An industry in bloom

ANITA ELASH September 8 1997

An industry in bloom

ANITA ELASH September 8 1997

An industry in bloom



As a Canadian book publisher, Jack Stoddart is not given to making upbeat predictions about the future of his industry. During his 30 years in the business, he has seen too many precarious or downright hard times. But even Toronto-based Stoddart is prepared to be bold these days. And he predicts his industry is on the cusp of unparalleled growth. Twenty per cent over the next two years, to be exact. Don Sedgwick, publisher of Doubleday Canada and Seal Books, is willing to go even further. With the blessing of Doubleday’s German parent, Bertelsmann AG, the Toronto executive has launched a new program designed to double his Canadian sales in the next five years. Even Karl Seigler, whose Vancouver company, Talon Books, was threatened with extinction after it lost 55 per cent of its government grants two years ago, allows a cheerful note. Talon has recovered so quickly, Seigler is planning a modest expansion later this year.

The parsimony that characterized Canadian publishing houses even a year ago has been replaced this fall by blooming optimism and abundant spending. Canadian authors are enjoying unprecedented esteem at home and abroad, and their publishers are banking on that momentum to boost profits. Author advances are up, promotional budgets have grown and new, more aggressive marketing techniques have found their way into the boardrooms of publishing houses. Finally, it seems, it is a good time to be a Canadian book publisher. “Books, we feel in the industry, have become a much hotter property,” says Stoddart. “People believe there will be a future.”

The publishing industry has persevered through times when no one believed there was much of a future. Only a handful of companies consistently make a profit or even expect to. In fact, most independent Canadian houses pride themselves on their willingness to ignore economics in favor of worthy projects that might otherwise never see the light of

day. Most are buffered by ever-diminishing government grants, and a few make up for their losses by distributing imported titles. But Stoddart, who claims his own firm, Stoddart Publishing, has always earned less than five per cent before taxes, declares he has “never” seen an independent Canadian trade publisher that set out to make money. “If they did, they would only go with the safe titles.”

As a result, Canadian trade publishers—both the independents and the multinationals—churn out an extraordinary number of books: about 6,000 new titles a year, ranging from obscure poetry to sensational political exposés and critically acclaimed literary fiction. Just 30 per cent of those books turn a profit, says Stoddart. Even then, a couple of unexpected flops can turn an otherwise healthy fiscal year into a disaster.

On the other hand, an unforeseen success can send profits soaring and finance a publishing program for years to come. Boom, Bust & Echo has done just that for its publisher Macfarlane Walter & Ross. A guide to the baby boomer economy by University ofToronto economist David K Foot and journalist Daniel Stoffman, it was expected to sell about 25,000 copies when it was published in May, 1996. In mid-August, sales were at 212,000 copies and climbing, a record for a hard-cover edition in Canada. The windfall has made up for previous losses and allowed publisher M W & R to begin acquiring new manuscripts for the next three years. ‘When you have a year like this, it gives you a chance to invest in titles that seem promising or those that you could not afford to do otherwise,” says publisher Jan Walter. “This gives us confidence that for the well-thought-out project there is an audience there.”

Most Canadian books realize only a ^ fraction of the sales enjoyed by Boom, I Bust & Echo, a reality publishers blame on o economies of scale. A typical fiction title I sells 2,500 copies. Nonfiction averages £ 3,500. By contrast, U.S. publishers can ex£ pect to sell at least 10,000 copies in either £

category. And because per-unit printing costs decrease as print runs increase, most Canadian titles begin to turn a profit—and earn industry best-seller status—only when sales reach 5,000. Even then, margins are slim. Depending on the volume purchased, 40 to 50 per cent of the cover price goes to the retailer. Another 10 to 20 per cent goes to the author, depending on sales and the author’s stature. Manufacturing and editorial costs eat up 20 per cent, while overhead accounts for a farther 15 per cent. In the end, a publisher can expect to earn $2.55 on a $30 bestseller that goes out the door.

