Editor’s note: This explainer was commissioned by subscriber Tresa Fernandez. We always encourage our subscribers to write in and ask for Big Stories on subjects of their choice. So be sure to reach out talktous@splainer.in. 

Researched by: Sara Varghese & Nivedita Bobal

Westland: A great fall from grace

In English language trade publishing, Penguin Random House, HarperCollins and Westland were the big three houses. They published upwards of 200 fiction and nonfiction Indian titles a year. That’s until Westland was shut down by Amazon in February—despite being home to some of the biggest authors in the biz, including Chetan Bhagat and Amish Tripathi. And it was the wholly owned subsidiary of the deep-pocketed Amazon. Hence, there was great puzzlement and distress over its demise—and multiple theories on what led to it. 

Dyed in red: Westland was deeply in the red—its losses ballooning from Rs 23 million (2.3 crore) in 2017 to Rs 192 million (19.2 crore) in 2021. And its sales dipped sharply from Rs 310 million (31 crore) in 2020 to Rs 250 million (25 crore) in 2021. But to be fair, in 2020, Harper Collins chalked up even bigger losses: Rs 362 million (36.2 crore)—while Penguin had a modest Rs 46 million (4.6 crore) deficit. 

Point to note: In the book business, losses are par for the course—especially in the first ten years of the business. And many think Westland was encouraged to spend big to acquire scale and develop its catalogue by Amazon—which then pulled the rug.

But all of this talk of Westland begs the big question: why is it so hard to make money in the book biz in India?

The price point of a book

For starters, the margins in the book business are very slim. Publishers have to pay authors, distributors, retailers, printers, editors, designers, staff etc—and keep the book affordable enough to sell. And they take only a small slice of the final pie, as Westland CEO Gautam Padmanabhan explains: 

“Typically the book industry works on 25% share of net receipts. So if a book is for Rs 100, say the retailer gets 40 to 50% discount then 25% share of Rs 50 goes to the author.”

The online effect: The idea of the Maximum Retail Price (MRP) for a book has also lost meaning as book sales move online—where they are almost always offered at a discount. And the platform has the power to set the price—not the publisher. 

Connecting the numbers: As we noted in the first part of this series, the definition of success in the Indian book biz is almost laughable—which in turn limits profitability:

• Westland CEO Padmanabhan says that 80% of a publishing house’s revenues comes from 20% of its most successful books. 
• A “bestseller” in English sells between 5-10,000 copies. In Hindi, that number is 2,000. 
• And yet the pressure is to keep the price of these “bestsellers” between Rs 99 and Rs 150 to maximise sales. 
• Now factor in the fact that less than 1% of the books published sell more than 10,000 copies. 
• None of these dismal numbers add up to big profits. 

The ‘bestseller’ syndrome

Betting on big: When Westland shut down, many blamed its strategy of placing all its eggs in a handful of big names. In 2018—flush with Amazon cash—Westland reportedly paid Rs 360 million (36 crore) for a six-book deal to woo Chetan Bhagat away from Rupa Publications—making it the priciest ever acquisition in India. It also leaned heavily on the likes of Rujuta Diwekar, Devdutt Pattanaik, and Ashwin Sanghi—who along with Bhagat comprised 80% of their sales.

But, but, but: Westland’s revenues did not keep pace with its big spends. Despite having the ‘Big Five’ in its stable, its revenues didn’t move upwards as expected—dipping from Rs 278 million (27.8 crore) in 2018 (when it signed Bhagat) to Rs 251 million (25.1 crore) in 2021. In that period, the strongest year was in 2020 with Rs 312 million (31.2 crore). In comparison, Harper Collins jumped from Rs 959 million (95.9 crore) in 2017 to Rs 1.37 billion (137.5 crore) in 2020. Penguin remained mostly steady—going from Rs 2.14 billion (214.6 crore) in 2017 to Rs 2.45 billion (245.6 crore) in 2020.

The key reason: Just as Westland signed the marquee names, their popularity also began to fall. The market pivoted away from mass market leaders like Bhagat. And by 2020, the company had only one book in the top twenty list: Bhagat’s ‘One Arranged Murder’ at #6. We discussed the reasons for this shift earlier—but the main factor is the rise of streaming. As other forms of mass entertainment became easily available on our screens, Indians preferred to watch YouTube or Hotstar instead of reading popular fiction.

