Publishing in 2010: Part 1

When we look around the book industry today we see constant and accelerating change, which is often in conflict with previous changes, or the current practices. It could be viewed by some as the Wild West as we see retailer fighting retailer, publisher fighting publisher and new entrants fighting to dominate all not with content, but price, exclusive deals and even loss leading strategies. We find ourselves asking what the industry will look like in 3, 5, 10 years.

This current battleground may appear to be digital against physical, it may appear to be a grab for market share and it may appear all to be focused at the consumer end today, but the reality it is about and effects the total value chain from author to reader and the life cycle not just about front list but books and content in many forms and dating back forever.

The first thing we all must recognise that we have long advocated is that Digital Publishing is Publishing. Publishing may become Digital Publishing but isn’t today.
So what are the changes we need to watch and why? What may appear a single issue has the potential to change and challenge what we know and do today?

1. Pricing.

In another time and another industry we worked within one of the major retail operations and did so during a time of a price war. At the start there were six competitors all with different consumer propositions. At the end there were just two. What you quickly learnt was that price sensitivity only effected a small fraction of the 50,000 lines and that broad discounting effectively loss margin and was counterproductive. We had to move from discounting wars to everyday low prices and that is and was a challenge. The other thing we learnt was that the only winners were those with deep pockets and consumers who were not really that price sensitive in the first place!

The book industry does not have deep pockets. The consumer does not know the price of a particular book in a particular format and there are no real price points yet.
Pricing effects the margin up the chain and if pricing sensibility is not practiced then there will be many casualties. It isn’t just about independent bookstores, it threatens distributors, wholesalers, printers, publishers, agents and authors. Discount pricing in a many to many supply chain where the channel consists of thousands of publishers feeding thousands of resellers is a recipe for casualties in all areas, full stop. It will also lead to more not less waste as sales become more volatile and print runs smaller and more volatile.

2. Blockbuster and celebrity.

The booktrade has always worked on the 80/20 principle, if not the 90/10 one. Here the majority of the volume in terms of units and sales is made by the few. It is a fine balance that in fact allows for a broad and deep range which is effectively subsidised by the winners.

However, if you change that balance and do so too quickly you can screw it for all. Selling volume at lower margin works but works best if higher margin is achieved on the others and a greater volume of sales is made across the total range. We know the book market is effectively flat so the overall impact challenges the validity of those that once made it broad and deep.

We also have seen the recent backlash to the dumbing down, or the Katie Price manufactured hit. Books aren’t Baked Beans.

In part 2 we aim to look at the issues of content on demand and consolidation.