Category: Big Business

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Quitters Never Win

Last week, I received the dissolution papers for my old publishing company. I waited quite a while before filing to dissolve it. While some of you might suspect it was because I harbored a romantic desire to get back into publishing, it was actually because I was scared that I would file something wrong. Essentially, it was like that dream where you’re taking the SATs but you haven’t prepared, and you’re naked, and you’re talking to a snake who’s wearing a vest, and —

But I’ve said too much.

Anyway, the company is officially dissolved, which leaves me very relieved. There were a variety of reasons I failed (or, “was not capable of succeeding”) in the literary publishing business, some of which I beat myself up over, and others of which were utterly beyond my control.

Which brings me to Dave Eggers. Last I week, I found a neat article in Forbes about Eggers’ work as a publisher. Now I didn’t get far when I tried reading Eggers’ blockbuster book, A Heartbreaking Work of Staggering Genius, and I made some pretty savage remarks about the book to various friends and acquaintances, but maybe I’ve just got an aesthetic blind spot.

Or maybe not. It’s not germane to this rant. Regardless of the book’s merits, it sold a bazillion copies and made a bunch of money for the author. Admirably, he put some of it into worthwhile causes, including learning centers for kids. He’s also continued his quirky literary mag, McSweeney’s, and built up an independent publishing company.

Since it’s in Forbes, the article discusses some of the business practices of Eggers as a publisher. In particular, it explores how his early failure with Might led to a different business model with McSweeney’s:

When he began, Eggers was no stranger to traditional publishing. He’d co-founded the influential but short-lived Gen-X magazine Might in the mid-1990s, which taught him that dependence on advertising is a road to frustration. With Might, he says, it “seemed crazy that an advertiser–or a 22-year-old media planner–could determine whether or not your magazine had merit, how many pages you could print or whether (in the end) you existed at all.”

Might folded in 1997, and Eggers embarked on a different path a year later. With McSweeney’s, Eggers chose to start a much smaller publication, with a modest distribution and a very high cover price (between $22 and $24 per issue). He managed to win a readership without having to play the advertising game.

“We were determined to rely only on the support of readers. We grew only in relation to what readers would support,” Eggers says.

We learn that McSweeney’s grew among independent bookstores before reaching major distribution:

McSweeney’s Quarterly–which now prints 20,000 copies an issue and remains the flagship money-maker for the company–is now distributed by San Francisco-based Publishers Group West, which puts McSweeney’s products on the shelves of online and chain retailers as well as independents.

And this is where I pulled up short. I scrolled back to the top of the article and checked the dateline: Dec. 1, 2006. Unfortunately, this article about the growth of McSweeney’s Publishing came out four weeks before its distributor, Publishers Group West, went bankrupt.

According to this article in the San Francisco Chronicle, McSweeney’s was left $600,000 in the hole by this turn of events, most of that cash intended for a Sudanese refugee charity (Eggers pledged the proceeds of his new book to that cause: like I said, he seems like a good guy).

There are bailout plans from at least two other distributors, promising between 70% and 85% of the money owed to the publishers who choose to participate. But the very fact that this occurred, and was so unforeseen, makes a major point about independent publishing.

See, the article was structured such that Eggers learns from the pitfalls of his first publishing venture, and decides to follow a different path. He gets away from the advertiser-supported world in favor of reader-supported projects. Eventually, this model is so successful that the company seeks larger distribution to reach more readers. Then there are years of success, followed by the cataclysm of PGW’s collapse.

The worst part about this is, McSweeney’s Publishing did nothing wrong. It was a success story, financially and artistically/aesthetically (so I’m told), but the very framework of the business meant that it had to trust a distributor to help promote books to buyers, physically get them to stores, collect payments, handle returns, and a million other things. There’s no way that a publisher can do all that on the scale that Eggers’ company had grown.

Now, please don’t read this as sour grapes on my part. I’m not happy about PGW’s collapse, nor about the hit that McSweeney’s took. I’m hoping that the company bounces back, finds a new, stable distributor, and continues fighting the good fight.

What you should read this as is a lament for how difficult it is to successfully publish books, especially for an independent company. On the tiny scale I operated on, it was silly to keep going (and thanks for never bothering to pay me, Small Press Distributors, you lousy sonsabitches), but it’s a shame when the publishers with a real presence can get struck down by circumstances so utterly out of their control.

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Say hello to Hollywood

Derek Lowe writes about a great article in the February issue of The Scientist. The anonymous author discusses the flaws in the R&D model among major pharma companies and develops an interesting method of fixing them: Go Hollywood!

Big Pharma continues to follow the old studio model, though there are signs that this may be changing. A similar and necessary evolution to what Hollywood underwent in the 1950s may be beginning, with increasingly more drugs being discovered outside Big Pharma, presumably because the R&D process elsewhere is more conducive to creativity. Biotechs or small pharma settings tend to be flexible and nonhierarchical, with a tolerance for mistakes and constructive dissent — all characteristics of environments that nurture creativity and innovation. Consequently, the trend towards more drugs being discovered outside Big Pharma is likely to accelerate.

There is a precedent for pharma emulating Hollywood: Pharma’s main preoccupation, the creation of blockbusters, was directly copied from Hollywood. The blockbuster model is really defined by broad and aggressive marketing, though the term is less accurately, if more commonly, used to define revenue thresholds. Hollywood’s blockbuster model was created in 1951, when the term was first applied to the movie Quo Vadis because of its then-huge budget of $7 million and the unprecedented zeal of its promotion.

