What If the Book Business Collapses?

The book business has stopped caring much about books. Like all businesses with stock, the people running them have one central responsibility: to increase shareholder value.
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Question: What would happen if, tomorrow, every publisher, and every book store, went out of business? What would you do?

The Big Stores

About fifteen years ago I walked into my first of the new breed of big book stores, Chapters in Toronto. I thought to myself: how can the book business support such a huge store? How can book selling pay for all this real estate? How can there be so many books?

At first I was encouraged by these stores. The choice of titles seemed endless. They were comfortable, well-designed. There was attention to detail. The coffee-shops were a nice touch, especially in the old days when you could get a stack of books from the shelves, get a coffee, and flip through books to your heart's content. If these book stores could be profitable, I thought, maybe there was hope for humanity after all.

Soon these big book stores were everywhere: Barnes & Noble and Borders in the US, Chapters and Indigo in Canada (now merged, but with separate branding to create the fiction of competition), Waterstones in the UK, and others elsewhere. They invested massive amounts in real estate, getting huge commercial spaces in prime locations in major cities, and bigger spaces in the suburbs. They stocked their stores with a dizzying array of books.

Boon or Bust?

But things started to go a little sour early on. The first indication that the new book behemoths might be bad for the long-term health of the book ecosystem came quickly, when the little guys started going out of business. Economies of scale and and pricing clout meant that the big stores could charge less than their smaller competitors; and because of their size, their selection was always bigger. Following their in-store caffeine partners, Starbucks, they liked to choose their locations near existing successful independents. The little guys couldn't compete, and went out of business, or got bought up, and absorbed into the book selling borg.

So now, there are precious few independent books stores left even in big cities.

The indie stores weren't the only ones complaining. Because of the volume that goes through these stores, they could squeeze the publishers, on cost of books and return policies. They could charge for prime shelf-space. Small publishers found it harder to get the attention of the readers. But even the big publishers complained about the policies of these stores - and a little later, the other behemoth on the scene, Amazon.

Then there's that odd feeling of being in a book store staffed by people who don't know much about books. Any inquiry about a more obscure title more often than not ended up in front of a terminal. It seemed as if book stores, if their hiring policies were any indication, no longer cared much about books.

More: as time went on, it turned out that book sales weren't really the most profitable kind of business these stores could do. Solution: reduce the shelf-space for books, increase the shelf-space for candles and trinkets. In Canada Chapters/Indigo has reduced book shelf-space from 75% to 60% (with Canadian fiction losing, and publishers cutting their lists in consequence). If the trend continues, books will be the minority in bookstores, and we might consider renaming them smelly candle stores that carry books.

The book business has stopped caring much about books.

Step One: Make Profit

These big stores are public companies, and big businesses. Like all businesses listed on stock exchanges, the people running them (boards of directors, and executives), have one central responsibility: to increase shareholder value.

The problem is that "shareholder value" has been defined almost exclusively as: "increased profits." The owners of shares of Borders or any other large company don't give a shit about books. They care about increased profits and increased share prices. The same is true in all businesses listed on stock exchanges. Mutual fund managers and institutional investors don't buy stocks because of what a company does; they buy stock in companies whose stock prices will rise. And stock prices rise when profits go up.

But extracting profit is not necessarily related to long-term creation of value. In the book business (selling and publishing) what we've witnessed in the last couple of decades might be considered a stripping of true value, in order to deliver shareholder profit.

The "fault" does not lie with the big companies. They're driven by a particular motive - profit. It's built into the DNA of public companies, and the way stock exchanges work. There's no use blaming them, might as well blame beavers for chewing through trees. But we should all remember that these companies are not driven by "value," if you define value as healthy long-term prospects for readers and writers.

The state of the book publishing business is dire. Publishers are cutting back staff, editors are getting fired, or leaving. Amazon is putting the squeeze on everyone, and bookstores across the land are having a hard time, with major closures expected.

The Future?

So the rest of us, readers and writers and lovers of books, entrepreneurs and technologists, those of us really interested in the voracious appetite of the powerful and relatively affluent group, are going to have to come up with new and different ways to get books written, published and in the hands of readers.

Imagine: what would happen if every publisher in the world went out of business tomorrow? If every book store closed it's doors?

Here's what I think: I think we would see a flourishing of innovation and the kind of excitement the book business has not seen since the printing press was invented. These companies (sellers and publishers) aren't all going to close their doors, but a good number might.

Lamentable? Maybe. Or maybe this is a fabulous opportunity for something new.

I'm optimistic. New technologies are coming along that change the economics of books: ebooks, ipods, print-on-demand, the web, and more to come yet. The readers are there, maybe fewer of them, but no less passionate. The writers are there. And let's face it, if the doom and gloom in the business is right, whatever model these companies were using hasn't worked all that well.

So it's up to us -- all of us who care about books -- to figure out what the book business is going to look in the next decade or so.

Exciting times.

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