Inside an industry: turning over a new leaf

Finbarr Bermingham on how the book publishing industry is dealing with the impact of decades of constant change

On 13 March 1997, thousands of terrified citizens in Arizona, New Mexico and the Mexican state of Sonora reported a series of V-shaped objects and clusters of lights above the desert skies. They believed an alien invasion was imminent and that the end was, quite possibly, nigh. The story of the "Phoenix Lights", as the sightings became widely known, is the only one thrown up by several search engines' news archives for that day 15 years ago. Speak to anyone in the British book industry, though, and they'll tell you about an altogether more cataclysmic event from the very same day, one of the most significant dates in publishing since Johannes Gutenberg rolled his first bible off the press in 1455.

The Net Book Agreement (NBA) was an informal arrangement between the UK's publishers and retailers that came into effect in 1900 in an attempt to stabilise an industry beset by price wars. It allowed publishers to set a fixed price for every book they published. In return for a discount on stock, retailers agreed to sell each book at its fixed price. If they sold it for less, they would be removed from the publishers' supply list. Over the course of the last century (which John Thompson, in his excellent book Merchants of Culture, describes as a "relatively stable commercial environment for publishers and booksellers"), the NBA was challenged on numerous occasions, but held tight, with the Restrictive Practices Court deeming it to be beneficial for both sides.

Chain letters

But the inevitable march of progress can't be kept at bay forever. Chains had been on the rise in the industry, both in book publishing and retailing, since the 1960s and their influence had grown significantly in both sectors by the 1990s. In 1997, after a series of multinational publishers and booksellers had already flouted it, the NBA was withdrawn as the Restrictive Practices Court ruled that it wasn't in the public interest and, therefore, illegal. With bookshops free to charge what they liked for books, it resulted in what Vivian Archer of Newham Books, East London describes as a "free-for-all". The hosts of "three-for-two" and "buy one get one free" offers you see in stores today would have been impossible pre-1997. While consumers may have benefitted from an influx of cheap books, the industry has been left treading water in an ocean of uncertainty.

On the publishing side, the fall of the NBA led to what John Thompson describes to me as a "polarisation" of the marketplace. With so much power transferred to retailers (in particular the large chains like Waterstones and Borders, and the supermarkets), only the big names in publishing were able to negotiate prices. It's led to a virtual elimination of midrange publishers in the UK (only Bloomsbury and Faber remain), as firms have merged in order to hold the clout to negotiate on price.

The UK's trade publishing industry (which produces books aimed at a general consumer) effectively consists of five large publishing houses (Hachette Livre, Random House, HarperCollins, Penguin and Holtzbrinck - all of which are comprised of dozens of subsidiaries and imprints which have been hoovered up over the past few decades) and a massive pool of tiny independents, many of which cater for niche areas. If Tesco approaches Penguin and demands a 65 per cent discount, the publisher has enough punch to dismiss the retailer. For a much smaller firm, it's not so easy.

Some argue that this sea change in the industry's makeup has damaged its creativity. With their margins more pushed than ever, the argument goes, publishing firms look to produce books which are sure to sell; quantity trumps quality, further marginalising those authors who exist on the mainstream's periphery, and leading to reams of throwaway "celebrity literature" and autobiographies of baby-faced footballers. Thompson admits that the first thought of publishers nowadays is profit, but that once it's been achieved, the quality will follow: "Once you achieve your numbers, then you have a degree of flexibility to do other things." He talks of the "symbolic credit" which companies get from publishing quality books. "It's a kind of cachet for the organisation," he explains.

For retailers, the fall of the NBA had, arguably, a bigger impact. The depressive effect on book prices has been dramatic. Since 2003, the average price of a book has fallen by 15 per cent (BML Bowker) - yet, there were 40 per cent more books published in Britain in 2010 than in 2001 (more ammunition for the "quantity over quality" brigade). The NBA's demise paved the way for the aggressive bookselling chains and supermarkets to dominate the landscape, eliminating hundreds of independent sellers in the process. The only competitive advantage supermarkets had was price, and after 1997 they were free to go to town on it. In 2000, supermarkets held a 12 per cent share in Britain's trade publishing sector. By 2006, it had increased to 26 per cent and had overtaken even the annual sales volume of Waterstones, meaning that supermarkets had become the UK's largest sales channel for books.

The industry is full of horror stories, like independent bookshops buying their stocks of the latest Harry Potter novel from Sainsbury's, because it would have cost more from the publisher. Says Vivian Archer of Newham Books: "Before, we were all on a level footing. You had to be very good to get people into your shop. It [the fall of the NBA] wiped out a lot of the market." Fifteen years on, though, new opportunities have arisen for the likes of Newham. "The war is over," says John Thompson, "but the party that has won is lame." Retail chains have scaled back, or, in the case of Borders and Woolworths, closed completely. For a nimble, well-run indie with low overheads and a big community presence, the opportunities are plentiful (see side panel).


