Friday, December 31, 2004

British book publishing as a business -- part 2

Chapter 3: Penguin

As its title suggests, this chapter of BBPB reviews the history of Penguin. The starting point is the statement by Allen Lane, who created the firm, that few great enterprises survive their founder.

The history of Penguin is at one and the same time a success story and a bizarre chronicle of some curious fumblings. By 1974, for example, when Penguin had been bought by Pearson, the chief executive suddenly found himself with an executive chairman as well. He complained, with good reason. ‘Who runs Penguin?’ he asked. ‘Nobody knows.’ He also complained about Pearson’s ‘alarming incomprehension of publishing in general.’

Here are a few snippets from the rest of the chapter.

Bellaigue’s book as a whole has little to say about authors and their remuneration, but we are told in this chapter that M.M. Kaye’s book The Far Pavilions was made into a bestseller via a large promotional budget; the budget was funded through the author agreeing to take a reduced royalty rate. This, I must say, is a cunning wheeze. It reminds me of modern supermarkets, which demand up-front fees of £1m or so before they will even talk about stocking your yoghurt.

This chapter also provides evidence for a conclusion which can be found in many of Bellaigue’s chapters: it is that trade publishing is, by and large, a thoroughly unprofitable business when compared with (a) less glamorous forms of publishing and (b) other businesses in general. In the five-year period at the end of the 1980s, for example, Penguin’s operating margins were ‘consistently below those of [Pearson’s] other publishing interests and typically below those of other divisions.’ As many other companies have discovered, trade publishing has ‘limited growth prospects’ and ‘obstinately cash-absorbent characteristics.’

Yes, but it's so glamorous isn't it?

Bellaigue's book was published before the current Penguin warehouse problems; and although Allen Lane's suggestion that the firm might not survive his demise was clearly wrong, the warehouse business may yet prove to be a mortal wound.

Oh, and by the way. I had no sooner written the above paragraphs than I read the latest Publishers Lunch newsletter and saw that the Wall Street Journal was quoted as follows in an article headed 'Crunch time for Pearson plc's education strategy':

'The media company has been focused on fixing problems at higher-profile divisions: the Financial Times newspaper and Penguin publishing. But it is the less glitzy business -- education publishing -- that will determine whether Pearson's strategies are working in 2005.'

Chapter 4: Four publishing takeovers

Bellaigue’s fourth chapter examines four situations in UK trade publishing where one well-known firm took over another.

Once again, the case histories provide evidence of two characteristics which, I am sorry to say, seem to me to be entirely typical of UK trade publishing. One is the notable lack of business expertise, and the second is the curiously irrational nature of much of the decision-making.

Paul Hamlyn, for example, made a huge personal fortune out of publishing, but he is here quoted as follows: ‘To say the amount of financial expertise (in UK publishing) is nil is no overstatement.’ And presumably Hamlyn was in a position to know.

And when Anthony Cheetham, widely thought of as one of the smartest people in publishing, took over Weidenfeld and Nicolson, he ‘turned his face against educational and professional publishing – notwithstanding their highly profitable characteristics.’ Who cares about making money when you can have fun and/or make a contribution to culture?

Chapter 5: Associated Book Publishers (ABP)

In 1987, when ownership of ABP changed hands, it was possible, in theory, for an investor who bought shares in the company in May to have sold them in July for three times as much. Chapter 5 investigates the background to this curious phenomenon.

The story is interesting, but there is not much in it to detain us here. It is worth noting, however, that when Philip Sturrock was appointed managing director of Routledge and Kegan Paul in 1983, one of his early decisions was to introduce ‘profitability hurdles for new books.’ This, please note, in a firm which had been founded in 1834. Prior to Sturrock's decision it had presumably been sufficient for an editor to declare 'Our reader says this is a jolly good book,' and publish on the strength of that.

Didn’t I say something earlier about the irrational nature of much decision-making in UK publishing?

More tomorrow.



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