Book publishing is a business conducted largely by middlemen. Its language is the language of percentages, commissions, royalties, rates, cuts, fees, and takes. As the product moves along from seller to buyer, everyone–agent, publisher, distributor, wholesaler, retailer–skims, accounting for an unkind and paradoxical reality for the middleman: book publishing is largely a business of thin (and thinning) profits. But of course there are exceptions.

Curt Matthews is standing near the center of an empty 65,000-square-foot warehouse at Pulaski and Chicago. Formerly occupied by Netflix, which left for a location near the airport, the space will in short order be full of books. Curt is the chief executive and majority owner of Chicago Review Press, Inc., the parent company of Chicago Review Press (founded by Curt and his wife, Linda, out of their basement in 1973) and the Independent Publishers Group, or IPG, one of the largest distributors in the U.S. of independent and small-press books.

This new space, recently leased by the company, is just a stone’s throw from another 85,000-square-foot warehouse IPG already owns, where five million books sit on the high shelves and a constant stream of trucks hauls away 25,000 to 35,000 units a day. But he remembers a time about ten years ago when that building, too, was nearly devoid of merchandise: “There was this little heap of books in the middle of the floor, with all this empty space spreading out endlessly around it. And I thought, ‘This will take me the rest of my career to fill.'”

At 64 Curt has not yet reached the end of his career, though with his gray beard and wire-rimmed glasses he looks more the scholar than the capitalist. But he gets phone calls on an almost daily basis from buyout firms prospecting for profitable businesses. And on several occasions he’s received “awfully serious” overtures from competitors in the industry who know that IPG is an uncommon middleman with a strategy that has allowed it to thrive. “I mean, shit,” he says. “If someone’s willing to buy Chrysler losing three billion a quarter, then I must look pretty good, don’t you think? I’m actually making a profit, amazing as it may seem.”

After studying for his PhD in 19th-century American literature at the University of Chicago, Curt taught for three years in the late 1960s and early 70s at Northwestern. There he met Linda, a fellow English instructor who’d just finished her doctoral course work at Tufts. They had adjoining offices then, and today they work even more closely, sharing an office on the first floor of their headquarters, a former bicycle factory at 814 N. Franklin. Neither ever completed a dissertation. Instead, they and a fellow grad student (who remained involved only briefly) started Chicago Review Press. Curt had been the poetry editor of the U. of C.-based journal of the same name and got permission to poach it–he liked the literary connotations.

The press’s first books were entirely uncommercial–a volume of contemporary Japanese verse in translation, an experimental novel by an obscure Belgian writer, a graphic novel titled Prairie State Blues, which, Curt says, “may be the best book I’ve ever published.” “We even got grants to bring out these fancy things,” says Linda. “But there’s no way to make a living doing that.”

Back then they supplied local bookstores out of the back of their station wagon. Their largest customer was Kroch’s & Brentano’s, the huge and beloved independent Chicago bookseller that went out of business in 1995. For a time they owned a bookshop themselves, a tiny storefront on Walton next to the Drake. But it brought in a negligible income, and they sold it in 1976 to go at publishing full-time.

Linda was CRP’s publisher, a position she maintained until earlier this year, while Curt handled the business side. Money was tight until the late 70s, when they published a nonfiction book called The Home Invaders, which Linda describes as “a look at what it’s really like to go into someone’s house and steal jewelry.” It was optioned by Hollywood and made into the 1981 Michael Mann film Thief, starring James Caan, and the money they made from that kept them afloat for a while.

Then in 1980 they were approached by the local agent of a national nursing board about publishing a series of test-preparation guides for nursing students. It was a survival move, says Linda, and it paid off. “Suddenly we had a product that people needed,” she says. “That was a big lesson for us.” They sold hundreds of thousands of copies before ceasing publication in 1990.

Around this same time the so-called mall stores B. Dalton and Waldenbooks, precursors to the colossal national chains that would soon come to dominate book retail, started springing up. Where before there had been thousands of mom-and-pop stores for publishers to deal with there were now the centralized buying offices of a few corporations–and they refused to deal with the accounts of thousands of small presses. It wasn’t worth their time. If a house couldn’t do $500,000 worth of business for a chain, the chain wouldn’t be buying books from that house, and the gates to an enormous sales channel were effectively closed to small presses. (The big New York houses, of course, could easily do $500,000 in business, and today for the most part publishers such as Random House and Simon & Schuster distribute their own titles.)

Faced with this problem, the couple began looking for options. It was 1986, and they’d just hired a young business-savvy sales manager named Mark Suchomel (he’s now president of IPG), who recalls, “I said to Curt, if we only had more stuff, we could sell to them. So we did two things. We hired another editor, and we bought IPG.”

