WHS and the malaise in publishing

W.H. Smith -- or WHSmith, or WH Smith, or WHS, depending on which styling you prefer -- is a firm in trouble. And, like many firms in trouble, this one finds itself subject to a takeover bid.

Just in case you don't know, WHS is the UK's second largest bookseller, and last weekend’s newspapers reported that the venture capital group Permira has offered £940m for the company. There is just one little snag, however. On checking the books, it appears that there is a shortfall in the WHS pension fund -- somewhere between £200m and £250m, depending on which report you believe. But then what are a few million between friends?

The two paragraphs immediately above tell you all you need to know about the UK book trade -- i.e. that it is not very profitable and it is not very well managed. WHS have been in business for over a hundred years, and for decades they dominated the high street, at least as far as books are concerned. Even in recent years, they have only been overtaken by Waterstones, and they still have much larger sales than their next nearest competitor, which in 2002 was Ottakars. But despite all that, they can’t even fund their employees’ pensions properly.

The weekend’s papers (e.g. the Sunday Times) carried several pages of adverts from WHS for ‘book bargains’. The good old 3 for 2 dodge again. Well, it may work but I wouldn’t bet on it.

Another ‘rationalisation’ announced by WHS recently relates to the sale of magazines. In future, WHS will not stock small-circulation and specialist magazines; they will only stock the big sellers. So, even though WHS is the biggest newsagent on the block, they probably won’t even match the range of magazines which is available from some modest little corner shops. Does that sound to you like a successful sales strategy?

The Sunday Herald for 13 June carried an article about the particular problems which the current state of the book trade creates for small Scottish publishers. The law of greed rules, says the article, and ‘the book trade is now falling apart.’ The big high-street booksellers demand up to 60% discount on the books they stock. ‘Joe Reader sees this as giving him a cheap read, but the fact is such bloodsucking discounts are bleeding the industry white.’ And WHS still can’t make a decent profit!

And the result of all this? The Sunday Herald has little doubt. ‘Paper, printing and binding costs are relatively fixed, so it is the writer who suffers most. Royalties are discounted until they are almost zero. These days, unless you are a big name, you are a no-name.’

And this is the business that all you wannabe authors are busting your guts trying to get into? Good luck, kids.