The Shatzkin Files


Stay Ahead of the Shift: What Publishers Can Do to Flourish in a Community-Centric Web World


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Special thanks to Christina Katz for providing us with the following clips.


Introduction

Michael Friedman and I were having lunch and he said to me, “You know Mike, the word is “evolve”.” And that’s the word. So in fact it’s not going to be about how you flourish, it’s going to be about how you evolve. How publishers who create products can evolve into a world that’s going to be about community.

There are a few fundamental premises that really ground this speech that we want to start with, and the first one is Things Will Change, and I don’t think we’re going to have a lot of disagreement about that. So, we can move on to the fact that It Is necessary to have a view of the future to anticipate change. Think, for example, that people in the future are going to look up publishers on the web, and search those publishers for the books they want. Well then you would do things differently to what I’m going to suggest to you, because I don’t really think that’s what the future is. But you have to have a view of the future in order to know what to do in the present. Another premise that I believe is true is that the market is going to shift in some ways, from now on, between the time you acquire a book and the time you publish it. Every book that is being published now was acquired before anybody had heard of Twitter. And every book that is being published now depends on something that is in Twitter. So that’s going to be normal. And because that’s normal, you’re going to be constantly trying new things. You’re not going to have any choice but to try new things! Because Twitter is a new thing, and things become new, and you don’t have the chance to sit on the sideline and watch how it works and analyze it. You have to be opportunistic, you have to see what opportunities are out there and you have to try new things all the time, and you have to do that within some sort of framework, within some sort of understanding of the future because we know that there are so many new things going on. We can barely remember them all from the last two weeks, let alone try them all. So if you don’t have some sort of an idea of where you’re going, and where the world is going, it gets very very hard to distinguish between the opportunities.

A Lot Happens in 20 Years

Now, before I describe what I think will be the world of content and publishing in 20 years, I want to make the point that a lot happens in 20 years, because I’m going to describe a world that is pretty different from the one that we’re in, and that would raise a lot of skepticism. Think about this:

In 1968, there were about three broadcast networks that had about 95% market-share. There was nothing else to do with your TV, and there weren’t a lot of things to do other than watch TV. So, half the country or 60% of the country, could watch The Beatles on The Ed Sullivan Show, that kind of thing doesn’t happen anymore. By 1988, half the homes in America had cable, and half the homes in America had VCRs. There were five broadcast networks, not three. And there were 40, 50 , 60, 70 channels on the cable. And the broadcast networks knew that that day they had, 20 years before, was never coming back.

I picked 1980 for the record companies because that was just before a huge boom. As a matter of fact it was before two huge booms, because the Walkman 2 was invented in 1980. So between 1980 and 1983, the record companies got to sell me all the records I bought until that time, as cassettes. And then in 1983 or 84, they invented the CD, and they got to sell me all the records they sold me as cassettes again as CDs. And that made the record companies a lot of money. And things looked great for them. And the future was booming. And we know where the record companies were by 2000. 2000 was before the invention of the iPod, but not before the invention of Napster.

Newspapers. Well 1989 was a peak year for newspaper ad revenue. It went down a bit after that, but you know what saved them? In the mid-1990s, classified advertising saved them. But you know what classified advertising is now? Craigs list. It’s not on the newspapers anymore. You know where newspapers are now. They’re threatened. So in 1989 they had a peak year, and in 2009, they’re facing extinction. That happened in 20 years.

Mass-market paperbacks. Now this is something where you have to be as old as I am to remember when book publishers made a lot of money selling mass market paperback rights, and the fact that that was the jackpot. You published that title in hardcover, and then you could sell the mass market rights for a lot of money. I’ve picked 1975 as a starting year there, because the record sale for mass market paperback didn’t occur until 1979. That was Princess Daisy. Remember Princess Daisy? Pretty forgettable book. 3.1 Million dollar sale from Crown to Bantam. That number has never been topped. By 1999, mass market paper backs were where they are now, which is that they are category books. 95% of mass market paperbacks fall into a fiction category. So in 20 years, it went from a business that meant, that mass market books were bookseller, to a business where it doesn’t anymore.

Online Access in 20 years. Well, in 1989, the World Wide Web was in the process of being invented. But you could go online. To Prodigy. Through a dial-up. And now, 20 years later, you carry the internet in your pocket. So, that’s changed a lot in 20 years!

Books. Well, 1989 was before two great booms, sort of like the music business in 1980. Because in 1989 the owners of Borders, and the owners of Barnes & Noble were headed down to Wall St. to get a lot of money, to open up superstores. And all those superstores stocked a lot of backlist. So in the early 90s, publishers were printing a lot of backlist to put into all those superstores. And then Amazon came along. And that, as a matter of fact, got the backlist for the guys who didn’t have enough sales clout to get into the Barnes & Noble and Borders. Their backlist is sold on Amazon. So everybody was moving up. But you know what? The last 10 years, unit sales on books are flat. And bookstore shelf space is now sinking, where it was really expanding. We have gone from a business that was expanding, to a business that is contracting in 20 years.

The World of Content 20 Years From Now

So a lot happens in 20 years! And that’s what we are going to talk about now. What might happen to the business we call “the book business” over the next 20 years? This is purely invention here. This is totally out of my head, but that’s what you have to do because you can’t drive with your rear view mirror, you have to think about how things are going to change.

