Insights from Penguin Random House CEO

Recently, the New York Times featured Madeline McIntosh, CEO of Penguin Random House. Wondering what such an influential member of the publishing industry had to say, I read the article twice.

Some  takeaways for me:

  • “The big [publishing] houses aren’t competing just against one another; they’re vying for the public’s attention against TikTok, Netflix, and Facebook.
  • “The company has grown even more dominant in recent months in part because Ms. McIntosh … foresaw a future in online book sales would vastly outstrip physical retail, but print books would continue to be a popular and lucrative format.”
  • The company invested in warehouses and distribution centres and ships seven days a week, which enables them to react to “upticks in demand for particular titles” – in other words, more of a just in time distribution model, which also cuts down on returns
  • “Penguin Random House has built what is probably the most sophisticated direct-to-consumer online marketing and data operation in the industry.” “This spring, the company upgraded its ability to sell directly from its own website.” Decisions are based on data, not hunches.
  • Alexandra Alter, author of the article, says that the industry has become “more profit focused, consolidated, undifferentiated, and averse to risk”. All of these factors have shifted dollars away from mid-list and debut authors and toward what publishers believe are ‘sure things’ like already proven authors of best sellers and proven topics like WWII. Expect more homogenization of what books are offered.
  • Publishing has “become increasingly reliant on blockbusters.”
  • Publishers have “less control over what readers see online”. Algorithms dominate the market. I wrote about the dominance of Amazon’s own imprints in that online retailer’s top sellers lists. You can check out those articles here and here.
  • Data and marketing control publishing houses, not editors. I encountered the same sentiment when working with senior editorial staff at Lake Union, one of Amazon’s publishing imprints.
  • Digital audiobooks are the fastest growing format in books.
  • “People are buying so many books, that the two biggest printers in the United States can’t produce enough copies.”
  • “The company’s best-selling novel of 2020 is Where the Crawdads Sing — which came out in 2018.” Other top 2020 sellers for Penguin Random House include Little Fires Everywhere (2017) and Becoming (2018). “Every dollar plowed into printing and marketing  older titles comes at the expense of discovering and promoting new writers.”

The turmoil and concentration within the publishing industry is a daunting challenge for authors hoping to break into the market. In some ways, it makes self-publishing seem like the best way to go.

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M.K. Tod writes historical fiction. Her latest novel, TIME AND REGRET was published by Lake Union. Mary’s other novels, LIES TOLD IN SILENCE and UNRAVELLED are available from Amazon, NookKoboGoogle Play and iTunes. She can be contacted on Facebook, Twitter and Goodreads or on her website www.mktod.com.

Writing Business – who “owns” the customer

In a previous life, I worked for IBM. More than ten years, in fact, at that icon of the technology world. One of the skills I learned was sales and one of the expressions I recall was “owning the customer”, an arrogant expression for sure, but that’s the way IBM sales management spoke about clients. If you were in sales, you had to find ways to “own the clients” in your territory so they would buy from IBM almost 100% of the time.

What’s Mary babbling on about now, you ask? Mike Shatzkin, a publishing industry guru, has recently written Four players in the book business with the power to rewrite some of the rules – and I thought you might be interested in a synopsis and a bit of commentary but first, a diagram. Diagrams help me think.

Four-Dominant-Players

According to Shatzkin, the US market is dominated by four players (those with the red stars): (1) Penguin Random House is almost the size of the four other Big Five publishers combined; (2) Barnes & Noble is the leading book store chain; (3) ReaderLink has recently purchased Anderson News thus becoming by far the dominant distributor to mass merchants like Target, Walmart and Sam’s Club; (4) Amazon is far and away the dominant online retailer. Or to use the IBM terminology: Amazon owns the online consumer; Barnes & Noble owns a significant portion of the book store customer market; ReaderLink owns the mass merchandiser relationships; Penguin Random House owns a huge whack of content readers desire.

Dominance = power. For the most part, writers have no power.

Other aspects to consider. Each step in the process of producing content and delivering it into the hands of readers costs money. Each organization has to make a profit.

But consider what’s happening in the publisher space.

 

Amazon-Publishing-ScenarioAmazon now has at least seven publishing imprints. (Full disclosure – my latest novel Time and Regret will soon be published by Lake Union, an Amazon publishing house.) Collectively, the organization knows what consumers buy and has a powerful database of reader information. The link from Amazon Publishing to Amazon Retail is represented by a dashed line to demonstrate that it is more seamless – and thus less costly – than connections between disparate organizations.

Will this new publishing dynamic deliver more compensation to writers? Will Amazon grow its physical store presence to be a serious threat to Barnes & Noble? How will Penguin Random House (PRH) use its leverage? Mike Shatzkin suggests that PRH could create a direct relationship with mass merchants and thus cut ReaderLink out of some of the action and he has previously suggested that they could “create their own ebook subscription service”. We shall see.

Other posts on the publishing industry: Follow the Money, Lifetime Value of an Author, Facilitate Connections Between Writers and Readers.

FOR MORE ON READING & WRITING HISTORICAL FICTION follow A WRITER OF HISTORY (using the widget on the left sidebar)

M.K. Tod writes historical fiction and blogs about all aspects of the genre at A Writer of History. Her latest novel, LIES TOLD IN SILENCE is set in WWI France and is available from Amazon, NookKoboGoogle Play and iTunes. Her debut novel, UNRAVELLED: Two wars. Two affairs. One marriage. is also available from these retailers.

Mary can be contacted on Facebook, Twitter and Goodreads.