July, 2009

My friend Michael Yamashita is one of the most interesting people I’ve ever met and his 21st century intellectual property challenge is to challenges what he is to people. He’s a photographer who has shot enormous projects, mostly for the National Geographic, over the past 35 years. He has shot the US-Canadian border end-to-end, the Mekong River from the source to the mouth, the path of Marco Polo’s journey from Venice to China on the Silk Road (which runs through Iraq, Iran, and Afghanistan), the entire length of the Great Wall of China, and countless other places that are documented by very few people. (Note: because Mike’s site is built in Flash, I can’t deeplink to each of these topics. You can navigate your way there through “images” on the home page.) And a camera in Yamashita’s hands is like a guitar in Clapton’s or a bat in Ted Williams’s.

What makes Mike so interesting personally is that he’s been to all these places armed with a curiosity and an engaging personality that means that he brings back lots of very personal stories and a real understanding of the mentality of the place. Thinking about what makes his intellectual property challenge so interesting could be throwing off some lessons.

The National Geographic has always purchased specific uses of the photojournalism it underwrites, leaving the copyright with the photographers. Over the first 20 or 25 years that Mike shot, the revenue from stock — pictures he had taken for a purpose he’d been paid for but which he could now sell again — just rose steadily. Every year he added the images from another major project or two.

And even in the early part of the this century, when the photo stock business began to soften pretty obviously, Mike’s sales were slower than most to take the hit. He had many pictures that couldn’t be replaced by “the crowd”. And some can never be replaced at all. When you’ve shot the Buddhas in the wilds of Afghanistan that were destroyed by the Taliban shortly thereafter, you have pictures nobody else can go get.

So Mike’s instinct was to protect the copyright and price of his pictures, not  to follow the increasingly conventional wisdom of making them viral. When you know the crowd can’t duplicate your work, it means it can continue to command high prices.

But not forever. Mike’s stock sales have now found the level everybody else’s has found: much lower. Yet there are still very rare pictures…

We were discussing all of this yesterday at a barbeque on Mike’s deck in a sylvan spot in northern New Jersey. Mike is smart and not hidebound; he recognizes that the world is changing. And even as he continues planning and working on three major assignments in Asia that will keep him busy for the next 18-24 months, he sees that his stock business is cratering, the funding for major assignments such as he has done for several decades is disappearing, and his future employment will be about exploiting his “brand”: teaching, lecturing, and producing and hosting documentary films about the places he knows that almost nobody else does (a career which he has already begun.)

What we realized through conversation was that only a small percentage of Mike’s pictures have the characteristics that make them (theoretically) worth “protecting.” On Saturday, Mike shot his local town’s annual Fourth of July parade (which featured Martha and the Vandellas) and got lots of great pictures that have no real commercial market. But lots of them would great on your 4th of July party invitation next year.

We further realized that the value of the brand Mike is nurturing, his name, is directly proportional to the number of people who know it and, even more important, to the number of people who own it and treasure it. That argues for free and viral distribution of his images (as long as they are prominently “branded”.) Mike saw quickly that the opportunities for teaching and lecturing revenues would be enhanced by free and viral distribution of IP.

The other thing we realized is that even as specialist a photographer as Mike can employ further verticalization to enhance his interaction with his audiences. Mike’s web site shows you his archive and allows you to buy prints. The archive is set up for the professional user (registration required) with search enabled and story ideas organized. But it is not set up for the Google searcher who wants to find Great Wall or Angkor Wat photos. He is not search-engine optimized to show up for those searches, and his site doesn’t pull that kind of material together. Yet those search terms should be his best friends, leading to unparallelled collections of images.

So as carefully- and cleverly-constructed as Mike’s branding site is, we recognized that there are two elements that need to be added to his strategy.

One is that he has to operate on two tracks. He has to separate out the relative handful of his hundreds of thousands of stock images that really do have scarcity supporting their price and protect those, but the best strategy for everything else is to push it out there. Brand it with a signature or stamp of some kind but make it possible for everybody to use it and spread it.

The other is that he needs to “niche” himself: organize and present his oeuvre by the subjects he’s covered, which is the way people can most readily find him. He has to enable people to discover  the brand “Yamashita” when they are looking for a famous place or person he has shot.

The business Mike has always been in: shooting assignments nobody, or almost nobody, else can do and putting together books and selling images that are stunning and, literally, rise above the crowd, will continue to diminish but, for a while at least, continue to pay. But building the new one, which is about Mike himself and not just the images, depends on his willingness to give away what he always used to sell.

