Read all about it: CFO strategy from Simon & Schuster
Publishing is dominated by a few established players. Laurence Eastham hears how Luke Shaller CA, CFO at Simon & Schuster UK, plans to beat the competition ahead of the company’s centenary in 2024.
Luke Shaller CA loves the publishing industry. “You’re talking about books all day. If you’re a lover of books, that’s pretty much bliss,” says the CFO at Simon & Schuster UK. Shaller has worked in his dream sector for 11 years, having spent a decade at HarperCollins before joining the venerable publisher in the newly created CFO role in June 2019.
A restructuring at Simon & Schuster UK by CEO Ian Chapman aimed to place the finance team at the centre of the business. The role of financial director was swapped out for a CFO who would encourage collaboration, especially with teams that had previously seen the relationship as purely transactional.
“My responsibility is not just looking after the finances,” Shaller explains. “I oversee commercial areas, including production, contracts, rights, IT, office support and our third-party distribution business. It’s a broader role.”
Finance has traditionally been an awkward fit in creative industries. Shaller has spent much of the last 16 months walking back that stereotype – “that risk-averse person in the corner” – and starting relationships afresh.
It’s not my place to tell an editor whether or not a book is going to sell, but I can inform that editor with a bit of risk analysis.
“In business, finance staff are often viewed as a potential blocker or as being aside from the main business,” he adds. “As a finance professional, one of the challenges is to show you’re not a blocker – you’re a catalyst – and to convince them you’re passionate about what they’re doing and can help them make it even better.
“Influencing is a really important skill to have in a creative industry because it assists in decision making. It’s not my place to tell an editor whether or not a book is going to sell, but I can inform that editor with a bit of risk analysis. Being able to have that conversation in a really honest and open way is very important.”
Since its founding in 1924 in the US, Simon & Schuster has published some of the world’s most influential books. Titles include How to Win Friends and Influence People by Dale Carnegie, Lonesome Dove by Larry McMurty, Catch-22 by Joseph Heller, and Watergate exposé All the President’s Men by Carl Bernstein and Bob Woodward. In recent years, it has added bestsellers by Philippa Gregory, Bruce Springsteen, business authors Phil Knight and Ray Dalio and the successful Dork Diaries children’s series to that list.
We’re lucky that we have such a well-known brand but, at the same time, we are in no doubt that we will continue to drive sales by publishing great books.
Shaller is keenly aware of the firm’s storied reputation but does not feel hamstrung by expectations. He explains: “I’m a strong believer that whatever business you work for, you represent what that business is and what it stands for. We do approach a lot of our decision making from the question of ‘How are we going to be perceived in the market?’ because people have an expectation about what Simon & Schuster is. That’s never something that would lead to suboptimal decision making, but it’s always in the back of your mind. We’re not sitting with every book we’re buying asking ‘Is this a Simon & Schuster book?’ But, subconsciously, we all have our idea of what it means to be part of a business like ours.”
For Shaller, the brand’s main value is in establishing and strengthening business relationships, rather than directly influencing the titles that customers choose to purchase. “It counts for something, in terms of cache, when we talk to retailers, authors or agents,” he notes. “Newspapers pick up the phone to our publicists – they trust us if we say we have a huge book. For many readers, that sense of branding doesn’t actually open doors. In many cases, the author is the brand – or maybe the retailer from which they’ve bought the book.
“We’re lucky that we have such a well-known brand but, at the same time, we are in no doubt that we will continue to drive sales by publishing great books.”
The business model of publishing houses has not changed for hundreds of years. “An author brings a great book idea to a publisher, and that publisher helps disseminate it and get it into the hands of readers. We try to make some money from that process, and we try to make some money for the author, and we try to ensure that we’re producing the best possible product,” Shaller says. “That hasn’t changed, and it will continue to drive publishing houses. It means that publishing is sometimes seen as an old-fashioned, archaic industry, but my experience has been that we are very agile.”
Publishing houses are second to none in their ability to create not just publishing successes, but publishing careers.
Shaller says the industry adapted to the digital revolution much quicker than its music counterpart, for example, and that the rise of self-publishing has only brought the value of publishing houses into greater focus. According to the Publishers Association, digital sales made up £2.8bn of the £6.3bn generated by publishers in 2019. It’s also a market that is growing faster (4.4%) than print (2.8%).
“Publishing embraced digital and we were able to make it work. We asked questions about digital rights management and made sure it wouldn’t lead to massive piracy. We’ve been able to respond to customer demand without sacrificing the basic principles of getting a book out and protecting its earnings,” he says.
