Spontaneous Auction

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[Episode 2 of The Story Grid Podcast is available here, transcript available next Tuesday]

It’s Tuesday September 3, 1996, 10:23 a.m.

After she’s hung up the phone with Bill Phillips at Little Brown, Janklow & Nesbit literary agent Tina Bennett gives herself the permission to enjoy a two-minute rush of adrenaline.

Phillips had called her back within five minutes after she’d left word for him about Malcolm Gladwell’s proposal. With little provocation, Phillip’s explained that he was tremendously enthusiastic about the notion of a Tipping Point book and that he envisioned the potential of it in much the same way she and her client Malcolm Gladwell do.

Phillips goes on to tell her of the cordial conversation he had with Gladwell over the summer and thinks the two of them could make for a compelling writer/editor combination.

It’s almost as if he’s pitching her instead of her pitching him…

He’s also assured her that he will share the proposal with his colleagues and get back to her as soon as he’s had a chance to “work the system.”

The adrenaline Bennett burns is the result of her now having an editorial “stalking horse.”

In her calls to the other upper level editors at the other first round publishing houses she’s targeted, she can now lead with the fact that one of their competitors has been in contact with her client about turning his New Yorker piece into a book. And then she can transition into the explanation that while the competing editor has a bit of a jump on them because of his or her pro-active interest in the project, Bennett thinks that you (Bill at Doubleday or Wendy at Viking or Jon at Random House or Tim at HarperCollins etc.) could be a good fit too. Would you like to take a look?

Why does Bennett lead her pitch to other editors with the fact that a competing editor is interested in her project instead of the dynamite big idea behind The Tipping Point? It’s a great idea, why not hammer it home?

Because the only opinions book editors take seriously (beside their own of course) are the opinions of other editors. Especially if the opinion is that of an editor who specializes in the same kinds of books they do.

This doesn’t mean that editors are arrogant jerks (some are, some aren’t…just like anything other buyer/seller industry) who don’t trust anyone but other members of their secret tribe.

This phenomenon (if my competitor wants it, I must take it seriously) is just normal business behavior in the buy/sell dynamic.

Say you own a store called “Scotch Tape Boutique.” (HT: Saturday Night Live, Season 4, Episode 2) You’ve got every variety of Scotch Tape available at your kiosk and you’re doing okay for yourself.

And then you get a call from the 3M sales rep, who pitches you a brand new kind of tape. Your pretty damn confident in your grasp of the tape business and you’re not really interested in hearing about yet another kind of tape that is supposed to be the new new thing to set the world on fire. You get new pitches about tape every day.

But just as you’re about to beg off, the rep tells you that your main competitor from “Scotch Tape World” is considering a huge buy. In fact he’s showing the tape around to all of his bosses in an effort to get them to back the purchase.

Don’t you think you’d be pretty interested in getting in a sample of that new tape before you completely rule out a buy?

Same thing goes for book publishing.

Bennett picks up the receiver again to begin the rest of her first round of pitches. Remember, this is 1996. The book publishing world is a vastly different place than it is today.

Back then, there were eight “major” houses, seven “secondary” houses and a scattering of small publishing houses for an agent to target.

They were:

The Big Banks of Publishing

  1. Random House (you’d pick from “little Random,” Knopf, Crown, or Ballantine as your first submission)
  2. BDD (Bantam, Doubleday, Dell)
  3. Viking Penguin (Viking was the hardcover imprint/Penguin the paperback division)
  4. HarperCollins
  5. William Morrow
  6. Warner Books (Little Brown and “Warner,” now Grand Central)
  7. Martin’s Press
  8. Simon & Schuster

The secondary houses (not in terms of prestige, but in terms of the desire/ability to spend large amounts of money in acquisitions, thus secondary financially for sellers.)

  1. Norton
  2. Farrar Straus Giroux
  3. Holt (both FSG and Holt were owned by Verlagsgruppe George von Holtzbrinck, a German family publishing corporation, and were left to operate independently)
  4. Harcourt
  5. Houghton Mifflin
  6. Grove/Atlantic (a terrific house run by publishing bon vivant Morgan Entrekin)
  7. Perseus

The small publishing houses that would not pay large advances (and still don’t pay more than $5,000 tops) but were respected and good homes for books that just didn’t find enough love at the top fifteen. Here are just a few.

