Any announcement of a new publishing venture is always welcome, especially the one made by Robert Miller who is leaving Hyperion to form a new venture under the wing of HarperCollins, with its promise to shake up some of the dusty traditions of traditional “trade” publishing. But a couple of assertions in the business plan just don’t make any sense. We’ll get to them in a moment.

The good news is the notion that they are going to sell books to retail stores on the basis of, you ordered ‘em, now sell ‘em! What a radical idea. As you may or may not know, most books are ordered by bookstores on a returnable basis. When my first megahit …And Ladies of the Club showed up in my local Beverly Hills bookstore and filled all the windows, I asked the manager how many books he had taken in his first order. The number was staggering, 200. He then confided they made for a great display, and if they didn’t sell he could always return them for credit. Yikes! What kind of business is this?

As a publisher I eventually got used to the numbers: print two books to sell one. And to save transportation costs on that unsold book, just ask the bookseller to rip off the cover and send it in for credit. But for a publisher, the real cost of selling books on consignment is not just the cost of printing two to sell one. It’s the fact that your receivables are always contingent. You can have millions of dollars in “sales,” but since no sale is final until the last book has been returned, it takes years to establish what the net profit, if any, is on a given title. That’s why author royalty statements always have that little item “reserved for returns,” since there always will be returns under the current system.

Now to the two items in the NY Times piece today that doesn’t make a lot of sense. First of all is the idea that in the new venture there’s going to be a partnership between the author and the publisher. Other publishers have tried this as well, but the advantage is never to the author. Why? Because if a book is a huge success, the author will end up with what she would have earned anyway. And since Miller’s new venture is also calling for no advances, the author starts out in the hole (hey, it takes a lot of time and intellectual horsepower to write a book, and nothing is more valuable than a good idea) and only gets whole if the publisher does a great job with marketing. The article says they:

“hoped to offer authors a 50-50 split of profits. Typically, authors earn royalties of 15 percent of profits after they have paid off their advances.”

But that’s not correct. Typically, authors who receive a 15% royalty on the cover price of the book end up making about the same as the publisher on a successful book. So the author, right now, is already making a 50-50 split. And that’s what an advance reflects, generally based on half of what the publisher expects the author to ultimately earn . That advance often becomes a self-fulfilling gesture, since a book with a large advance gets more marketing dollars devoted to it. Most big books are declared big books the day the agreement is negotiated, a year or more before actual publication.

Now for the final shoot yourself-in-the-foot concept which I hope Miller and his cohorts will swiftly abandon:

“The new group, which Ms. Friedman is calling a studio, will most likely publish hardcover editions priced at the low end of the market, around $20 a copy.”

The underlying assumption in this pricing statement is that all books are the same — they’re commodities. If your product is coal, or tap water, or radishes, you definitely need to be competing on price.

But books?

Some books I have read have been worth tens of thousands of dollars to me. Some books have been priceless. And many have been worth not too much, to be kind. When my client Jeffrey Fox’s first book was published by Hyperion, How to Become CEO was a small hardcover containing one valuable nugget of advice after the next. It was priced at $16.95, and became a huge bestseller. The many subsequent Jeffrey Fox books for Hyperion were also priced at $16.95, no matter what their worth! Fox’s book on pricing, Dollarizing, was published by Wiley at the price of $27.95. The Dollarizing concept has made tens if not hundreds of millions of dollars for all kinds of companies. Why shouldn’t the book have been priced at $49.95 or even $99.95? Is there a senior sales executive or CEO who wouldn’t spend $100 to add millions to the bottom line?

I hope that in tossing out all of the traditions in trade publishing that deserve re-examination, Mr Miller and Co. will take an experimental and imaginative look at pricing, and try to develop a Value method of pricing that recognizes that books are unique, and not commodities. We should always try to remember that most of us are in publishing because ideas, for the right reader, can often be priceless.