“Over the last decade, publishers have shown we provide a vital function by creating bestsellers through experience and expertise – that knowledge of how to deliver a marketing campaign and help an author hone the text itself to make the best possible book. Publishing houses are second to none in their ability to create not just publishing successes, but publishing careers.”
Risk and reward
The creation of the CFO role – and the hiring of the commercially minded Shaller – is one of the more recent steps in Simon & Schuster UK’s evolution. The company has also brought on new heads of adult fiction, adult non-fiction and children’s books, as well as hiring new publishers. It all forms part of “pretty aggressive growth plans” for the future.
“Publishing books has been a pretty steady market for many years. It’s a very mature market and there are a lot of mature businesses,” says Shaller. “Achieving growth, particularly top-line growth, is difficult as you need to take a few risks and buy some big books.”
In publishing, we have to get comfortable with the idea that a lot of the decisions that we make may lead to losses on those particular books – but when a hit comes along, it makes them all worthwhile.
The challenge for Shaller and the other new recruits at Simon & Schuster UK will be in finding that perfect level of risk which helps power the company forward without entering the territory of reckless spending. “Businesses that facilitate content creation have to take a fair amount of risk upfront on a product,” he says. “In publishing, you buy a book based on what you think it is worth. A lot of publishers have deep pockets and when you get a book that everyone believes will be a hit, they are prepared to really put money down.
“The danger is that it becomes a bit like casino operations. You take a lot of risk, but you have to do so with some science behind it. In publishing, we have to get comfortable with the idea that a lot of the decisions that we make may lead to losses on those particular books – but when a hit comes along, it makes them all worthwhile.
“As a finance person, you have to make numbers speak to people without instilling fear. You’ve got to find a way to enable risk-taking in a somewhat measured and controlled environment with the right guardrails around it. It’s about making sure that you’re keeping those decision-making conversations moving in the right direction.”
Shaller expects to see the effects of this shift in strategy from 2021, when the first titles acquired by Simon & Schuster’s new publishers begin to hit the market. Of course, there are plenty of challenges to keep Shaller busy in the meantime. Three months of lockdown placed significant pressure on one of the most important routes to customers – the high street. Factor in the closure of the major wholesaler Bertrams in June 2020 and there’s a growing worry that the pandemic may have stripped the sector of much-needed competition.
“We believe in a varied customer base, where we have supermarkets, Amazon, high street retailers and independent bookshops. What we’ve seen during lockdown has been a lot of those physical channels being really challenged,” says Shaller. “Right now, we’re hopeful that those retailers get back to operating at the levels they were before lockdown. I don’t think it serves anyone’s purpose if there’s one dominant player that survives and the others fall by the wayside.”
The publisher’s year has been bolstered by two bestsellers, both discussing one particular US President. The headline-generating The Room Where It Happened by John Bolton was published in June, despite attempts by the Trump administration to block it, quickly followed by the equally controversial Too Much and Never Enough by presidential niece Mary Trump in July. Another Trump deep dive, Rage by long-time Simon & Schuster author Bob Woodward, came out in September and caused a similar stir.
Shaller points to these bestsellers as confirmation that, despite the challenges faced in the physical distribution of books, demand has stayed strong during the pandemic. “For the last however many hundred years, literature and reading has persisted as an almost recession-proof product. No matter how tough times get, parents still want to read books to their children and people still want to read the latest thrillers and biographies,” he adds. “We’re lucky that we’ve got a product that people feel is a necessity.”
The numbers support the theory. Nielsen found that two-fifths of adults were reading more in lockdown, with the average adult almost doubling their reading time to six hours a week. The Bookseller website reported that UK shops sold four million books in the week after reopening, a 30% rise on the equivalent period in 2019.
Shaller’s love of publishing is evident, but he never thought it would lead to a career. Trying to choose between studying English literature and mathematics at university, the teenage Shaller decided that the latter was the more pragmatic option.
“I grew up in Middlesbrough, where there isn’t a media industry. There wasn’t a sense that a love of English could lead to a career in publishing,” he recalls. “It wasn’t until a recruiter sent me the description of the HarperCollins job that I thought it could be a career for me.”
This encounter with the recruiter led to his departure from EY in 2009, enabling Shaller to combine his passion for literature with the skills he had developed since joining EY as a graduate. In fact, those three years with the Big Four firm would make his transition to a new sector all the smoother.
“The training on the job at EY, combined with the very intense education that you receive, was hugely important in my development. You’re not learning about something in isolation, you’re actually able to put it into practice,” Shaller explains.
“Without the CA qualification, I wouldn’t be where I am now. It’s a way of proving a level of exposure to education, training, technical detail, ethics and continuing professional development. You know what you can expect from a CA. We spoke about brands – that’s the value of the ICAS brand.”