Where have all the midsize book publishers gone?

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When Hachette Book Group acquired Workman Publishing, HBG CEO Michael Pietsch observed that Workman was one of the largest, if not the largest, of the remaining independent publishers in the United States. of its kind. Which has raised a question in publishing circles: why are there so few sizable independent publishers? There is a dearth of what can be called mid-sized publishers that fall between the Big Five and the many independent publishers with sales of $ 20 million or less.

Houghton Mifflin Harcourt’s business division, with 2020 revenue of $ 192 million, was what might have been considered a mini-major before it was acquired by HarperCollins. The Scholastic Business Group, with revenue of $ 355 million in the fiscal year ended May 31, is a major player in the children’s retail market, but as a member of a publisher of 1, $ 3 billion, it is clearly not independent. Other professional publishers who could be considered as medium-sized companies and which are also part of large companies are the publishing division of Disney and Abrams, which is owned by the French company La Martinière Groupe, itself acquired by Media. Participations.

Other commercial publishers classified as mid-sized independent, based on market share data from NPD BookScan, are (listed alphabetically and not by market share) Andrews McMeel, Chronicle, Kensington, Norton and Sourcebooks. Many of the smaller commercial publishers are distributed by three companies – Independent Publishers Group, Ingram Publisher Services, and National Book Network – which together represent approximately 900 publishers. The revenues of each of these distributors are the equivalent of a mid-sized publisher, with Ingram by far the largest of the three.

Jed Lyons, president and CEO of Rowman & Littlefield Publishing Group and its sister company NBN, cited two reasons it’s difficult to build a mid-sized publishing house: time and money. The key to a mid-sized publisher’s success is having a quality backlist, and that takes time to build, Lyons said. He noted that it took RLPG 45 years, and numerous acquisitions, to build his firm’s strong list of 80,000 titles containing both academic and business titles. Building a publisher also requires access to capital to support expansion, whether through organic growth or acquisitions. Small businesses don’t have access to the cash that big businesses do, and Lyons said as he grew up he had had “near-death” experiences, usually related to concerns raised by clients. banks.

Lyons offered a final reason for the current shortage of mid-size publishers. “They were chosen,” he said. All of the Big Five companies have grown to their size through a series of acquisitions that began years ago. Among the most significant transactions over the past 10 years are the purchase of Harlequin by HarperCollins in 2014 (which was not an independent but was a mini-major), the purchase by HBG of Perseus Book Group (which made its share of purchases prior to its acquisition) and Penguin Acquisition by Random House of the assets of Rodale Books.

David Lamb, partner at mergers and acquisitions broker Book Advisors LLC, said one reason for the lack of mid-size publishers is that many of the more successful small presses are comfortable in their own ways. publication and that while they seek annual growth, they do not. have the interest, time or resources to engage in major expansions. Given the shortage of mid-size publishers, Lamb said it was next to impossible for a new player to create a publisher that could compete with the Big Five, unless he bought one of the Big Five.

At the same time, Lamb said, the larger publishers are likely to continue to make acquisitions in an attempt to achieve greater economies of scale and operational efficiency, resulting in higher profits. He didn’t rule out the possibility that a company could build something like the equivalent of a Perseus (which had book sales of around $ 100 million when it was sold). He noted that some of the more well-known smaller independent and niche publishers have older owners who may be looking to cash in, and with the high prices HMH and Workman receive, it seems like now is a good time to sell. .

Ken Fund, executive director of Quarto Group, which had a turnover of $ 127 million last year, was not so sure there was a company that would be interested in stacking small publishers. , explaining that while books performed well during the then pandemic, investors don’t see publishing as an exciting investment opportunity. If there’s a company that is considering starting a mid-sized publisher, Fund has this little advice: “Develop a strategic vision and stick to it. For an independent publisher to survive, the business “needs to know where it fits” in the publishing ecosystem.

For Quarto, that means “sticking to your knitting” in areas such as illustrated non-fiction, arts and crafts, and home improvement, Fund said. “These might not be the sexiest categories, but there is an audience for these books. Over time, they will sell in number of bestsellers. It may take a few years, but the sales will get there. Similar to Lyon, Fund said Quarto has focused on building its order list, which accounts for around 65% of its revenue each year.

While this can be a good time to sell, one publisher that is not for sale is Kensington Publishing. After a few tough years, it finished one of its best in the fiscal year ended Sept. 30, said President and CEO Steve Zacharius, with sales up about 30% from the previous year. ‘fiscal year 2020. He attributed Kensington’s ability to function as a mid-sized publisher to its relationships with authors, noting that, for example, Fern Michaels and Kat Martin left the publisher for larger houses then came back. “Publishing is a relationship-based business,” he added, “and it makes a difference when an author can meet the top executives of a company”.

Zacharius said he was sorry to see Workman being acquired, but admitted “it’s hard to be in the middle”. He said Kensington’s budget only allows him to invest in certain areas, which is one of the reasons the house still licenses its audiobooks rather than publishing them itself. “We can’t put money into everything,” Zacharius noted. Priorities at the moment include investing in IT upgrades and adding to advertising and marketing, with a focus on digital marketing in particular.

Zacharius is planning a modest expansion in the new fiscal year. Kensington was one of the first generalist publishers to enter the African American market in a meaningful way with the launch of Dafina in 2003, and Zacharius said he was looking to do more in this area. He would also like to expand Cozy Mysteries, another area of ​​strength for Kensington, while adding more thrillers and non-fiction. In the latter category, Zacharius has high hopes for Harlem Dance Theater, a $ 50 book that he noted received good initial orders ahead of its October 26 release.

Zacharius, Fund, and Lyons don’t really see the Big Five as direct competitors. “We’re in different leagues,” Lyons said. He noted that the agents RLPG works with on a regular basis know how much it can spend on a book and don’t come up with projects outside its budget. “They might not always be happy with the scale of the advance, but they are grateful that we buy a lot of books,” Lyons added.

“We publish in areas where we don’t go one-on-one with the Big Five,” Fund said, adding that books from Quarto and other independent publishers are a big part of what bookstores have to offer. .

One area where mid-sized independent companies can compete with the bigger players is finding companies to buy, which Lyons, Zacharius and Fund have said they do. “Nobody wants to sit still,” Fund said. The problem small buyers make Workman, a multiple of 1.8 of Workman’s revenue of $ 134 million).

International interest

While US businesses and investors may be cold on the publishing industry, international publishers remain interested in securing a share of the world’s largest book market. Quarto, although based in the UK, has generated $ 63 million, or about half of its sales in 2020, in the United States and is looking to continue to grow its presence here. UK-based Bloomsbury Publishing has made no secret of its interest in expanding in the US, a market that generated around $ 75 million for the publisher last year.

A potentially significant new player is Astra Publishing House, which is backed by Thinkingdom Media Group, the Beijing-based company that previously acquired Boyds Mills Press and took a controlling stake in Minedition. Last month, Astra announced the creation of a children’s book division, Astra Books for Young Readers, under which the company has organized its list of children’s book lines.

When asked what advice Lyon would give to someone who wants to start a mid-size publisher in America today, he replied: “You need a lot of determination. ”

A version of this article appeared in the 04/10/2021 issue of Editors Weekly under the title: The Vanishing Middle


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