Richard Charkin: Unintended Consequences in Publishing

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Charkin’s Law, according to the eponymous Richard Charkin in London: ‘Everything that can go wrong will go wrong.’

At London’s Henry Pordes Books in Charing Cross, a shot from November 8, 2021. Image – Getty iStockphotos: Andy Solomon

By Richard Charkin | @RCharkin

‘With the Best Will in the World’
Unintended Consequences in Publishing support Charkin’s Law: everything that can go wrong will go wrong.

Richard Charkin

HarperCollins’ announcement of a big increase in digital sales—largely downloadable audio and materially generated by the partnership with Spotify—made me contemplate the balance between decisions made with the best will in the world and their not-always-beneficial consequences.

I don’t know enough (I couldn’t know) about this particular deal, but is the offer of 15 hours a month of free audiobooks to Spotify customers a longer-term benefit to sales? What proportion of audiobook listeners actually listen to more than 15 hours a month? There will be some, of course, and Spotify might indeed increase the numbers of the hard-core audience but what happens to the rest?

With the benefit of an exceptionally helpful rear-view mirror, let’s think about other similar decisions.

Royalty Rates and the RRP

Not so long ago after the United Kingdom joined the rest of the Anglophone world in renouncing retail price maintenance for books, there was increased pressure from retailers for higher discounts from publishers in order to support high-profile marketing campaigns for major titles using price as a selling point.

“It’s frequently more profitable for a publisher to grant a higher discount if that new discount triggers a lower royalty rate. Crazy but true.”Richard Charkin

At the time—and now—most authors were paid a percentage (normally ranging from 10-15 percent) of the recommended retail price (RRP). But in order to fund the heavy discounts and still make a margin, publishers and authors—the latter via their literary agents—evolved a system in which the royalty rate was reduced to four-fifths after, usually, 55 percent and three-fifths after a 60-percent discount to retailers.

Authors were happy because the reduced royalty rate was normally more than compensated by the increased exposure and sales. The snag became apparent when these high discounts were granted on all titles (not just the big ones) to large chains and digital retailers.

The consequence of continuing to link the royalty rate to the notional RRP has not only reduced the rate for the bulk of an author’s sales but has also introduced unintended distortions. It’s frequently more profitable for a publisher to grant a higher discount if that new discount triggers a lower royalty rate. Crazy but true.

It could all have been avoided if authors’ agents had accepted—and might still accept—that royalties should be based on the revenue received by the publisher, not the RRP. This would absolutely align the interests of both authors and publishers.

An Unrecorded Decision and Returns

Of course, one of the unrecorded but significant decisions was made by a publisher’s salesperson trying to persuade a bookseller to take more copies than he or she thought possible to sell. “Oh, go on, take more. If they don’t sell you can send them back.”

A consequence of that agreement might have been quite a few additional sales as copies were more available. The unintended consequence was the huge numbers and costs of allowing retailers to return whatever they like, more or less whenever they like.

Scholarly Journals and Subscriptions

A more academic example relates to subscriptions to scholarly journals by universities.

“The combination of a negative reaction” to higher subscription prices “and the advent of Web-based technology made the open-access movement, with all its benefits, problems, and complexity, an inevitability.”Richard Charkin

As library budgets came under pressure in the 1980s, universities took action by cancelling multiple subscriptions usually held by individual departments.

Publishers reacted quite rationally and extremely effectively by raising the prices of subscriptions enough to mitigate any reduction of unit sales caused by these cancellations. Indeed they discovered that they could raise prices to such an extent that they could even increase their margins: Joy of joys, fewer journals to print and distribute, higher margins.

The problem was that librarians eventually noticed. Authors even noticed. Publishers were seen to become profiteering parasites on the academic community. It was an unfair characterization, particularly as some of the biggest villains were scholarly societies themselves, but anger sticks.

The combination of this negative reaction and the advent of Web-based technology made the open-access movement, with all its benefits, problems, and complexity, an inevitability. We are living with the consequences.

The ISBN and Amazon

In 1967, David Whitaker espoused the creation of the ISBN (International Standard Book Number). By 1970, it was formally made an International Organization for Standardization standard.

“Thank you, ISBN, for Amazon with all its benefits and some of its shortcomings: A very definite unintended consequence of David Whitaker’s initial idea.”Richard Charkin

For the first time, books had a unique identifier by publisher, country of origin, language, etc. It has been an undoubted simple and brilliant innovation of enormous importance to the publishing industry worldwide. It’s hard to imagine a world of books without ISBNs. Even today, very few other products have such an all-encompassing global indexing system.

A consequence none of us could have envisaged was that an uber-ambitious entrepreneur wanting to start the world’s largest consumer retailer would begin his campaign for world dominance on the back of the humble ISBN.

Along with the rectangular shape of the book which made packing easy, the ISBN allowed him to warehouse, market, manage books worldwide from “Day One,” something it would take years to achieve with other products. Thank you, ISBN, for Amazon with all its benefits and some of its shortcomings: A very definite unintended consequence of Whitaker’s initial idea.

The AI Question and Attitude

So back to Spotify and audiobooks: Are we right to embrace this new model without addressing its consequences? I have no idea what might happen, but for what it’s worth I think we’ll never find out until we try.

Our columnist testing the ‘suck it and see’ approach. Image: Richard Charkin

Nearly every innovation or decision in publishing can be challenged, resisted, or shot down, but the strength of the publishing business is that we are confident enough in our fundamental assets, our intellectual property, to take chances on the new and deal with negative consequences, if any, when they arise.

Publishers everywhere have set up think tanks, committees, rules of engagement about how to deal with our current obsession, artificial intelligence.

I’m absolutely certain that we’ll make many bad decisions, take many wrong turns. But I’m equally certain that we should engage with a positive attitude, looking for the opportunities not the possible negative consequences.

As with Spotify, audiobooks, and all innovation, the best description of strategy might be “suck it and see.”

Join us monthly for Richard Charkin’s latest column. More coverage of his work from Publishing Perspectives is here. Richard Charkin’s opinions are his own, of course, and not necessarily reflective of those of Publishing Perspectives.

About the Author

Richard Charkin

Richard Charkin is a former president of the International Publishers Association and the United Kingdom’s Publishers Association. For 11 years, he was executive director of Bloomsbury Publishing Plc. He has held many senior posts at major publishing houses, including Macmillan, Oxford University Press, Current Science Group, and Reed Elsevier. He is a former president of the Book Society and non-executive director of the Institute of Physics Publishing. He is currently a board member of Bloomsbury China’s Beijing joint venture with China Youth Press, a member of the international advisory board of Frankfurter Buchmesse, and is a senior adviser to and Shimmr AI. He is a non-executive director of Liverpool University Press, and Cricket Properties Ltd., and has founded his own business, Mensch Publishing. He lectures on the publishing courses at London College of Communications, City University, and University College London. Charkin has an MA in natural sciences from Trinity College, Cambridge; was a supernumerary fellow of Green College, Oxford; attended the Advanced Management Program at Harvard Business School; and is a visiting professor at the University of the Arts London. He is the author, with Tom Campbell, of ‘My Back Pages; An Undeniably Personal History of Publishing 1972-2022.’

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