An Amazon Problem: The Book Is Dead, Long Live the Book

By Markus Brauck, Wolfgang Höbel and Claudia Voigt

Photo Gallery: The Future of Publishing Photos
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Publishing houses are Germany's intellectual backbone. For many years, they created a culture of literary abundance and generated healthy profits. But in the age of Amazon, e-books and self-publishing, they could be facing demise.

It's quite a drama, practically tailor-made for a TV miniseries with at least seven episodes. The main character is the beautiful publisher who takes over the business when her husband dies, and apparently believes that she inherited the aura of omnipotence from him. Her adversary is a cold-hearted businessman who seems to be interested in only one thing: money, money and more money.

She makes him feel like a cretin. Whenever she can avoid meeting him in person, she sends her lawyers instead, or she hides behind sunglasses when they do. He exacts his revenge for this humiliating treatment and fights her on the terrain he knows best: the world of numbers.

In reality, the plot revolves around Germany's Berlin-based Suhrkamp publishing house, and the struggle between Ulla Unseld-Berkéwicz and minority shareholder Hans Barlach. It's a duel that critics portray as a soap opera. But the real question at the heart of the dispute affects the entire industry: What does the future of book publishing look like?

It's a little reminiscent of the story in the British television series "Downton Abbey," in which an aristocratic family struggles against its declining relevance. The series concerns the English aristocracy at the beginning of the 20th century, while the real-life story today relates to the intellectual aristocracy at the beginning of the 21st century. Both are tales of the demise of an old world.

For decades, this publishing aristocracy could take special pride in two things: it made money and it represented more than just vile profit. A colorful intellectual elite was created as a result, as well as a culture of literary abundance -- the intellectual backbone of the nation.

Some important names represent this tradition: Suhrkamp, of course, but also publishing houses like Hanser, Ullstein, Fischer and Rowohlt. They are names that every German reader associates with great authors, wonderful works of literature and late nights spent reading a book.

A Precipitous Decline in Book Sales

Book revenues have been crumbling for the last two years, a development that will only accelerate, and brick-and-mortar bookstores have been steadily losing ground for the last five years. Long derided by publishing houses, e-books, though still a minority phenomenon in Germany, are experiencing tremendous growth. Today, about 11 percent of Germans are reading digital books on devices like the Kindle and the iPad, up from only 4 percent two years ago. In the United States, e-books already make up more than 15 percent of volume in the bookselling industry, mainly because they are more affordable. All of this indicates that margins will continue to shrink, as the book business becomes increasingly hectic, nervous and profit-driven.

"The golden era of publishing, that is, of reading, contemplation and literary education, has somehow come to an end," says Michael Krüger, the outgoing head of the Munich-based Hanser publishing house, who has the reputation of being one of Germany's last great publishing figures. Many people no longer view book publishers "as a stronghold of culture, but merely as a transshipment point for cultural products," says his successor Jo Lendle, the current head of the Cologne-based DuMont publishing house.

Even publishing executives not known for their pessimism, like Kiepenhauer & Witsch Publisher Helge Malchow, expect continued decline in the industry in the coming years. Others say that sales could even drop by more than 20 percent in the coming years. "For decades, the publishing business was pretty much the same," says Malchow. "It is now entering a crisis for the first time, and everything will look different after that."

For years, careful calculations allowed a marriage of intellect and money to persevere. Publishing houses sought to assure they could generate enough bestsellers that could be used to ensure profits and to subsidize the more sophisticated books favored by editors and publishers that also ensured a publishing house's cachet and literary reputation. It's a system that has guaranteed diversity in the books published for decades.

The publishing industry produces more than 90,000 new books a year in Germany. The Suhrkamp publishing group alone publishes about 460 new titles, each written, edited and expensively produced with an enormous amount of thought going into them. It's the very culture that Suhrkamp is famous for in Germany. But it also sells only 500 copies of some titles.

The Dead Writers' Society

With this approach, the company has about €30 million ($39 million) in annual sales and a work force of about 110 employees. Its overhead is high compared with other publishing houses, especially in light of a wretched return on sales estimated at about 0.5 percent. A significant portion of profits is not derived from new releases, but from the sale of books on the so-called backlist, bestsellers by the likes of Hermann Hesse, Bertolt Brecht and Max Frisch.

This dead writers's society is like a life insurance policy for Suhrkamp. But once an author has been dead 70 years, the works enter into the public domain. Hesse died 51 years ago and Brecht has been dead for 57 years. In other words, these revenue sources are finite.

Nevertheless, Suhrkamp's reputation remains unbroken. Three Suhrkamp titles were on the shortlist for the German Book Prize last fall, and one of the best books, Rainald Goetz's "Johann Holtrop," wasn't even on the list. But as illustrious as all of this seems, it still doesn't do much for the bottom line.

The past, from which Suhrkamp and other publishing houses are just awakening, was a luxury situation that depended largely on one circumstance: that success was not possible without publishers. Without publishers, readers would have nothing to read, and without publishers, authors couldn't be authors.

That's changing. Nowadays, publishers are suddenly expected to explain and even prove their achievements and how they make money. It is no longer anything special to bestow the seal of the "writer" on someone when anyone can acquire the label on his or her own.

