(FORTUNE Magazine) – For most publishers, selling 20,000 copies of a coffee-table book is a minor miracle. Not for Callaway Editions, which racks up the kind of sales figures you'd expect from a rock label: Its Diana: Portrait of a Princess has sold 350,000 copies since it hit bookstores across the globe in August. Callaway's robust backlist includes Madonna's 1992 soft-core opus Sex, which sold 1.4 million copies worldwide, making it the best-selling illustrated book in history. In a different genre, children's books, Callaway's Miss Spider series has sold more than 2.5 million copies worldwide since its 1994 debut. "There's a certain look to a Callaway book that is unique and quite outstanding," says HarperCollins CEO Jane Friedman. "In some ways they've cornered the market for high-end, high-quality illustrated books."

To find out how they did it, FORTUNE paid a visit to the circa 1810 townhouse--brick on the outside, sleek and stark white on the inside--that's at the heart of Callaway's tiny three-building campus in Manhattan's Greenwich Village. There we met with owner Nicholas Callaway, son of golf-club magnate Ely ("He's a wonderful unpaid business consultant," says Nicholas), who explained how he's built his business by bucking conventional wisdom in the hidebound and chronically unprofitable publishing industry.

Unlike the corporate behemoths that churn out hundreds of books every year and let them sink or swim, Callaway publishes only about 25 titles annually--and markets them like crazy. For example, last year Miss Spider's image was plastered on shopping bags, billboards, etc., as part of Target's nationwide Valentine's day promotion. It's the kind of plug normally reserved for a movie and TV phenomenon like the Rugrats, and unheard of for a book character that has yet to make its screen debut (although that's in the works).

But Callaway's skill at editing, printing, and marketing books wouldn't mean much if it weren't for the unusual distribution arrangements it forms with larger publishers. That's how Miss Spider came about: Callaway discovered series creator David Kirk when he was a struggling artist in upstate New York, bought his first book, and after 34 rejections hit pay dirt in the form of a distribution deal with Scholastic, the world's largest children's book publisher. Callaway has similar partnerships with publishers worldwide. "The international sales are the real key to our success," says Callaway. "With certain titles, we have the same reach as Bertelsmann even though we're only a fraction of their size."

Callaway earned $1.5 million on revenues of $10 million in 1998, a 15% profit margin that compares nicely with Bertelsmann's 4%. This year Callaway hopes to build on that success with solid bets like Nova's Ark, the first book in a new series from Kirk, and a line of books that will carry the Callaway Golf imprimatur. Callaway's 1999 list also includes photography books about two of the most compelling figures of our time: Pope John Paul II and, of course, Victoria's Secret model Laetitia Casta.

--Ed Brown