The first thing that’s going to happen, or the thing that we’re evolving to, where we’re going to be in 20 years, is that we’re not really going to have hard drives. We’re not going to really have much information cached, or able to hold in our hands. Everything is going to be in the cloud. And that means that DRM is no longer a problem really, because you’re not authorized to get the material from the cloud, you won’t have a copy, people won’t be circulating copies. So almost all file access of any kind will be tethered. Now you will know we’re getting there when you can use your iPhone in the subway. You will be able to use your iphone in the subway. You’ll be able to use it anyplace, but until we’ve built that infrastructure, we’re not in the cloud. You’ll know we are when that happens.

We are Licensors and Licensees

What that means is that we’re all licensors and licensees. In that day, when you don’t have a hard drive on your computer and you’re saving the thing you just wrote into the cloud, you’re going to have to license it. You’re going to have to say “I can have this and no one else can have this” or “I can have this and my assistant can have this” or “Anybody who pays $100 can have this”. So you’re going to have to set the licensing terms for everything that you save in a sense. There will be defaults, you won’t have to fill out a form every time you save something, but in effect, that will be the case. Where is this happening now? On Scribd. Right now. People put documents up there, and they license them in way that they think is right for that document. One of the reasons we’re going this way is because it’s really very inconvenient to have your files in your computer, because if you don’t have your computer, you won’t have your files. Now that’s fine if you have an office network and you can tap into it from any place, but many of us don’t have office networks.

Everything is in the Cloud

Well we’re going to have a cloud network, and we’re going to access that material through screens and devices. Screens and devices will be the same thing. A screen is a device that will get you to the cloud, and let you read it on a screen. And we’re going to have all kinds of screens. We’ll have a screen on the wall that you can watch the football game, it will have a Picasso in it when you don’t have the football game on. You’ll have screens that you’ll roll up and put in your pocket. You’ll have screens of various sizes for various functions. And, by the way, if you want to get at your material using my screen, you’ll be able to do that. You’ll have your iris scan, or your fingerprint, or six passwords, or however you felt you had to lock up that material. But you won’t be locked to any particular device, you’ll be able to use any device.

Niches & Nuggets

I want to introduce the idea here of a nugget. I know the niche I something that we’re beginning to understand, but I wanted to also introduce the idea of a nugget, which is more granular than a niche, which might give you a picture of how I think this world is evolving. Imagine this as a nugget: there is a single person in Richmond, VA, or Tuscaloosa, AL, or Omaha, NE, who is obsessed with Civil War uniforms, and collects them, and collects information about them, and links to everybody who is interested in them. But of course, Civil War uniforms need to be found by the Civil War community, they need to be found by the military history community, they need to be found by the history of fabric community. So that nugget is going to end up in many niches. And most nuggets are going to end up in many niches, and that will be the composition of the world that we’re going to live in 20 years from now.

Inside the niche, everything is going to exist. That is to say that it’s a sort of a combination or Wikipedia, and Facebook, and Google. It has the taxonomy. It has the bookshelf. The Safari Bookshelf, great idea, makes a lot of money for O’Reilly. It won’t make a lot of money in every context, but the idea of a searchable bookshelf? It should exist in every vertical. And it will exist in every vertical 20 years from now. All of these things are going to be combined and there will be gateways to every niche, and what’s going to happen when that happens, is that format-specific publishing is going to give way to format-agnostic publishing. Because when your relationship to the consumer is that you can deliver them a file, you are no longer captive to any particular format. Your file could have something to be read, it could have something to be looked at, it could have animation, could have software, could have games, could have anything at all because when the transaction takes place on the level of the file, then we break out of this notion of format, which has really been the way publishing and all media has been in the 20th century.

So you’re going to have these community gateways, and these portals, and this upstream aggregate’s idea is that the guy who is interested in the Civil War uniforms, he’s not really thinking that he’s part of the world of the history of fashion, or the world of the history of fabric. Somebody else who has decided to construct a portal on the history of fabrics says “ha! This belongs here, this should be part of this, the discovery of this should be enabled here” And that’s going to be another kind of opportunity, which is aggregating things, and creating the logical front door to a lot of nuggets that go together in ways that perhaps the people who created those nuggets didn’t even think about.

Crowd Curation

The crowd is going to be doing a lot of work. The crowd is already doing a lot of work. We’re going to get here because the crowd is going to look at all the material we have created over the last many many hundreds of years, thousands of years in some ways, and digitize. They’re going to be editing it, and they’re going to be curating it, and somebody’s going to be deciding that that Civil War uniform thing belongs somewhere.

We’re also going to have professional and personal superediting and super-curating. A business that is already starting is Louis Border’s MyWire and Michael Cairns has a piece of that which he’s calling “Week’s Best” and this is exactly about professional super-curation. It’s about bringing an expert on to look through all the material that has been generated across the web about a particular subject, and selecting those things which are most important. Yes, it can be done by the semantic web, but it still can be done better by a person, and I think it’s going to be a long time before that changes. We’re seeing the front edges of that now.

The Subscription Model

I believe that the subscription model is going to be the common model, and the idea of selling individual items is probably going to largely go away. Now of course these things are not mutually exclusive. The phone company charges you a flat rate for your local calls and then you pay someone else more for long distance. You can buy a cable television subscription that has more free channels, or fewer free channels, or you can get additional channel subscription, but then you can also get pay-per-view. There is pay-per-view but there’s much less pay-per-view than there is subscription, and I think that’s probably where we’re going with content in general.

Since everything’s happening in the niches, it’s going to take another element of discovery to find things that are really of broad general interest. That is essentially already happening. Publishers are already looking at bloggers and niche content creators for their next books, and that is going to be where anything mass-market arises 20 years from now.

