Books

Best Sellers Sell the Best Because They’re Best Sellers

On a Tuesday in mid-March, the most powerful executive in American publishing slid into a booth at a restaurant on Central Park South for her last power lunch of the pre-pandemic era.

New York City was about to shut down, and over octopus pasta Madeline McIntosh, the U.S. chief executive of Penguin Random House, described the contingency plan she was developing for her roughly 4,400 employees — the editors, copy editors, sales operatives, cover designers, marketers, publicists, illustrators, audio engineers, coders, warehouse managers, typesetters and other book professionals who populate what is by far the largest publishing company in the United States.

For Ms. McIntosh, 51, whose rise began with a temp job, and who shocked literary stalwarts by once taking a job with Amazon, the switch to remote work was only the first in a gantlet of catastrophes. On top of the pandemic-induced recession, there have been intense political and social upheaval, an industrywide outcry over the lack of racial diversity in publishing, mass bookstore closures, major disruptions at the printing presses and more.

“It did feel like every hour and every day was bringing more bad news and more uncertainty related to the supply chain and retail,” a remarkably composed Ms. McIntosh said in August, over video chat. “Would we be able to print books? Would we be able to ship books? Would we be able to sell books?”

To almost everyone’s surprise, the answer to those unnerving questions, at least for the moment, has been: Yes. After a steep drop at the start of the pandemic, book sales not only recovered but surged. Unit sales of print books are up nearly 6 percent over last year, according to NPD BookScan, and e-book and digital audiobook sales have risen by double digits. Reading, it turns out, is an ideal experience in quarantine.

“People were watching a lot of Netflix, but then they needed a break from Netflix,” Ms. McIntosh said. “A book is the most uniquely, beautifully designed product to have with you in lockdown.”

As the industry’s Goliath — as big as the four other biggest publishers combined, analysts say, with authors from Barack and Michelle Obama to Toni Morrison — Penguin Random House has fared better than some of its rivals. Of the 20 best-selling print books of 2020, eight (by far the largest share) are Penguin Random House titles, according to NPD BookScan. It has had 216 New York Times best sellers this year. Penguin Random House’s U.S. sales grew 5.2 percent in the first half of the year, helping to soften a global sales dip of around 1 percent, according to an earnings report from its parent, the German conglomerate Bertelsmann. Overall sales at several other major publishers — Simon & Schuster, HarperCollins and Houghton Mifflin Harcourt — all fell further, according to filings.

While no one expected a pandemic, Penguin Random House was, in a weird way, prepared for the new retail reality. The company has grown even more dominant in recent months in part because Ms. McIntosh, who took over two and a half years ago, and other leaders foresaw a future in which online book sales would vastly outstrip physical retail, but print books would continue to be a popular and lucrative format.

For years, the company had been investing in infrastructure, spending $100 million on expanding and upgrading its warehouses. With four distribution centers and warehouses on both coasts and in the Midwest, it is the only publisher that ships books seven days a week. That supply-chain advantage enables Penguin Random House to quickly react to upticks in demand for particular titles, which has not only increased sales but cut down on returns of unsold books by 30 percent.

Early in the shutdown, when Amazon was delaying book deliveries to focus on shipping essential items like cleaning supplies and food, Penguin Random House directly fulfilled some of the Amazon orders on its own, helping mitigate delays.

“By dominating all of the levers in publishing, they’re almost untouchable,” said Thad McIlroy, a publishing industry analyst. “Penguin Random House can get more books on the shelves than their competitors, at a time when the distribution market is disrupted.”

In publishing, as in other industries, the pandemic has accelerated forces that were already at play, delivering several years’ worth of change in just a few months. The big houses aren’t competing just against one another; they’re vying for the public’s attention against TikTok, Netflix and Facebook. Penguin Random House has built what is probably the most sophisticated direct-to-consumer online marketing and data operation in the industry, with a proprietary research operation that tracks 100,000 book buyers across the country.

This spring, the company upgraded its ability to sell books directly from its own website, bypassing bookstores, a move that could alienate big retail partners. When the coronavirus changed book-buying habits overnight, driving purchases almost entirely online, Penguin Random House was ready.

