British book publishing as a business -- part 5

Chapter 10 continued: Current trends and issues

Self-publishing

Bellaigue suggests that the average cost to an author, of publishing a book himself, is in the region of £7,000 to £8,000. And if you want a Rolls-Royce version then I guess that is correct. But in fact you can comfortably publish a book for somewhere between 1% and 10% of that sum, depending on how much you do yourself and whether you already have a computer, printer, and appropriate software.

Those who offer self-publishing services to authors who would otherwise remain unknown are naturally keen to point out that many writers who are now household names have at one time or another dabbled in self-publishing. This ignores, of course, the fact that, for every self-published writer who makes even a modest impression on the market, there are at least 1,000 and possibly 10,000 who succeed in selling no more than 3 copies. And who have a big pile of books in the garage.

Venture capital

The term ‘venture capital’ is now more or less interchangeable with ‘private equity’, and Bellaigue tells us that, typically, a private-equity group is looking for a 20%+ return on capital over the life of each investment.

As far as publishing is concerned, surely we have enough evidence by now to know that such a return is flat-out impossible, except as the result of some enormous fluke. And investors do not normally care to rely on flukes: by and large, a proven track record is preferable.

Nevertheless, Bellaigue presents us with some evidence that private-equity investors are willing to consider publishing projects. I have no reason to doubt the evidence, but I suspect that, if publishing is chosen, it is chosen in the same spirit that one might invest the last 10% of one’s own portfolio in something highly speculative. The thinking would be, This is worth a punt. I might lose all my money, but there’s a long shot that it might work.

Not surprisingly, investments of this nature tend to be in publishing firms which deal in non-fiction and professional specialisations. Fiction, Bellaigue reminds us, ‘is notoriously cash-absorbent and subject to unpredictable successes/failures.’

Valuations

Bellaigue’s section on valuations is technical and is really for the benefit of bankers and high-level strategic thinkers. Most of us are not likely to be faced with the problem of how much to pay for an existing publishing company.

It is worth being reminded, however, that publishers’ balance sheets are 'notoriously opaque in respect of debtors, which may be shielding unearnable advances, and stocks, which can be housing unsaleable books, both of which have a direct bearing on the quality of reported profits.’

Given that profits tend to be very much the name of the game these days, it must be supposed that there is strong pressure for the financial officers of any but the smallest private companies to massage the figures (within the law, naturally) so as to put the most favourable possible interpretation upon the outcome of the financial year. Periodically, the CEO, or some other representative of any publishing company in the public eye, will issue a statement that this year Clapham & Irons have done jolly well, and have achieved a 10% return on capital, or whatever. But then they would say that, wouldn’t they? On the optimistic assumption that the CEO and the chief financial officer of each company have at least some understanding of their firm’s accounts, and if we assume, for the sake of argument, that there are 10 major companies in UK trade publishing, then there may be as many as 20 people in the UK who really understand whether there is any money in the book business or not. I suspect not.

However, as Bellaigue reminds us, the City of London is a funny place. From time to time some otherwise sane people can be persuaded to invest substantial sums in a hole in the ground in Australia, on the strength of a third-hand report from a bloke in a pub that there might be a diamond pipe in said hole. And in the not-so-distant past there were plenty of people willing to assume that internet retail sales would take off like a rocket, at a time when it was fairly obvious to anyone who had actually tried to buy anything over the net that the time was not yet ripe. So it is not altogether impossible to find otherwise hard-headed entrepreneurs who are prepared to pay silly prices for publishing firms which are perceived as, God help us all, ‘glamorous’. (Examples: Reed buying Octopus; American On Line buying Time Warner.) Yes I know that such purchases and ideas make you and me laugh until we feel sick, but Bellaigue tells us that ‘there is a newsworthiness about trade publishing which sets it apart from all other parts of the industry.’

Oh dear, oh dear. It will end in tears, mark my words.

Final thoughts tomorrow.