Hot Negative: Why the Media Miss the Business Message


Start-up businesses are admittedly difficult to report on. Millions of companies begin each year, with many having a life span only slightly exceeding that of a Mayfly. Start-up industries are a rarer occurrence, and are almost impossible to spot. To be the first company to do what you are doing is adding risk on top of risk. The reward comes in making it work, in creating wealth, and the true indicator of success, in attracting competition and, in fact, starting a totally new industry.

Selling books over the Internet is cool, but let's look at an even more innovative enterprise that few have heard of.

Think back to 1972. President Nixon is strong in his presidency, Cadillacs are just shedding their tailfins, eight tracks rule, and the cassette (invented only seven years earlier by Phillips Enthoven, the Dutch electronics company) is just beginning to push beyond dictating machines. In-dash cassette players and Walkman? portables are virtually unimagined.

It was in this environment that Duvall Hecht had his moment of inspiration, one born of necessity. While creeping along the Santa Ana Freeway one morning, he had an idea that was to change his life and the lives of thousands of others: Why not listen to books while in traffic? He had heard of books recorded for the blind and felt that his would be a great application (a "killer app" in techie terms) of that effort. His first discovery was that books for the blind are done under contract for the Library of Congress, and their use is restricted by government regulations to only those who are blind.

Hecht didn't qualify, and so had to consider starting his own business if he wanted to take advantage of his idea. Already in his forties, and with family responsibilities that included three young children, quitting his job in the securities industry was not an option. Sweat equity was. So, in typical California style, he sold his Porsche to raise the cash necessary to begin. It took him three additional years to complete the preparatory work: contracts acceptable to New York publishers, marketing studies, and the acquisition of recording rights in a baker's dozen titles, sufficient to get started. The year was now 1975.

He was not a publisher in the accepted definition of the term, nor a book seller or distributor; he was just someone who loved to read. His product model was the recording of full-length books. He was not attempting to condense information for sale. He correctly determined that windshield time for many people is virtually unlimited. In many cases it added up to hours and hours each working (and commuting) day. Sales professionals who travel by car have even more dead time to attempt to fill productively.

His solution, which seemed obvious to him, was to have books professionally recorded full-length on audiocassettes and then to rent them to customers for a thirty-day period. Titles longer than three hundred pages could be divided into second or third parts with their own thirty-day time limits and, of course, an additional rental fee.

Because he had to invent all of this from scratch, there were no rules; there were no cost or pricing guidelines. Needless to say, there was little or no financial support from standard sources of capital.

Duvall's Newport Beach, California, location did provide him with talented readers. It's difficult to earn a living as an actor, and many people go west to give the profession a shot. Fees for reading books out loud were most welcome to those hanging in looking for their big break or for those hanging around the business who wanted to work in some phase of the profession. Because he didn't have the cash to hire name actors, he had to develop his own low-cost talent base. Ironically, the ability to read a book to others requires considerable skill, with voice inflection and a sense of the story, to bring dialog or characters to life. What Duvall did was bring the art of the storyteller back to life.

That, of course, was not his intention. He just wanted people to be able to "read" while driving. What he found was that not everyone he knew wanted to do this. New approaches take time for acceptance. Having a vision is one thing; having a customer from whom you can profit share that vision is yet another. Building a market is slow going.

One of the advantages of starting small and staying small for a long period of time is, you get a chance to work out the details. Mistakes, though costly, are easier to survive on a manageable scale. In some ways Hecht was going through the same steps the McDonald brothers had gone through many years before him just a few miles east in San Bernardino. They weren't necessarily inventing anything new; they were just trying to perfect a delivery system. They, of course, had considerable experience in the business, plus the cash flow to experiment with. Duvall had none of this. He was in a trial-and-error effort with nothing but common sense to go on.

