Episode 12: Michael Cader on Challenges and Opportunities in Publishing
In this episode, Michael Cader, Founder of Publishers Lunch and PublishersMarketplace.com, joins me to talk about some of the challenges and opportunities publishers are encountering. Publishers are doing great right now, with record sales and profit margins, and larger year-over-year growth than anyone could have expected. Meanwhile, the people who work in publishing, including booksellers, authors, and many others, are feeling stressed and are not necessarily seeing the personal benefits that come from this extraordinary growth.
Michael talks about what he sees as a reset: a reassessment of what publishing does and how it does it, and an opportunity to address some longstanding limitations that the industry as a whole has been unable or unwilling to address, from diversity to the locations of publishing offices, to the types of content being published.
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On this episode of the BookSmarts Podcast, I’m pleased to be joined by Michael Cader the founder of Publishers Lunch and PublishersMarketplace.com. Michael, thanks for joining me today. I’m very excited to chat with you!
Happy to be here.
So, Michael as someone who is reporting daily on the various activities in the publishing industry, I feel like you have your finger on the pulse of our community, much more than the rest of us do. So, I wanted to chat with you today about the challenges and the opportunities that you’re seeing in the publishing space. What are some challenges that you think we should be addressing or opportunities that you think we need to watch out for?
Well, I guess the good news is, I always see challenges and opportunities, to me the landscape is full of them. So, we’ll try to keep it to under 20 minutes or so. There’s a lot of interesting stuff happening right now. And some of its particular to publishing and some of it is about our world in general, right? As we go through this COVID transition and redefine what work looks like and how work becomes meaningful. So, part of what’s really fascinating to me is, we’re in this unusual moment, where—as an industry—publishers are doing great, probably better than ever, sort of extraordinarily great, right? Sales, particularly among the larger corporations are higher than ever, profits are, in turn as high or higher than ever. We’re seeing in a business that thinks of itself as being low growth. You know, typically the whole industry grows, one to four percentage points a year in dollar sales level, we saw sales growth of almost 10% last year. This year sales are up close to 20% for the first half of the year. That’s going to come down a little bit as we get towards the comp later this year. But we’re seeing an extraordinary response from readers during this COVID lockdown. When times are tough, and people need to use their time in a way that they value and is rewarding, and use their dollars in a way that’s rewarding and makes them feel good, they’re reading. And when their kids are home, and they need to learn, they’re reading. When the kids stop learning and need to be occupied, they’re reading.
The disconnect, of course, is that although the industry writ large, and the big publishing companies are doing terrific, I’m not sure the people are doing as well. Right? You know, what we keep hearing is that the stress and strain that a lot of the individual employees are feeling as they’ve gone through this extraordinary period. It’s not clear if the windfall that the companies are feeling is trickling all the way down to the people doing the work. There’s a lot of real pain out there, particularly among booksellers who have been adversely affected by the pandemic, there’s been some pain felt by authors who’ve seen secondary sources of income disappear, because they can’t go on the road and be speaking and they can’t do the same kinds of teaching gigs, and visiting schools, and giving lectures, and a lot of the other resources that they depend on. They’ve seen their publication schedules changed, right? So there’s all kinds of disruption, the disruption is being felt at the individual level, the gains are being seen quite clearly at the corporate level.
We are also seeing consolidation, but not just consolidation, but publishing companies selling for multiples that they’ve never sold before. Companies selling for more or less twice what they would have sold for two or three years ago, or more. Which tells you that the investment community actually believes this is a robust business again. So, to me, all of this wraps up together into a really interesting reset point as companies start thinking about having employees come back to the office at least part time and start thinking about what the future of work looks like and start thinking about how to spend this windfall, and how to hold on to some of these market gains. It raises all kinds of interesting questions, right? Part of part of why people companies are making a lot more money is because sales are up, but part of it is because expenses are down. In the pandemic, people stopped going to book fairs and they stopped touring authors, and a lot of them stopped sending out galleys, and cut back on marketing expenses and did all kinds of things, some out of necessity, some because those things just didn’t exist, and some for ease, and some because they wanted to conserve. So, there’s this really interesting chance to rethink “Where are we spending our dollars?” How are we spending those dollars consciously? And what’s driving ROI? There’s an interesting opportunity to rethink every role within the organization. What have people actually done during COVID, when they’ve been working with less direct supervision more on their own at home? And how has that worked well? And how can we enfranchise people to keep doing more of that, and less of what they didn’t like doing? What’s the office for? Why do I need everybody back in the office? Why do people not like the office so much and don’t want to come back to it? What is that saying about our office environment?
