Random Redux, Freese Helms PGW: Client Distribution Biz Jostles and Grows
Don Fehr, nearly a year into his tenure as Director of Smithsonian Books, needed a distribution fix. The august publishing concern (formerly Smithsonian Institution Press) was gunning for trade sales growth — aiming to reverse its mix of 80% academic and 20% trade-bound titles — and outstripping the reach of fulfillment partner Books International and a road-weary sales force of independent reps. “We weren’t able to grow at the pace we were being asked to grow by the Smithsonian,” Fehr explains. The company, of course, was a plum for those publishers vying for the profitable business of distributing other publishers’ books. “Holtzbrinck, Penguin, Harper, they were all interested,” Fehr says, what with the blockbuster brand (studies say close to 90% of Americans know the Smithsonian name). The lucky winner? Norton. “Aside from the fact that they gave me a great deal, they had representation in the academic marketplace as well as the trade,” Fehr says. Moreover, the Smithsonian’s nascent line of books for young adults filled a niche Norton was eagerly eyeing. Sweetening the deal, Fehr notes, Norton affiliates are handled by a special marketing staff, and topping it all off was the palpably excited Norton sales team when they found the backlist bonanza in the bags of Fehr’s former reps: “When they looked at our backlist, they were like kids in a candy shop.” Advance print runs will now hit as high as 20,000 copies, where they previously had peaked at 6,000. Bottom line: “We’re looking at possibly a 25% increase in sales this year,” says Fehr. “It’s a good shot in the arm.”
‘The Age of Distributors’
With Random House back in the client distribution biz — which it had all but abandoned in 1999 — and the announcement last week that former Motorbooks CEO Rich Freese would take the helm of Publishers Group West, what you might call the “competitive metabolism” of the book distribution business seems to be getting booster shots all around. As PT’s survey of selected distributors shows (see chart), despite languishing overall book sales and ever-jostling competition, many distributors are grabbing double-digit sales growth — and they’re bullishly predicting a profit-filled future. “The market for distribution in the book business is so strong, and the arguments for working with distributors are so compelling that there’s enough room for everybody,” Freese tells PT, as he shoves off for the Bay Area. “CDS is starting to grow. Consortium is starting to grow. There are so many publishers that need these services and the economies of scale these services represent. This is the age of distributors. I think it’s only going to get stronger.”
Word on the street can be almost surreally cheery, with so much growth one feels one’s stepped through some book-world looking glass. “As of the end of last month we’re up well over 25%,” reports Curt Matthews, CEO of Independent Publishers Group, “and unless the world goes to pieces we’re going to be up a bunch for the year.” Matthews’ total number of clients is stable at 300 — core larger publishers number about 50, and the largest client kicks in between $4 and $5 million in sales — but those clients are building business by the minute. “A lot of them are just simply growing,” he says. “They’re just plain publishing more books and getting better at what they do.” A dozen in-house sales and marketing staffers handle major accounts, augmented by 23 commission reps, all of whom are profoundly grateful for the growth of smaller houses. “It absolutely continues,” Matthews says about the burgeoning small presses (see PT, 4/03). “The little guys are taking market share from the big guys. It’s a fact.”
Like IPG, National Book Network is looking to boost revenues among its existing clients, says Miriam Bass, VP Marketing and New Business Development, while being “much more careful” about reeling in new customers. The majority of NBN’s 85 active clients fall into the $500,000 to $1.5 million range. Despite the emphasis on internal growth, the distributor is delving into the children’s market, taking on publishers such as Child & Family Press. Meanwhile, NBN division Biblio continues to barnstorm though the small press world, now at 575 clients and counting. “I wouldn’t be surprised if we ended up signing 150 publishers as a result of BEA,” says Director of Sales and Marketing Jen Linck, who adds that Davida Breier has been brought on as Marketing Coordinator. Unfortunately, Linck reports, some clients have been shocked to learn that they’ve initially racked up negative sales with Biblio, because booksellers sitting on unsold copies have been only too happy to return them for an NBN credit. Nonetheless, sales are on track to more than double this year, with the 1,000th-client mark on the horizon.
Even in the face of downshifting chain bookseller orders, business is swell, says Aaron Silverman, President of SCB Distributors, which services an eclectic mix of 60 clients from its Gardena, CA distribution center. “We grew 25% last year,” he says. “More books are being sold, even if the chains say their business is anemic.” Borders’ category management initiative, he notes, effectively boosted SCB’s sales at the chain; fewer titles are being purchased, but quantities are up on those that sell, like the Ultimate Unofficial Guide to the Mysteries of Harry Potter (SCB has shipped 53,000 copies). Though Silverman receives up to 1,000 submissions every year, he lets only half a dozen in the door. “We’ve always been very cautious about taking on new publishers,” he explains. “This is not a quick dollar.”
Strong internal growth may soon be followed by a notched-up public profile at Midpoint Trade Books. “Our biggest clients have been producing wonderful growth in sales year in and year out,” says President Eric Kampmann, whose revamped booth at BookExpo America drew raves from clients, particularly after a lackluster show last year. For Midpoint, where gross sales stand at $12-$13 million, the successful BEA can be read as a bid to join the big leagues. “We have been really quiet about who we are and what we do,” Kampmann says, “and that’s going to change very shortly. We think we’re ready to be considered seriously along with PGW, IPG, and NBN.” Midpoint aims to seamlessly integrate a number of core services (what Kampmann calls “in-sourcing the out-source,” or simulating distribution services as if they were done by the publishers themselves) and its stripped-down sales philosophy — selling chiefly to national accounts — and “extremely competitive” pricing are pitched as a sensible solution at a time when clients rule the bargaining table. “The publishers are more in the driver’s seat in terms of demanding and getting better pricing and better service,” he says.