Something that I don’t think we pay enough attention to is – anybody with a website is a publisher. Because after all, if you’re putting content together, or you’re putting information together, and expecting people to come to it or buy it, you’re a publisher. But not all publishers are content creators. Most people who have websites are not expert content creators, but they need content. And that is the big unfolding opportunity for publishing and the people in it over the course of the next 20 or 30 years.

Perhaps: One General Trade Publisher?

When this day comes, 20 years from now, that the world is as I described it, there might be one general trade publisher, and that one general trade publisher will sort of scope the internet and they’ll deliver books, or whatever books are by then. Books will not be exactly as they are now, we have ebooks, we have multimedia… A lot of people, not a lot of people in the commercial sense, but a lot of people in the digerati sense who are thinking about how to enable group creation of books and of intellectual property. Probably to the extent to which these things are printed, they’ll be PODs. The problem with press runs 20 years from now is going to be, where are you going to sell them? It’s going to get harder and harder for the bookstore to stand as things move to the net, and so where the books get sold 20 years from now at retail, is going to be an interesting question. But that doesn’t mean that people with publishing skills have nothing to do, because inside the niches and the nuggets, there’s going to be a lot of publishing going on.

I say that publishers are going to be people who own, manage, administer or lead a nugget or a niche, or they work for somebody who does. I’ll make the case in a few minutes about why the power is going to be in the niche owner, not in the content creator. Within those niches and nuggets, you’re going to generate, that is create new content, you’re going to curate, that is look at what’s there, select, and edit, and you’re going to aggregate content of any kind for the people who are in the niche.

I might add, this is a little bit like a university press. You’re reporting to the niche owner, the niche is kind of like the university, and you’re serving the community with what you’re doing with your publishing, which is a little bit like a university press. And as I say, I think that B2B is going to be where the money is going to be 20 years from now.

What About Books?

Now, because this is BookExpo America, I know that there are people in the audience who want to know “but what about books?” Well, they’re never going to go away, I don’t know how many billions of them we have on the planet, we’re not going to suddenly burn them all. The books are going to be here, and because of print on demand, pretty much as long as anybody wants a book, they’ll be able to have a book. We have to keep a shift running, like lightning, so it can’t be down to one person wanting one book, it has to be a little bit broader than that. But for the most part, anything can be made into a book, and books will be delivered as most people want them. We’re going to reach a time, if we haven’t reached it already, and we may have, where the number of titles that are created by the readers is larger than the number of titles created by the publishers. So, for example, a person creates a book about their wedding, or a person that creates a book about their kid’s little league season, which is the world of author house or the world of LuLu. It could be, though the data has not been carefully analyzed, it could be that we already have more of those than we have books by publishers. If we don’t, we will next year or the year after. Press run titles, in those days far off, they’re going to be the exception, not the rule. They will happen occasionally, if there are presses to run.

There is no question in my mind that if, 20 years from now, you read a book on paper, you’re going to be definitely stamped as retro. This is not going to be a fashionable thing to do. We’re headed to a world which is quite different from the one we’re in, and that’s never comfortable, but what’s really uncomfortable is one little letter change from N to X. This is a title that I have ripped off from a paper I worked on eleven years ago for Vista Computer Services called “From N to X” and from N to X means from content to context.

From ConteNt to ConteXt

We are all in the content business, and we are going to have to move into the content business. The ownership in the future of eyeballs will be more important than the ownership of IP, because value moves to scarcity. This is immutable, you cannot change this. Content creation and distribution are no longer scarce. Anybody can do them. Distribution is not an issue. I can type something on my computer today, I can flip it to my website, it is distributed. Any body in the world, on the web, can get it. The problem is, will they know about it? That’s the problem. Marketing is the problem. Distribution is no longer the problem. And you’re going to do your marketing niche by niche, and nugget by nugget, and it does require scale. If you don’t have enough content, or clout in a community, you won’t be heard. If you don’t pay enough attention or put enough labor into a community, you won’t be able to command the attention of that community.

So if the community development requires scale, and the content development doesn’t require scale, and you’re a big company with a lot of money, where are you going to make your investments? Where are you going to look for your advantage? You’re not going to look for it in owning content. What we’ve come to is a point, where where we create value today is not going to create value tomorrow. You win today because you own valuable content and have the ability to put it on a shelf, but tomorrow what you need to own is the attention and the bandwidth of human beings.

Today vs. Tomorrow

The historical revenue model was very clear. We printed things for less than we sold them for, and when we sold enough of them, we paid for the cost of originating them, and when we sold enough of that, we paid for our overhead, and then we had a profit. I’m not completely sure I can tell you what the next revenue model is, and that is part of why this is all so scary. Because we have to do something new, and different, that we’ve never done before, and we don’t actually know how it will work. I believe in the model of value moving to scarcity, and I believe that when you have something scarce you can figure out how to get paid for it, but I’m not exactly sure how that’s going to happen.

So in the next 20 years, what we get from wherever we are today, to where we’re going, and I hope something resembling what I’m talking about. We’re in a transitional decade, and unfortunately these transitional decades are going to be categorized by two things: costs are going to go up and revenues are going to go down. Why are costs going to go up and revenues are going to go down? Well first of all, because you’re supporting multiple models. We have to support this whole print model that I say is going to be gone in 20 years. You can’t dispense with it, it’s not gone yet, it’s yielding the revenue that runs the business today. Ebooks – we don’t even know exactly what they are yet, right now most people think that an ebook is the print book in a digitally delivered form. That’s ok with me. It’s not ok with a lot of people. People are trying to invent new forms, and that takes money. Legacy content is being digitized, that costs money. The legacy content is being tagged and organized, all these things that the community is doing.

