How Book Publishing Is Financed

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A book publishing enterprise may take many forms. It can be a large, publicly held corporation such as Harcourt General. It can be a small, privately held company, or it can be a limited partnership with backing from a number of investors.

For publishers, there is a slow payback. Authors' advances, manufacturing costs, and staff overhead must be paid before money comes back to the publisher from sales. Also, except for a runaway bestseller, a book publisher's profit comes from subsidiary sales; for example, paperback rights, book club rights, foreign rights, and so on. Thus, the publisher must wait for these revenues. In the interim, the company may require bank financing.

When a publisher enjoys a consistent period of profitable operations, it may be in a position to finance the business without loans, saving the costs of debt service. It may also choose to use excess capital to acquire other publishing and media enterprises.



Educational Purchasers: Schools and Colleges

The school market represents elementary and high school textbooks, college textbooks, supplementary textbooks, audiovisual, and other materials. In total, it makes up better than $4.5 billion in annual sales, a substantial portion of all book sales.

This vast market presents unusual distribution difficulties. In the educational field (elementary, junior, and senior high schools), textbooks are ordered at the state, city, and district levels, and, in some cases, by the individual schools.

At the college level, individual departments select their own primary and secondary textbooks. This selection is made after a review of all the available books in a particular discipline. The prescribed texts are then sold to students at the college bookstore, which is often owned by the college.

In colleges, supplemental texts are also adopted for use. Publishers employ skilled salespeople, once called "college travelers," who meet with professors and department heads in an effort to influence their decisions.

The adoption of a book by a teacher or professor doesn't mean that it cannot be replaced at a later date. Often a book written by a university professor will be adopted at his or her own school. Publishers, however, will not produce a textbook unless its potential sales extend beyond the limits of one or two institutions.

The Library Market

The library market represents a total sales figure of more than $1 billion per year. The group comprises about seventy-five thousand libraries in elementary, junior, and senior high schools, and about two thousand more at four-year colleges. In addition, there are approximately ten thousand public libraries.

Libraries may buy from publishers directly or, more often, through wholesalers or catalog operations, which simplifies the purchasing procedure. A library's discount from the publisher is less than that of a bookstore. Libraries generally buy hardbound editions, which are more lucrative to a publisher than paperback editions.

Publishers promote book sales to libraries by mailing catalogs and direct mail pieces. The sales staff or representative of a publisher will also visit large libraries directly and attempt to make sales of a large part of their lists.

Wholesalers and Jobbers

The operations of wholesalers and jobbers are vital to a publisher's distribution procedure. The terms are used interchangeably to describe organizations that stock books from publishers and ship them to bookstores and libraries. Some are huge businesses servicing the entire country. They function, in a sense, as clearinghouses by ordering fairly large quantities of each book on a publisher's spring and fall list. A small bookstore can then place orders with the jobber for one or two each of many different books from various publishers and have them all shipped the same day. For the bookstore, this method is much simpler than placing orders with each individual publisher. The bookstore pays the same price to the wholesaler that it would to the publisher, while the middleman, or jobber, receives a special discount from the publisher for ordering in large quantities.

Two of the largest wholesalers in this field are the Ingram Book Company and the Baker & Taylor Company. Baker & Taylor issues annual guides to elementary and secondary school libraries. In general, wholesalers and jobbers provide all types of books, from trade and technical volumes to school texts.

Wholesalers such as Ingram and Baker & Taylor service publishers' hardcover and trade paperback lines. Trade paperbacks are books that are larger and higher priced than mass-market paperbacks and are distributed primarily through bookstores.

Mass-market paperbacks are distributed through a network of about 550 independent wholesalers. These wholesalers, many of whom have a monopoly in a particular city, also distribute magazines and, in some cases, newspapers. Wholesalers also distribute mass-market paperbacks to air and rail terminals, newsstands, chain and convenience stores, supermarkets, and bookstores.
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