The Polarisation of Publishing

Publishing whatever sector, geography and format has always adhered to Pareto’s 80/20 law and in many cases less than 20% have generated even greater than 80% of revenue and unit sales. This obviously leads to a polarisation of the market, with in many cases, no more than a handful of publishers and channel operators dominating each sector. Many don’t like it, cry monopoly, but its not going away and the dilution of one operator will just be replaced by another.

We recently raised the question of the impact of the migration from print to digital revenues and asked what it would mean to organisations, supply chains and the remaining print based operations. We all know digital is happening and continues to accelerate and although we may not be able to predict where the line will be drawn, the impact will be significant and not preparing for it may be like a publishing ‘Pearl Harbour’. Perhaps today’s biggest conference circuit agenda should be on , ‘How to survive in a downsized print world.’

When Chris Anderson first coined ‘long tail economics’ in 2006, many were cynical and merely asked where the money was. It challenged the fundamental principles of the economies of scale and scope on which the 20^th century was successful. However, today no one can deny that the long tail is here and not only has it arrived, revitalised the forgotten back list, inspired many authors to do it themselves, but it has challenged the industry’s obsession with front list. Penguin’s recent acquisition of self publishing operation Author Solutions, is not just about feeding the machine, it also about trying to accommodate the new long tail world and get involved in a mass movement. Amazon have once again shown great strategic vision and application with their Kindle DP programme, which could now become a significant jewel in their crown and although other players are trying to emulate it, they are playing catch up and are clearly behind the curve. Open research and access is also going to have a significant impact on some markets and change the balance of power across the value chain. However, we still to see some more moves and there are some real opportunities today that are just begging to be taken.

Only this week we read in Publishers Weekly about the demise of print back list sales which is in part down to reduced shelf space and also part down to digital offering what we believe is a more logical and better home for these works. This again impacts the balance of the market both in terms of front versus back list and also physical versus digital. the interesting question is, if the physical back list market becomes less predictable and attractive does this give publishers the confidence to digitise their back list or raise the risk that digital migration may not be rewarding? Will they merely sit on their assets, revert them, digitise them with no marketing effort, or let them slide into an orphanage? Digital may only be seen to be worth the effort if it generates sales and if the digital shelves are full how do readers find and differentiate the back list from the rest?

We are no longer talking about ‘long tail’ economics but ‘long market’ economics.

So what will be the organisational and economic impact of the seismic changes that are taking place today?  It is not just a case of responding and generating new revenues, but one of managing and protecting old ones too. We and many others believe that the 80/20 law will still prevail but that the market will become even more polarised and middle ground will change radically. One of the leading thinkers and a Director at Bloomsbury, Richard Charkin, recently is quoted as saying that, ‘publishers should now start to act and think as start-ups.’ A very scary thought for some, but a stark reality for many.

In some media sectors competitors are now working together to share investment and importantly risk and reward. Do we see a similar collaborative publishing environment, or a continuation of the ‘winner takes all’

Many still believe that digital is just about pouring the physical book content into a digital container. Whilst others believe that digital wizarderly and extras will prevail and digital content will become a full blown multi media experience. Reality will be somewhere in the middle but what is clear is that publishing will continue to polarise and in doing so create some exciting opportunities which will demand market and organisational change.

The democratisation of reading and writing is happening and the question is who will be prepared, fit, and responsive and succeed in the Brave New World of digital and physical content?

Some say the today’s weather is becoming more volatile, extreme and unpredictable. Welcome to publishing tomorrow.

Bifurcation

Last week we had two viewpoints expressed in Digital Book World which raised much debate and further amplified the gulf of dialogue and thinking within the industry today over the issue of self publishing especially in the digital world.

First we had the original article ‘Leaked: Hachette Document Explains Why Publishers Are Relevant’ , which again raises the question as to the role of the publisher in tomorrow’s changing value chain. The premise of the proposition was based on, ‘Self-publishing is a misnomer’ and it went on to lay out the value added services that publishers can offer authors. When we look at these in pure digital terms there are a number of questions:

‘Curator’ we are not sure that this is the right term but irrespective is the curator for the author or the consumer?