We’re also in this interesting moment of the industry finally reckoning with diversity in a more meaningful way, I think, than in the past. And part of diversity means having an industry that’s not just centered in New York, right? Only certain types of people can afford to live and work in New York, and New York has all sorts of different people and viewpoints in it, but it’s not the nation at large. So there’s also this interesting opportunity to rethink having satellite offices or satellite working groups, because who needs an actual office, in cities and places around the country. And an ability to recruit people who live all over and an ability to recruit people who might be able to live on a publishing salary somewhere other than in New York, where cost of living is more within reach? Right?
So, I think writ large it’s this really interesting reset moment? The good news is that publishing is coming at it from a position of strength, and that the sales are there, the readers are there. The retail channels have been resilient, even the ones that have suffered from having their doors closed. So there’s a really strong foundation to build from. So, where people go from there, I think will determine a lot of what the trajectory of the business looks like, over the next few years.
That said, there are then some actual challenges. And again, to me, in some ways, it’s sort of extraordinary that the business is doing so well given the depth of the real challenges we’re seeing. One is just the increasing difficulty of selling new books, right? You know, what we’ve seen during the pandemic is the backlist sales continue to rise. Backlist sales have been rising for years, which is in part a function of the increased percentage of book sales online, right? because an online environment is less conducive to displaying new titles, and stacking them up and putting them in prime real estate, and more conducive to people browsing or searching, or going to look for the book they want at the price or vendor they want to get it from. Early in the pandemic we saw some very big authors holding on to their audiences or big news-making books sort of driving a cycle. The interesting thing—I was just looking at this yesterday—with sales at record levels for the first half of the year, the extent to which the front list is pulling those sales is almost smaller than ever. Currently, the biggest titles of the year are comparatively weak. And they have not gained 10% or 20%. In fact, they’re taking up a smaller percentage of sales. We are seeing strength passing down through the list. Which again, it’s terrific if you’re a long tail big company and you have 100,000-title backlist. Now if you’re an author and your new book is coming out, or if you’re an agent, and you represent people trying to get new books out. Or if you’re a store and a lot of your audience is pulling in customers because they want to know what’s new, that’s become more challenging than ever. And that’s going to take some really interesting thought and experimentation to see how we drive people back to new titles. Because for the industry to persist and grow, it needs to continue to produce new titles of relevance and interest.
Then there’s some more profound challenges going on, right that the supply chain has been severely tested by the pandemic. It’s withstood those challenges, but, you know, like most businesses now, but book publishing in particular, is suffering from this sort of perfect storm of transportation problems around the world. On top of it, we have tight supply of printing and paper that’s not going away because although our industry is growing, the other industries that use book-quality paper and book-quality printing, particularly educational markets, are not growing, so that market is not seeing investment coming in and we’re going to have to reckon with printing of books being in tight supply probably for the foreseeable future.
As you probably know, because it’s the area where you live in, Internet security is a nightmare. Lots of people have gotten hacked, many people don’t like to talk about it, they’ve been very large companies in the industry, small companies are getting hacked, too. There’s a lot of mischief out there. So just as we’ve all become very dependent on online, staying safe online and protecting your business online, and ensuring business continuity and protecting your intellectual property, and protecting customer information has gotten harder than ever, right?