“Without knowing it, we’ve been planning to operate in this market for years,” Ms. McIntosh said. “We have the biggest list of books, we have access to the most data, so we could have a very accurate view on a daily basis of how consumer demand was shifting. We could see right away when people were grabbing the sourdough bread book, or the birding book, or the inspirational book, or the book that put this moment in the context of history.”

On Thursday, Penguin Random House announced that it would release Mr. Obama’s memoir in November, with an initial run of three million copies. It is virtually guaranteed to be the biggest book of the year.

Chasing the next blockbuster

As publishing becomes even more of a winner-take-all business, Penguin Random House’s dominance represents the culmination of decades-long trends that have made the industry more profit focused, consolidated, undifferentiated and averse to risk.

Like Hollywood, which pours resources into universe-scale superhero franchises that are nearly guaranteed to get an audience, publishing has become increasingly reliant on blockbusters — a development that has left beginner and midlist authors struggling. Mass-market retailers like Target, Walmart and Costco — whose share of book sales has soared during the pandemic — buy books that are surefire hits, and often wait for an unproven author to hit the best-seller list before they even order copies.

“There are a few winners and there are far, far fewer books around the break-even point, and there are more that lose,” said Mike Shatzkin, the founder and chief executive of Idea Logical, which analyzes the book business. “The medium-sized publishers can’t sustain themselves anymore. They can’t compete for the really big titles, so they get bought.”

The shift to online retail amplifies the trend. Amazon’s algorithms showcase books that are already selling well, so more people see those books and more people buy them. Publishers have less control over what readers see online than what they encounter in a store, so they funnel more marketing and advertising dollars into titles that are preordained successes.

“The impact on literary culture is more homogenization, which is only going to accelerate now,” said Dennis Johnson, a co-publisher of Melville House, an independent press.

The result is an algorithmic marketplace that serves up mostly the hits, driving a cycle so self-fulfilling it’s nearly tautological: Best sellers sell the best because they are best sellers.

Under Ms. McIntosh, Penguin Random House has flourished in this climate. In an industry that’s still to a degree shaped by instinct-driven gambles on the next literary breakthrough, Ms. McIntosh comes across as reserved, calm and hyper-rational, more inclined to base a decision on numbers than on relationships, institutional habits or hunches.

“She’s not showy, but she’s incredibly influential,” said the literary agent Suzanne Gluck, who considers Ms. McIntosh a friend. “She keeps pushing the company to use data better, to use their corporate divisions better, to use their size better. She doesn’t have ‘rest on laurels’ as a gear.”

As she has pushed to make Penguin Random House more data-driven, hit-focused and efficient, Ms. McIntosh has, in her unassuming way, had an outsize impact on how the industry operates. It sets her apart in an ecosystem that has long elevated bookish, creative types to its top executive roles, with legendary editors like Sonny Mehta, Robert Gottlieb and Nan Talese operating independent literary fiefs, with freedom to acquire and publish whatever they liked.

During her tenure, Ms. McIntosh has overseen a spate of acquisitions, making her a little like Eric Carle’s Very Hungry Caterpillar: The company bought F+W Books, a publisher of illustrated nonfiction, and a 45 percent stake in the independent publisher Sourcebooks. (It also bought the intellectual property rights to “The Very Hungry Caterpillar.”)

Penguin Random House, which was valued at $3.67 billion in 2019, could get even bigger. Anticipating another wave of media consolidation, Bertelsmann recently announced its interest in buying Simon & Schuster, which Viacom put up for sale this spring for $1.2 billion.

Even if a rival spends more to get Simon & Schuster, it will be hard for anyone to catch up with Penguin Random House. “There is no No. 2. There’s only No. 1,” Mr. McIlroy said.

Because of its enormous publishing program, with more than 300 imprints globally and a backlist going back nearly a century, the publisher leads the literary world on seemingly every axis, from the highest-brow fiction to pulpy commercial authors. It publishes Nobel Prize winners like Kazuo Ishiguro and Alice Munro; Pulitzer Prize winners like Colson Whitehead, Anne Tyler and Jon Meacham; and prose deities who shaped 20th-century American literature, including Cormac McCarthy, John Cheever, Eudora Welty, Saul Bellow, William Faulkner, John Updike and Joan Didion. It publishes blockbuster authors like Dan Brown, E L James, John Grisham and Danielle Steel. It publishes mega-best-selling children’s and young adult authors like Dr. Seuss and John Green. It publishes the Obamas, whose memoirs Penguin Random House acquired with a record-breaking $65 million advance.

