Klopotek

The publishing industry faces some mammoth challenges that it will be very hard for any one publisher, even the biggest, to address.

Costs have to be cut dramatically over the next few years. New technology is going to enable upstarts to compete in the marketplace with far less overhead and infrastructure than legacy publishers have built. The legacy cost structure will be competitively unsustainable and, at the same time, investments are needed to create whole new infrastructures for marketing and new processes for product creation. What the products themselves will turn out to be is something that will only become clear through experimentation, trial-and-error, and an iterative exchange between publishers and their markets.

There are some challenges that are simply awesome. The big publishers are sitting on rights they can’t exploit because they don’t know what they own. The typical “rights database” in a major house is an ocean of filing cabinets containing hard copy contracts that could be 20, 40, or 80 years old and still in effect. The biggest emerging market might be the use of publishers’ material on web sites that do, indeed, need to “buy licenses” to use the material, but the granularity of potentially millions of very low-value transactions would defeat any attempt in the current environment to make this business profitable.

In fact, transaction costs are going to be one of the closely-watched metrics distinguishing publishers in the 21st century from publishers in the 20th. Everybody is going to have to be paying attention to cutting them to enable those low-value transactions to be profitable.

We’re going to need concerted and focused efforts to enable today’s publishing companies, particularly in trade but really in all areas except a few professional niches that have already made the transition, to do what’s necessary to reconfigure and rebuild for new paradigms that are still being invented.

All of this leads me to introduce an organization I hadn’t heard of a month ago which could well be the White Knight riding to the rescue of publishing. I don’t know them well — I’m still in the process of getting introduced — but a publishing systems veteran who has been my client twice before has just taken an important position with them. We’ll be working with them to hone their approach to the publishing community, which I’m sure will have a profound impact over the next few years.

The company is the Tata Group, and more specifically, the unit within it called Tata Consulting Services, or TCS. The executive is John Wicker, with whom I worked in the 1990s when he was at Vista Computer Services (now Publishing Technology) and more recently when he was at Klopotek. (We did the Digital Asset Distribution project together three years ago.) Tata is extraordinary.

The company was founded in 1868 and today the Tata Group comprises 96 different companies with over $70 billion in annual revenues (not far off the annual revenues of the entire book publishing industry, worldwide.) The consulting group is about 10% of the company, with annual revenues of about $7 billion, growing at about 20% a year. TCS has 160,000 associates worldwide, with more than 14,000 in the United States. All of them, of course, have a technology background. Hundreds have experience with publishing and thousands have experience with other media.

Wicker’s new job is to head up the Publishing Segment for TCS’s Global Consulting Practice (GCP), but he is building on a substantial existing base. There’s a major media company of great importance to the publishing community that has been having TCS handle its back office functions for years. Another major publisher was halfway through an Oracle system implementation that was over budget and behind its schedule working with a big brand consulting firm. TCS took over the project and delivered the implementation within the original timetable and budget.

And a substantial portion of the apps on sale for the iPad were developed by TCS. They have dealt with publishing’s legacy challenges and they’ve got experience at the things publishers are just learning that are critical to our future.

In the 1990s, Wicker helped us pioneer a new fusion between envisioning publishing’s future and educating the industry by organizing Vista’s “Publishing in the 21st Century” program, which I co-chaired with Mark Bide of Rightscom in the UK. The White Papers and conferences we did then were really groundbreaking. We can read what we said was publishing’s future more than a decade ago with pride. (Most of the speeches on this web site that are from before the year 2001 were delivered at Vista conferences.) We tapped the thinking of a lot of smart people to develop our understanding of the challenges publishing faced and to feed our imaginations about where things were going.

But the degree to which we could address the challenges directly was limited. Vista was the biggest provider of ERP (that’s “enterprise resource planning”) systems to publishers, but they were a tiny company, far less than half a percent of the size of TCS. What we learned influenced Vista’s systems development but we really couldn’t help much with a lot of the challenges we saw.

We didn’t have the resources to boil the ocean. TCS does. TCS can’t stop change (nor would they want to try) but they really have the capabilities to help publishers do what’s necessary to adapt to it. From the perspective of guys like Wicker and me, who for years have been contemplating issues so large they were more frustrating than enlightening to consider, being able to help steer such a massive rescue flotilla into publishing waters looks like the opportunity of a lifetime.

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Dinner Saturday night. 12 of us. Three spouses who had no particular interest in the BEA. Eight of us with one interest or another in the book business, but no possibility of personally being an exhibitor. And one publishing company CEO with a stand.

Of course, I got my money’s worth. I got in free as a speaker and live in Manhattan. I had several meetings with publishers and distributors on stands they were paying for that could result in assignments. I had other meetings with a bookstore chain and some technologists that came because of the publishers too that also could result in work.

An ROI of pretty much infinity. We all felt that way. Except for the exhibitor.