‘Venture capitalist’ some would suggest that this actually describes the publisher role. As many who have dealt with VCs know, the VC onus is often purely on the money and return, more than the venture and interestingly most VCs have an exit strategy from the outset.

‘Sales and Distribution Specialist ‘ we agree this is very important in the physical world where grabbing shelf space and promotion has to be ‘in the face’ . However, does it carry the same weight in a digital world? The digital world does not just compete with the other new titles and some back list, but has to compete with everybook ever published. There is an opportunity, but it is more about marketing and brand awareness than sales and distribution. It could be questioned what digital sales expertise one needs when the sales are to a small number of aggregators who actually drive the sales and who by their virtual shelves carry everything anyway.

’Brand Builder and Copyright Watchdog’ this is real value and one that becomes of even greater importance the more digital we become. Brand building is critical in today’s viral world, but as often proved, this can be unpredictable in today’s Facebook and YouTube world. Copyright protection is however difficult and the publisher should have the mechanism to monitor, raise take down notices and litigate where needed. However, we must remember that a watchdog is not just about copyright and we live in a digital ‘honesty box’ trade, where it is rumoured that ‘no audit’ clauses exist today, so assuming a huge amount of trust.

We then read the response from self publishing author JA Konrath, ‘Advice to Publishers’ .

In his response Konrath lists six points:

‘Offer much better royalties to authors.’ This should be a given but there is often much debate about the digital norm and the fact that royalties are based on net sales which can be very loose. If agents do not tie contracts to term times, authors may find they are digitally tied to perpetual contracts, with little incentive and where both agents and publishers live off a sizable proportion of earnings for life plus 70 years. In this digital real time age, why digital royalties aren’t paid out monthly or even at the end of each day and totally transparently? The recent Simon and Schuster move on transparency is a step in the right direction but to some is only a one step.

‘Release titles faster. It can take 18 months after a book is turned in to be published. I can do it myself in a week.’ This is a legacy issue and often tied to physical lead times that are required by many large bricks and motor chains. In a digital world this doesn’t apply but the implications on the development process within publishers are significant and with reducing advances the pressure to reduce lead times and be smarter is clear for all to see.

‘Use up-to-date accounting methods that are trackable by the author, and pay royalties monthly.’ We have covered this above and must remember, when someone decides to do this and promote it heavily, it may become a game changer for all.

‘ Lower e-book prices.’ We see Konrath’s point and how some have moved volume by low price pointing. It is a case that when there is only one mouth to feed then a larger amount of a lower price is acceptable, but when there is a corporate to feed, there is often a cost point that must be first cleared to have any chance of break even.

‘ Stop futilely fighting piracy.’ This is not so much about self publishing as about publishing risk. We will soon reach a point when DRM (Digital Rights Management) becomes less of a risk and more of an inhibitor. It happened in music with MP3 and it will happen with books, it is just a case of timing.

‘Start marketing effectively. Ads and catalogue copy aren’t enough. Neither is your imprint’s Twitter feed.’ We understand Konrath’s point, but we all face the same problem and there are no digital marketing silver bullets. If there were, we would all be adopting them and … Publishers do offer scope and skills, but many have not developed these and rely heavily on external resources to show them the way. This is a core skill set for tomorrow’s publisher and one where they can offer in house value add.

Last week a good friend was offered a digital deal on some six titles that are still in print, but where the digital right is not encompassed within the contract. The agent had taken some months to negotiate an offer 25% net and suggested it was a good deal. Our advice was to define a fix term time, understand the reversal clauses on digital, agree the loan and rental deals up front, and the control and pricing policy on agency. The agent gulped and understandably is yet to respond.

Rethinking the Digital Future

Technology is not only changing how we do business and is introducing a significant challenge in reducing the time to do business. As technology speeds up processes it also highlights those age old time blockages and inefficiencies that didn’t matter, or could not be addressed yesterday. Technology now enables us need to look afresh at the end to end business and consider how we can do things quicker and smarter.