  1. Graywolf
  2. Coffee House Press
  3. Milkweed
  4. Overlook
  5. Copper Canyon
  6. City Lights
  7. Melville House

Today, there are just five publishing conglomerates that control what we all think of as Big Five trade publishing.

  1. Penguin/Random House (Bertelsmann controlled)
  2. HarperCollins (News Corporation owned)
  3. Simon & Schuster (owned by Viacom, controlled by CBS, always subject to “for sale” rumors)
  4. Grand Central/Little Brown (Hachette owned)
  5. St. Martin’s Press/FSG/Holt (Verlagsgruppe George von Holtzbrinck owned)

And four secondary houses.

  1. Norton
  2. Houghton Mifflin Harcourt
  3. Grove/Atlantic
  4. Perseus

And the smaller houses too of course.

The difference between 15 opportunities (8 big banks and 7 secondary publishers) and 9 (five big banks and four secondary publishers) isn’t just a 40% drop, it represents a consolidation of cultural power into the hands of a very small number of players. Fewer editors reduces the chances of one of them having the guts to defy convention and put her career on the line for something different than what everyone else says is “good.”

What it means is that instead of an agent being able to find an enthusiastic editor like Bill Phillips among 15 calls, she has just 9 to try today. And just as enthusiasm by one editor helps an agent, negative feedback by one editor making the industry rounds (and all feedback makes the rounds through scout coverage) can undermine her.

News of a “pass” by a big name editor travels fast. Faster now than ever before.

And soon after a big pass, guess what happens next…every one else in town passes too.

So agents must not just follow the flow of information, they must manipulate it to their advantage as quickly as they possibly can.  Or…a submission that buzzed early on as a “sure thing sale” ends up as a heartbreaking Pasadena festival.

Back to the Story.

Bennett’s calls on Tuesday go great. She gets Gladwell’s proposal to the top eight nonfiction editors in the business via messenger by mid Tuesday afternoon.  No email back then, so messengers were the fastest delivery mechanism. All of the editors have promised to read overnight.

Some even do read it over night.

On Wednesday morning, Bennett gets a call from Phillips at Little Brown.

He’s run his numbers and since he’s already spoken with Gladwell back in the summer (editors always want to talk to the authors to make sure they’re not crazy or incapable of social interaction…PR is mucho important), he’s ready to go. Would she consider at pre-empt?

An agent’s answer to this question is always “OF COURSE!”

Phillips offers her $500,000 for world rights. He’s already cleared it with his publisher and the CEO of Warner Books…that’s what he spent all of Tuesday doing. This is a major offer by a major player is lightning fashion.

Internally, Bennett’s already thinking about that first edition of Henry James’ Portrait of a Lady that she’ll buy with her share of the commission.  But she can’t let on to Phillips that she’s so happy…there’s a lot to be done to make sure she’s doing the best job for Gladwell.  Bennett promises not to “shop” the offer and tells Phillips that she’ll call Gladwell and get his thoughts. But she does warn Phillips that there was a lot of interest the previous day and that she doesn’t think he’ll be alone in his admiration.

What “shopping” an offer means is calling up a competitor and telling them the exact number that another publisher has offered as a pre-empt for the book and asking if they’d top it. It doesn’t mean that an agent can’t “alert” the other editors to the fact that a publisher is trying to pre-empt and that they need to give her an answer about their opinion of the project sooner rather than later.

It’s still a gentleperson’s business where one’s word is one’s bond.  Hope that never changes.

These follow-up calls on pre-emptive offers are stomach churning for an agent. You have to walk a very tight rope. The editors who have yet to offer need to know that they better get moving.  They need to let you know that they are interested at a very high level (pre-empt’s are code for at least $100,000) or you’ll be forced to recommend to the client that they accept the pre-empt already on the table.

You usually call and just say something like, “I’ve got a pre-empt for the Gladwell project.  Where are you on it?”

And the editor would say something like, “I love it, don’t do anything before I call you back…”

The size of the pre-empt determines how much time the editors have to move. In this case, $500,000, the editors have to get back to Bennett that day…more like within an hour.

So the agent let’s them know the size of the offer by saying something like, “It could move by end of day, so I can’t make that promise.”

