Saturday, December 31, 2011

2012 Digital Perspectives: The Publisher

This week we have written a series of short articles titled, ‘2012 Digital Perspectives?’ These have looked at what we believe are the short term issues, challenges, potential game changers and outcomes across the digital publishing value chain. Today we look at the many complex opportunities facing the Publisher.

As we have seen this last week with the HaperCollins versus Open Road legal charge, different parties can view even a contract from a perspective, which is not always shared. We often find ourselves through different windows into the same house and seeing completely different rooms.

Publishing is a rights business without a Rights registry, where much of the information about rights remains locked away behind closed doors. Digital publishing now demands greater clarity and transparency on rights and the current ambiguity and lack of information remains digital publishing’s biggest threat and opportunity.

The book world is global and as the ebook market explodes, publishers have to rethink territory rights. Orphans remain the prize sought by many and an issue still unresolved. Permission rights will increasingly become an opportunity as content gets fragmented, enhanced and as snippets become more accessible in a digital world.

Licensing models that exist in other media don’t exist in the book market today. Rental and loans can’t be ignored any longer and if not addressed proactively they may be addressed by others.

Digital Rights Management will continue to be demanded by publishers who will be wary of piracy. The shift to online and cloud based on-demand platforms will also start to negate the need for DRM and downloads as we know them today and it is inevitable that DRM as we know it will have a limited life.

Copyright contracts should move to fixed term contracts and commercial terms where a licence may automatically revert if not renewed. This could itself offer a different reward structure and one which is based more on performance by all parties. However publishers must seize the initiative and not wait for others to dictate it.

Many still print first then convert to digital and Editorial remains for many the last bastion of the analogue world. Although many in professional and STM have already learnt the lesson and gained the benefits of XML workflow and development it is still to be adopted more widely across all sectors..

Ester Dyson once said that being able to find a needle in a digital haystack was key and we thought that Google’s big opportunity was to start to change search and discovery. However this did not happen in 2011 and perhaps their problem is that they still see books as mere information to index and fail to grasp the context.

Content will increasingly be used to provide context and support search and discovery. These opportunities demand changes in how content is developed, managed and distributed.

Progress has been made with services such as Net Galley and Yudu, but these were still locked into solving bits of and not the total problem. The industry is failing to grasp the difference between content based services and transactional ones. It’s standards bodies and focus is still focuses on servicing business to business information and fails to grasp the more important and greater business to consumer opportunity.

Social networking is starting to make a difference, and the challenge is to harness the social facilities in a positive way to advise, stimulate and lead consumers to discover titles, whilst avoiding blatant product placement and ;happy money'. Success is not guaranteed by the size of the spend, but by the skill of the approach and the only one that really matters and decides the winners is the consumer.

We still have to see trade publishers grasp direct marketing skills and mail list management. It is after all easy to collect names, but a lot harder to know how to exploit them when you are not the natural consumer facing agent. Trade publishers now find themselves dealing with traditional mass marketing, marketing to channels, brand building of both authors and their own brand and direct marketing. Is it therefore understandable that they all often fail as they try to cover all bases.

Digital Sales, Tax, Pricing and Royalties
Today’s digital ‘honesty box’ sales model is not sustainable without sales and royalty transparency. Asking publishers to reconcile sales that they can’t often audit, could be seen by some as an untenable position. No longer can publishers count the stock out, sold and returned. In a digital world, the unit only needs to be stored once and only moves when it is sold and there should be no returns. In theory this should make sales and royalty reporting and reconciliation very simple. We expected the industry to address this before it became indoctrinated within the market, but have seen little co-ordinated effort, standards or even approach.

Taxation is a digital mess with different rules and rates everywhere and a lack of harmonisation even across the EU. Should prices be inclusive or exclusive? Should tax be at point of distribution or consumption? Why is the same product taxed differently because it is digital? Publishers may not make the rules but can lobby and influence them.

We know now that the agency pricing model will face many legal tests this next year and will probably fail some if not all. Pricing is a threat and an opportunity. Managing prices across thousands of titles, from thousands of publishers, through many many channels and outlets, can only be managed at the consumer interface. In a digital world where all books look the same, the lack of consumer price points only adds to confusion. This was partially addressed in music when iTunes invented the track price but remains a challenge in publishing where value still has to be effectively communicated.

The Publishing Organisation
Publishers now need to seriously consider the impact of digital on the organisation. There is no right or wrong answer.Do they have a single organisational focus that sees physical and digital as mere renditions of the same work and if so, which part is the dog and which is the tail?

The digital business will have to be far more holistic in its approach and consideration of all aspects of publishing and yet must remain agile enough to respond to rapid changes.

The large publishers will continue to control the vast majority of sales and in sectors such as education, professional and academic and it is hard to see a change to this 80/20 rule set. However, in trade publishing we see a different dynamic and potentially, a more level digital playing field. In digital, publishers are only as good as their ability to exploit their content and rights and those that believe they have a divine right to market share will soon learn the digital reality.

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