Can This Man Save Publishing?

One mild winter morning in early 1994, as jack Shoemaker sat in the home office of his Berkeley bungalow, a room dominated by a poster announcing i shall always love the west, the telephone rang with a summons from the opposite coast. A corporate headhunter wanted Shoemaker, a renowned book editor, to meet an unnamed someone in Washington, D.C. As if the invitation were not cryptic enough, the headhunter added, “You won’t know this person.”

Baffled, Shoemaker demurred. Two years earlier, he had closed North Point Press, the acclaimed literary imprint he had founded, nurtured to fruition, and then disastrously overexpanded. His current position, as the West Coast editor for Pantheon Books, did not exactly exhaust his talents, but it allowed him to savor such Bay Area pleasures as the year-round garden beneath his window, vibrant this day with seasonal roses and grasses.

The headhunter called several times over the next few days. Finally, he identified his employer, a lawyer named Frank Pearl, and said that Pearl was interested in learning about publishing. Intrigued, Shoemaker took the flight to Washington that had been reserved for him and checked in to the room that had been booked at the luxurious Hay-Adams. Then he went to a suite of offices a few blocks from the White House to meet his host.

Bearded, balding, and just past 50, Pearl spoke with admiration about Evan Connell’s book about Custer, Son of the Morning Star, a surprise best-seller that gave North Point fame and cachet. He asked about Shoemaker’s background, North Point’s history, the publishing industry, even his guest’s taste in music, art, and cuisine. Rarely had Shoemaker been in the presence of such a ravenous curiosity.

At last, Shoemaker asked a question of his own: “What book would you most like to have published?”

“Marcus Aurelius’s Confessions,” Pearl answered.

Shoemaker told himself, This is the least frivolous person I’ve ever met.

Before the visit ended, Pearl revealed more of himself and his plans. He was a lawyer by training and an investment banker by profession – albeit one too circumspect to add that he had earned tens of millions of dollars doing leveraged buyouts. Now he was considering launching a publishing company. What would it take for Shoemaker to lead it?

It would take four or five more trips to Washington, each one spent in hours of conversation. All the talk reassured Shoemaker that Pearl shared his own commitment to literary publishing and furthermore had pockets deep enough to absorb the risks that had even major publishers sliding into financial trouble. In June 1994, Shoemaker resigned from Pantheon and moved to Washington as editor-in-chief of Counterpoint Press. Within twenty months, the upstart imprint had captured both the National Book Critics Circle Award and the PEN/Faulkner Award for Fiction for Gina Berriault’s short-story collection Women in Their Beds.

These laurels were only the beginning. In the past year, Pearl has spent perhaps $60 million assembling a publishing enterprise called Perseus Books that is entirely devoted to the sort of literary fiction and serious nonfiction that the conglomerates increasingly deem endangered species. To Counterpoint, Pearl has added one imprint oriented to history and politics (PublicAffairs), one devoted to African-American culture (Civitas Books), and two properties that were being closed or drastically shrunk by their previous owners (Basic Books and the Addison Wesley Longman General Publishing Group). He has attracted to these ventures several distinguished former publishers from Simon & Schuster, Times Books, and HarperCollins – all of them disturbed by the excesses of corporate publishing – as well as one of the nation’s foremost public intellectuals, Henry Louis Gates Jr. Perseus’s roster of authors includes Berriault, Connell, Cornel West, and National Book Award winner Orlando Patterson. Now Pearl has his first bestseller, Iris Chang’s The Rape of Nanking, which currently sits at No. 11 on the Times’s list and fetched $500,000 for paperback rights.

This coming fall, Perseus will release a unified list of 60 new hardcover titles, as many as an established house. Undergirding these books is a paperback backlist that brings in annual revenues of roughly $13 million, a rare asset indeed for a new publisher.