You know, as we discussed a little bit, there’s still real pain and challenge on the physical retail side. And we’ve always depended on physical retailers, to help spread the word about new books and bring in customers and expose them to a wide variety of books. So that sector remains quite challenged, and is gonna need industry help and innovation to reinvent itself and stay relevant. And as we sort of talked about at the beginning, employees are presenting—are both feeling the challenges of the era, but also presenting challenges to their employers, right? We’ve seen an era in which employees want a much stronger voice in the companies they work for, and the kinds of books that they work on and the values that they stand for. And that’s producing an interesting reckoning sort of across the industry, as people try to try to reconcile living their values and running values-based companies, but publishing for the entire audience writ large, which represents a broad variety of viewpoints, and making sure that we have a business that still publishes responsibly to people from all different walks of life and people of all different kinds of interests and people all different kinds of political viewpoints.
What do you see as the end effect of this, say, a year down the road? Do you do think that we’ll see bookstores come back with power, that retail will become that place, again, where people want to go to discover new books? Do you think that the change to online sales, that we’ve seen—the increase in online sales in the last year is going to diminish again, or at least flatten out again? Where do you think that’s headed?
Well, the long-term history of online sales to date is that the curve only goes in one direction, right? Online doesn’t seem to give up share once it gains it. And during the pandemic, interestingly, we’ve seen Amazon which is clearly the leader far-and-away, gain significant share. But we’ve also seen Target and Walmart and other retailers of scale finally, develop more meaningful online offerings across the board and in all kinds of merchandise, but in books in particular, where the audience is conditioned to buying books that way, and we’ve seen new entrants like BookShop.org do really well, in consolidating the buying of people who have long wanted a good, reliable, single stop, online bookstore that wasn’t part of a big chain. So, I think that is part of the challenge, right? There may well be a relief return to retail, as people enjoy that physical shopping experience again, at least briefly. But I think it will be on physical retailers of all kinds, including bookstores, to push past the relief and continue to reinvent themselves and give customers good, exciting reasons to be coming into the physical store, rather than just ordering online because all we’ve seen so far is that online doesn’t like to give up share. Once it gets it.
Taking things in a little bit different direction in the couple of minutes we have left, I’m curious if you have been seeing as you’ve watched what publishers have been doing in the past couple of years—you’ve been watching not just the types of books that we’re producing as an industry but the directions our businesses are going. It seems to me that there’s a broadening of the types of products that publishers are selling or getting into, the types of content that they want to produce. We’ve seen, you know, major publishers—obviously, audio books as a type of content have taken off, but we’ve also seen publishers getting into the movie space and the TV space, we’ve seen publishers getting into board games, there’s a lot of things that it seems like—publishing as an industry is starting to see itself more as content production, content aggregation, content curation in most ways, not just books. Do you have any thoughts about that? Or have you seen any of that direction yourself or think that any of that that you’ve seen is interesting?
So books have always been foundational IP that have driven all kinds of other products. And those products, in turn have driven back interest in the books and authors that originated the material. There’s this sort of regular wave of book publishers flirting with other steps along the IP chain. I think what is most meaningful is just the extent to which books are driving streaming video exploitations. And that is, you know, that sort of trumps everything, right? I mean, yes, Lagardère, for example, is invested in some games companies and people are trying to engage more actively in other parts of IP development. But I think it’s the success that the people who develop this IP all the time are having in taking great foundational material and then turning it into other forms, that’s still driving the most activity. You know, Harper Collins has this investment with Elizabeth Gabler that will take a few years to pay off, which is maybe one of the more meaningful attempts to bind book property to a producer with a long track record of really picking successful book material and exploiting it. So, it will be interesting to see what’s happening there. We are seeing some meaningful moves, as you said, in audio and with original audio that then may turn back into text. You know, Malcolm Gladwell is now a very successful podcaster, and his most recent book was really the book version of a podcast or an original—book version of a podcast that turned into an original audio book that was then printed out, if you will. So, we’re going to continue to see some movement back and forth there. But I think it usually comes back to book publishers focusing on what they do best.
That makes sense. Well, Michael, thank you very much for joining me today. I appreciate your thoughts. It’s really great to hear from somebody again, who has their finger on the pulse of so much of the industry and can see where those challenges are, where those opportunities are, and I appreciate you taking some time to join me today.
Thanks for the conversation, nice to be with you.
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