Confronted by more competition for consumers' time and money than ever before, publishers need to lower prices and spend more money on marketing, attendees at Publishers Weekly's first annual Publishers Summit were advised by a range of speakers. Although the combination of lowering prices while spending more on marketing may seem a recipe for shrinking already slim profit margins, it is the best way for the industry to fight to get its share of consumer spending in an entertainment marketplace that, in the words of Booz Allen Hamilton consultant John Frelinghuysen, "is glutted with products."
The event, held May 5 in New York City, was sponsored by investment banking firm Berkery, Noyes & Co., and company president Joe Berkery kicked off the day with a presentation he called the Seven Steps to Success. He offered practical advice like "confront reality" and "coping with change" by creating it. These are ideas, he said, that seem intuitive but he finds are often abandoned in the course of everyday business. He also stressed divesting troubled units to focus on a company's core strengths.
In the first panel discussion, Howard Reese, president and COO of Levy Home Entertainment, confirmed that the trend of lower than expected sales from major authors has been true at the mass merchandise retailers that are Levy's major accounts. "Big authors are not doing well," Reese said, noting that the return rate for hardcover bestsellers has risen to 37% in the October-through-March period, compared to 29% in the year-earlier period, despite Levy shipping 14% fewer units.
John Marmaduke, CEO of Hastings Entertainment, emphasized that books have competitors whose suppliers are outmarketing and outpromoting book publishers. Marmaduke chided publishers for "bad policies" and continuing to engage in a kind of "command marketing" style. Media is "too diverse and specialized" for morning talk-show marketing campaigns. He urged the book business to try some experimentation, observing that "a decent failure would be better than what is going on now." In the last two years, he stated, the movie industry has made more innovations than the book business has in 20 years. Discussing an idea echoed several times throughout the day, he talked of the music business's boldness in charging lower prices to break out new acts. Book prices in general, Marmaduke said, are too high, particularly compared to other forms of entertainment.
Frelinghuysen and fellow Booz Allen consultant Harry Hawkes looked at marketing and back-office pressures. Frelinghuysen explained the problems with, and made recommendations for, approaches to book marketing. He invoked a number of comparisons to the TV and DVD businesses, and wondered if the book business shouldn't think about either lowering prices or adding content; the DVD market, he noted, is flourishing because manufacturers did both (discs retail for $19, compared to $24 for many hardcovers, and have plenty of extras to boot). Hawkes mentioned the RFID, a Lojack-like transmitter that can be embedded in products and used to track movement from warehouse to consumer.
Reaching Kids
Amy Henry, from the consultancy firm The Geppetto Group, said children's publishers might be wise to consider the efforts of other companies that turned their brands into kid-friendly products, such as Heinz's green ketchup. She also pointed out that in today's consumer culture, it is children who are heavily influencing adult culture and purchases, not the other way around.
A panel of children's experts discussed the importance of the industry paying attention to the next generation of readers. "If you want to make an investment in the future, there they are," said Barbara Marcus, executive v-p and president of children's books at Scholastic.
Linda Jones, children's sales and marketing v-p at Borders, called the children's department a "traffic-driver" for the stores, saying that the children's category has consistently performed above the company trend. As far as marketing, she said the best kind, for kids, can't be bought: it's word-of-mouth. "It's invaluable, and the speed at which it travels is incredible."
The issue of branding, which came up in several forms throughout the day, was addressed by Rick Richter, president of Simon & Schuster's children's division. He believes that children's publishers have "gotten better as an industry at building brands. We've always done it, but we do it more consistently now. It's an area that we can teach adult publishers." Also, as Marcus pointed out, many brands are now aimed at older readers.
All three panelists felt that the teenage market is in major growth mode. Jones called Borders's teen business "very strong, though we haven't done enough to market to them."
Retail expert Paco Underhill noted that in today's entertainment environment, "it's not about HarperCollins vs. Simon & Schuster or Borders vs. Barnes & Noble, but the book business against the world" in competing for consumers' discretionary income. The retail guru was unsparing in his criticism of the book retailing model, which he said was adhering to old tenets. Underhill suggested the industry develop better research methods and went on to describe how the core demographic of readers is "older and wiser." He felt one of the major failings was that publishers continue to treat older readers the same as younger generations whose "eyes work differently." He pointed out that as people age, their eyesight gets worse (calling for more readable typefaces) and their vision becomes more "yellowed" (requiring a different use of color). He advocated changing covers, which he said are now designed "only to look good in the hand," to those that have different appearances "at 20 paces, 10 paces and one pace away."
Perhaps his most provocative question was: "Where are the hip bookstores?" He pointed out that at high-end retailers, everything on the shop floor is for sale, but not so at bookstores. These lost opportunities were the reason so many customers "went into a bookstore, but left without buying anything." He suggested making floor displays more attractive and more efficient by putting a message on the back.
The day ended with the star-heavy panel of Hyperion president Bob Miller; booksellers Roxane Coady, owner of RJ Julia, and Joseph-Beth's Neil Van Uum; agent Robert Gottlieb; and BEA's Greg Topalian—and a slate of suitably high-profile topics. Coady, for example, wondered if business books could be shorter and possibly cheaper. Gottlieb suggested that publishers keep authors in the media eye throughout the year. And Miller suggested that lower advances, with higher royalty rates and more long-term contracts, could be one way to help break out new authors.
More extensive coverage of the Summit will appear in the May 26 PW.
