Under August Derleth and Donald Wandrei
The Outsider and Others
In late 1937, the death of Howard Phillips Lovecraft prompted his two friends, August Derleth and Donald Wandrei, to gather a collection of Lovecraft's best weird fiction from the pulp magazines into a memorial volume. However, after several attempts to place the omnibus volume with major hardcover publishers without any success, the two men realised that no publisher would be willing to take a chance with the collection. Derleth and Wandrei thus decided to form their own company, Arkham House (Its name based on a town featured in many of Lovecraft's stories) with the expressed purpose of publishing all of Lovecraft's writings in hardcover. The omnibus volume was scheduled as the first offering from Arkham House, with a price of $5.00, while advance orders were accepted at $3.50 each. Even at that bargain price, only 150 orders were received for The Outsider and Others before its appearance in 1939.
The Outsider was a perfect example of fine bookmaking. It was printed by the George Banta Co. of Wisconsin, in an edition of 1268 copies. The book was over 550 pages long, with small print, and featured a jacket by noted fantasy artist Virgil Finlay. The omnibus sold slowly but steadily. Derleth was in a position that most small publishers could only dream about. He was a successful writer and had a good deal of revenue coming in from his work not connected with publishing. He could afford to keep Arkham House going without the company realising a quick profit.
A second Lovecraft omnibus, Beyond the Wall of Sleep, appeared in 1943 as sales on all Arkham House books continued to advance. By 1944, Arkham House was established as a successful small press, with four titles appearing (collections of works by Donald Wandrei, Henry S. Whitehead, Clark Ashton Smith, and a final Lovecraft omnibus). In 1945, Arkham House widened its range by publishing two novels, neither of which had seen print in any form before. These were Witch House by Evangeline Walton and The Lurker at the Threshold by August Derleth (based on an outline by H.P. Lovecraft). Derleth also widened Arkham's range by publishing collections of stories by well-known English fantasy authors, the first being Green Tea and Other Ghost Stories by J. Sheridan Le Fanu. Collections by Englishmen A.E. Coppard, H. Russell Wakefield, William Hope Hodgson and Algernon Blackwood followed in 1947. Also in 1947 were books by three American writers, including the science fiction novel Slan by A.E. Van Vogt. Derleth must have felt he was in the wrong field as Slan, with a print run of over 4,000 copies proved to be the fastest and best selling Arkham House of the 1940s.
Arkham House published many books in the fantasy and horror field including a small but steady number throughout the 1950s. Robert Weinberg has written that: "However, intense competition from the SF (science fiction) small presses as well as slow sales of certain titles put August Derleth in a precarious bind. Only a generous loan from Dr David H. Keller prevented Arkham from going bankrupt during a period of cash flow problems in 1948. Keller visited Derleth's home, "The Place of Hawks" in the company of Sam Moskowitz, the object of the visit being Derleth agreeing to publish a Keller book under the Arkham House imprint, Keller to advance Derleth a loan against the cost of the book. Derleth revealed to Keller and Moskowitz that he owed his printer $2500 and had exhausted every possible source of help. Upon Keller's return to his home in Stroudsburg, Pennsylvania, he wrote a check for the needed sum and sent it to Derleth as a loan at 35% interest on Derleth's personal note. Reporting the transaction in Thirty Years of Arkham House, Derleth adds: "I had not asked for it; he had offered it with the comment, 'I pride myself on my judgment of character.' No greater compliment could have been paid me or Arkham House.' 
In the late 1960s Arkham House seemed on the verge of going bankrupt, but suddenly found a whole new market for its books when the surge in interest in Robert E. Howard (capitalised upon by Donald M. Grant) coincided with a surge in interest in the work of H.P. Lovecraft. All of Lovecraft's works were reprinted in three newly edited omnibus volumes, which were kept continually in print.
In addition to volumes of H. P. Lovecraft's fiction, Arkham House began to publish a five volume edition of Lovecraft's Selected Letters which had been planned from the very start of the company, and which gives an overview of Lovecraft's correspondence to peers, friends and family. Among his correspondents were Arkham House founders, Derleth and Wandrei. (Arkham House's volumes of Lovecraft's letters are highly abridged; unabridged volumes of Lovecraft's letters to individual correspondents have been issued progressively by Hippocampus Press). After a long slow period, Arkham House entered the 1970s with ambitious publishing plans.
Arkham House also published fiction by many of Lovecraft's contemporaries, including Ray Bradbury, Robert E. Howard, Frank Belknap Long, Clark Ashton Smith, Robert Bloch, and Derleth himself; classic genre fiction by authors such as William Hope Hodgson (under the prompting of Herman Charles Koenig), Algernon Blackwood, H. Russell Wakefield, Seabury Quinn, and Sheridan Le Fanu; and later writers in the Lovecraft school, such as Ramsey Campbell and Brian Lumley to whom Derleth gave their earliest publication in hardcover.
Despite the wealth of talented writers who appeared under the Arkham House imprint, it was not a financial success. Derleth wrote in 1970, "[T]he fact is that in no single year since its founding have the earnings of Arkham House met the expenses, so that it has been necessary for my personal earnings to shore up Arkham House finances." Robert Weinberg has stated "Arkham House's greatest flop was Witch House, an excellent novel that took nearly two decades to go out of print.
After Derleth's death in 1971, Donald Wandrei briefly acted as editorial director but declined to resume his interest in the firm permanently.
Prior to the 1980s, Arkham House did not reprint its books (with some exceptions such as Someone in the Dark and Night's Yawning Peal: A Ghostly Company and four of the core Lovecraft collections issued in the 1960s - Dagon and Other Macabre Tales, At the Mountains of Madness and Other Novels, The Horror in the Museum and The Dunwich Horror and Others). (Rights were occasionally sold during the 1960s and 1970s to other publishers who issued paperback editions of Arkham House titles). However this changed in the 1980s. There are now multiple printings and/or alternate editions of over 20 individual Arkham House titles.