Publishing as Venture Capital: Exploring How ‘Comps’ and ‘Blockbusters’ Influence the Investments in Book Publishing

“For most authors it is true that every book is, on some level, a business venture,” notes Eric Hellman in his article “The Author as Entrepreneur”[1]. If one were to stretch this analogy a little further, you could say that if every book is similar to a ‘business venture’, then every author advance offered by a publisher is an ‘investment’. But it is an investment that guarantees no safe returns. Thus, a parallel begins to emerge between the world of book publishing and that of the high-risk venture capital. The comparison is a lot less farfetched than one would think. Both these business models function under the same set of principles: placing a number of bets on ventures with no assurance of a profit, and the hope that some of these bets yield outsized returns to compensate for the rest of the investments.

 

As Hellman observes, “if most projects lose money, that’s okay, because some yield significant enough returns to more than make up for the losses.”[2] Therefore, for the investors investing in venture capital, “the odds of a company successfully hitting a ‘home run’ (10x return) is one in ten. Most venture investors are lucky to get their original capital returned, and many investments are simply written off in their entirety.”[3] This can easily be compared to the 80/20 rule that the publishing industry functions on: “eighty-percent of the output is generated by twenty percent of the input.”[4] In other words, only 20% of the books will “break-out” or become bestsellers and subsidize the investment poured into the rest of the 80%.

 

“Publishing” as Nash observes, “has no particular ability to discern what is good or not, what is successful or not.”[5] Due to this lack of a fixed formula for a break-out book or bestselling success, publishers often resort to what Anita Elberse calls the ‘blockbusters’ strategy. Elberse defines this strategy as one in which “a content producer makes huge investments to acquire, develop, and market concepts with strong hit potential, and then banks on the sales of those titles to make up for the middling performance of their other content.”[6] In the world of publishing, a good example of such works “with strong hit potential” would be a memoir by someone like Michelle Obama or a Dan Brown novel. But the industry cannot always rely on ‘celebrity’ for all its investments. Thus, the closest way to protect the returns is through ensuring that the profit projections for the book you are investing in are as accurate as possible, something that can be done with the help of a strong ‘comp title’.

 

“Comps are king in this business,” notes Laura B. McGrath in her essay “Comping White”[7], where she skilfully dissects this phenomenon of ‘comps’ that rule the publishing industry. Short for “comparable” or “comparative”, comp titles have become the basis of all acquisitions today. Editors often make profit and loss projections by looking at the sales track of a comp title, in order to determine whether or not to acquire a book, and how much to pay in an author advance. More importantly though, as McGrath posits, “comps are conservative.”[8] As the purpose of these comps is to minimize the risk on investments and maximize the returns, they are designed to manage expectations and predict the safest possible bet. They are, therefore, “built on the idea that if it worked before, it will work again.”[9]

 

Furthermore, comps are not just about books, they are also about the writers. As the print runs (which consequently informs the rest of the P&L projections) are based on the size of the potential audience, publishing professionals need to pay extra attention to this hypothetical reader base when choosing the comps and acquiring new books.[10]

One editor explained, “You get into the type of author that somebody is, and the type of audience that they’re reaching more than you do content. And that is very voice-driven. […] There’s a limited number of readers for a book like that, and you kind of know who they are and what books those people are responding to.”[11]

 

Now the important question posed by McGrath here is this: what happens if there are no comps to be found? Or if an idea has never “worked” because it has never been done before? Or if the concept of the book is so niche that the potential target audience is not big enough for an investment?[12] Well, then the book is probably not going to get picked up. The value ascribed to comps here reveals that they are indeed the king when it comes to book publishing. McGrath goes on to point out that this dependence on comps can have quite a few drawbacks: comps titles were intended to be an “instructive description” (“this book is like that book”), but they have ended up becoming “prescriptive” (“this book should be like that book”) and “restrictive” (“…or we can’t publish it”).[13]

Comps perpetuate the status quo, creating a rigid process of acquisition without much room for individual choice or advocacy.[14]

 

While this practice could be justified from an economic standpoint, the ‘comp’ culture, nevertheless, ends up restricting the permissibility for certain voices and stories that did not have much of a platform to begin with. As McGrath observes “comp title data don’t show us the output of this system — they show us the system itself […] comps are evidence of what the publishing industry values. It turns out the industry values whiteness.”[15]

 

Similar sentiments are echoed by the Canadian noir writer, S. G. Wong, who argues that this reliance on comps demands writers from marginalized backgrounds to only recreate certain kinds of narratives which have “worked” in the past:

the immigrant experience; coming-of-age-as-queer; overcoming-disability-to-triumph; the pain-of-being-Black/Indigenous/Other; etc. They’re all variations on a theme: how the marginalized can become accepted into the historically-centred culture. Obviously, this narrow framing excludes the full, complex experience of marginalized communities—but it’s how publishing gatekeepers control what gets considered mainstream.[16]