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Michael Wolff has written in Vanity Fair about Politico, which demonstrates many of the priciples of verticalization that I have written about often on this blog. He begins with a summary of a startlingly prescient piece Michael Crichton wrote in the fourth issue of Wired Magazine. Wolff writes:

“In the fourth issue of Wired magazine, in the fall of 1993, just as the Internet was entering public consciousness, Michael Crichton, the author of The Andromeda Strain and Jurassic Park, wrote an essay arguing that newspapers were doomed because they were too dumb. As information became cheaper, more plentiful, and easier to get, consumers, he argued, would become ever more immersed in their specific interests and understand that their more generally oriented paper—at least in the matter of a reader’s special interest, but also by inference everything else—had no idea what it was talking about.”

As for Politico:

They are narrow and deep.

They have established a brand that trumps, or soon will trump, the formerly established brands in their niche.

They built an “Internet-first” model, but they have a “spinoff” print product that is a major contributor to their revenue.

They’re (apparently) profitable.

And if you publish a book on politics. I guarantee you’ll be knocking at their virtual door.

Have a great 4th of July weekend!

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As the reality of the shrinking marketing opportunities for general trade books and the continuing verticalization of audiences through the Internet takes hold, we can expect to see some unusual changes (by historical standards) in trade publishing over the next few years.

It seems inevitable that retail shelf space for books is going to be diminishing. This, in and of itself, doesn’t have to mean a reduction in title exposure to the public; Indigo in Canada has said that they’ve cut store inventory but increased title selection by going to more frequent replenishment. That’s a good strategy. The problem in this country is that Barnes & Noble has already been employing it for years, so they don’t have the same opportunity to create further improvement by doing it going forward. They already replenish every store from their DCs every day! And since B&N’s share of the retail book shelf space is likely to be growing since their competition is more challenged than they are, in the US we must expect a declining opportunity to promote books through bookstores.

This is a major problem for the Big Six (in alpha order: Hachette, HarperCollins, Macmillan, Penguin, Random House, and Simon & Schuster) because they require, and plan for, continued sales growth. If overall industry sales of books in stores is going to go down, and it is, then all of the Big Six can’t see their sales go up.

That signals consolidation going forward. We should expect to see at least one get sold to another in the next two or three years. But the traditional method of consolidation — one company acquiring another — will probably not be the only way these companies respond to the increasingly difficult market conditions they’ll face.

Two types of commercial transaction that have been almost unknown in consumer publishing will be pretty common by the middle of the next decade, both of them coming under the overall heading of “publishing portfolio rationalization” which I think all the big houses will engage in.

These changes I’m expecting will start when trade publishers recognize that marketing effectiveness and controlling marketing costs are both dependent on niche focus. Costs which have been traditionally associated with “imprints” will increasingly be seen to be sensitive to subject niches. As marketing activity shifts increasingly to the web, it becomes more and more expensive to market a book that is directed to a different audience than previous books the company has published.

So what happens then? Publishers figure out how to “trade lists.” Look at the situation now with a number of players in the sci-fi arena. Macmillan (Tor) and Hachette (Orbit) are trying hard to build online communities; Macmillan just took the heretofore unusual step of setting up to sell the sci-fi books of all publishers to its audience.

The history of the online world suggests that one of these communities will “win”. In fact, the likelihood is that we’ll see the day when the leading sci-fi site has twice as much traffic as the one in second place, which will in turn have twice as much traffic as the one in third place. Why would the one in third or fourth place keep trying then? Their books would sell better and be marketed more effectively through a competitor’s site. So why wouldn’t they sell off their list to the competitor in that case? I think they would.

Perhaps there will be symmetry and the publisher in first place with sci-fi will be in third place with romance, so they’ll be a buyer in one genre and a seller in the other.

The bottom line is that we can expect to see reshuffling as publishers trade off areas they can’t afford to market to for others where they’re going to expend the marketing effort and want to have the most possible content to dominate the niche and from which to extract a payoff for their efforts.

The second kind of reshuffle we’ll see will involve smaller publishers or third party aggregators taking content off the Big Six’s hands. Each of the big publishers has a few titles in niches such as interior design, health and nutrition, or gardening that they don’t have the critical mass or bandwidth to do anything significant with. Many will be in niche areas that others, often smaller publishers, are developing aggressively. Since the Big Six are going to be financially challenged in the new environment and looking for ways to become more “focused”, selling off clusters of a dozen or two dozen titles will seem sensible. And from the niche players’ point of view, they’ll see the opportunity to sell copies to their growing web communities, or to use the content to make those communities grow even faster.

Horizontal lists that were built for the 20th century publishing ecosystem will not prove to be the right mix for the marketing machines for content that will be evolving in the 21st.

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