Houghton Mifflin Files for Bankruptcy and the Publishing Industry Limps On
The San Francisco Chronicle yesterday reported that “Houghton Mifflin Harcourt Publishing Co., the publisher of authors from Mark Twain to J.R.R. Tolkien, sought bankruptcy protection to eliminate more than $3 billion in debt. The company, based in Boston, listed $2.68 billion in assets and $3.53 billion in debt in Chapter 11 documents filed today in U.S. Bankruptcy Court in Manhattan. More than 20 affiliates also entered bankruptcy, including Broderbund LLC and Classroom Connect Inc.”
The article goes on to say that two main factors are to blame:
1. Textbook Purchasing Decline – The “global financial crisis” over the last few years has affected sales of their books. Houghton Mifflin also has a huge chunk of their money tied up in textbook production (and have produced some fine ones over the years). Schools used to purchase new textbooks every year by subject in a four year cycle. Now schools have shifted to a seven year cycle with about two years of that cycle broken with absolutely no sales. The U.S. government has also cut back on textbook subsidies for schools.
2. E-book Sales – “Sales of adult paperbacks and hardcover books fell 18 percent from 2010 to 2011, according to the Association of American Publishers. Borders Group Inc., the second-largest U.S. bookstore chain, filed for bankruptcy in February 2011.” This seems to be a trend that will not lose steam any time soon. I attended a textbook caravan this school year and most of the companies represented (and there were at least half as many as last time) had some type of digital version of their textbooks. E-books are indeed the way of the future and other big publishing houses better get a clue about how to incorporate this medium into their game plan or they will soon end up like Houghton Mifflin.
I have three ideas for the big publishing houses (not that my advice matters):
1. Stop Paying Out Big Checks to Celebrities – In January, rapper Lil’ Wayne received an undisclosed amount from Grand Central Publishing to publish his memoir about being in prison on a weapons charge. The guy can’t even spell the word “thanks” without using an “x”. I know that Lil’ Wayne has a following and that possibly people will read his book, but how many of his fans probably read anyway? Even though a celebrity might have a huge following, they do not guarantee a best seller. Only one month before this story broke, The Independent reported that the celebrity memoir market was taking a “nose dive”. Didn’t Snookie get a book deal soon after? It just makes good business sense to not let money ride on a celebrity who may or may not be “so five minutes ago.”
2. Don’t Pay the Big Advance to Untried Material – The publishing game seems to be full of risks, but why should they risk so much money on advances to authors who may or may not be the next best thing. It is a huge gamble to take a risk on an untried author, but how is new talent discovered, anyway? Literary agents and publishers have slush piles that they send unpaid interns to go through in order to find manuscripts that would be worth keeping. The rest are tossed aside. Sometimes they find something that they think might sell based on hundreds of factors that are only seen by the editors. Sometimes the editors are right, but how long can the dice bounce across the green felt of the reader landscape before they come up snake eyes? This is a delicate balance. The next best selling author is sitting in a slush pile somewhere, waiting for some intern to stumble across their hard work. It could be you.
3. Egon Spengler Might Be Right – One of my favorite movies is Ghostbusters. There is a scene (and this movie was made in 1984, mind you) where Egon Spengler (Harold Ramis) is having a conversation with Janine Melnitz (Annie Potts) which goes:
Janine: I bet you like to read a lot, too. Egon: Print is dead.
If publishing companies do not get off of their high horse about e-publishing, they are soon going to find themselves in a difficult problem, and the problem may already be here. I think about all the publishing companies out there who are warehousing books, printing up large print runs of books that may never sell, and think to myself “Why?” If I decided to start a restaurant that sold only gopher pies, and I thought that there might be a 10% chance they would sell, so I made 5,000 gopher pies, everyone in their right mind would think I was absolutely crazy. Why can’t publishers get into the print-on-demand game and print and send out books as they are ordered. There has to be a way. Statistics show that most of the hardback best-sellers are from well known established authors, with The Girl Who Kicked the Hornet’s Nest settling in there with the rest of them. The fact is that most people buy used books from Amazon or check them out from the library, and e-book sales are skyrocketing. Book stores are closing. Remember Borders? Read this article entitled “Confessions of a Publisher” and decide for yourself. Amazon (it seems) is out to bring down or change the publishing industry.
Something has to give way sooner or later. Read this article by Lawrence Osborne about “why publishers fail” for further thoughts on the industry from an insider. Hopefully all of this industry shake-up will soon be over and we can all breathe easier, but more than likely it is just the tip of the iceberg, and that ship is about to sink regardless of who thinks they are king of the world.
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