In the past few years, nothing has transformed the publishing industry like the advent of the ebook, which present publishers and retailers with a whole new raft of challenges. How do you compete with something as flexible, accessible and portable as a Kindle? One newspaper journalist has suggested that the printed word will be no more within 25 years, while others have said the publishing industry will follow a similar path to its musical counterpart. Artists have been forced to give their music away for next to nothing through the likes of Spotify, hoping the minuscule royalties combined with touring revenue will keep them afloat. Wired editor Chris Anderson wrote in his book The Long Tail that "every industry that becomes digital will eventually become free", and christened the model "Freemium".

John Thompson, however, points out that books and music are very different, that the industry has been plagued by such predictions for many years, and that they've almost always been wrong. "Nobody knows how it's going to go," he admits. "We have no idea. Five years ago, everyone expected ebooks to have an impact on business books. They thought the businessman was geeky and affluent enough to be the driver of change, but it didn't happen there at all. It happened somewhere nobody expected it to, which was romance fiction, sci-fi, mystery thrillers, and often with female readers."

Change is certainly afoot. Publishers and retailers alike have become embroiled in a price war with Amazon, which has become the dominant force in the ebooks market. Amazon, manufacturers of the Kindle, announced its intention with a bang when it reduced the price of all ebooks in America to $9.99 (just over £6) - even those the publisher was selling in hardcover for $30. Publishers were outraged and a standoff ensued between McMillan (owned by Holtzbrinck) and Amazon.

When Apple entered the market in 2010, it offered publishers an "agency model" agreement, in which the publisher sets a price and the retailer (Apple) takes a commission, acting as a selling agent. McMillan proposed a similar model to Amazon, who rejected it and removed all McMillan products from sale, in any format. Surprisingly, a wounded Amazon was the first to blink in January 2010, moving McMillan to an agency model. By spring 2011, all big six publishers had followed suit, winning a moral victory in an important battleground for the publishing world. The war, however, continues, with investigations underway as to whether the agency model is anti-competitive.

For John Thompson, it's crucial that the agency model remains in place. "Big, powerful retail corporations like these don't have a vested interest in the long-term health of a creative industry," he says. "It is important that anyone who's involved in thinking about these issues thinks about the long-term health of the creative industries when they're considering allowing firms like these to determine prices."

Thompson, though, remains optimistic about the future of the industry. The silvery chrome lining on the digital cloud on the horizon is the chance for the industry to shed its old, inefficient models, streamline and progress. "The rules and set conventions of the industry are being shaken and called into question. There's a lot of turbulence, but this is an industry that's trying to reinvent itself in the midst of a technological revolution. It's quite exciting, actually!"

Vivian Archer

Manager, Newham Books, London

What impact have issues like NBA and ebooks had on Newham Books?

I've been a bookseller for a long time and the fall of the Net Book Agreement was the biggest mistake ever. It's become more difficult for authors and many of our reps [representatives of publishing houses] have lost their jobs - ten in the last six months. Now, though, publishers can see they have to keep the indies sweet after the troubles of Borders, etc, or they're going to have bugger all. Ebooks haven't affected us so far. Some of our customers would rather die than have a Kindle, but we're not complete luddites: we'll have to sell ebooks eventually.

How has Newham Books managed to stay alive through all the turbulence?

By working really hard and networking. We have the shop and in the evenings we do events all over London and they can bring in a lot of money. We're reliable and we always bring books - which is not a given in this game! Our reputation allows us to negotiate directly with publishers - I only use wholesalers to top up customer orders - which gives us a huge breadth of books. We have a very eclectic selection, but we're not snobs or elitist. We cater for the community.

What sorts of community initiatives do you undertake?

The shop was set up by a group of parents who all put in a fiver to set up a shop for the East London community because it's been ignored, as far as bookshops are concerned. It's a non-profit making organisation and we give back to the local community. We do an increasing amount of work in our libraries, where they've sacked all the senior staff, which is belittling people's reading experience. To be a bookseller requires skills, knowledge and understanding - people understanding. We try to give that to the community.

John Thompson

Director, Polity Books

Author, Merchants of Culture

Is the publishing industry moving with the times?

Many people from the outside look at the industry and think it's some fuddy-duddy, nineteenth century institution, resistant to change. In fact, for 20 years, it's been pushing forwards so hard on digitisation in every level and every way; what's slowed down is the marketplace, not the industry. There are many inefficient features of the supply chain and the digital revolution opens up the possibility to eliminate them - over-producing books, pulping books, getting big returns [of unsold books from bookshops]. You can now get a book in a matter of minutes. There's also the opportunity for publishers and writers to reach out to readers in a more direct way than ever. It's all very exciting.

How do you rate the role successive governments have played in the publishing industry's travails?

The role of the government in the last few decades has, basically, been to outlaw the Net Book Agreement and allow the industry to develop in a space without anything like it, or the Robinson-Patman Act [a law in the US that stops chain stores buying books cheaper than other retailers], which would create a level playing field on the retail side. I think we need something like that - it exists in other European countries and, in my view, we find ourselves in an undesirable situation.

What does the future hold for the industry?

It would be sensible for us to recognise the fallibility of guessing at the question and admit that we just don't know how it's going to develop. There are lots of threats out there, but opportunities, too. My expectation is that there's going to be a mixed economy of the physical book and electronic text, but how exactly it develops will vary from type of reading material, to genre, to country. It's impossible to say for certain, but I try to avoid the pessimism that exists elsewhere.