That means two things. First of all, the community is occupied, doing this tagging and organizing, and secondly, we’re not getting the benefits of it yet. It’s not organized yet. So in fact, we’re not really prepared to get revenue out of it. This is a big one. This is a big one that people are just beginning to come to grips with. It is going to cost more for the big publishers to digitize their rights databases than it costs them to digitize their content. And because those rights databases today are paper contracts in file drawers, and the file drawers aren’t even in the publisher’s office, they’re off-campus somewhere, where space is cheap. Not only that, but not all the information needed to build those rights databases are in those files, because when you bought the photographs that went into that book, you did it in a separate contract with the photo supplier, and that’s in another file cabinet somewhere else. Pulling all of this information together and having it in a digital form is going to be a severe challenge, and most challenging for the biggest publishers.

The Transition

During this transitional period, everyday, as we’re well aware, because I can’t keep up with it and I don’t know anyone who can, we get new screens, new platforms, we get new channels. Every single one of these things costs publishers money, because you have to know what it’s all about. You have a learning curve. Sometimes that new screen is going to force you to do something with the content, to make it look good on the screen, and that’s going to cost you more money. But even if you could just give them the ePub file, you’re going to need to understand the commercial realities, you’re going to need to understand how to promote through that channel. All of these things are a learning curve, all of these things cut in to current margins.

Meanwhile, the digital natives, who are not us, in the publishing business, are inventing a new future, and we have to keep up with that future, which is also time consuming and expensive. We have to respond to it, and we have to use it, initially for marketing, but it’s also going to change product creation in the long run, and all of that makes things more difficult for us during this transitional period.

Here are some things that I think are going to happen during the course of that transition. First of all, the distinctions between 20th century media are going to begin to go away. We’re already seeing that the newspapers and the magazines are printing less often. Do you notice that? And they’re going to have the content on the web. They’ll have the content on the web four weeks a month, but they’ll print the magazine one week a month, or the newspaper won’t print three days, and so-forth. We’re going to go the other way in the book business. We’re going to update our ebooks. We never did that before, particularly. The lines are going to blur. I don’t really want to get into games, because we could do a whole hour on games, but I think games are going to find their way into a lot of the content we do in he digital world.

Content is actually going to find the markets and the pricing models. Scribd is a very good example of that. Scribd gives 80% of the revenue to the content creator. As the ebook sales grow, an author is going to realize, “well, if the publisher sells my ebook for $15, maybe I make a dollar. And if I want to make a dollar on Scribd, I can sell my ebook for a dollar and a quarter, or $1.20, and make a dollar. I don’t have the marketing and a publisher and all this other help, but that’s certainly going to catch my attention, and it’s going to make things harder for the publisher in two ways, because, one, they just lost a good author that they were able to make money on, and two, that author’s out there selling stuff for a buck and a half, instead of $15, which is going to put pressure on everything else.” When I say that the markets are going to find the content, I mean the niche is full of people who are knowledgeable about subjects who are going to find content and surface it in ways that we don’t have now.

I wanted this slide to make a point that access to audiences is always a key. New York Times and Barnes & Noble 20 years ago had a stranglehold on access to audiences, and then Google and Amazon came along and everybody in the publishing business got really nervous. And about two or three years ago, or maybe up until now, everybody is worried about if Google and Amazon are going to steal this business from us. Are the going to be the ones to control everything? But then, wait a minute, Facebook and Twitter. Twitter is making Google nervous, because Twitter is the place to search for the stuff that happened in the last 10 minutes, which Google doesn’t really have. In fact, I don’t think Facebook and Twitter are going to be here in 10, 20 years, because they are horizontal. They’re not vertical. What Facebook and Twitter do is going to be broken into every niche, and it will be there for you. You’ll be able to tweet, but you won’t have to go to Twitter to tweet, you’ll be doing your tweets within the community that you’re interested in. By the way, where everybody will be more interested in your tweets.

Darwinian processes are driving a lot of this, if you don’t know Ning, you must. I’m not going to get into a long explanation of it now, but I’m going to tell you this: Ning lets anybody set up a community. I was talking to a publisher who I believe has an opportunity to aggregate teachers. It’s not the company you’re thinking of, it’s another one, but there is an opportunity to create a teach community. Somebody in that company said, “well, you know Mike, it’s really hopeless. They’ve self-organized.” I said, “You mean with Ning?” “Yes!” he said, “the teacher communities, they’re all over the web. They’ve just self-organized.” That’s an opportunity for an upstream aggregate. If they’ve self-organized, that means there are 14 different places in the country where people are sharing their Shakespeare lesson plans. They would like to know about each other. So there is an opportunity for more self-organizations, for someone to organize around the self-organizations to make a super organization.

This is not to say that the old models are completely broken yet, it still works. The problem is, it works for fewer books every year. It works for fewer bookstores every year. And it works for fewer publishers every year. That’s why everybody’s got to change, and that’s why I’m trying to give you an idea of a target to move toward, as you change. These are changes that we can feel right now. We can see the day coming when we’re likely to have one dominant bookstore chain the in the United States. When that happens, we’re going to have a serious critical mass issue, because publishers can’t market a book if they can’t print it, and they’re not going to be able to print it if there’s one bookstore chain and that store turns the book down. So you’re suddenly going to be faced with one “No” and you can’t publish the book.

