasing current liabilities, a shrinking gross margin, and negative operating margins.

Inarguably, it’s a near-worse-case scenario, a perfect storm akin to Books-a-Million suddenly reneging on its obligations while B&N shuts down stores across the US.

Meanwhile, there’s a very real concern that small- and medium-sized publishers in Brazil will not be able to withstand this sudden whiplash and their need to honor their payment obligations to their own employees, suppliers, and authors. There’s an expectation that things are likely to worsen before they improve, as Cultura continues to teeter on the fragile edge of outright bankruptcy, while (optimistically) Saravia begins the sobering process of a complete restructuring of their corporate strategy and future.

(On a personal note, as someone thrust from the cozy confines of a huge, US-based business to a comparatively miniscule Brazilian publisher, this has been educational, to say the least.)

Amid this onslaught of bad news, my priority has been to maintain perspective. Not only as a lover of books (I’ll never forget my first time visiting the Cultura flagship location on Avenida Paulista, São Paulo), but as someone working in the book publishing industry, there’s a continued tendency towards despair (oftentimes shared by the publishing industry itself). The so-called “death of books” has been called for countless times, citing numerous boogeymen (namely eBooks, Amazon, Youtube, Netflix, etc. etc. etc.), with somewhat halfhearted pushback on the part of the publishers themselves each time.

There’s a very strong case to be made that book publishing is not the best industry to invest all your money going forward. There are very real challenges (some of which cited above), and minimal expectation of explosive topline growth (aside from the very real, continued expansion of audiobooks around the world, something we’re working on bringing to Brazil).

On the other hand, books are inarguably as relevant as ever – the richest and most visible people in the world are infatuated with books (Gates, Zuckerberg, Buffet), and take to blogs like my own humble site to talk about the books they love. Even the much maligned Jeff Bezos saw books as his entryway into world domination way back when, and continues to carve out market share in this space, despite seemingly bigger fish to fry (like space). Books about President Trump have consumed weeks of news cycles, and sold millions of copies. And President Barack Obama and Michelle Obama are set to release their own memoirs over the next two years, sure to be similarly explosive megasellers that will provide intangible solace to countless Americans (and people around the world) in search of hope.

In summary, books aren’t going anywhere. We may see less books overall published in the future, and a continued decline in brick-and-mortar bookstores, but as long as consumers continue to want to read books (not only the thousands of new books published every year, but also the hundreds of thousands of books beloved and passed down over generations), there will be places to buy these books. Discoverability will continue to be an issue, and some great books will almost certainly fall through the cracks, but classics are still being published every year (Lincoln in the Bardo’s genius still haunts me), and there will be many more classics in the years to come.

And if you’re still feeling despair even after reading this post: don’t worry – Sam Hinkie’s on the case.