Through all this activity, the 54-year-old Pearl has achieved one more goal – being a supremely connected man who remains as obscure to the public as he was four years ago to Jack Shoemaker. In the past twenty years, even as he has executed landmark LBOs, donated hundreds of thousands of dollars to the Democratic Party, served as a trustee of the Kennedy Center and on the trustees’ council of the National Gallery of Art, and become a significant figure in publishing, he has rarely uttered more than a sentence in the media. The standard reference book for venture capital, Pratt’s Guide, does not list Pearl among its 3,500 entries. Neither the Washington Post’s book critic, Jonathan Yardley, nor a major literary agent in the capital, Rafe Sagelyn, had ever heard of Pearl. Perseus’s own press releases sometimes omit his name.

“Frank is one of those people who enjoy anonymity,” says Leonard Slatkin, the conductor of the National Symphony Orchestra and one of Pearl’s closest friends. “He’s one of the least self-promoting people I know.” Indeed, Pearl declined repeated requests to be interviewed for this article, maintaining that it would be “premature” and “unbecoming” to speak before Perseus Books compiles more of a record. He conceded that his aversion to publicity might strike others as “phobic.” But regardless of his reasons, his fierce privacy belies his public impact. “He can bring not only business acumen but taste and culture, and you rarely find people with both,” says James Wolfensohn, the president of the World Bank, who recruited Pearl for the Kennedy Center’s board. “And he gets things done.”

The perils of publishing are by now well documented. Net sales of adult hardcover books, as measured in dollars, fell by 5.6 percent from 1994 to 1995, 4.4 percent from 1995 to 1996, and 4.8 percent in the first ten months of 1997, according to statistics from the Association of American Publishers. Unpaid returns, again in terms of dollars, stood at 35.9 percent in 1996.

Few publishing houses escaped the implications. HarperCollins canceled the contracts of 106 authors last June and two months later announced a write-off of $270 million. Simon & Schuster, Random House, and Penguin Putnam all wrote off huge losses in 1996. Ultimately, HarperCollins decided to shutter Basic Books, an imprint esteemed for publishing scholars from Sigmund Freud to Stephen Carter, and Addison Wesley downsized the trade-publishing operation that had broken out such authors as Melissa Fay Greene (Praying For Sheetrock), H. G. Bissinger (Friday Night Lights), and Robert Bly (Iron John).

Against such odds, Pearl still expects to make a profit, but without the reliance on blockbusters that has undermined so many larger publishers. Instead, Perseus will depend on disciplined spending and lean staffing. Drawing on models as varied as small-press collectives and the Random House behemoth, it will provide a single back office to serve its various imprints while outsourcing such tasks as design and legal representation. And it doesn’t hurt that the chill among larger publishers is driving down the advances for important authors into Perseus’s modest range, which runs roughly from $7,500 to $250,000.

Even potential competitors of Frank Pearl and Perseus Books applaud his effort. “It’s a brilliant idea, and it’s healthy for the business,” says William Patrick, the senior executive editor for Henry Holt and formerly the editorial director of the general-books division at Addison Wesley. “Pearl and Perseus are the smart people who see that if the conglomerates are pruning off these worthy branches, then, hell, we can grab them, collect them, replant them, and make them grow under a different roof.”

During a celebration of the National Gallery of Art’s fiftieth anniversary in 1991, its senior curator of paintings, Charles Moffett, found himself admiring the same Italian canvas as a man he faintly knew from other gallery events, Frank Pearl. As they talked for the first time, Pearl exhibited such knowledge that Moffett thought him “as well-versed as an art historian.” Before separating from the curator, Pearl mentioned his interest in someday publishing art books.

Moffett remembered that comment a year later, when he became director of the Phillips Collection, a small and prestigious art museum in the capital. The Phillips had assembled all 60 paintings in the black artist Jacob Lawrence’s “Migration Series” for the first time in decades and was preparing to send its exhibit across the country. “Mr. Pearl,” Moffett told him on the phone, “I think we’ve got a project that might interest you.”

If Moffett had merely been seeking a financier, he could not have chosen better. After taking his law degree from American University in 1969, Pearl had made millions first as a commercial lawyer with Lane and Edson, representing Washington’s wealthy Cafritz family, and then as a partner in the investment firm Wesray, with former Treasury secretary William Simon. Wesray essentially launched the LBO craze with its 1982 purchase of Gibson Greetings – having put just $1 million of its own cash into the $80 million acquisition, Wesray took Gibson public sixteen months later for $290 million – and netted a $750 million profit in the 1986 LBO of Avis.