 

These ‘comps’ itself then, according to McGrath, “take on the role of gatekeepers, “determining what — and who — gets access to the marketplace.”[17] And this is where the strategic investment model of venture capital becomes a bit limiting for an industry that is essentially producing ‘culture’. The need to lower the rate of failure and the motivation to gain the best possible results on these ‘investments’ has caused the industry to focus on “replicating past bestsellers rather than on innovation.”[18] One can see why this can be a problem when you are in the “business of literature”:

…the business of literature is the business of making culture, not just the business of manufacturing bound books. The publisher is an orchestrator in the world of book culture, not a machine for sorting manuscripts and supplying a small number of those manuscripts in improved and bound form to a large number of people via a retailer-based supply chain best suited for the distribution of cornflakes, not ideas.[19]

 

Publishing is a ‘business’ at the end of the day, and every business needs to turn a profit to remain solvent. However, the industry’s very nature as the purveyor of culture obligates it to look at the book not merely as a “unit of exchange” and a “vehicle to generate sales”[20], but rather as an artefact of expression and thought through which individuals can make sense of the society and self. This practice of “looking back”[21] to recreate a formula for profitability, can thus prove detrimental to the role of publishing as a cultural industry.

 

 

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[1] Eric Hellman, “The Author as Entrepreneur,” PublishersWeekly.com

[2] Ibid.

[3] George Deeb, “What Exactly Is Venture Capital?,” Forbes

[4] Gabriel Medina, “The 80/20 Rule (or Pareto’s Principle) Explained,” Medium

[5] Richard Nash, “What Is the Business of Literature?” VQR Online

[6] Sean Silverthorne, “Blockbuster Strategy: Why Star Power Works,” Forbes

[7] Laura B. McGrath, “Comping White,” Los Angeles Review of Books

[8] Ibid.

[9] Ibid.

[10] Ibid.

[11] Ibid.

[12] Ibid.

[13] Ibid.

[14] Ibid.

[15] Ibid.

[16] S.G. Wong, “Claiming Space: CanLit Redux”

[17] McGrath, op. cit.

[18] Wong, op. cit.

[19] Nash, op. cit.

[20] Dallas Baker, “Publishing Should Be More about Culture than Book Sales,” The Conversation

[21] Wong, op. cit.

 

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BIBLIOGRAPHY

Baker, Dallas. 2016. “Publishing Should Be More about Culture than Book Sales.” The Conversation. July 2, 2016. http://theconversation.com/publishing-should-be-more-about-culture-than-book-sales-54173.

 

Deeb, George. 2016. “What Exactly Is Venture Capital?” Forbes. July 18, 2016. https://www.forbes.com/sites/georgedeeb/2016/07/18/what-exactly-is-venture-capital/.

 

Hellman, Eric. 2013. “The Author as Entrepreneur.” PublishersWeekly.Com. May 24, 2013. https://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/57403-the-author-as-entrepreneur.html.

 

Hirsch, Matthew. 2018. “Publishing as Venture Capital: A Deep-Ish Dive.” Ethan Hirsch (blog). November 25, 2018. https://ethanphirsch.com/2018/11/25/publishing-as-venture-capital/.

 

McGrath, Laura B. 2019. “Comping White.” Los Angeles Review of Books. January 21, 2019. https://lareviewofbooks.org/article/comping-white/.

 

Medina, Gabriel. 2019. “The 80/20 Rule (or Pareto’s Principle) Explained.” Medium. July 8, 2019. https://medium.com/swlh/the-80-20-rule-or-paretos-principle-explained-6345ce94ab96.

 

Nash, Richard. 2013. “What Is the Business of Literature?” VQROnline. Spring 2013. http://www.vqronline.org/articles/what-business-literature.

 

Silverthorne, Sean. 2013. “Blockbuster Strategy: Why Star Power Works.” Forbes. https://www.forbes.com/sites/hbsworkingknowledge/2013/10/15/blockbuster-strategy-why-star-power-works/.

 

Wong, S.G. 2019. “Claiming Space: CanLit Redux.” 2019. https://sgwong.com/blog/claiming-space-canlit-redux/.

 

 

One Response to Publishing as Venture Capital: Exploring How ‘Comps’ and ‘Blockbusters’ Influence the Investments in Book Publishing

  1. JMax says:

    Nice discussion and very clearly framed. I suspect that while many employees’ and entrepreneurs’ motivations for getting into publishing tend toward cultural expression and the kind of innovation you write of here, the day-to-day realities of running the business lead them into the risk-avoidance-first mentality that you describe. If that’s so, there’s a kind of existential tension at the heart of the profession.

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