What We Will See During, and After, the Transition

We have six major publishers. We’re not going to have six major publishers for a long time. I’d be very surprised if we have more than four, four years from now, and as I said, maybe we’ll have one major trade publisher. And by the way, this is about trade. I have a rule I call the “Wiley-O’Reilly Rule.” The “Wiley-O’Reilly Rule” is that Wiley and O’Reilly do just about everything smarter than every one else, but it’s almost impossible for any one to copy them, because of the nature of their business, the nature of their markets and the nature of their companies. But I’m not talking about O’Reilly, and McGraw-Hill, and Taylor & Francis, I’m talking about Hachette, and Random House, and HarperCollins. That kind of publishing can’t exist a lot longer.

Another thing that we’re going to see, and I think we’re already seeing, is that mass-market events happen very quickly. This is a product of Twitter, and Facebook, and viral spreading of the word. There won’t be as many mass-market events as we get niche-ier and niche-ier, but the ones that happen are going to rise and fall very quickly, which, by the way, is not particularly good news for book publishers.

We are already seeing that the niche in the self-publishing blog world is a farm system. We are already seeing that many more books are either short-run or POD. Bloomsbury has just announced a program, and I know there are others, where they are putting their academic list online in the UK for free, and if you want to buy a book, you buy a book, and they print it on demand. I think we’re going to see, as ebooks happen more and more, we are going to see a lot more of that.

The other thing we’re going to see is that ebooks are increasingly going to have a content edge. Authors will force this on publishers. It’s very uncomfortable for a publisher, because I published a book in January, a major even happened in April which changes something. The author says, “I need to add six sentences! Or six paragraphs! It’s important. I know I can do this in and ebook, but my printed books are in the store, and they are out of date. And the ebook isn’t out of date.” That’s a real problem, but it’s a problem we’re going to be facing, because the authors are not going to live with their ebooks being out of date when they don’t need to be out of date.

We know that it’s already more difficult to launch new titles than it ever was before. The amount of time they get, your ability to pre-market them, get pre-pub reviews. All of that is harder than it used to be, and we also know it’s harder to sustain backlists. Those slopes will continue to get steeper.

Another point that I’m not sure has really been taken on board, and this goes back to the idea that scale is in the marketing. The marketing vehicles are changing all the time. For most of my career in publishing, the press list was the press list in the publicity department. Sure, things got added, names got changed, but it didn’t change wholesale in six months or a year. Well, that’s happening now. All new sites, all new bloggers, all new influences. And because the social networks have become an indispensible word of mouth vehicle, this is another thing that’s going to drive publishers to the niche, because you know what? The followers you need on Twitter are different if the book subjects are different.

Going Vertical

So what’s pushing, I gave you a hint, but what’s pushing the book publishers to vertical? Necessity. Of course, because the horizontal marketing and sales channels are going away. There was a piece in The Nation by Elizabeth Sifton last week, a very thoughtful piece. I didn’t agree with all of it, but it was very helpful on a lot of useful history. One of the points Elizabeth made, and I believe she has a lot more authority to make these points than I do, is that newspapers dying is killing book review media in print, and all of the social networking sites around books are not replacing that book review media in print. Publishers are losing valuable marketing capabilities. What’s happening is, the old ways we used to market are going away, and the new marketing opportunities are on the web. The web is organized by niche. What publishers will start to find is that the cost skyrocketed when they do marketing outside of the known niche.

I was talking to a publisher the other day who has an extensive crafts list. Now crafts lists used to be about presenting to the craft club, or the book of the month club, or the craft buyer at Barnes & Noble or Borders, and so crafts meant needlework, and it meant beading, and it meant papermaking, and it meant glassmaking, and it meant just about anything that you could call a craft. Well you know what? On the web, it ain’t gonna be like that. If the last six books you promoted were knitting books, and somebody hands you a beading book, and you’ve been promoting on the web, you don’t have a head start at all. You have to start all over again. This is something that publishers are going to begin to take on board, is that what they used to think of as vertical organization ain’t vertical enough anymore.

What happens when you market in a niche is that you start to develop relationships, and those relationships can be leveraged, and they stay inside the niche. They can’t be leveraged if you move outside the niche.

This business for websites being a market for content is also going to force publishers to rethink, because you’re going to find, when you start to talk to the website that wants content on rock gardens, that your three books on rock gardens just aren’t enough. You need 40 books on rock gardens. There are going to have to be 11 publishers to come up with 40 books on rock gardens to have enough content to help the guy who is trying to sell the rocks and the fertilizer and whatever he needs to attract the audience. So this is going to be a different kind of verticalization, sort of outside the boundaries of the publisher.

What does a publisher do?

So as we face all these changes, I thought it would be helpful to get back in touch with what do publishers do? What is the value proposition of being a publisher? Well, what I always used to say when I started speaking 20 years ago, “publishing is the business of contents and markets.” And then around 1999 we figured out, “you know what, it’s not just about content and markets anymore, it’s databases and networks.” What publishers are doing is creating databases, which is lots of content, in an arranged, structured way, not to markets which are vague, but to networks which are specific. That’s really what we do in the 21st century. I’m very proud of the fact that if you Google the words “publishing is databases and networks,” well you Google those words and you’ll see what you get.

What a publisher also does is they understand communities of content. This is more obvious outside trade than it is inside trade. Outside trade, if you publish mathematics books, you go to conventions of mathematicians. You know mathematicians. To a certain extent that’s true in trade too, editors don’t do just anything, they specialize, and they specialize so they can understand the communities of content.