These changes are currently affecting all levels of the book business, as things become expendable. Even bookstores and the recommendations of their booksellers have become expendable with the rise of online booksellers like Amazon, whose platforms allow customers to recommend books to each other. With the emergence of self-publishing, traditional publishing houses themselves are becoming expendable. Meanwhile, e-books, which are significantly cheaper to produce, are making the printed book expendable.

Is Book Culture Dying?

The book has become cheaper, it will get even cheaper, and it seems questionable whether the two things on which the industry has prided itself -- making money while at the same time representing more than just commerce -- can still be funded in the future. It's also a question of whether a culture is in the process of dying, and whether its death signifies more than just saying goodbye to printed paper.

You don't have to be a culturally pessimistic high-school teacher to walk into a large bookstore today and notice the signs of decline all around you. At some point, it started with stuffed animals at the register. Then came the wrapping paper and Christmas decorations, chocolate, toys, candles and esoterica. It's enough to leave some customers baffled when they enter a store trying to find the new releases section. The branch of chain bookstore Thalia in downtown Hamburg is one of these bookstores, one of the largest retail stores in Germany, with 2,000 square meters (21,500 square feet) of floor space. The store will close its doors in January 2014.

The Thalia chain is now owned by Douglas Holding AG, which is best known for its chain of perfume and cosmetics shops and in which US private equity firm Advent International holds a majority stake. It all began in 1919, with a small bookstore in the building occupied by Hamburg's Thalia Theater, from which the former family business derived its name. The company now has about 230 retail stores in Germany, some of which are gradually being closed.

Sales Shift Online

Online bookstores now have a market share of almost 20 percent, but the large bookstore chains have failed to come up with a convincing strategy to counter this development. An exceptional bestseller like the "Shades of Grey" trilogy, with more than 70 million copies sold worldwide, can certainly improve a company's bottom line, but such phenomena do not change the fundamental outlook: People are buying fewer printed books, and when they do buy them, they increasingly order them online.

The industry is so nervous that the German Publishers & Booksellers Association has launched a €3 million campaign to coincide with the Leipzig Book Fair taking place this week. The campaign was created by Zum goldenen Hirschen, a German advertising agency that has worked on the campaigns of similarly ailing industries before, including the "Print Works" campaign for magazine publishers and "Piracy is a Crime" for the film industry.

The goal of the campaign is to bring the book back to the center of society, back into the public consciousness and back into conversation, says Publishers & Booksellers Association CEO Alexander Skipis. It aims to portray the book as fresh, modern and contemporary, partly to counter the results of surveys indicating that books are no longer as popular as gifts to bring along to parties as they once were.

The real issue is that books don't have an image problem at all. What really needs a campaign -- although it's a message that would probably be too cumbersome for a few posters -- is the fixed book price, which, largely unnoticed by the public, is dying a slow death. It could spell the end of bookstores in a few years.

Unlike other industries, where supply and demand regulate prices, publishing houses in Germany can set the prices of their books. No matter where they are sold, books cost the same. It will be enormously difficult if not impossible to maintain this system with e-books. The problem for publishing houses is that fixed book prices for printed books could also decline in the long term. After all, what bookseller would still perceive the fixed price as a privilege if his customers are going to Amazon en masse to find e-book bargains -- and he isn't even allowed to participate in the price war?

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1. Correction Of Assumptions
Ravenport 03/18/2013
I have just opened a new generation of book publishing in America, after working with several other authors and publishers, and Amazon, I discovered that book purchasing is down while readership is increased, due to ease of search and purchase of e-reader books from many sources. The increase in readership in the United States has risen 40 percent in 2012, and e-books amount to 80% of all book sales (as reported by Amazon) for that period. E-books are easier to access, cheaper, and can be stored for long periods of time without dust, mold or weathering. Hard copy books are not dead, but must move with the trends, where school text books and technical manuals often cannot be accessed on e-readers, as well as other forms of table books or albums. Publishing must look for the must-have-in-print types of books, and not concentrate on fiction as their main sales any longer. Ravenport Publishing Albuquerque, New Mexico, USA
2. Not Buying It
MissMarcia 03/23/2013
I do not believe the book is or ever will be dead. There is, intellectually and aesthetically, no comparison to a book in the hand, just as viewing a painting cannot be replaced with poster art. By the way, it seems that over and again when great cultural institutions such as publishing houses, newspapers, museums or opera houses try to become more "relevant" (i.e. mass-minded) they only succeed in making themseves further irrelevant. There is good reason to have cultural "elitism" in this sense: it attracts and fascinates. The higher the quality of production, the more the curiosity. The reason why publishing houses are going downhill is not so much because of ebooks (which, for the most part, are garbage writing) but because marketing managers and not Editors are running them. America and Europe used to produce great writers. Did everyone's brain just shut off suddenly? Did talent just disappear into thin air?
3. Some traditional books will never stop to be printed:
brunocaronte 08/29/2013
Books like "The Republic" by Plato, "Holy Bible", "Thought of Marcus Aurelius, "Koran", "Plutarch's Lives", and other great classics including modern ones like KafKa, Mann and others.
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