A canny ‘demotion’

When the coronavirus hit, Ms. McIntosh left her Manhattan home, a recently acquired apartment in the Dakota, for a second property in Orient, at the extremity of the North Fork of Long Island. She has ridden out the pandemic there with her husband, the thriller writer Chris Pavone; their teenage twin boys; and a Labradoodle named Wally.

Mr. Pavone is published by Crown, a Penguin Random House imprint. The couple say they observe a strict separation of “church and state” when it comes to his career: Her only involvement is reading early drafts and passing along encouragement. Most days, he cooks dinner for their family, and enjoys their household division of labor — their sons see a father who’s around for homework help and a mother who’s a C.E.O.

To unwind, he told me, Ms. McIntosh “bakes maniacally” on the weekends. As Covid-19 began to spread, she bought 100 pounds of flour, which she steadily converted into bread, cookies, pies and cakes, though she took a hiatus after breaking her hand in a paddle-boarding accident this summer.

In some ways, Ms. McIntosh’s ascent has been typical — a steady climb up the corporate ladder. But she also stands out as someone who at every turn has rejected conventional thinking, and who has had an uncanny degree of foresight about technological change.

The daughter of an arts administrator and a banker, she grew up in St. Paul, Minn., and Pittsburgh, and studied fine arts at Harvard, hoping at first to become a curator. She took the Radcliffe Publishing Course instead, leading to a toehold in the industry as a temporary assistant to an editor at HarperCollins, then to a permanent position at Norton.

By 1994, Ms. McIntosh saw that the internet would irreversibly transform publishing, and that year she got a job in the new-media department at Bantam Doubleday Dell, a division of Bertelsmann. Her work involved creating proposals to convert texts to CD-ROM and developing and managing the company’s first website. Eventually, she was put in charge of online sales — a small fraction of the business, but one she suspected would grow. Her first task was to set up an account for Amazon, when no one really knew what it was, a bookstore or a distributor.

“She understood it differently than most people,” said Don Weisberg, then a sales chief who became a mentor. “She saw what Amazon was going to be, and she saw that we needed to deal with it.”

Mr. Weisberg eventually promoted Ms. McIntosh to run adult sales for all of Random House, a powerful position. After seven years, she became the head of Random House Audio — a move some saw as a self-inflicted demotion.

“You were going from the nerve center of the company to the fringe,” Ms. McIntosh said. “There were a few times in my early career that people thought I was a little bit crazy.”

At the time, audio sales were a small slice of the business — and digital audio sales were tinier yet — but Ms. McIntosh anticipated a boom.

“Madeline said, ‘We need to build a digital archive and distribution system,’ and we were like, ‘What?’” said Amanda D’Acierno, who worked for Ms. McIntosh and currently heads the audio division at Penguin Random House. “She said, ‘One day it’s all going to be digital.’” (That has largely proved true. With astronomic growth in recent years, digital audiobooks are the fastest-growing format in books.)

In 2008, Ms. McIntosh made an even more radical move. Wanting to understand the technological transformation of publishing, she went to work for Amazon in Luxembourg, as director of content for the international rollout of the Kindle e-reader. Many of her former colleagues viewed the company with suspicion, if not contempt, as a would-be monopoly and an existential threat. But Ms. McIntosh thrived there.

“Amazon gave me the experience of being fully immersed in a culture where all the decisions were driven by the data,” she said. “That gave me the confidence that, hey, I can do this, too, and that it could be freeing. The good thing about doing things by math is that it diminishes the politics of a situation.”

After a year and a half, Markus Dohle — the gregarious, grinning and optimistic chief executive of Random House in the United States — made an enticing offer: to “come home” to a position created just for Ms. McIntosh, as the company’s president of sales, operations and digital. She took it. Random House merged with Penguin in 2013, and she became chief executive of the company’s U.S. business five years later. (Mr. Dohle is the global C.E.O.)

She was seen as a natural successor, yet she operates from a different vantage from that of many of her peers, who base decisions on deckle-edged intuition.