Publishers also recognize creative possibilities and ideas that aren’t fully developed. As a matter of fact, publishers usually buy projects based on ideas that are not fully developed, and participate in the development of ideas. That is a very important skillset. That doesn’t go away. And the publisher is coordinating the whole range of disparate activities that are necessary to connect the creator to an audience. You know what that is, it’s putting the art in the book, it’s deciding what typeface, it’s deciding what price, it’s deciding how to market, but sometimes it’s finding a co-author for the book, or sometimes it’s finding an illustrator. So sometimes you’re actually connecting the creators with each other, as well as providing the detailed management that the creator needs. Actually, I believe, is the most important skill set of publishers is that they manage a massive amount of detail. Which the authors would very rapidly table themselves up in knots if they managed for themselves. That is the scale opportunity that publishers present, and that is not going to change. It’s actually going to be even more necessary in the web.

The Pros & Cons of What a Publisher Does

I wanted to also talk a little bit, before I give you the prescriptive stuff, about what the pros and cons are to what publishers have going into this world. You know there are going to be a lot of people competing for that civil war niche, or that baseball niche, or that baseball history niche, or that baseball uniforms niche. It’s not just going to be publishers. It’s going to be all different. It’s certainly not going to be just book publishers.

So what do book publishers have going for them or against them in relation to other media or other businesses? Books are the ultimate niche product. The first thing I remember learning about books that was significant when I went into the business was, and this is no longer true because technology has changed it, but in the 1970s if you had a message for 5,000 people, you could deliver it profitably in a book. You couldn’t deliver it profitably through any other medium. Only a book. So going back to the beginning of time, is that books have a focus, targeted audience. That means that publishers, and particularly general trade publishers, are the most skilled, experienced, and trained niche marketers that exist on the planet. Because every single book requires them to think about a unique audience, and how they’re going to get to their unique audience. As I said before, the publisher has skills in content creation and development.

Here’s an important one, that fourth bullet, this is good for you for the next five or 10 years, it’s not going to last forever. When you go out in that niche and you talk to somebody who is not a book publisher, you can do them a big favor. You can put their content, or their brand, in a book, and you can put that book on shelves, where people are going to see it. And across the internet, where people are going to see it. They don’t know how to do that. That has value.

The last point is that publishers can target distribute URLs. That 5,000 books can carry as many URLs as you want. May I suggest that the URL, which is the front door to the publishing house, is not useful. The URL to the author’s website, where the author is never going to make a change to it, and never going to do anything about it, that’s not useful. What is useful is to engage some number of the people who buy that book, who will check out that URL, in an ongoing conversation. If you don’t have a URL that will log in to an ongoing conversation, you are losing one of the principle values in publishing the book. That is another thing that is going to drive your niche, because you’re not going to create a unique website, meaningfully, for every book.

Here are things that work against us. We’re product and book central. That is a real problem. Communities don’t care about your book or your product. As a matter of fact I was on a panel about a month and a half ago with an author who has published a novel and worked the internet, and then got a deal with Hachette for his novel. He did a very good job of promoting his book and then now he’s got a company, I think it’s called Author’s Gumbo. He’s got a company that’s helping authors promote on the web, very very sharp. So somebody from the audience is talking about Facebook and he says “Yes, definitely you want to work Facebook, but don’t mention your book!” and the authors in the audience were stunned. People on Facebook aren’t interested in you, they are interested in themselves. You need to engage them about the things they are interested in, which is not your book. I’m seeing this in a publishing company I don’t want to name, because I think they’re really smart and I like what they’re doing, but here’s the problem. They are organized by vertical, and they’re working those verticals, but from the standpoint of the product development people, those vertical websites are their marketing budget. They don’t want to see a front page that doesn’t have a book ad on it. But you know what? People in a community don’t want to see a front page that does have a book ad on it.

Publishers are not continuous. The web is continuous. We’re event driven. We’re going to start to get more continuous, but that’s going to be a real problem for us because there will be others. Most of general trade publishing is not vertically focused. The first thing to do is going to be to get vertically focused. Most publishers lack the resources to experiment. And as I suggested, we are not headed into a time where we’re going to have a lot more resources, and that is a serious challenge. It is a challenge that can be overcome with the right kinds of partnerships.

Publishers generally lack a culture of technology, or culture of experimentation. Tim O’Reilly said a lot of smart things, almost every time he gets on a platform I want to take notes. One of the things he said at Tools of Change that really resonated with me, although I wouldn’t know how to do it, it’s really important. You’ve got to have an IT department where you throw them an idea in the afternoon, and they come back with a sketch for you the next morning. It can’t be that everything has to require a business plan and a complete set of specs and all of this preparation to decide whether you’re going to go forward or not. You have to be much more nimble than that. I think that’s not where publishers have been. We don’t have the skills to hire that, we don’t have the skills to find that, we don’t have the skills to direct it, but we need it. This is something that is going to be a drawback for publishers moving forward.

When we started this conversation, one-way conversation, we said we are in an era of rapid change, we have to experiment and reinvent, we don’t have any choice about that, and we should do it in a framework molded by our view of the future.

Shatzkin just said that the future means vertical and community. I’m going forward with that because I haven’t heard a better idea from anybody. I’m going to go forward and say, if the future is vertical and community, how do you adapt to the future? Remembering, of course, that you have to continue publishing what you’re publishing because it’s going to make money. You have to publish what you’re publishing and move to the future at the same time.

What a Publisher CAN Do

What’s the action plan for the 21st century?

The first thing, is you’ve got to understand yourself vertically. You’ve never enquired that way. Most general trade publishers haven’t thought about that. There is no master plan about subject matter to most general trade publisher’s lists, they have to understand what those lists are.