He began with just four titles: Paper Lion, the story of George Plimpton's training camp with the Detroit Lions; Zelda by Nancy Milford, the biography of F. Scott Fitzgerald's wife; Happy Days, H. L. Mencken's first volume of autobiography; and Oil and Water by Edward Cowan, the story of the first super-tanker disaster, the Torrey Canyon's loss on the English coast. That was the product line. Today, Books on Tape, Inc. has over forty-five hundred full-length books recorded. The struggle was to get from then to now.

The first big break came when The New York Times book section took note of this new idea. The story was not "hot negative," but it made it to print in the right place at just the right time. Duvall needed high-end customers who could appreciate the convenience of having someone read to them while in their cars. Cash flow became an unending battle. He had to add product continuously. He had to buy the audio rights to popular titles and pay royalties to authors and publishers from his sales. (Titles whose copyrights had run out and were in the public domain were a welcome exception to this rule.) Each new book had to be recorded to his standards. Multiple copies had to be made, with an average book requiring six to ten ninety-minute cassettes. Longer titles, as mentioned, were divided into ten cassette parts. Beginning in a storefront location in Newport Beach, Books on Tape, Inc. actually had some walk-in retail customers from the area. Without capital, everything had to be boot strapped. Sales income had to go directly to new product acquisition and production. Few people understood how the business worked, and few could evaluate its potential, which effectively eliminated outside capital. You couldn't get investors or go public with a concept company in the mid-nineteen seventies. My, how times have changed on the West Coast! But then was then and growth had to be one new customer at a time. Twenty percent a year was the target Hecht set for himself. He was able to hit his goal year after year, but unfortunately his base sales level and customer count were so low that his growth percentage didn't amount to much in dollars, which were needed for the expansion of the offering.

Year after year he kept the operation going. He didn't do everything right, but he didn't do anything fatally wrong. It just seemed to take forever. He began tiny space ads in the New Yorker Magazine showing one book cover and listing his phone number. He rewarded word-of-mouth referrals with a free rental to those bringing him a first-time new customer. Gradually, he was able to work his way into the more expensive audio rights for current best sellers. Tom Clancy's techno-thrillers became money makers for Books on Tape, Inc. It was a long way from the first most requested book in the listing (Walden, by Henry David Thoreau) to the top-of-the-charts fiction hits, but Hecht's background had prepared him for the long haul. He was an oarsman in college, went to the 1952 Olympics, lost, competed again in 1956-and won a gold medal.

From walk-in to mail order to computerized telephone and Internet sales, was a slow and expensive journey to make on day-to-day income. Duvall did it. His catalog grew to a four hundred and sixty page book. Newsletters of current additions had to be mailed out regularly. They had to be sent to potential prospects as the full listings became more and more costly to produce and mail. Eventually, the catalog had to become an annual, and the mailers had to be the main marketing vehicle. With technology came information. It became possible to send long-time customers reading lists of all of the titles they had rented right back to the manual days when the company had just begun. It was not unusual to have steady commuter users run up several hundred full-length book lists. The increase in the volume of reading was dramatic for everyone who got into the system.

Unlike the current media blitz for Internet book sales, Books on Tape, Inc. was not recognized for what appeared to be just a low-tech service operation. The real business story, as is so often the case, went totally unreported after the initial New York Times piece.

In this age of information, the knowledge explosion has gotten completely out of control. Magazine and newspaper editors have responded to the challenge of unlimited filler by reducing content volume and increasing brief factoid-type features. Recently, a newspaper actually ran a piece with the startling information that Kermit the Frog has eleven points on his puppet collar. Is it any wonder that important business news gets lost in the factoid clutter?

Book publishers have gone to condensed or summarized business books to compete for the reading time of business professionals. As is often the case, when the herd goes in one direction, it is a good idea to take a look in the complete opposite (and usually empty) quadrant. That is exactly what Duvall Hecht did. Instead of condensing audio books, as conventional publishers were forced to do to be able to sell two cassette packages economically, Books on Tape, Inc. kept its commitment to full-length rental recordings. They set up their marketing and fulfillment operation to create and service a rental market that was outside the vision of the conventional publishing industry. By changing the rules of the game, Hecht found himself on new ground. It was lonely ground at first because few wanted to compete with him. Few even knew he was in business.

