This article is republished here from Forbes
Book of the Month Club, founded in 1926, was once one of the most influential players in the book industry. But as Amazon has reshaped book selling the club’s membership has shrunk and the company has changed ownership several times. As part of Bookspan, a collection of book clubs, it was run as a joint venture between Time Inc. and Bertelsmann, until Bertelsmann bought out Time Inc. and then Bookspan was acquired by an entity controlled by media investor Jahm Najafi. In 2012, John Lippman, 43, previously an executive at music-rights firm Evergreen Copyrights, bought a majority stake in Bookspan from Najafi for an undisclosed sum with the idea of relaunching Book of the Month online. His idea: Millennial women, used to buying subscription boxes from Stitch Fix and Birchbox, would breathe new life into the outdated book club if he made the business digital and offered a handful of great books from emerging fiction writers. To do that, he shut the club down, moving its existing members members to Bookspan’s other clubs, then relaunched Book of the Month in late-2015. Today, subscribers pay $14.99 a month and get to choose among five hardcover books, with extra books available to subscribers only at $9.99. Revenue hit $2 million in 2016, and Lippman expects it to surpass $10 million this year. In an interview that has been edited and condensed, he spoke about the struggles and opportunities of reinventing a faded brand.
Amy Feldman: What brought you to buy the parent company of Book of the Month?
John Lippman: We had sold Evergreen to BMG Rights Management [a division of Bertelsmann], and then I was doing some other entrepreneurial and deal-oriented work. An investor who owned the business and had bought it from Bertelsmann called and asked if I was interested in taking it over. The timing worked out.
Feldman: Why did you want a struggling book club?
Lippman: I have always loved books and authors. I was interested in taking some of the things I had learned in the music business and applying it to books. With Amazon’s dominance, the project was clearly going to be challenging. But what I thought was interesting was that there was not a lot of innovation in the space because nobody was trying. Amazon is not a very good place to discover what you will like. I saw the opportunity to redo Book of the Month in a way that would make it relevant again.
Feldman: How much did you pay for the acquisition?
Lippman: I don’t want to disclose that. It was a lot of sweat equity, a lot of work. The thing was troubled in a variety of ways.
Feldman: So if you didn’t buy it, it wouldn’t have survived?
Lippman: I think if I didn’t do it, it probably wouldn’t exist today. That would be pretty sad. It’s 92 years old, and it was just getting crushed alongside other bookstores.
Feldman: Bookspan had a lot of different clubs. Did you buy all of them?
Lippman: It is all the different ones. The one we’re focused on is Book of the Month. We shut it down completely and relaunched from scratch in late-2015. It had a great legacy and very high name recognition. We thought there was a great opportunity to bring the brand into the modern era. The thing we relaunched is very different than the old club. It has the same mission but a different business model. We couldn’t do it halfway. We had to take a risk.
Feldman: How did you come up with what you launched?
Lippman: We started with what was missing from the consumers’ perspective. We wanted to have a very focused, limited selection of books we believed in each month, and we wanted to shine a spotlight on books that otherwise wouldn’t get attention. Most of the attention goes to the most famous authors and it has become very difficult for up-and-coming authors. We had some debates about how few books we could pick each month and still have a business. Can you only have one book? Probably not. We figured five was focused enough. It gives us enough breadth of choice each month that each person can find something they like.
Feldman: You use judges to help pick the books. How did you come up with that idea?
Lippman: Book of the Month Club always had done that. In 1926, they were more authoritative, they were people who were arbiters of culture. We interpreted it a little differently. We don’t come from an authoritative perspective, but with the idea of getting a lot of voices.
Feldman: Are you doing similar relaunches of the other book clubs?
Lippman: The other clubs serve our members. We haven’t done a deep dive. There is one we are deep into preparing for a relaunch. That is children’s Book of the Month. We may do it under a new brand identity. It’s the one property that you could be at a dinner or a cocktail party, and people will say, ‘Please do children’s.’ We’ve also been in discussions with various media companies about launching book clubs for them.
Feldman: How many different book clubs are there?
Feldman: Does it still make sense to have 15 of them?
Lippman: The ones we have make sense. There were some we combined or shut down. There’s a consumer base at the other clubs and we continue to serve our members there. We don’t want to dilute our focus on Book of the Month to the extent we do other relaunches.
Feldman: What happened to the previous members of Book of the Month when you shut down?
Lippman: We moved those members to some other clubs. Most of those customers were in their 60s and 70s. Now it’s 95% women, and most are in their 20s and 30s.
Feldman: Why did you target women in their 20s and 30s?
