Financial Planning: an interview with Peter Tam
Recent events in the international economy have placed many businesses in dangerous territory, but despite the economic slowdown, Iceberg Publishing remains on sure footing. We talked to Iceberg Partner and Chief Financial Officer Peter Tam to learn more about the company’s plans to weather the storm.
It’s no secret that Canada and the world are facing an economic downturn right now. What position is Iceberg in to deal with the situation?
We’re in a very strong position because of our business model. Our revenue is driven primarily by direct sales and web sales, so our profit margins have always been generous. We also avoid unnecessary overhead, and we have very loyal readers. That insulates us against many of the problems this economic downturn might cause.
Can you elaborate on some of the specific differences that provide that insulation?
Unlike most traditional publishers, we use smaller print runs and a direct distribution model that ensures we maximize our per-book profits. If you print 5,000 copies of a book, you have to warehouse and usually distribute them exclusively through a third party. That can cost as much as 60% of the cover price. So if a reader buys a $10.00 book, the publisher might only get $4.00. Out of that they pay for printing, the production staff, editors, the author, and office expenses. There’s not much room for profit.
By contrast, we tend to run no more than 1,000 copies of a book at one time. That relieves the warehousing and distribution pressures, and allows us much more flexibility. We print what we need, sell through the run, and print again. Because of digital print technology, we can do this at a reasonable per-unit cost. And when we sell direct to readers, we keep 100% of the cover price.
So your model can adjust specifically to match demand?
Yes. Our model has been very successful for the past six years, and it’s robust enough and flexible enough to endure. If demand for a title goes down, we’ll simply shorten our print runs until it picks up again.
Have you changed any plans because of the economic situation so far?
We had some things in the pipeline, but we’ve decided to take a step back and watch the marketplace. A few of these books are ready to go into production right now, but we’re waiting to make sure we maintain our financial flexibility in the coming months.
Are these delays going to affect new books in existing series?
Those are all still on schedule. We’ll have new books in Defense Command, His Majesty’s New World, and the Equations in the spring and summer of 2009. It’s the brand new projects that we’ve put on hold. Launching a new series, even a spinoff, can tie up resources in marketing and events. We’re being cautious about making those sorts of expenditures, so that we can continue to guarantee that we’ll remain on schedule with our existing series.
Can we expect to see some of these new projects later in 2009?
We’ll read the marketplace and decide when to launch them. One thing we don’t want to do is launch a series at time when people are reluctant to look into new titles. That could undermine the book’s chance of finding its audience, and hurt its long-term potential. It’s bad for business, but it’s even worse for the author who’s working hard to promote it.
So there will be delays in new projects, but current series are staying on schedule?
What’s the level of confidence among the partners, that Iceberg will weather this period of financial uncertainty?
We’re quite confident. We have the stability and the flexibility we need to allow us to come out the other side [of the slowdown] as strong or stronger than ever before.
For more information on Iceberg’s titles and upcoming new releases, visit www.icebergpublishing.com.