So Bennett makes the seven other calls and hears a lot of praise for the project. A few of them drop out, citing that old chestnut “a magazine article does not a book make.” But four of the editors are excited enough that they tell her not to do anything without coming back to them first. This is code that the editor will be going to the powers that be in their house (the publisher and CEO) to secure a ton of cash.  These are editors who have the juice to get the cash fast or she wouldn’t have sent them the project in the first place.

Bennett calls Gladwell and explains the situation. They have a pre-empt on the table, but a lot of other editors love it too.  Editors who can match Phillips’s offer or do better even…

Gladwell’s overjoyed at the pre-empt offer and wants to accept it. He thinks Bill Phillips is a good guy from their call and $500,000 is an incredible amount of money. Bennett convinces him to give it a couple of hours while they wait to hear something back from the four other editors who love the proposal too.  And they’ll want to talk to you too…

Phillips, getting pressure from his bosses for an answer on their offer, puts in a call to Bennett…

“What’s up? Is Gladwell going to take our $500,000 or not?”

Bennett explains that a few other editors requested to speak to him too (which is true). Gladwell wants to hear them out before making a decision, which is also true.  The fact that those calls will take time works to the agent’s advantage.

Phillips now knows that he’s not going to get this book for $500,000. So he asks the obvious question…”How much is it going to take to make this happen?”

Bennett says she’ll talk to Gladwell again and see what he’s thinking.

Meanwhile Random House has called Bennett and they are definitely in…in fact they also offer her a $500,000 pre-empt.

Bennett takes a deep breath. What is the best/most ethical way to handle this?

She goes to see Eric Simonoff first who explains that she should just “start an auction” right now. She checks in with Mort Janklow and Lynn Nesbit and they agree.

Because there is so much heat on the project, Bennett takes their advice and starts a spontaneous auction.

What that means is that there is no “formal” announcement. She’ll just call Phillips and Random House and the other three players and explain that she’s going to start the auction at $500,000. Right now.  All who are in will be given the opportunity to top one other in increments of $10,000. After everyone has placed their final bid, she will let Gladwell choose which house he’d like to go to. She will reserve the right for him to accept a lower bid if he feels a kinship with an underbidding editor.

So The Tipping Point‘s Spontaneous Auction begins on Wednesday September 4, 1996 at 3:00 p.m. (here’s another reminder that I’m playing fast and loose with the Tipping Point narrative for a larger purpose…to show you how big advances happen)

It goes on until late Friday afternoon when…

Bill Phillips at Little Brown “wins” the auction for The Tipping Point for a rumored $1,500,000 guaranteed advance. The stalking horse refused to yield.

Now all Gladwell has to do is expand the 4,000 word article it took him over ten years to develop into an 80,000-word book.

It has to be a book so irresistible that by his own definition, it “tips.”  In order for him to earn back the guarantee, he’ll need his as yet written book to sell 500,000 copies. (This is assuming the book was priced at around $20.00 and that Gladwell received industry standard 15% of retail price on hardcover sales, which every first time author does, or $3.00 for every copy sold).

Keep in mind that there are only about 15 non-fiction titles a year that sell more than 500,000 copies and a lot of those are holdover bestsellers from the previous year.

Exactly how many nonfiction books are published a year?  Conservatively…about 150,000.  So Phillips and Little Brown expect that Gladwell will write a book that will commercially land in the top .01 percent (one out of 10,000) of the nonfiction pyramid.

He has eighteen months to deliver.  No pressure.

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Shawn Coyne

SHAWN COYNE created, developed, and expanded the story analysis and problem-solving methodology The Story Grid throughout his quarter-century-plus book publishing career. A seasoned story editor, book publisher and ghostwriter, Coyne has also co-authored The Ones Who Hit the Hardest: The Steelers, The Cowboys, the ’70s and the Fight For America’s Soul with Chad Millman and Cognitive Dominance: A Brain Surgeon’s Quest to Out-Think Fear with Mark McLaughlin, M.D. With his friend and editorial client Steven Pressfield, Coyne runs Black Irish Entertainment LLC, publisher of the cult classic book The War of Art. With his friend and editorial client Tim Grahl, Coyne oversees the Story Grid Universe, LLC, which includes Story Grid University and Story Grid Publishing.