Lippman: We wanted to do fiction, and we wanted to focus on up-and-coming authors. Older readers tend to have favorite authors who have written many books, but younger readers are looking to find their favorite authors. And generally speaking it is younger women who sign up for subscription services like Birchbox and Stitch Fix. That is an audience that shops online and has enthusiasm for subscription lifestyle services.
Feldman: How many members does Book of the Month have?
Lippman: We have about 100,000 active members. We are also a marketing platform for new books. We have 330,000 Instagram followers and we’re doing millions of impressions on Pinterest and we have celebrity tie-ins. We’re running TV ads and subway ads. We are in the New York City subways promoting Book of the Month and the books.
Feldman: What are revenues?
Lippman: In 2016, the first year we launched, we had roughly $2 million. This year, we’ll finish between $10 million and $15 million.
Feldman: Are you profitable?
Lippman: We’re investing in growth at this point so we are not profitable.
Feldman: How long will it take to become profitable?
Lippman: It depends how fast we grow. We have the ability to be profitable at a scale that is not that much bigger than we are now.
Feldman: Explain to me more how the business model works.
Lippman: We work with all the major publishers and many independent publishers and identify the books that will be best for our members. We negotiate a license agreement where we pay in advance for the rights to produce the book ourselves. We take the risk that we may print a dud or have extras. Throughout the month we reprint titles, and our most popular titles may be reprinted several times.
Feldman: How did you convince consumers that this was a brand they want?
Lippman: We have tried and continue to try every approach to get our message out.
Feldman: What has worked and what hasn’t?
Lippman: Facebook, Instagram and Pinterest work very well. We’ve experimented with other marketing channels. With messages, it’s a mix of focusing on the specific books we’re featuring and explaining the brand. It’s a little tricky to balance those two. Sometimes people will see the Tom Hanks’ book [Hanks’ “Uncommon Type: Some Stories,” was a November pick] and say, “I want to get that.” In other instances, for the club to scale we have to tell what our mission is.
Feldman: What have been the biggest challenges of bringing back the brand?
Lippman: Ooff. What has not been a challenge? Everything has been hard-earned. Building momentum from zero is very, very hard. I have always meant to look up who that very first person was to get a membership who wasn’t friends or family. There are also lots of product things. Figuring out what kinds of books members love is a challenge that never ends. And figuring out what kinds of features are important. There are many things we can do for that audience.
Feldman: Like what?
Lippman: Social. We have a discussion forum. Ebooks we can easily do, but our members haven’t clamored for it. Even the shopping experience, and how narrow or wide to make it for our members.
Feldman: What kind of extras do you offer now?
Lippman: We often have one or two extras, which could be a backlist book or a book we didn’t think was exactly right for the whole club. We did a promotion with Josh Gad who is starring in “Murder on the Orient Express.” I don’t think you should watch the movie and read the book, so we said, “Let’s pick our other favorite Agatha Christie and promote it.” We picked “And Then There Were None,” and did a joint promotion with Josh on Instagram. Sometimes we do celebrity guest judges. We had Gabby Sidibe in October, and also sold her book because we were working with her. Our main focus is the five selections on the site, but there are a couple hundred books total.
Feldman: Why was it so hard for the previous owners to bring it back?
Lippman: The business was declining and Amazon was rising. It’s hard for large organizations to embrace the amount of change that is fundamentally needed to transition a property instead of saying, “What if we tweak this?” I made no compromises. People ask, “What about the old members?” You have to set aside the heritage and mission and all that stuff from the past and look into the future five or 10 years. It was almost a startup.
Feldman: What’s the long-term potential?
Lippman: There’s no logical reason it can’t be 500,000 people. Even at that size it would be a very small fraction of the book business. In order for the club to be successful, it doesn’t have to be huge. We’re a very small portion of the industry, but a very large portion of the books we sell. Between 75% and 80% of the books we feature are by relatively unknown authors, and about 80% of the authors are female. We sometimes sell 15,000 or 20,000 copies, and you can see that everyone else sold 5,000 copies. We are shining a spotlight on a limited number of great books.
Feldman: Tell me more about how you do that.
Lippman: Because we are focused on this audience, we have opportunities to market a book that you cannot do by yourself. We featured Ruth Emmie Lang’s “Beasts of Extraordinary Circumstance.” We’re running subway ads, and one of the frames features that book. Nobody was going to run New York City subway ads for that one book, but we found it and believed in it. Last year’s most popular book was Bryn Greenwood’s “All the Ugly and Wonderful Things.” At the end of the year, it won our book of the year award. We reprinted a special edition with a special book cover. Not only did a surge of our members buy it, but it hit the New York Times bestseller list just after we announced it won. That was very rewarding. We are helping launch a career.