THE MONDAY INTERVIEW: Gail Rebuck New chapter opens as Tory values brought to books

The collapse of the price-fixing system is creating a new world in publishing. The chairman of Random House ponders the future

The unilateral withdrawal by three top publishers from the Net Book Agreement last week was reminiscent of that peculiar brand of loyalty favoured by the Conservative Party: fidelity to the cause until all hope is lost, than a rapid, efficient betrayal and a new direction.

All three - Penguin, HarperCollins and Random House - were staunch supporters of the near century-old price-fixing scheme, which set a minimum price for new books sold in the UK. It brought order to the market, protected diversity, and cocooned the country's specialist and independent bookshops.

But when the agreement came under heavy fire from retailers demanding price flexibility (and, not inconsequent- ially, from the threat of European Commission intervention), the pressures became too great.

Gail Rebuck, the 43-year old chairman of giant Random House, probably would not care for the Tory link. (Her husband, Philip Gould, is an adviser to Tony Blair and author of the notorious memorandum questioning Labour's fitness to govern.) But she is the very personification of the industry's ambivalence towards the collapse of the NBA: long a supporter, it was partly her precipitous actions last week that helped sound the agreement's death knell.

Ms Rebuck certainly knows the business. With Anthony Cheetham, she created Century, an independent publisher, in 1982, following a career that ranged from small imprints to the paperback operations of Hamlyn.

She became a millionaire when Century was bought by Random House in 1989, and rose to the chairmanship following Mr Cheetham's high-profile departure a year later.

She now runs a business with an annual turnover of pounds 100m. Privately owned by the Newhouse family of the US, the company is "profitable" but reveals no financial figures. When Ms Rebuck took over, the company was losing money - due, she believed, to the huge number of books it published every year. Over a three-year period she slashed output from 1,800 titles to about 1,200 annually, allowing the sales force to focus its attention.

"We were able to spend more on everything, and we weren't spreading ourselves too thin," she said in a rare, face-to-face interview with the Independent late last week.

Atop the ugly Random House fortress in London's unfashionable Vauxhall Bridge Road, Ms Rebuck's office is oddly comfortable: a deep sofa lines one wall, across from a coffee table groaning with books - Random House books, of course. Perched on one pile is a copy of Salman Rushdie's The Moor's Last Sigh, the bookies' favourite to win this year's prestigious Booker Prize. Next to it lies a copy of Enigma, the new thriller by Robert Harris, whom Random House nurtured from non-fiction quasi-obscurity to international bestsellerdom.

Ms Rebuck, her small features framed by long and unruly hair, is never quite at ease. There are certain questions she doesn't like to answer - particularly of a personal nature. But she is quick to smile, and highly intelligent about the industry she has made her own.

"I am running a business," she says. The old battle between the traditional small publisher and the giant multinational is chimerical, she maintains. "Authors want the intimacy of a small unit, where everyone knows them. When it comes to sales, they want a machine," she says.

By running Random House's 32 imprints - Jonathan Cape, Chatto & Windus, Century - on an independent basis, and by centralising the sales force, authors get the best of both worlds.

Until very recently, the NBA ensured that the book publishing environment was also quite stable. "A workable NBA worked very well indeed for many years," she says. "But an unworkable NBA, which is the situation we found ourselves in, didn't work at all. The situation had come to a head, and we had to recognise that the market had changed."

The proximate cause of the agreement's collapse can be found among Britain's book retailers. Allowed to discount titles published by companies outside the NBA - Reed, since 1991, Hodder Headline since late 1994 and even the BBC children's book range, since mid-September - the big retailers found they could attract additional custom by aggressive pricing.

The trend was confirmed by the deep discounting by supermarkets such as Asda and Tesco, which stocked popular books only and sold them at half price.

"Many of our customers wanted to start trading on a non-Net basis," Ms Rebuck says. "Authors asked us why their titles weren't discounted and others were. We just couldn't sustain this half-way house."

But a unilateral withdrawal was not the preferred route for Random House, she insists. "We would have preferred an industry consensus and an orderly withdrawal towards the end of the year."

So why did she move only two days before a meeting sponsored by the NBA administrator, the Publishers Association, to discuss the agreement's future? "We could see there was no concensus forthcoming," Ms Rebuck says. "A number of publishers felt there was increasing pressure and that it was inevitable it was going to disintegrate. But they didn't want that, so they weren't going to do anything about it. We felt we had to take decisive action."

Her decision was made easier by WH Smith, the industry's largest customer, which told publishers it was preparing a massive promotional campaign at both Smith and at its high-street chain, Waterstone's.

"A number of customers had come to us with what-if scenarios and contingency plans. The difference with the Smith-Waterstone's approach was the immensity of it and the fact they had worked it out in such a lot of detail."

The chief worry of publishers such as Random House is the prospect of a debilitating price war. The supermarkets have already declared they will remain the low-cost sellers of popular books. High street shops are likely to counter with special offers of their own - for example, cut-rate prices for this year's Booker titles, as well as special rates for bulk purchases.

The battle will mean great bargains at Christmas. But Ms Rebuck is concerned about the longer term, particularly the fate of independent bookshops. "We need to ensure quality, diversity and accessibility," she says. "We must encourage independents to be resourceful, imaginative and entrepreneurial so they can compete with the bigger chains."

Random House is offering a "flexible" package to independents to encourage them to offer deals to their customers. "Flexibility" probably means lower wholesale prices for Random's books, but Ms Rebuck refuses to provide further details. The publisher is also believed to be campaigning for "firm" sales of books, rather than the current system under which retailers can return unsold stock for credit.

She predicts some failures in the independent sector ("regrettable") but believes the future of the book business remains bright. She dismisses the idea that new authors will have difficulty getting published, or that best-sellers will push aside more worthy titles.

Bookshops, however, will have to learn to market more effectively, providing more attractive sites, a wider range of services (coffee shops, CD-Roms for children to play), and personalised services.

"It is a steep learning curve," she concedes. "But I am convinced that price alone is not going to sell books."

Mathew Horsman