Publishing venture aims to end retailer returns

HarperCollins is launching a new publishing unit that will aim to move from traditional author royalties and advances to more of a profit-sharing structure where authors get a piece of the bottom line. While innovative for a conglomerate, some independent publishers are already experimenting with this approach. But what's more interesting is that HC says this unit will also attempt to eliminate returns from retailers.

If successful, this could bring about some big changes in the publishing industry. Returns of unsold inventory have been a fact of life for publishers since the Depression era. While giving retailers the right to return unsold inventory for credit surely grants retailers more flexibility in some cases, it also puts a lot of financial risk on publishers. According to a respected industry overview (Publishing for Profit by Thomas Woll), in the 1990s returns of trade hardcover books averaged over 31% of all copies. This makes it very difficult to forecast how well a book will do, and it forces publishers to keep reserves against authors' royalties as a result.

If a conglomerate like HC is able to make headway in developing a no-return model, other publishers would surely seek to follow their lead. This would give the big brick-and-mortar retailers a strong incentive to collaborate on moving away from the current system. I think this would be a winner for many publishers and authors. It could even help retailers, as well. The article notes that "several years ago, Steve Riggio, CEO of Barnes & Noble, said in an interview that he would like to be able to mark down books rather than returning them." This would give retailers more pricing flexibility to maximize cashflow, something they currently lack -- and of course discounted books would benefit consumers.

Only time will tell if this idea is to gain any traction in the publishing industry. I think it has potential, though.