Pearl retired in 1988 and spent a year sailing around the world with his wife in their 92-foot sloop. Upon returning to Washington, he devoted much of the next four years to volunteer work, endowing everything from cancer research to meals for the homeless to college scholarships for poor children through a foundation he named for his grandmother Jennie Zoline.

But Moffett was right in thinking that Pearl was more than a checkbook with a conscience. Pearl’s passion for the arts can be traced back to his childhood in Chicago, when his middle-class parents treated him to painting classes at the Art Institute and tickets for the Lyric Opera and Chicago Symphony Orchestra. His adult tastes ranged from Italian and Northern Renaissance oils to Vaughan Williams compositions to the blues of Mose Allison. He endowed a piano scholarship at Washington’s Duke Ellington School for the Arts in the name of another favorite, jazz musician Michel Camilo. And in the years to come, as a Kennedy Center trustee, he would immerse himself in projects as disparate as restoring the concert hall and reorganizing the symphony.

Still, not even Moffett may have realized that Pearl was treating the prospective book on Jacob Lawrence as his firsthand education in publishing. By himself or with the staff of his new investment company, Rappahannock, Pearl debriefed experts in distribution, formulated financial projections, and recruited a respected Knopf editor, Susan Ralston, to serve as managing editor.

“He took an active interest in all aspects,” Moffett recalls. “Design, choice of typeface, color separations, bids from binders. He was thoroughly versed in all the details.”

“When we were sitting around the table with lunch sent in, he’d ask me questions about the book business,” says Ralston. “About the difference between keeping a book alive in hardcover and keeping it alive in trade paper. About the effect of chains. And this was more than four years ago. He felt that if sound business principles were applied to trade publishing, it could work. And I certainly didn’t disagree.”

The resulting book, Jacob Lawrence: The Migration Series, qualified as a success in all the familiar ways, earning favorable reviews and selling out its first printing. More than that, though, it enticed Pearl more deeply into publishing. And it introduced him to a valued associate for the future.

Peggy Cooper, a woman colloquially known as the “culture minister” of black Washington, was at this time married to Conrad Cafritz, one of Pearl’s most important law clients. Hearing of the Jacob Lawrence project, she arranged for Pearl to meet her friend Henry Louis Gates Jr. Not only did Gates write the introductory essay for the book, but he struck up an instant friendship with Pearl.

“He was an intellectual as much as a businessman,” Gates remembers. “I liked talking to him about ideas. It was like talking to one of my colleagues. It was clear he was a person of the book.”

Moving down a receiving line on the White House lawn in September 1994, Eli Segal found himself staring into a strangely familiar face. “I remember you,” he blurted out as he shook the man’s hand. “You’re Frank Pearl. I met you 30-odd years ago at the University of Wisconsin.” Segal was at the White House because he was the founding chief executive of AmeriCorps, the community-service program President Clinton was launching that day. Pearl merited his invitation because of his extensive voluntarism – and also perhaps because of his $100,000 donation of “soft money” to the Democratic Party in 1992. (He would make a comparable donation in 1996.)

Pearl arranged several dinner parties at his home in northwest Washington at which Segal could plead AmeriCorps’s case with selected members of Congress. And when Segal left AmeriCorps in 1995 to return to private business, Pearl gave him free space in his offices.

From that vantage point, Segal could see how seriously Pearl took Counterpoint Press, which was headquartered in the same building. More than once, he heard Pearl say, “I don’t view publishing as a hobby.” The word he preferred was mission. So when Segal learned in October 1996 that his old friend Peter Osnos was resigning as the publisher of Times Books to try launching his own publishing house, he thought here was someone Frank Pearl ought to meet.