“The media culture historically has been about ‘How vigorously can I persuade you to my point of view?’” Ms. McIntosh told me during an interview in her office last year. “And I may end up persuading you simply through my eloquence or my passion, and that could translate into actually making the wrong decision.”

A changing of the literary guard

Almost everyone I spoke to about Ms. McIntosh described her as curious — more likely in meetings to probe for information than deliver imperatives.

“She’ll pause, and then she’ll ask you this extremely insightful question that becomes your answer,” said Annette Danek-Akey, executive vice president of the company’s supply chain.

But in a business that’s still, to a surprising degree, built on personal relationships forged over long, boozy lunches, some see Ms. McIntosh as analytical and sometimes hard to read — a framing that would not, perhaps, be applied to a male C.E.O. (The other Big Five chiefs are all men.)

Mr. Weisberg, who was recently promoted to chief executive of Macmillan, one of publishing’s Big Five, said his protégé had perhaps the hardest job in publishing, in managing a huge company and facing pressure to make it even bigger. “I don’t envy her on a day-to-day basis,” he said.

In her relatively brief time at the top, Ms. McIntosh has made some unpopular management moves, including a reorganization and a decision to close some of the company’s most prestigious imprints. In 2018, she combined the Crown and Random House divisions, which strengthened the pipeline of popular nonfiction, a growing category — but also pushed out some of the company’s most influential editors and tastemakers, including Molly Stern, Julie Grau and Cindy Spiegel. If Ms. McIntosh has made Penguin Random House more streamlined and profitable, she also risks weakening its ability to spot breakout literary talent.

She has also had to navigate tragedies — the deaths of the revered editors Susan Kamil and Sonny Mehta, and the politically fraught succession that ensued. Recently, two other big-name editors announced their retirements: Gerry Howard (her former boss at Norton) and Nan Talese, who shaped the careers of writers like Margaret Atwood, Ian McEwan, Jennifer Egan and Pat Conroy. At the end of an era in American literature, it’s unclear who — if anyone — will fill the void.

One imperative is to make the next generation more diverse. The company recently published a report acknowledging that its work force is 79 percent white.

“I feel and fully acknowledge the lack of progress in our company and in our industry,” Ms. McIntosh said during a companywide video address this summer. “We are not where we want to be.”

‘Focused on the book we published 20 years ago’

After weathering the shutdown better than anyone anticipated, Penguin Random House now confronts an unexpected challenge. People are buying so many books that the two biggest printers in the United States can’t produce enough copies. Penguin Random House and other publishers have had to delay some fall titles into 2021, including books by prominent authors like Martin Amis and Jo Nesbo. The enormous print run for Mr. Obama’s memoir will likely make the logjams even worse — especially as the holiday shopping season arrives. Ms. McIntosh and others worry about a resurgence of coronavirus infections that could cause warehouse, printer and bookstore closures.

Ms. McIntosh also faces a more entrenched problem: how to keep growing when you’re already gigantic. Investors expect a rise in year-over-year earnings, and one path is through acquisitions of smaller publishers.

Another is to keep publishing huge best sellers, which can be a gamble, and an expensive one. The company’s best-selling book of 2020 is the novel “Where the Crawdads Sing” — which came out in 2018. Other current top movers include the backlist titles “Becoming” (2018), “Little Fires Everywhere” (2017), “Oh, the Places You’ll Go!” (1990), and “The Very Hungry Caterpillar” (1969).

The books make money, but the trend is worrying. Every dollar plowed into printing and marketing older titles comes at the expense of discovering and promoting new writers, causing a sort of slow stagnation of literary culture. Talented English majors don’t accept underpaid jobs in publishing to move inventory; they dream of discovering the next James Baldwin or Alice Munro.

“They’re not going to have the next wave of books sitting in the backlist if they take away the lesson that they don’t need anything other than the big books,” said Michael Cader, the founder of Publishers Marketplace, a trade publication.

For Ms. McIntosh, who absorbed a customer-centric approach during her time at Amazon, the biggest priority during the pandemic has been getting readers the books they want. And what many of them want are books that other people already bought.

So far, it’s working. “We might be focused on the book we published 20 years ago instead of the book we’ll publish next week,” she said. “When the outside world is very chaotic, you want the tried and true.”

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