The two shortcuts I can suggest are: The BISAC codes and the special sales department. In big trade publishers, the special sales departments are a big island of rationality. They organize the material that is helter skelter and across all niches into logical buckets, because they’re thinking about customers. Customers need things in logical buckets. Once company, Thomas Nelson, has moved to the BISAC code, a concept of organization. It’s another way of getting at the problem. You need to start thinking about how does your list stack up by vertical. Once you know what your verticals are, you can start to research your vertical web world, which you have to do. Who else is in there? Obviously there are other publishers in there. Those other publishers could be potential collaborators for you, they could be people to sell parts of your list to. They could be people who sell you parts of their list, but you need to know who they are. You need to know who the non book publishers are in there too, because if it’s a newspaper or a magazine publisher, you might be able to offer them a souvenir on a shelf. But if they’re a bank, or if they’re a company that manufactures sustainable living brick to build houses, you might be able to create some sort of a partnership with them. You have to look at the world of your verticals and understand all the people in it before you can do anything further.

Next: you have to have a sensible web strategy. There are almost none. The publisher’s name is a B2B thing. It is not a B2C thing. The community needs to get things in verticals that make sense. The names Random House, Simon and Schuster, Penguin, mean very very little to most consumers. It is not the way to sell to them. And in fact, one of the things that we checked for in my office yesterday because it suddenly occurred to me and I didn’t want to cast without checking. It’s true. Not one major publisher have different product descriptions for the trade than they do for the consumer. Not one. When you’re talking about a book to a consumer what you want to say is “you need this book because…” When you’re talking about a book to a bookstore you need to say, “X number of people need this book because…” It’s a different pitch, but we’re using the same content for each. The web strategies of authors need to be rethought from the bottom up.

You need to be monitoring your business by vertical. One of the blog posts that I wrote that has gotten the most attention in the last four months since I’ve been doing this is one I wrote about what imprints should be in the 21st century. I think that publishers should stop tracking their profitability by imprint, and start tracking their profitability by BISAC code. The would have a much much better guide as to how to run their businesses.

You also need other metrics. You need better metrics. You need to know how many email names you’re collecting, you need to know how many links you’re creating, you need to know whether promotions are being put through or not. You need to come up with new metrics for the future. You need to be tracking your metrics and your financials by the verticals.

You need a complete email list strategy. This is another thing that I really don’t see that anybody has. It’s not good enough just to collect a lot of names and then spam them every once in a while. You need to be vertically sensitive in the way that you collect names. You need to understand – what is this person interested in? You need an author-facing component to your email strategy because the author has names they could be sharing with you, and you have names you could be sharing with them. You need rules of the road to do that. You need clear understandings with your email listees to do that. This is something that will be built over time but you have to start by having rules and having an engagement with authors around those rules.

Once you’ve done all those things, other things start to be possible. We will be reshuffling our publishing portfolios, because we’re not going to really know what the niches are until the publishers start going out on the web and looking at themselves in that way. You start finding out that, let’s say, maybe knitting and crocheting do go together, even though knitting and beading don’t. I don’t know enough about the web to know whether that’s true or not, within those communities, but neither do the publishers publishing, but they will over time. Over time, you’re going to see – here are areas where we’re strong, and you want to make an investment, and here are areas where we’re weak, and we either have to build ourselves up or we have to get out, and if we get out, we can see who the logical person to sell to is, and we’re going to see that coming over time.

You are going to maximize over time by looking at your verticals, the cumulative effect of your web marketing efforts. We did a project a couple of years ago about marketing where I raised the notion of investment marketing vs. spent marketing. Spent marketing is what we’ve already done, and always done. You put an ad in the NY times and it has a life span of a day, a week, a month, that’s it, it’s gone. When you market on the web, and you develop a relationship with a website, you’re posting to them and they’re posting to you, and you’re linking back and forth to each other, well that’s there for the next book, and it’s there for the next book. That’s the kind of change that is possible, and that’s what is necessary, because remember, we’re headed into a period where we’ve got to bring marketing costs down because margins are suffering. Over time, and this is the important part, you’re going to construct alliance that are going to enable new businesses and the new business models, because the new business models are not going to be about selling content, they’re going to be about selling other things, and they’re going to be about community, but they’re not going to be about primarily selling content. Everybody needs content to sell the other things. Everybody needs content as bait to attract a community. The publisher has a position of power, but the power is gained and exploited through linking up other people that can make that power have value in a vertical world.

Conclusion

I’ve just described what makes sense to me as a future. It might not make sense to you. But you have to have a view of the future of some kind in order to proceed in the present, and give context to the experiments that you’re going to be forced to try.

If anybody’s not too stunned to ask a question, I’d be glad to take some.

Thank you very much.

  Back to blog

35 Responses to “Stay Ahead of the Shift: What Publishers Can Do to Flourish in a Community-Centric Web World”

  1. […] 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: […]

  2. […] Mike Shatzkin’s great talk on “Stay Ahead of the Shift; What product-centric publishers can do to flourish in a […]

  3. […] those of you who missed the “Stay Ahead of the Shift” speech at BEA, we posted a link to the slides, but over this coming weekend we’ll do even better. From Friday morning, June 12 until Monday […]

  4. […] Monday morning (June 15), we are able to show you the video of the speech (below). We have also put the slides and full text on the speeches page of our […]

  5. WOW! What a great speech! Greater than usual, I mean… :)

  6. Oh, just to let you know, I’m translating the transcript in Italian.

    • Mike Shatzkin says:

      Antonio, thanks for the generous praise and molte grazie for making me accessible to your co-linguists!