That is assuming 80 per cent of the copies produced are sold. Usually they are. But if they are not, bookstores can return them for a fall refund. Last year, largely as a result of store closures when many SmithBooks and Coles merged to become Chapters superstores, more than 30 per cent of books were returned. Combined with a 55-per-cent cut in federal publishing grants in 1995 and accompanying cuts in some provinces, the changing retail market pushed many publishers perilously close to the edge. Small houses, which rely substantially on public funding to sustain their programs, have suffered most. Although only a handful have actually collapsed—the demise of Coach House Press last

Canadian publishers prepare to put an end to hard times

year is the best-known example—most have been forced into a new conservatism, especially when acquiring new titles. “The cuts in grants have hurt us very badly,” says Seigler of Talon Books. “Opportunities have been lost all the way from acquisition to sales.”

But while cuts to grants may translate into fewer volumes, they have also led publishers to take some creative measures. Seigler was forced to lay off two of his four staff members and pare his list by one-third, but he also set up a Web page for international orders and targeted sales efforts at readers most likely to welcome Talon’s brand of poetry, social criticism and drama. Talon earned a $40,000 profit last year. Toronto’s ECW Press, which traditionally focused on scholarly works on Canadian literature, moved towards a more commercial list when library budgets began to dry up in the early-1990s. It now produces about one-third fewer titles, half of which are moneymakers such as hockey books and celebrity biographies. According to publisher Jack David, sales have increased 40 per cent in the past year.

For the industry as a whole, however, a sales increase remains elusive. Although Canadian titles are hot, domestic trade has been stuck between $1.2 and $1.4 billion a year since 1990. Analysts believe the biggest hurdle has been attracting new readers, especially younger ones. “How do you compete with motion picture companies, which are huge?” says David Kent, publisher of Random House of Canada. “Then you have the whole cable TV industry, and the In-

ternet, which makes the world available to your home. That did not exist 10 years ago.”

In response, larger publishers are also shifting their focus to the business side. “Publishers are becoming much more intentional,” says Doubleday’s Sedgwick. “We are hoping we can drag more people into bookstores.” For Doubleday, greater intentionality has meant tearing apart its Canadian book program. Cookbooks and gardening guides are out. Fiction, politics, sports, business and Canadiana are in. Rather than waiting for authors to come to them, the editors at Doubleday are actively seeking out writers who can produce mass market titles.

Once the titles are acquired, publishers are leaving nothing to chance. “The book business has tended to be, here is our front list [newly re leased books] and wait for people to come in and shop the front list,” says Ken Thomson, vice president of sales and marketing for McClelland & Stewart. These days, book launches are care fully planned, often to coincide with current events, and promotional campaigns can include everything from traditional newspaper advertising to gimmicks such as sending an author on tour via motorcycle.

And for the first time, publishing houses are trying to position themselves in readers’ hearts

by developing brand loyalty. To that end, M & S has launched two series aimed at young readers—True North Comics, produced with the McDonald’s chain, and the Screech Owl series of hockey-mystery novels for nine-to-13-yearolds. “If we can hook young readers and get them reading McClelland & Stewart books, that bodes well for our future,” says Thomson. For older readers, M & S has tested rebate and a value-added promotions—the first offered a $12 rebate on M & S books while the second offered a free Canadian music CD on purchases over $40.

Promotional gimmicks aside, most publishers pin their optimism on a rapidly changing retail market. “For the last decade, it has not been very interesting out there,” says Stoddart. Although the Chapters and Indigo superstores are hated and feared by many smaller booksellers, they have added interest. With coffee shops, cushy chairs and tens of thousands of titles, new bookstores are a destination again. “One superstore has more titles in it than anywhere but Toronto and Vancouver had in a whole city,” Stoddart says. “Once people understand that they can go and find 5,000 titles on a subject in one store, they will take the time to do that.”

And once customers are in bookstores, they tend to buy books. The question is whether superstores will continue to be magnets for bookbuyers, or whether—as has been the case in the United States—they will lose their novelty. But for now, the unusually optimistic players in the Canadian publishing industry are betting that superstores will continue to yield super-sales. □