The Shatzkin Files

Examining the relationship between start-ups and publishers

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We are in another high-funding era for digital start-ups. The book business has always looked ripe for disruption, but never any more so than now. With bookstore shelf space shrinking, ebooks growing in very uneven ways across the types of books that are published, and everything about technology getting cheaper, everything is up for grabs.

It is not a new thing that the world looks different to the companies funded by the revenues from the legacy business than it does to outsiders, some of whom want to bring tech disruption into collision with the legacy business.

Publishers see an ebook business that has been very commercially unkind to the digital versions of books that aren’t immersive narratives. Start-ups and their funders see publishers too stuck in old forms, and unable to break away from a book-style presentation when the content and use cases would call for something quite different.

Publishers see a printed book marketplace that is dominated by Amazon with less and less room for books in stores. Start-ups and their funders see an opportunity to gain further digital discovery by making the content easier for people, and web crawlers, to “see” online. And they also see making digital versions of books easier to “share” as an aid to discovery; publishers often see it as an enabler of unauthorized distribution that could cut into sales.

Publishers see books as products driven primarily by interest in the author or genre (for fiction) or the subject (for non-fiction). Start-ups and their funders see reading as an activity at least partly driven by convenience and availability and the ability to share the reading experience.

Publishers see Netflix and Spotify and think, “How many people read more than a book a month? The subscription model doesn’t really apply to our business.” Start-ups and their funders see that the consumers of all other content really like the subscription model and they can’t see why it wouldn’t work in the book business, too.

So we have, for example, several serious initiatives around subscriptions: dedicated (and often well-funded) start-ups like Oyster, eReatah, Skoobe and 24 Symbols, as well as initiatives from the totally-established and the differently-established Scribd. At the same time, some agents are outspoken in their objection to the whole concept, seeing it as a way that commercial power will pass from the author brand to the subscription brand. Publishers generally pay close attention to what agents say. Whatever the reasons, as of this writing only HarperCollins has broken ranks among the Big Five to place any substantial number of books in subscription services.

If you get many of the start-ups to speak candidly about publishers, they’ll often accuse them of being hidebound, unimaginative, wedded to old ways and models, and still “experimenting” with things that should be well-established.

If you get many of the publishers to speak candidly about start-ups, they’ll bemoan the fact that they too often don’t understand how the business really works or the true commercial imperatives at the publishing houses, which must continue to sign up and please authors and harvest revenues that still come overwhelmingly from sales of one item at a time to one consumer at a time through intermediaries.

At Digital Book World in January, we have five elements in the program to address the relationship between start-ups and established publishers.

First: we are running a survey of start-ups and publishers to get them each to talk about what they expect from the other. If you work for a start-up or your job at a publisher includes meeting with and evaluating start-ups, please respond to the survey! We will announce the results at DBW.

Second: Ron Martinez, who has a start-up (Aerbook), partly financed and supported by an industry leader (Ingram) and a long background in tech, patents, and design, will speak about the relationship between start-ups and incumbents.

Third, Fourth, and Fifth will be three panels exploring the question from three sides.

A panel of start-ups, which will include Martinez and Andrew Rhomberg of Jellybooks and two others we’ll pick after we see the survey results, will talk about what it takes to get traction with publishers, what publishing, marketing, or ecosystem problem they’re addressing, and explain their own vision of a path to success for their enterprise.

A panel of publishing business development people, including Rick Joyce of Perseus Books Group and Leslie Hulse of HarperCollins, will talk about how they view start-ups. What makes them give start-ups a meeting? What makes them engage? How much buy-in do they need from the rest of their company to be able to work together?

Finally, a panel of investors in start-ups, three of which are owned or controlled by existing publishing entities (Ingram, Macmillan, and Harvard Common Press) will talk about what persuades them to fund a start-up and what disruption they see on the horizon for publishing from the start-up community.

Very good publishing minds from three continents around the world, including Arthur Attwell,  Javier Celaya, and Brian O’Leary, have expressed themselves recently on this very problem. Although I disagree with chunks of what each of them has to say (as Jeremy Greenfield’s interview with me on the DBW blog makes clear), they individually and collectively express the real challenge of finding both workable paths to the future and workable ways for innovators to work with incumbents to get there.

The post from Jeremy triggered an exchange on Twitter among Rhomberg (from whom it inspired a thoughtful post), Peter Turner, and me which surfaced another important point. An incumbent’s job is to continue to maintain economic viability. A start-up’s objective, often, is to “change the paradigm”. If the paradigm does change, the incumbent needs to roll with that, but they don’t need to be an instrument of change. A start-up often does. That is an inherent difference in perspective that a start-up can’t afford to ignore.

As a guy who questioned why anybody would want another device just to read books when Amazon introduced the Kindle, I’m the first to admit that predicting in advance how an innovation will do — including the observations I made with such conviction in the DBW piece — is rarely a slam dunk.

It isn’t likely that our sessions at DBW will help anybody predict which innovations will succeed in the future, but it might help both start-ups and incumbents develop more mutually productive approaches to engaging with each other. That’s certainly the intention.

