2. The market-testing

The first printing of 2,000 copies was placed with the Chapters/Indigo chain (now totaling 255 stores in Canada) and quickly sold out at $7.99 each with hardly any returns.

     What we learned:

     1. Price is the determining factor in this highly competitive market. Content and quality of the product comes only next. Big names have some pull but they cannot edge out less expensive alternatives.

     2. Consumers who go to the bookstores make their own choice of which dictionary to purchase from those displayed.

     3. Advertising and promotion would only drive up the price of the dictionary and make it less competitive. UWD was never advertised or reviewed in the media or in academic journals. The "Review of User's® Webster" (please see website) came out only recently.

On the other hand, speaking as the lexicographer, my two previous dictionaries were widely advertised in the print and electronic media. I was interviewed many times on national radio and TV, but those dictionaries didn't sell so well as UWD in spite of their content and quality. The New York Times Everyday Dictionary, 1982, for example was acclaimed by a focus group of 40 English teachers from coast to coast who tested it out in their class rooms. Their observations may be seen on the website at "Reviews of New York Times Everyday Dictionary." However, because of unsatisfactory sales attributed to the pricing, both NYTED and my Penguin Canadian Dictionary, 1990, were taken off the market after a few years. I decided not to offer UWD, my final work, to mainstream publishers before I had it first published at a competitive price.

A positive example of competitive pricing with no advertising and promotion is The Winston Canadian Dictionary that has sold over two million copies in Canada and is still on the market. It was first published in 1937 by John C. Winston Company in the U.S. A Canadianized edition was put out in 1948. Revised in 1960, it continued to sell in the six figures. In 1962, for example, it sold 148,960 copies; in 1963, 149,298 copies; in 1964, 166,941 copies. It was reduced to five figures by The Winston Dictionaries of Canadian English (Intermediate, 1969; Compact, 1970; Elementary, 1975) edited by this lexicographer.

3. Why we prefer a small publisher or entrepreneur

Unlike UWD, which was gradually built up single-handedly from 1975 to 1998, the major publishers have teams of lexicographers, researchers, copy editors, proofreaders, etc. working on dictionaries. Because of this overhead, they are forced to price their dictionaries many times the paper-printing-binding (pp&b) cost of producing them. A small publisher or sales-entrepreneur should be able to do well with five times pp&b.

In the case of UWD, the best printing quote we have (from the Toronto printer of the first edition, better even than what our New York consultants could find) is $2.60 per unit, based on a print run of 100,000 copies. At five times pp&b, UWD can be sold at a retail price of $12.95, competitively with the major publishers who sell dictionaries of comparable size and scope for around $19.95. The temptation to raise the price as close as possible to the competition should be resisted; it will only lead to the same results as with the Penguin and Times Books dictionaries - the fate of the proverbial goose that lays golden eggs.

4. Projected sales and profit (in round figures)

Based on 100,000 copies sold annually at $12.95 per copy:

Gross returns: $1,295,000

Cost of printing (pp&b): $260,000 (20% of retail price)

Cost of sale: $777,000 (This 60% of retail price should cover sales discounts and distribution. If the licensee is handling only one title, the warehousing and distribution costs can be considerably reduced if it's done in-house. The 100,000 copies of UWD will be delivered by the printer on 139 skids, each pile measuring 40" x 48" x 52").

Net income: $258,000. (This 20% is to be shared by licensee and licensor, as in the agreement to be negotiated).

BACKGROUND:

The following facts may be relevant in negotiating the division of profits between licensee and licensor:

The product that the licensee takes over for printing and selling is a ready-for-press dictionary.

In the conventional way, an "author" would present a raw manuscript to the publisher who does all the publishing and production work of evaluating the manuscript, keyboarding, proofreading and editing, checking and cross-checking of data, typography, layout, book design, word-processing, typesetting, final proofreading, cover art, pre-press work, etc. All this has already been done for the licensee of UWD.

The conventional "author" receives royalties of 10-15% of retail price. What would be a fair share for the licensor of UWD?

To give you a rough idea of the value of this piece of intellectual property, in 1969, when this writer was head of lexicography division at Holt, Rinehart & Winston, the development cost of a dictionary of the size of UWD (The Holt Intermediate Dictionary, New York, 1967) was around $1,000,000. It could easily exceed $10 million in today's dollars.

The licensee has the advantage of economies they can benefit by. Such are, besides in-house warehousing and fulfillment mentioned above, cheaper printing if he can get it done abroad, sales to independent bookstores at the basic 40% discount, etc. Additionally, if the licensee is a minority company, interest-free loans, preferential orders from school boards and the Feds (GSA is the largest purchaser of commercial dictionaries), etc. would make for a better bottom line.

In sum, the licensee should be able to make much more than the negotiated share of the projected net balance of $258,000. A net profit of $100,000 per year is practically guaranteed.

5. Negotiating a license agreement

The following steps are proposed for reaching a satisfactory agreement between the would-be licensee and licensor. Please understand the licensor is trying to hand over his life's work to a sales wizard who may or may not have a track record of selling dictionaries to the masses. The procedure outlined below is based on several recent negotiations with private entrepreneurs whose credentials proved dubious. One of them had a history of going into bankruptcy every few years. The licensor ended up spending thousands of dollars in legal and other expenses to dig himself out of the mess.

1. Would-be licensee provides a curriculum vitae and references.

2. Some evidence of fiscal responsibility is required before the licensor can come up with a draft license agreement for negotiating a deal.

3. The licensee meets with licensor and presents the broad outlines of a marketing plan. If this is satisfactory, the licensee is offered a copy of the dictionary from its 2000 printing to help solicit orders for the new printing. (A payment of $20/copy is expected of the licensee as a token of serious intent. Free copies are always in demand, but unfortunately, not many copies of the original printing are left for free distribution. However, as mentioned above, the complete UWD text, with dimensions of the book and pictures in color, are given on the website at "User's® Webster."

4. If the licensee feels confident about selling UWD and both parties can agree on a final agreement, an advance on royalties, however modest, is expected on signing.

5. The remaining copies of the 2000 printing (as many as can be made available) will be turned over to the licensee on signing of the agreement.

Thomas M. Paikeday
Lexicography, Inc.
83 Sunny Meadow Blvd.
Brampton, Ont. L6R 1Z3
Phone: 905-790-7076
Fax: 905-790-9168
E-mail: thomaspaikeday@yahoo.ca
Website: www.paikeday.net
4 October 2004