The Independent Publishers Group was founded in 1971 by a former sales rep named David White. (Sales reps are another kind of middlemen: they represent publishers to retailers and many are paid on commission.) It was the first business of its kind, though within the decade others would pop up in response to the rapid growth of the national chains. The idea was simple: pool a group of small presses and then approach the chains with their combined list of titles, all of which, taken together, could easily surmount the $500,000 barrier to entry. In effect, the small presses would pass along to this third party the overhead associated with sales, warehousing, and order fulfillment; in return the distributor would take a cut of the net sale price, or the price that the bookstore paid for each copy, about half of retail.

Based on Long Island, IPG represented maybe 15 publishers and 50 new titles per season. White’s office was next to a tennis court; he worked half the day and then played tennis the rest. Curt recalls, “I said to myself, ‘Hey, I can easily double sales–I’ll work a full day instead of half.'” The purchase transaction involved no cash. CRP simply agreed to give White, for a term of five years, a couple percentage points on what it charged publishers.

Book distribution is a difficult business. Distributors compete fiercely to sign the best and most lucrative of the independent presses, which typically take only one-year contracts. Warehouses are complex to manage, and profit margins are so thin–generally under 10 percent–that “one mistake can be fatal,” says Jim Milliot, the business and news director at Publishers Weekly.

Yet since 1987 IPG has doubled its sales every three or so years. Its revenue increases, on average, 15 to 20 percent a year. In 2007 Curt projects the parent company will gross somewhere between $60 million and $70 million, and 90 percent of that will come from IPG. The company represents more than 400 publishers, and 50 or 60 of them account for most of the business. (In sales, Chicago Review Press is the biggest of IPG’s clients.) IPG’s catalogs contain more titles each year (about 1,600) than Simon & Schuster’s. Last year it acquired Trafalgar Square, a U.S. distributor of books published in the UK. The company now employs 110 people, from editors to sales managers to warehouse logisticians, and has hired 15 new staffers in the last year, while other publishers maintained hiring freezes or laid people off. Sales industry-wide have been more or less flat for ten years, but IPG continues to see double-digit growth. In the small-press world, Linda says, “people bemoan the loss of independent booksellers. But the fact of the matter is that the chains and the Internet have been great things for our company.”

“The big-box retailers are doing sales for me,” says Curt. “They herd publishers to my door. A press will go to Barnes & Noble, and Barnes & Noble will say, ‘We don’t deal with small guys. But Curt Matthews does. Here’s his number.'” Online retailing has been a boon simply because Amazon’s business model is to stock as many titles as possible, including each of the 31,000 that IPG publishers now have in print. (Amazon recently overtook Barnes & Noble as IPG’s biggest customer by dollar amount, ordering, on one recent Tuesday, $150,000 worth of books to B&N’s $72,000.) “I wish I could say I planned this all out,” Curt says, “because the way it’s unfolded has been so tremendously to my benefit.”

Aside from IPG, there are only two other comparable independent distributors in the country. Earlier this year, following a spate of trauma and consolidation in the industry, the Perseus Books Group took over the bulk of the publishing contracts of Publishers Group West, a venerable distributor of literary and left-leaning political works. (IPG picked up a few as well.) Founded in 1976 in Berkeley and sold to an upstart distributor in 2002 for $38 million, PGW was brought down by the bankruptcy of its parent company late last year. It subsequently couldn’t pay its publishers for their book sales, causing a cash-flow jolt that in turn nearly bankrupted many of those presses, among them Grove/Atlantic and McSweeney’s. When Perseus made the decision to step in, paying the publishers 70 cents on the dollar, it was seen by many as a white knight.

With its Booker and Pulitzer and National Book Award winners, its Basic Books and Da Capo Press and Public Affairs imprints, Perseus is known as a fairly serious literary and intellectual company, and a liberal one–an association that only got stronger with its acquisition of PGW’s clients. The other big indie distributor, the Maryland-based National Book Network, made its reputation distributing presses of a politically conservative bent. It’s perhaps telling that NBN came in with a higher bid for PGW’s contracts, yet the distraught publishers voted to go instead with Perseus.

IPG is largely apolitical and above all commercial. Although its roster of clients–most notably Chicago Review Press itself and the new Trafalgar Square books–encompasses some serious fiction and journalism, salability is more important to them than literary awards. “We’re looking for high-quality publications that will turn numbers, not for high-quality publications that won’t,” says Mark Suchomel.

That mind-set has led them to steer clear of some publishers altogether. “We’ve had not-for-profit publishers that we’ve tried to sell,” says Curt. “But it has never worked out that well. The not-for-profit mind-set is: if I’m out of money, I need to raise money. The for-profit mind-set is: if I need money, sell more books. I’m not running a charity or a summer camp.” He pauses, and adds, “You wake up in the morning and realize that there are 110 people working here. I’ve got an obligation. I damn well better make good decisions.”