Today when we look at publishing, we often see a market littered with ‘gatekeeper’ checkpoints. These barriers were not only aimed at introducing quality control, reducing the flow of traffic and they also often to slowed down the process itself.

Manuscript submissions, acquisitions, development and production can take months if not years. There may appear to be perfectly good reasons why it should be as slow as it is, but it is now clearly restrained by people rather than technology. The way works are also marketed, promoted and sold, could be said by some to belong to a bygone age that was more obsessed with feeding the shelf, events and calendars and those 13 week windows, than satisfying today’s real time world of instant gratification.

However, like many markets, we are obsessed with the consumer end. After all, the consumer is the only one that puts money is and despite what some marketers think, is the only one who decides the true winners. When we look at the end to end process we often view it as not one marketplace but a series of linked marketplaces each with their own gatekeepers, fiefdoms and find that they are often overly protected from each other. Despite the huge advances and improvements to Supply Chain communications, some what suggest that we still do business by ‘slipping notes to each other under the door’.

What if we could tear up today’s processes and redefine the role of the gatekeepers?

What if we could view the business as one end to end marketplace?

What if Michael Porter’s linear Value Chain model was a virtuous circle with no start and end?

What if we viewed the business as one integrated marketplace with content and associated rights at its core and the players and activities being just that and periphery to that core. More importantly, what if we recognised that all players could effectively participate at any time?

Imagine consumers being able to access and comment on manuscripts alongside agents, publishers and retailers, some will say its already happening. Imagine living bibliographic records being managed as ’wiki’ records where they are developed not so much in a vacuum but as crowdsourced documents that never stop being updated, appended to and refined. Imagine the elusive rights registry being open to all.

An inclusive ‘book’ marketplace perspective could change not only how we do business, the speed in which we do business but the relationships within the business? It could remove some of the adversarial and holier than thou attitudes that continue to dog the industry. It could create a new level of interest and participation that is more organic and spontaneous than today’s often ‘manufactured’ approach.

This holistic marketplace may appear unfamiliar, dangerous, exciting and to some a bridge too far, but it is the direction that technology, social networking and networks are clearly taking us today. We don’t fully understand the implications on today’s roles, processes and business and the route is somewhat dynamic and unpredictable but it is happening and the genie is not going back in the bottle.

The key is to see one holistic marketplace.

When we look at the likes of Amazon, Kobo and others we see businesses uncluttered with yesterday’s thinking and ready to redefine how we do business tomorrow not just at the consumer end but within the new virtuous circle of value.

So is $9.99 the eBook Price Point?

BooksOnBoard, the online eBook and Audio Book shop, has announced a massive discount on current New York Times Bestsellers, slashing prices from around $20-$30 to the price point of $9.99 and below. The price reduction is scheduled to last until Wednesday, May 27. So we see short term promotional price discounting similar to that done by Fictionwise, who some may say had one every weekend to celebrate everything and nothing. So what is the big deal?

Firstly $9.99 happens to be the price point chosen by Amazon for its ebooks and irrespective of whether they held it or not the perception sticks. So just like Apple did with the iTunes price point we now see others following with the $9.99 ebook price point.

Digital pricing may now no longer be established by the publisher or even the retailer but by the market. Once you have a recognised price point it is hard to drive consumers away from it. Look at the recent reaction when many raised concerns that they perceived Amazon was trying to raise the price from $9.99.

The question is not whether $9.99 is right or wrong but what is that impact on both the value chain and the author, publisher, aggregator, reseller etc? What is the knock on impact on the physical book model? Is the price point sustainable or merely a promotional price and how is that managed?

We have seen many readjustments in the ebook model such as the initial author rewards split being pegged back, with some advocating that they should now only receive a flat fee on digital.

Whenever we look at pricing there is that classic cause and effect implications that have to be thought through but in a market which has tens of thousands of authors, thousands of publishers, thousands of titles the point of aggregation often makes the decision and often based on their needs and their margins.