In twelve years at Random House, Inc., Osnos had published such authors as Natan Shcharansky, Boris Yeltsin, Tip O’Neill, and Stanley Karnow, counting on the occasional bonanza and a backlist of crossword-puzzle compilations and consumer reference to supply the profit margin his superiors dictated. The year 1995 persuaded him the system could not survive. Despite four best-sellers that collectively sold 650,000 copies – Robert McNamara’s In Retrospect and Jimmy Carter’s Always a Reckoning in hardcover; The Contract With America and the papal encyclical The Gospel of Life in trade paperback – Times Books barely broke even. Facing a shortfall of several million dollars on a $30 million budget in 1996, Osnos flung what he calls a “Hail Mary pass” with President Clinton’s Between Hope and History. While the book-length essay made money because the president received neither an advance nor royalties, it sold only 140,000 copies of the nearly 500,000 printed.

“The system for publishing my kind of books had clearly run aground,” says Osnos. “And it had nothing to do with the books. It had to do with economics.”

Osnos came to believe that the audience for serious books was simply too limited to sustain the customary author advances and corporate overhead. Such well-reviewed Times Books titles as Jeff Birnbaum’s The Lobbyists, Fred Emery’s Watergate, and Larry Sabato and Glenn Simpson’s Dirty Little Secrets sold fewer than 20,000 copies each in hardcover. Yet Osnos recognized that even a generous contract for a book with such limited earning potential – a contract of, say, $100,000 – “is minimum wage for the author after you’ve paid your agent and spent four years on it.”

So Osnos devised a system of syndicating the cost of a book contract among underwriters, much as Broadway shows are financed. In the Osnos scenario, an author could receive a contract of $250,000, with only a portion contributed by the publishing house. The rest might come from the PBS series Frontline, a partner of PublicAffairs, in exchange for the rights to produce a companion documentary; the 20th Century Fund, in consideration of a conference tied to the book; and even an online magazine like Salon, for serialization. By thus spreading the risks (or rewards) proportionally among the partners, Osnos could pay an author enough to support years of research and writing. “Can I do that for hundreds of books a year? No,” Osnos says. “Can I do it ten or twelve times a year? Absolutely.”

Just as Eli Segal had anticipated, the plan found a ready advocate in Pearl. Within hours of first meeting Osnos in October 1996, Pearl wrote to him, “I’m struck by how common our vision is.” Osnos recalls, “I was comforted by the degree to which Frank understood the economics of the business – that this was a tough business, that it needed substantial changes to be viable.”

The pair met six more times in the following months. Ultimately, Pearl bought a majority interest in the nascent PublicAffairs, while Osnos landed such minority shareholders as ABC anchorman Peter Jennings and cable-television executive Robert Rosencrans.

The new company, announced to the public in May 1997, gave Pearl a line of books on politics, history, and social issues to augment Counterpoint’s strengths in fiction, religion, and the natural sciences. But Pearl’s plans didn’t end with Counterpoint and PublicAffairs. He envisioned a number of editorially independent houses, each with a precise, focused identity and the commitment to publish a limited list with great care – something like a constellation of North Points. In keeping with the North Point model, the model Jack Shoemaker had mistakenly abandoned in the heady wake of Son of the Morning Star, Pearl would hold his staff-to-book ratio to about 1:4, as compared with the 2:1 common in large houses. But unlike most independent publishers, which either sacrifice the economies of scale or have to sell out to conglomerates to get them, Pearl’s imprints would share such back-office functions as accounting and subsidiary rights in the way Random House’s constituents do.

As a business, Perseus still lacked a top and a bottom. The bottom of a publishing house is its backlist, a body of trade paperbacks that have long since recouped their advances and are still generating steady, predictable sales. The top is its CEO, a role Pearl did not want for himself.

Charles Hayward, a former publisher at Simon & Schuster and Little, Brown, was consulting for Perseus in 1997 when he introduced Pearl to Jack McKeown, a protégé from Hayward’s Simon & Schuster days. McKeown had gone on to HarperCollins but had quit recently after being passed over for the presidency of the company in favor of Anthea Disney, an executive whose bona fides included stints at TV Guide and the tabloid-TV show A Current Affair.