“No way it is worth it,” he reported. He even had to plan on having four people at the show on Sunday, just to cover the booth when he knew in advance there’d be hardly any productive business conversation. (BEA is fixing this next year by shifting to a mid-week schedule.)

I am always skeptical of any individual’s ability to characterize a show like this based on their own experience. After all, there were considerably more than 20,000 people there. There were dozens of panels going on that had great impact that I didn’t even know were happening, because I was engaged doing something on the floor. But, speaking for me, it was a great show. Lots of fun and lots of business.

Martin Levin, whose first ABA was in 1950 and who commented on my previous BEA post, argued with me about my prediction that BEA would soon come to an end. I had to remind him not to confuse what I say I think will happen from what I would hope would happen. It is work to keep those things separate.

Martin said, “being fat is no reason to commit suicide. This show is fat. It needs to go on a diet!” Another trade show veteran from one of the supporting technology companies said very much the same thing.

But wait, there’s another point of view. Make it bigger! Richard Nash and Michael Cairns (two smart guys I agree with a lot, but not this time) both suggest “open the show up to the public.” Frankfurt does! Book festivals in Los Angeles and Miami attract huge crowds! 

Sorry, public participation is not the “solution” for this show. What ails this industry is horizontality! What ails this industry is dedication to the book as a form! Publishers need to understand niches better; they don’t need to try to replicate the horizontal world that is disappearing in newspapers and bookstores through trade shows!

What made BEA such a fabulous experience for those of us for whom it was that was the aggregating of all of the industry players from around the world. And not just publishers! What do Bowker, Bookmasters, and Klopotek (just to name three exhibitors who were important to me at this past weekend’s show) have to gain by having the public come in? The smartest publishers who are beginning to understand verticality — like Wiley or F+W or  Taunton — need to meet the public in verticals. They don’t need to spend a beautiful Sunday fending off people looking for a free novel or a free children’s book. (And, of course, the German model isn’t “free books for the public”. Exhibitors sell the books to the public off the stands! I wonder what the sales tax authorities in New York would say to that…)

I’d love it if Reed would keep BEA going for years and years, particularly when they bring the mountain to me on my very own home island. But I’m still having trouble seeing why publishers will keep paying and, if they don’t, no more show. I’m afraid that what will work for publishers is smaller and more focused, not larger and more horizontal. That may very well not work for Reed. I expect very shortly it won’t work for Reed. I think the rights-trading piece can be revived in a much cheaper form. The retailer-facing piece — horizontally — is a dinosaur. And all the PR opportunities occur because of the size and glitz. Like most horizontal PR opportunities for books, that won’t get replaced either.

My message of verticality is clearly not getting through! The Washington Post was kind enough to feature me on the front page of today’s Style section with a lengthy and, as far as it went, accurate summary of my Shift speech from last Thursday. But, you know what? Not one mention of the central theme: verticality!

These are twilight times for the good old days.

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The Google settlement brings into bold relief what has been a quiet issue for book publishers, particularly the biggest ones.

They are largely in the dark about what rights they own.

It is not really hard to understand why they’re in this position and it isn’t really anybody’s “fault”, but it sure is a mess. The “rights database” or “contracts database” for most publishers consists largely of paper contracts in file drawers. That’s because all the big publishers gain a substantial portion of their income from backlist that was acquired years, decades, or even many decades ago, long before electronic rights databases were even conceived of.

There have been big improvements in the possibilities for storing this data in recent years. We’ve written extensively about StartWithXML processes and the idea that the rights information could “travel along” with the content in an XML document. That’s new stuff. So is the Klopotek system that actually builds the publisher-author contract from a rights database; the workflow had always had this work the other way around.

But these solutions, even for publishers farsighted enough to employ them, don’t solve the problem of thousands of legacy contracts in file cabinets. The Google-related issues primarily revolve around whether the rights to an inactive book (or, in the settlement lingo, what they would call “not commercially available”) have reverted to the author or are still held by the publisher.

Publishers also have problems with books on which they unambiguously have the rights to print and sell copies. What they don’t know, without looking at the original contract, is whether the language in it gives them a shot at an ebook, a print-on-demand edition, or allows them to include some of the material in that book in an electronic database. Even looking at the book contract might not tell them if they have the rights to use artwork that is in the book in any other edition. 

We are working on a future post on “business development”, which we figure is a big opportunity for publishers who have digitized a large amount of legacy content, which many (if not all) of the big publishers have. But any hopes of business development are stopped in their tracks if a publisher doesn’t know what rights are controlled.

The challenge of building a comprehensive rights database for the many tens of thousands of titles the big publishers control is probably cost-prohibitive. And even if money were no object, there would be a lot of empty cells in that database where information should be because contracts would be lost or incomplete. Figuring out how to attack that problem cost-effectively is one of the most important puzzles facing the senior executives of the major houses.

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