I know it sounds bizarre, and it may be dry subject matter, but this is a really compelling opinion piece, and I think laymen (like myself) can gain a lot of perspective from it on some of the problems with developing new drugs.

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I’m the agent orange of change agents

This article on BizWeek about the downfall of Wal-Mart ad exec Julie Roehm makes for entertaining reading. And it’s worthwhile to note that advertising people really do talk like this:

Wal-Mart, she says “would rather have had a painkiller [than] taken the vitamin of change.” What has she learned? “The importance of culture. It can’t be underestimated.”

. . .

“We’re probably the edgiest automaker in terms of the things we try. And the times Julie went over the edge have been well documented,” says Jason Vines, [Chrylser’s] chief spokesman. “But we realized you don’t know where the edge is unless you are willing to go over it once in a while.”

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Leavin’ on a jet plane

There’s neat article in BusinessWeek this morning about the design of airports, accompanied by a gorgeous slideshow.

[Ron Steinert, principal at aviation architectural design specialist, Gensler, said,] “There has been a real sea-change towards this. In the old days, the airlines thought of airports as a service industry that provided space to them and their passengers. Now, airports see airlines as providing a service to their customers. It’s a total change in the way airports are looking at themselves. They’re realizing that they have to run themselves as businesses, to make money and provide a high level of service, or passengers will go elsewhere. Take the East Coast of the U.S.: There’s an airport virtually every 10 miles. If you don’t like one, you’ll go to another.”

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300 Pimps

I’ve never been a car aficionado. My brother seemed to inherit Dad’s Corvette-gene. Not that he would go off and spend big cash on a sports-car or anything, but he did go for a Mustang back when he was single. Me? I’ve owned three cars: a Hyundai Excel, a Saturn SL1, and a Honda Element. I’m not exactly stylin’ and profilin’.

That said, I admit that I once had a certain fondness for the Chrysler Crossfire. I think it’s largely because it looks like a coupe that a Micronaut would drive.

In the last year, I’ve become enamored of the Chrysler 300. I think it’s largely because it looks like something Batman would drive.

At first, I thought the 300 was a car for oldies, but then I noticed younger drivers in them, and started seeing tricked-out (sorry: pimped) models. Personally, the “black rims” thing always struck me as silly-looking, but it was a good indicator that the big-barrel sedan had crossed over. I found that I really liked the car’s lines, and wondered if it might be time to retire the Element of Style.
I was able to talk myself out of buying one because of Chrysler’s corporate ownership. Mercedes-Benz, which acquired (“merged as equals with”) Chrysler in 1998, employed Jewish slave labor during WWII. Around the time of the merger, economist Steve Landsburg wrote a neat article about the implications of “punishing the child for the sins of the father” when it comes to corporations:

Corporations can be punished for misdeeds in at least two ways. One is a consumer boycott and another is a (voluntary or involuntary) fine. Both kinds of punishment have been visited on Daimler-Benz (though arguably at levels that are small compared with the underlying offenses). In the 1980s, the corporation paid about $11 million to the descendants of its slave laborers.

Who exactly suffers from those punishments? You might think the $11 million came from the pockets of those who owned Daimler-Benz stock in the 1980s, but that’s not necessarily the case. Suppose, for the sake of argument, that in 1950 it becomes foreseeable that Daimler-Benz will eventually make reparations. Then every share of Daimler-Benz stock sold between 1950 and 1980 sells at a discount reflecting that expectation. Without the discount, nobody would buy the stock. So given sufficient foresight, the prospect of a 1980 punishment hurts the 1950 owners, even if they sell in the interim. And those who buy stocks after 1950 are not punished at all, because the discount compensates them for the fine.

He makes some interesting arguments in that piece. Lately, I’ve been rethinking my aversion to buying a sorta German car, and not because I wanna zoom around in that 300. It’s more a question of globalization, and the moral lines we draw in the sand. I mean, because I drive a car, I can’t help but prop up Arab dictatorships. That said, I can elect not to do publicity for a country that has a strict anti-Israel policy. But I don’t know how viable it is to protest so selectively.

For instance, my wife drives a Mini Cooper. The parent company is BMW, which makes it problematic for me. My knee-jerk reaction is not to support a German car company.

That said, the car is assembled entirely in the UK, and it seems to me that the British could hold an awful lot of resentment toward Germany. So, does the fact that commerce helps both nations serve to ameliorate some of the ill-feelings from from those nations’ past behavior?

I don’t think I’d ever buy a German-brand car (M-B, BMW, VW), but I can imagine that people whose family served in the Pacific theater consider me a traitor for buying a Honda. Any of you guys have issues about this sorta stuff? Are there nations/nationalities you wouldn’t buy from?

Anyway, all of that is a very roundabout way of posting links to a couple of BusinessWeek articles. The first is about how DaimlerChrysler’s CEO is under siege because of the company’s poor performance (and its avoidance of reality). The other is about Freeman Thomas, the guy who designed the 300. Both stories come with neat slideshows, including shots of two of Thomas’ new vehicles for Ford.

Thomas’ description of the philosophy behind The Interceptor (no comment) probably skewers my exact reason for liking the 300: “This is a car that is at once for the mature car buyer, but for someone who likes to stroke his bad boy side. He wants a grown-up car, but wants to feel fun.”

For the record, I would not ‘stroke my bad boy side’ with a German car.