Profitability and Economic Collapses

I read a very interesting post over on Romancing the Blog today. Sylvia Day -- a writer I've met a few times and who strikes me as very bright -- was talking about the state of the economy and of book selling in particular. She wondered, in particular, why publishing companies are looking to trim contract obligations (cutting back on advances and options, for example) rather than cutting back on the number of titles offered.

There are two factors to consider. First is the overall profitability of a unique title, which is what Sylvia is considering, if I understand her post correctly. Second is the overall profitability of a publishing company (or line, or imprint, or what have you).

We know that releasing a reduced number of titles might increase the overall sales per title. Notice, I say might, because there are a lot of factors at play here. For example, if I release ten titles per month, and decide to kill one, that doesn't mean that each of the remaining nine will sell 10% more. Some of those sales that might have gone to the killed title will be permanently lost. Some will go to my competitors. And some will go to other titles which my company publishes.

So there might be a small bump in the number of sales per title if we reduce the number of titles released. Will this be enough to compensate for the lost revenues from the killed project? That's really the question, and it's one that is hard to answer.

Factor in a few variables. You lose economies of scale when you print fewer books overall, so the profitability of each remaining title might be undercut by scaling back production. There's a world of difference between paying a buck a book and a buck-fifty when you're analyzing P&Ls.

And which title do you cut? Just pull out the old crystal ball and try to predict which of the ten books slated for a possible cut might be the one that underperforms. Big books carry big risks, and in the current climate, maybe it's wiser to be risk-averse and preserve a stable producer on the midlist. Then again, when big books pay, they pay huge. So maybe it's wiser to gamble on the big book and cut a midlist title. Do you cut the title from the big name author whose sales are sliding, but still generates good numbers, in the hopes that her slide is over? Or the title from the newer author with a growing readership who might produce fewer overall sales, but whose up-front costs are lower? Or the brand new author whose book you simply love, but who is the biggest gamble of all?

The cruel truth is that we're in a climate that defies easy answers. Publishing is an industry with bizarre vagaries and easy-to-make predictions of doom. Anyone who's been around for more than, say, a month has heard about the death of literacy, the death of print, the death of the midlist, death, death, death. "Death" is like some odd insider code word for "change." But in the last month, something has changed. When industry people whisper the word death, they mean actual death. The end of companies. Not just some English major's metaphor for changing conditions.

That said, my house is in order, and I'm feeling pretty darned lucky these days. Sure, sales are down, but so far we're well able to float. So although there is a lot of bad news in general -- and that bad news tends to be really, really bad -- it's not universally terrible.

What a time for me to have to take some leave, huh? I swear, you take a few weeks off, and the whole world changes. The family business is now settled in its new location, and I'm back to work, and even with publishing in a state of hysterical near-collapse, I'd still rather work here than in any other industry.

eta: Theresa