What Duvall discovered was a completely different approach to the information overload environment. He found that more detail was better.

It was not unusual for customers to get immersed in multi-part classics such as War and Peace and take a couple of months to go through its forty-five cassette, four-section recording. There was no time pressure when a daily commute provided hours and hours of potential listening opportunity. Instead of having to skim or rush through a business book at odd hours or only while traveling by air, business professionals now could take the time to review in detail just what was becoming available in their discipline in this new media.

It has been estimated that the average executive reads only .08 books per year. All of a sudden, out of nowhere came the opportunity not only to do extensive business reading, but to become a recreational reader with access to not only best sellers, but to many classics as well.

Books on Tape, Inc. has created a knowledge revolution all its own. Duvall Hecht has reversed the trend. His customers now read twenty or thirty books a year. They not only listen each morning and evening going to and from work, but they leave the cassette player on, so whenever they get in their cars they pick up the text where they left off and do not require multiple hour time blocks to keep on reading. Most customers continue to read printed books, but the advent of the lightweight headset and miniaturized cassette player made it possible to listen to books at any time when it would fit with daily activity. Air travelers can sit back, rest their eyes, and advance through many chapters just going from here to there.

Avid readers often like to go through the complete works of favorite authors. This is now possible through Books on Tape, Inc. because their policy is to publish all the work of authors with whom they contract-not only that, but to keep the recordings continually "in print" and available on a same- or next-day basis.

The almost unheard-of ability to read multi-volume efforts or continuing-series books is no longer restricted to retirees or the idle rich. When Patrick O'Brien's sea stories became popular, all twenty-one books in the saga were recorded by Hecht. His mass market continuing education effort is making a considerable contribution to society. The media has little interest in this accomplishment.

Continuing to innovate, Duvall has offered his rental product line for sale to those who wish to own recorded books. He has marketed his library to public libraries so that they may be borrowed without paying a rental fee. They now total almost one-third of his sales. He encourages regular rental customers to purchase their favorite titles, and then to donate them to their local library as a tax deductible gift.

When private enterprise makes major innovative contributions to our culture and to the management of information, it should be considered business news. Books on Tape, Inc. should not have to come up with some hot negative angle to be noticed. How is it that a conventional discount book store that decides to sell over phone lines through computer screens is portrayed as the wave of the future? A real wave of the future began as an unnoticed ripple in Newport Beach in 1975.

Those who earn their living by processing words daily don't seem to read much other than their own copy. They are on deadline. They have to get some numbers for a visual. They need something that will grab their readers. They can jump on- line and find a factoid or two that will fill a box or side bar.

The media misses a great deal by rushing through the news cycle. In the case of Books on Tape, Inc., they missed a great business story as to how a new industry was created, but also they missed a major shift in how bright people acquire information in a time efficient manner.

How many hours a day people surf the Web is reported as news. Is it? Books on Tape, Inc. now mails to 150,000 customers annually. Ninety-five thousand people are reported as core group users of the service. With sales of more than fifteen million dollars and 100 employees, Duvall Hecht has not made business news. Can you imagine just how many innovative and creative companies and even whole industries (Books on Tape, Inc. now has a couple of copycat competitors that keep it sharp) we are missing?

To point and click and buy a book is big news. To dial an eight-hundred number, punch in your account number and the catalog number of a recorded book and receive it in a day or two in the mail with an equally automated process is not news. Perhaps it should be.

As for now, it is still the closely-guarded secret of Duvall Hecht and a hundred thousand of his most grateful, well-read friends. In fairness to The New York Times, they did do a follow-up feature in April 1996, but this falls far short of recognizing a truly revolutionary company.