Don’t forget to respond to the survey if you are either a start-up or in a role at a publisher that involves meeting with or evaluating them. We’ll be collecting responses through next Monday, November 18.

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  • Matthew

    There is no mention of the customer or reader in this article at all and I think this is indicative of the issues facing the start-ups.

    So for instance you state “Start-ups and their funders see publishers too stuck in old forms, and unable to break away from a book-style presentation when the content and use cases would call for something quite different.”

    When the reality might be that publishers are wedded to old forms and a book style presentation that their customers want.

    You state “Start-ups and their funders see reading as an activity at least partly driven by convenience and availability and the ability to share the reading experience.”
    Whereas readers may see it as a solitary activity between them and the content that they may or may not want to talk about with others.
    Way too many of the start-ups in publishing appear to be fixed on the idea that their job is to ‘change the paradigm’ and that’s often why they don’t succeed. Actually their job like anyone else’s is to meet the customers’ needs or wants. If they have to change the paradigm to meet this need then they’ve a chance of succeeding. If they don’t then chances are the encumbant will succeed with the existing paradigm.
    To me it is no surprise the kindle was a success given amazon’s focus on the customer. They knew their customers liked to read and they gave them a device to enable them to do that digitally. They didn’t (initially) try to change the paradigm of what was read or the form it was read in because they knew that wasn’t what their cutomers wanted.

    • I basically agree with you. It seems to me that too many start-ups focus on what they *think *might be the the changes the industry needs, but it is a priori assumption without any confirmation. I tend to view books and reading the way you describe it here: a solitary immersive experience. I think that is what it is for most people, for most of our industry’s customers.


      • jellybooks

        hmmm, why do our views diverge?

        Publishing has traditionally been a very stable industry and in a stable industry this “wait-and-see” approach makes perfect sense

        I have been through a few rapidly changing industries in the past 12 years and been very active in building out ecosystems or being beaten by pulp by companies that built out better ecosystems and thus dominated their markets

        I think what publishers are missing is that their industry has a lot more ecosystem upheavel ahead of it and if they do not actively participate in experimentation – which helps them learn about changes – then they will be in danger of facing the wrong end of the stick. Experiments should be cheap, cover multiple bases and learning-rich, but if there is no pipeline for absorbing those learning (plenty of examples from plenty of industries), then – yes – publishers might as well not experiment at all.

      • Right. There’s no point to experimentation in a vacuum.

        I can’t remember what thing it was John Wiley & Sons did several years ago that I complimented my friend and their Chairman, Peter Wiley, about. He said it had happened through “persistent, controlled experimentation.” Unless you are experimenting with a *purpose*, and *measuring* what you do, there’s not a lot of point to doing it.

        Obviously, whether a publisher should try “something” depends on what the “something” is. But if we’re talking about two of start-ups’ favorite subjects — making complex digital products or putting ebooks into subscription offers — I can’t see what significant risk any major publisher would be taking to say “let us know how you’re progressing every six months” and then joining in if and when the effort gains traction. If the start-up has a workflow solution that will get a publisher from a doc file to a printed book in half the time for half the cost, then, yeah, try it right away!


      • jellybooks


        I guess “ebooks as apps” and “Netflix for ebooks” – both ideas, that I have regularly and repeatedly picked apart – have ruined start-ups reputation somewhat in publishing circles. Now that is something I can agree on.

        as for those workflow solutions, the start-up tales I get to hear from start-ups in that area are the same as mine, book publishers are sweet as honey, but slow as molasses – I think most have discovered their customers to be among magazine publishers…

    • jellybooks

      Yes, there are start-ups that focus on new untested features, such as social reading, but then there are many, many more who innovate in other dimensions.

      The diversity among start-ups and publishers is immense (a lot of the complaints about publishers is really just about the “BIG 5”)

      The important thing to remember is that start-ups that offer only very incremental solutions, rarely gain traction, because their feature are too easily absorbed by an established industry player or simply do not offer too much differentiation in crowded market place of established players.

      Trying something radically different, even it fails 1 in 10 or 1 in 100 times is, paradoxically, a more viable start-up strategy.

      My key point is always: “big publishers may complain about Amazon’s dominance, but I opine that this is in large part down to their unwillingness to nurture alternative solutions and ecosystems”.

      Tomorrow’s solutions are today’s experiments.

      • I’m with you until the suggestion that more innovation from publishers could somehow have prevented Amazon’s hegemony. We’ll have to agree to disagree about that one.


  • Jack W Perry

    Very thought-provoking post. I look forward to hearing more at DBW.

    Regarding content and the “Big5.” Don’t forget that Simon & Schuster is all-in with eReatah. Their front-list and back-list. Granted eReatah has a different business model than the pure-subscription platforms, but it is still a corporate publisher stepping out and experimenting.

    • Jack, thanks for adding this piece of information about eReatah and S&S, which I didn’t know.


      • Jack W Perry

        No worries. You cover so much ground, it is amazing how much information you pack into these posts. More excellent news tk on eReatah soon!

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