In many ways IPG’s methods are very different from the established models. “We do it so much differently than New York publishing,” says Linda, “though it makes me sound so provincial just to phrase it like that.” For one, IPG advocates a measured approach to print runs, balancing the odds of running out of copies with the necessity of avoiding, as much as possible, the dreaded unsold return. (If a retailer doesn’t sell a copy, it can be sent back to the publisher for a full or partial refund.)

“The hard truth is that most books don’t sell out their first print run,” says Curt. On average industry-wide, 30 to 35 percent of a book’s first run comes back unsold. Curt says IPG’s returns have historically averaged about 20 percent.

IPG also pays a lot of attention to its backlist, which means that it keeps trying to sell books that came out a season ago, a year ago, five years ago–for as long as they remain in print. At least 40 percent of CRP’s sales come off the backlist, says Cynthia Sherry, a longtime CRP editor who took over as publisher earlier this year. The big trade houses, on the other hand, focus their efforts on the current season’s new titles–the front list–to the exclusion of all else.

“If you’re Random House, you’ve got to sell 15 to 20 thousand copies of a book or you’ll take a bath,” says Curt, noting that author advances alone can nearly wipe out the profit. “The same book at a small publisher, he can sell 5,000 copies and make money. And a smaller publisher will probably sell just as many books, over time, as a big publisher, and probably sell more over time, because the big guys tend to hit and run.”

Five years ago Dallas-based BenBella Books was a one-man show: Glenn Yeffeth, a former management consultant who had yet to publish anything and had no experience in the book business. He came to IPG with proposals for a biography of Joss Whedon, creator of Buffy the Vampire Slayer, and a book of essays called Taking the Red Pill: Science, Philosophy and Religion in The Matrix. Matthews and company thought the Matrix book looked promising and agreed to take BenBella on. It’s sold 25,000 copies to date.

BenBella has since published around 40 books about films, TV shows, and popular novels, a series it calls “Smart Pop,” but the company hit zeitgeist pay dirt last year with The China Study, a health book that counsels a non-Western vegan diet. Published in January 2005, it’s sold 175,000 copies to date and continues to move off shelves at a rate of 5,000 to 10,000 copies a month.

About a decade ago Curt had an epiphany. “We sold 40,000 copies of a $45 coffee-table book on collecting Pez dispensers. When that happened, the light went off for me. It’s not about finding a big audience somewhat interested in something. It’s about finding a smaller audience passionately interested in something.”

To tour the company’s warehouse is to be immersed in a world of esoterica. Storage is arranged so that the hottest-selling books are stacked closest to the principal outgoing conveyer belt, and Curt picks up volumes to show me. “This is a huge seller,” he says of a martial arts how-to. “Brazilian jujitsu. If it’s one thing I don’t understand, it’s why anyone would want to read this. But it’s sold many tens of thousands of copies, and it just keeps going and going.”

He picks up another. “I don’t quite want to call this a classic for us, but . . . ” It’s the third edition of Win Government Contracts for Your Small Business. Nearby is 1-2-3 Magic: Effective Discipline for Children 2-12, a book self-published by a Glen Ellyn child psychologist named Thomas Phelan. Its Amazon sales rank is currently 314. It came out in 2003. This year alone it’s sold 80,000 copies.

There’s Don Quixote in the original Spanish. (IPG has a fast-growing Spanish-language line.) There’s Jennifer Toth’s controversial The Mole People, about people who live in the subway tunnels of New York. A backlist title, it’s selling better today than the year CRP first published it, in 1993. Barnes & Noble just restocked its distribution center with 1,500 copies.

“Here we go,” Curt says, standing right near the outgoing conveyer belt. “This is interesting.” It’s a large-format art book on the work of the mysterious graffiti artist Banksy, profiled last month in the New Yorker. Called Wall and Piece, it’s a Trafalgar Square title published by Random House UK. Such is the oddity of the book business that this doesn’t mean Random House in the U.S. would automatically distribute the book here. Titles from the UK get bid out to anyone who’s interested. Random House wasn’t, nor were other distributors. “They all passed,” Matthews says with delight. “We’ve sold 60,000 paper and another 40,000 cloth, and it’s just getting started. That’s the thing about the book business. Nobody is very good at predicting what will do well. So the people who know what they’re doing hedge a bit. They want to see what’s hot and what’s not rather than trying to impose their ideas onto the marketplace.”

Art accompanying story in printed newspaper (not available in this archive): Linda and Curt Matthews photo by Yvette Marie Dostatni.