  7. Ed Rogoff says:

    This the best single statement of where we are are how we got here. But more than it, it really lays out the future — and I am convinced by this that Mike is absolutely right.

  8. Excellent. Many thanks for making the video (and slides, and transcript) available. I’m reminded of Mark Nelson’s advice from the “Going Digital” talk at BEA: “Skate to where the puck is going to be, not where it is!”

    • Mike Shatzkin says:

      Erin, thanks for invoking Nelson’s advice here. It was precisely my intention with the speech to help people see where the puck is most likely to go.

  9. […] Stay Ahead of the Shift: What Publishers Can Do to Flourish in a … (tags: ebooks epublishing) […]

  10. […] have suggested that we’re in a shift from paying for content (IP) to paying for context (community.) This is being enabled by vertical development on the web. But we also see that development as a […]

  11. […] Stay Ahead of the Shift: What Publishers Can Do to Flourish in a Community-Centric Web World is what Mike Shatzkin has to say about the book future to a group of publishers, at BookExpo America. We are all in the content business, and we are going to have to move into the context business. The ownership in the future of eyeballs will be more important than the ownership of IP, because value moves to scarcity. This is immutable, you cannot change this. Content creation and distribution are no longer scarce. Anybody can do them. Distribution is not an issue. I can type something on my computer today, I can flip it to my website, it is distributed. Any body in the world, on the web, can get it. The problem is, will they know about it? That’s the problem. Marketing is the problem. Distribution is no longer the problem. And you’re going to do your marketing niche by niche, and nugget by nugget, and it does require scale. If you don’t have enough content, or clout in a community, you won’t be heard. If you don’t pay enough attention or put enough labor into a community, you won’t be able to command the attention of that community. […]

  12. […] the heart of Horwood’s presentation and a key to my “shift” argument is that the “act” of publishing — putting content out in a way that anybody can […]

  13. […] you really must, MUST read the text of Mike Shatzkin’s address at BookExpo America: “Stay Ahead of the Shift: What Publishers Can Do to Flourish in a Community-Centric Web World“. Here’s just a snippet: So if the community development requires scale, and the […]

  14. […] from Savikas, is about marketing, not about service. And marketing, as we have said repeatedly, most recently and elaborately in the Shift speech, is the reason that publishers have to get […]

  15. […] I am not a 100%-no-DRM guy. (Actually, I’m a nearly-100%-social-DRM guy.) And while I believe that the price of content is in an inexorably downward spiral, to the point that the day will come some years from now that it won’t be much of a business to control and sell it, I also believe publishers (and authors) need to preserve content margins as effectively as they can for as long as they can to finance the transition to the new publishing economy where eyeballs and human bandwidth, not IP, are the currency of the realm. […]

  16. Great article, it is a must read for publishers. We have liked it so much that we have provided a Spanish translation in our blog Soybits, together with a downloadable ePub version under a CC license (Attribution-Noncommercial-Share Alike). If you have any objections, please tell us and we will do as you say.

    Thank you for all your good work!!

  17. […] That’s what Google does. That’s what PublishersMarketplace does. That’s what the future successful publishers I envision in the Shift speech will have […]

  18. […] prosperar en un mundo centrado en las comunidades en red” (original en inglés y videos en Idealog, traducido al español por […]

  19. […] Stay Ahead of the Shift: What Publishers Can Do to Flourish in a Community-Centric Web WorldPresented at BookExpo America, May 28th, 2009. by Mike Shatzkin en The idea-logical company […]

  20. […] audience, publishers are going to get some hard lessons about where the power really will lie as the shift continues to take hold. Remember that what Perseus is bringing to deal is a commodity: lots of other publishers can offer […]

  21. […] been imagining “verticals” for more than ten years. My BEA speech earlier this year postulated that publishing power would shift from controlling “IP” to controlling […]

  22. […] been imagining “verticals” for more than ten years. My BEA speech earlier this year postulated that publishing power would shift from controlling “IP” to controlling […]

  23. […] “Stay Ahead of the Shift: How Content-Centric Publishers Can Flourish in a Community-Centric Web W… […]

  24. […] Mike Shatzkin is the latest to opine on the future of book publishing. People take him seriously as a technologist, it seems. I expect he would flunk any test of minimal technical qualification. Actually, now that I think of it, I ought to publish such a test. […]

  25. […] might want to check Mike Shatzkin’s presentation at the BEA, or his Publishing Points series of lunchtime talks to get a feel of what’s coming […]

  26. […] blog and my speeches contain frequent references to what we see as the big shifts the book publishing industry, and some […]

  27. […] was working on a story about publishers and digital change. He was building something around my “Stay Ahead of the Shift” speech from last year’s Book […]

  28. […] an ongoing conversation in trade publishing about vertical niches – which I won’t go into here – but it seems like this might be a conversation that […]

  29. […] was cancelled due to the Iceland volcano. Since I was really prepared for the talk, updating the “Stay Ahead of the Shift” speech from last year’s Book Expo and adding some thoughts about the immediate future in the US […]

  30. […] awareness. What happens in a world where niche markets and “vertical” integration (see Shatzkin 2009 for a discussion of these dynamics) are the way to serving audiences more […]

  31. […] Here is a different presentation where Mike focuses on publishers and verticals. TweetEmailPrint Filed Under: Marketing Tagged With: Avon, Mike Shatzkin, Penguin, Random House, […]

  32. […] What people spend for books won’t necessarily shrink drastically, but where the money goes will shift drastically. The challenge for today’s leading revenue producers will be to find the ways their business models can adapt to the shift. […]

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