Price sensitivity is also a key concern for CDS, which is now up to 35 clients, according to COO Stephen Black. “Given the difficult economic times, people are really looking at their operating costs. We are extremely competitive in our pricing, and that’s given us an opportunity to talk with people.” Black says sluggish sales have been offset by the explosive “manga” and “anime” segments. “We’re probably the largest provider of graphic novels, and that business is going through the roof,” he says. “Marvel and TokyoPop are really leading the way.” TokyoPop has been growing at least 200% each year for three years running, according to Steve Kleckner, TokyoPop’s VP Sales and Licensing, who adds that the growth may be slowing but it ain’t over yet: “We think we’ll double again this year.”
Throwing another option into the ring is Baker & Taylor, which opens next month with the first client for its new Distribution Solutions Group, according to VP John Phillips, who says he’s spent the past 18 months developing a suite of “value-added” services for clients — everything from printing a book to freight management. The latter service is a typical B&T forte, Phillips says. “We do over $30 million a year with UPS. Since we do the volume, we’re able to create a revenue channel for publishers within the shipping and handling area.” A key selling point is the program’s “à la carte menu” of services; sales representation is available via independent rep groups, but the option to use one’s own sales force is pitched as a competitive plus. “If you go with NBN or PGW, you’re really locked into their sales force,” Phillips says. “With DSG, your inside sales team can handle 90% of your business, and rep groups can cover the rest.” The division targets clients with at least $750,000 in sales, aiming to sign on six in the first year: “We’re looking over the long term to make this a significant chunk of Baker & Taylor’s income.” (They’ll be battling Random House Distribution Services, where there’s capacity for the taking — 1.8 million square feet of it — and the gamut of supply-chain services. Still, Random’s keeping the door open to offer sales as well. “Random House sales support for a prospective client’s book is an option which we’ll offer to the right fit among prospective clients,” a spokesman says.)
For most publishers, the distribution truism is this: if the right client complements what you’ve got in your bag, it’s a no-brainer. “We’re always looking for new client publishers,” says Lynne McAdoo, Director of Client Publishers for Andrews McMeel Publishing, specifically houses topping the $1 million mark in sales who jive well with the Andrews McMeel forte: gift and other special markets (the last catalog mailing went out to 14,600 accounts). Book clients include Carlton and Welcome, with a number of others on board for calendar distribution. Fulfillment comes via Simon & Schuster’s Bristol, PA distribution center. “For our distribution clients, it’s the best of both worlds,” McAdoo says. “They enjoy the one-on-one personal relationship with Andrews McMeel, but then they also enjoy the state-of-the-art distribution facility that Simon & Schuster offers. They’re getting a lot of bang for their buck.”
That’s certainly how S&S would put it, as they boost their own distribution biz. “We’re very committed to this business,” says spokesman Adam Rothberg. “It’s a major source of income for us. We’re absolutely on the lookout for new clients.” Simon & Schuster handles full-service distribution for 10 clients including National Geographic and Reader’s Digest, while offering back-office services to the likes of AMP and Millbrook. Next year S&S adds Hodder Headline’s US operation, according to Larry Norton, President of S&S’s Sales and Distribution Division. “We do want to leverage our infrastructure and we do have some capacity,” Norton says, cautioning that clients must meet a minimum sales threshold. Distribution at S&S logged double-digit growth last year, as it did at Holtzbrinck, according to Patti Hughes, VP Sales and Marketing for Distributed Publishers. Her eight clients include Rizzoli and Rodale, and Hughes oversees a staff of 10 supporting distribution clients. “We focus actively on the distribution lines,” Hughes says. “We will definitely look to grow the business, selectively and intelligently.”
Even in the museum world, players such as Yale University Press are moving to beef up relationships with key distribution clients and bring on new ones when they find the right fit. “We’ve expanded the number of museums we’re working with on an exclusive basis,” says Publishing Director Tina C. Weiner, noting that Yale’s 14 such partners include the Metropolitan Museum of Art and London’s National Gallery. While Yale has previously worked with many museums on a single-book basis, its growing roster of exclusive deals is a full-service program. “We’re doing the whole package,” she says. “Sales, marketing, fulfillment, publicity, and promotion.” Illustrated book distributor D.A.P., meanwhile, just added the Guggenheim to its list of 100 active clients (200 total), and recently had a year of 70% growth (chalk it up to MoMA’s Matisse Picasso, among other titles), says VP Trade Sales Director Avery Lozada, who adds that average growth over the past five years has been about 15%.
For an extremely selective take on distribution, there’s Sourcebooks, which recently signed as its sole client startup Reed Press. Publisher and CEO Dominique Raccah explains point-blank: “We are not in the distribution business, nor do we want to be. The only time we look at distribution is when it has real strategic impetus.” Hence Reed Press, whose access to 120 Reed Business magazines fit well with Sourcebooks’ reference business (i.e. the U.S. News Ultimate College Directory), expanding Sourcebooks’ library and specialty retail business, while taking Reed into the trade channel. Reed Press Publishing Director Nicholas Weir-Williams notes that Sourcebooks’ special sales force has already been a boon: “Our first book, Oscar Fashion, is being looked at by Costco and Target and a whole range of catalogs that most book sales forces don’t reach.”