In the early 1950s, many paperback lines were overproducing and generally not being brilliant. Think: petri dish population boom. On top of those problems, Bantam's board was very active and kicked Ballantine (the man) out, after which they started losing money (duh). The head of Grosset & Dunlap was approached by Oscar Dystel to see if they might be interested in what would ultimately become People magazine (Dystel is the guy responsible for Coronet becoming the massively successful magazine we've all completely forgotten ever existed). Dystel's proposal was ignored/rejected, but Dystel himself was hired to run Bantam, compensation including a percentage of earnings.
"Larry Hughes, then of Pocket Books, said, "Bantam was a sleeping giant until Oscar Dystel began to make it move. They had the backing of the hardcover houses, whose books they could have locked up, and Curtis. We could never understand why they didn't wipe the floor with us."
Here's Davis' description of how paperback distribution was not working at the time.
"In general, the wholesaler's order was predetermined by the publishers ... The wholesaler in turn parceled out the books to the local retailers based on his assumption of what the drugstore or corner newsstand could sell. ...At best, the publishers would send out men like Larry Huges to "stoop, squint, and squat," visually checking inventories at the local level."
Translation: jobbers didn't exist yet in this area.
This is where the only-send-the-covers-back policy came from; retailers and wholesalers were just landfilling books because they didn't have the space for them. Dystel's first step was to get all the backlog returned, to deal with wholesaler and retailer anger. Then he reduced print runs and deliveries to undershoot rather than overshoot to correct consumer psychology and prevent the returns policy from recurring. "By the end of 1955, using this undershipping strategy, Bantam had increased reorders from wholesalers by 348 percent over 1954. Returns were down 38.7 percent and sales went from 15,346,000 in 1954 to 18,124,000 ... in 1955."
Dystel then went on to reduce the emphasis on westerns, change the cover art, buy up some massive bestsellers, in part by demonstrating they could do a better job co-ordinating promotion with Hollywood, rather than by simply offering still more money.
So with Dystel on board and correcting the most obvious stupidity, and having implemented a successful, if unsubtle and expensive strategy (buy bestsellers, co-ordinate promotion with the movie release), Bantam's board is feeling really good. Meanwhile, however, the rest of the crowd is not sitting still. Dystel quit abusing the existing distribution system, but during the same time frame (tail end of the 1960s) newsstand distribution was starting to be replaced with bookstore distribution, and the top-down strategy was starting to get a little feedback through a jobber system. The newsstand story is an interesting one in particular.
Dell had been locked into the American News Company for its distribution. They got some new people in editorial, who picked up _Bonjour Tristesse_ and _Peyton Place_ in advance of hardcover publication. The team also broke with American News.
"Bud Egbert, then a regional sales manager for Pocket Books, recalled the situation. "Dell was a real vicious sort of thing in the minds of everybody after they went through the independents and the ANC. Dell looked and saw which was best in a town and waved a stick between the two. It was considered a very evil thing to do at the time because everybody should have their franchised territories."" ANC didn't force Dell to pick one until 1957, by which time _Bonjour Tristesse_ and _Peyton Place_ gave Dell the ability to decide not to stick with ANC.
I'm going back and forth in my mind between whether Egbert is right to consider this a franchise/free-rider issue, or if this is straight up market division and therefore an antitrust no-no. I'm not sure; I think I'd need to understand the underlying contracts a lot better to know.