When they met, Pearl praised the serious nonfiction McKeown had published at Simon & Schuster, extolling in particular David McCullough’s Truman and James Stewart’s Den of Thieves as books that “moved the culture.” And McKeown, like Shoemaker and Osnos before him, perceived in Pearl a businessman unbeholden to the traditional economics of publishing and eager to learn from the harrowing experiences of this cast of corporate refugees. “You couldn’t spend five minutes with Frank Pearl,” McKeown remembers of their initial encounter, “and not know there was a first-rate financial mind at work.”

McKeown began consulting for Perseus in May 1997, and he became CEO four months later. From the moment he arrived, he set about acquiring a backlist “to give the revenue stream to grow your front list.” A lucrative one became available last spring when HarperCollins announced it would discontinue its Basic Books imprint. From McKeown’s years at HarperCollins, he knew that Basic’s backlist provided half the subsidiary’s annual revenue, one of the highest proportions in the industry. Basic’s titles in the social and behavioral sciences sold especially well to library, academic, and institutional markets, far from the caprice of the superstores. By late August, Pearl had signed a letter of intent to buy Basic. While the price was not disclosed, an imprint commonly costs twice its annual revenue, which was $10 million at Basic.

Less than four months later, Pearl signed a similar letter to acquire Addison Wesley’s General Publishing Group. Its backlist of 400 titles supplied about 45 percent of the group’s $20 million in annual revenue. In a general sense, the deal gave Perseus secure inroads in business, health, parenting, and popular psychology; more specifically, it provided such cash cows as T. Berry Brazelton’s Touchpoints, Dr. Susan Love’s Breast Book, and Take Care of Yourself, by Donald Vickery and James Fries.

While Pearl’s new publishing house manifestly lacks the movie idols, military heroes, and fallen spin doctors who have been passing for authors recently, it can already boast one certifiable literary luminary. Through much of the mid-nineties, Henry Louis Gates Jr. made the rounds of major publishers, trying to find a believer in his longtime dream – a print and multimedia reference work on Africa and the African diaspora, the Encyclopedia Africana. Neither Gates’s own credentials as a Harvard scholar and New Yorker writer nor the growing sales for black authors from E. Lynn Harris to Toni Morrison persuaded a single house to buy the project. Gates pitched the encyclopedia to Frank Pearl, who in the four years since they had met had built a company capable of taking on such an ambitious project.

On the strength of his own reputation and the CD-rom demo, Gates eventually came away with a commitment from Perseus to produce the encyclopedia in both print and multimedia formats in 1999. He also came away with something else.

“Frank said, ‘What about an imprint devoted to African and African-American studies, broadly construed?’” Gates recalls. “And would I be interested in being involved? It took me about two milliseconds to say yes.

“Anybody my age has seen two or three cycles since 1968 of boom and bust in the publication of books by and about the black experience,” Gates continues. “So I never trust the trend. Even now, when you have several black writers on the best-seller list, the larger houses are concerned about finding the next Toni Morrison. Their commitment to moderate-selling books is always a question. I’d always wanted to intervene with some publisher to ensure that books in the midrange will continue to be published. Frank offered that. I’d be a fool to turn it down.”

Pearl not only hired Gates as editorial director of the new imprint, Civitas, but gave him an ownership stake in it and a seat on the Perseus board. For his part, Gates led Harvard’s veritable all-star team of black intellectuals to Civitas. He encouraged Orlando Patterson, a Harvard sociologist who won the 1991 National Book Award for Freedom in the Making of Western Culture, to sign with Perseus for his trilogy on race in America. The first volume, The Ordeal of Integration, was published in late 1997 to admiring reviews. Civitas will also publish a collection of lectures on African-American culture by Cornel West, another Harvard colleague of Gates’s.

A personal bond has grown alongside the professional one. Last June, when Gates had two tickets to the final game in the NBA championship series between the Utah Jazz and the Chicago Bulls, he invited as his guest Frank Pearl. “We saw Michael get the trophy,” Gates says of the great Jordan, still glowing at the memory. So, of course, did 20,000 fans and a throng of media. Which could only have pleased Frank Pearl. He was where he plainly prefers to be – at the center of events, in rarefied company, and utterly unnoticed.

Can This Man Save Publishing?