Point to note: The shift in tastes of the Indian reading habits are writ large in the bestseller lists of recent years. In 2020, the only fiction title in the top 20—apart from Bhagat—was Paulo Coelho’s ‘The Alchemist’ at #4. 

The catalogue matters: It isn’t a coincidence that the other two big publishers—Penguin and Harper’s Collins—are global companies. As Mint explains:

“What cushions publishers from big bets going wrong are two factors—international titles and strong back-lists. Indian outposts of global publishers, such as HarperCollins or Penguin Random House, benefit from global rights acquisitions by their operations in the US or UK. So when some of those titles become bestsellers, the Indian unit profits, without having had to spend much on that title.” 

All thirteen of HarperCollins titles on the top 20 lists between 2018 and 2021 were international titles. An Indian company like Westland had no such luxury as it was not integrated into Amazon’s global publishing business.

Also required: A strong backlist of older fiction and nonfiction. As we explained, the shift to online sales—in a time-starved world—has made people more selective about buying a book. And it pushes us towards what is familiar and safe—a tendency reinforced by online algorithms that offer you more of what you already like. As Coelho’s enduring popularity demonstrates, old is always good in the book biz. 

Point to note: Penguin and HarperCollins have a 30-year catalogue to fall upon—unlike Westland which never had the money to build a strong list until Amazon came along.

The data problem

Every entrepreneur knows that it is near-impossible to build a profitable business without good numbers to guide your decisions. The Indian publishing industry, however, does not have industry-wide data to track growth or the sales of various genres. Instead, it is reactive and relies on “observed trends.” 

Also a problem: is the lack of financial data since all the large Indian publishers are privately owned—and they don’t have to reveal their numbers: “So we have to rely on hearsay to assess how many books are sold in the country, how much revenue is generated and so on.” Also a problem: Many of the publishers are small and independent—we know next to nothing about them.

The benefit of online sales: is that they give the marketing and sales departments solid data to make decisions and hone their strategies—unlike offline distribution which is highly fragmented and unreliable. As former Penguin India VP Niti Kumar tells Scroll in a roundtable conversation:

“I see a lot of sales moving online, which enables us to get much more data on how readers are picking up books across genres and formats. It certainly sounds a little odd because so much of publishing is led by the sensibilities of the editor and the author and their conversations, but I feel that data will strengthen the process and make books more marketable. It will make marketing more tangible.”

But, but, but: What’s notable is the immediate pushback she gets from then Westland publisher VK Karthika, who tells Kumar:

“When you talk about data and what kind of data drives the market, my biggest worry is that we will end up selling a certain kind of book to a certain kind of reader because that’s what the data tells us she is interested in. So basically, it will be more of the same kind of books and genres and formats entering the market.”

There’s often anxiety at the top echelons of publishing about the pursuit of profitability—since they also view themselves as custodians of culture.

Also a problem: As with all things digital, information can always be manipulated. As Hindu Business Line notes, there are many new and self-published authors who buy reviews, ratings and even books to skew their sales:

“Alongside buying reviews, authors buy copies of their own books from designated stores online and offline, so this data is reported to media that run bestseller charts. On top 10 lists, you might notice between Paulo Coelho and Chetan Bhagat, a book you haven’t heard of, and which lingers there for a few weeks. The exceptions to this are books that legitimately sell well briefly due to some associated event such as winning a prestigious award.”

All this jugaad likely pushes buyers even more toward authors and books they already know—which in turn forces publishers to bet everything on those titles. So we end up in a cycle that perpetuates itself

The bottomline: There is a lot of anxiety over the diminishing “bibliodiversity” in the Indian catalogue. Books that could be moderately successful—the so-called midlist—are being discarded in the heated search for the next bestseller. Add to that an Indian audience that rarely buys books and now is busy chilling on Netflix—and it’s clear that a significant shift is required for survival of Indian fiction and nonfiction. Hachette MD Thomas Abraham says:

“It’s my belief that trade publishing is at an inflection point right now, and the next decade will be shaped by the choices the industry makes collectively. The outlook is still good, but it’s pretty clear that just getting books ‘out there’ cannot be a long-term strategy.”

Reading list

We strongly recommend reading the first instalment of this series to understand the big picture—and it has its own reading list. The Signal and Mint do an excellent job of decoding the fall of Westland. Hindu Business Line has a great analysis of the challenges facing the industry.