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Crossing the Chasm – Getting from the Physical Here to the Digital There

June 15, 2000 by Mike Shatzkin Leave a Comment

Times are getting tougher and tougher for established publishers doing things in established ways This is structural. Change is making doing what they’ve always done a lot harder to do.

There is suddenly a much wider range of book choices available — in the broadest sense of the word “available” — to every consumer than ever before. Not only is every book that is really in print now truly accessible to almost anyone who wants it because of the Internet, so are all the books no longer in print through a fully-wired used book distribution system. And there are more and more books listed because backlists are going to print-on-demand and publishers, mostly NOT established publishers so far, are now able to launch new titles without first printings.

That the threat inherent in these upstarts is now apparent to the ruling classes is reflected in recent moves by the majors, including Bertelsmann’s purchase of Xlibris and Time Warner’s iPublish initiative.

I ask the best minds I can find who study spending on books in the United States and, aside from one recent statement in PW by a leading retailer to the contrary, the consensus is that the spending on books, discounting for inflation, is flat. The experts say it has been that way for more than a decade, and there is no expectation that it will change in the forseeable future. Apparently much the same situation prevails in Britain and, in general, throughout the worldwide English language market. So what we have, in effect, is many more books chasing about the same number of dollars.

That, in a nutshell, is why the old business is getting so much harder for everybody rooted in it. And it will continue to get harder. Today’s estimates of sixty-to-one hundred thousand new titles published in the US and UK, respectively, will be dwarfed by the outpouring to come, as the barriers to publication come down. Could we see a million book titles published five years from now? It’s possible, and the numbers will still be expanding. The gatekeepers will look pretty silly and lonely in their gates when there are no more fences.

So that’s what is going on over here, where we publishers live. But something perhaps more hopeful for publishers is going on over there, in the Internet world.

In what was probably the first big spate of new Web businesses that now, for many of them, seems to be coming to a somewhat dramatic and undesired premature conclusion, the business planning requirement for a new company did not extend to having a “content strategy”. That is, start-ups had to show the VCs that they had a business concept, a technology strategy, a first stage, second stage, IPO financing strategy, an e-commerce strategy, and various exit strategies. “Content” was seldom considered separately, or prominently, particularly as compared to technology.

So we have come to a moment when there is a collective awakening taking place in Silicon Valley that sites, to be effective, have to be “sticky”. They have to have reasons to make people come back. They have to have content.

This Web problem, of course, spawns some Web solutions. If huge content creation challenges are not being very efficiently met, new operations like Screaming Media and iSyndicate will try to address the need. “Content strategy” is not yet as common a concept in Silicon Valley as it should be, but the signs are there that it will be very soon.

What has happened to all these people who run Web sites for Intel or Levi’s or General Motors is that they have found themselves needing to be something between a TV channel operator and a book and magazine publisher. They are being caught short by a lot of things they don’t know; things they don’t know that publishers do! How to create content: find authors, direct their work, team them with illustration-capability, fit the work into an overall presentation scheme, what rights to acquire and how to make use of them, or even how to acquire the rights to work already created. And that’s just on the micro level.

They also need to understand what publishers know from their experience on the macro level: what constitutes a coherent offering of content; how to draw the lines between niches of interest or levels of sophistication; what brands convey marketing value to content.

In other words, Silicon Valley has a problem that publishers possess the skill sets and resource bases to solve. But the $64 billion question is this: will this opportunity be seized by publishers, or by the people who now work for publishers?

Through a combination of luck and design, at The Idea Logical Company we are actually gaining a Web presence that seems to be a developing model for a new publishing company while we are building a fast-growing content provision company, all of it with roots in a book. Many things we have learned through this experience seem to permit generalizing from the particular and may offer clues as to how today’s assets can be used as a ramp to the new world that is coming.

This story begins with a single book called The Ballplayers. Created by a team under our direction in the 1980s, the book was 800,000 words of baseball history, organized under 6,000 proper nouns presented A-to-Z. It was completed in 1989, published in 1990, out of print and reverted to us by 1993.

Rather naturally, this book spawned a web site called The Baseball Online Library, housed within Sportsline.com, one of the leading sites on the Web. What a fellow called Rick Wolf, acquiring content for Sportsline in 1995 saw, was that hyperlinking The Ballplayers created an endless trail of interesting clicks for the fan. You are reading Mickey Mantle, you see his teammate Yogi Berra. You click on Yogi Berra, you see his manager’s name, Casey Stengel. You click on Casey Stengel, and in his biography you see HIS manager’s name, John McGraw. You click on John McGraw, and you see many names from an entirely different era of baseball history.

Since we already had all these bios, so all that was necessary to make it exciting was to set up the hyperlinks. To give an even better start to the Baseball Online Library, we also secured online rights to a companion reference called The Baseball Chronology, created by Jim Charlton, which was baseball history day-by-day to go with our baseball history A-to-Z. Charlton’s text, which was easily navigable by date, contained names of players and teams which could be linked back to the biographies in The Ballplayers.

Having The Ballplayers to start with was a piece of luck that we have turned into a springboard. But having demonstrated the value of this particular springboard, it becomes a specific element of our experience from which it might be useful to draw some general conclusions.

For one thing, we immediately exploited our interest and knowledge into another editorial suggestion for Sportsline once we’d met them. Originally called “Spring Training: The Fight for Jobs”, our concept was to consolidate a lot of generally-available information with some pithy writing into a graphical “depth chart” that told baseball fans how the battle for regular playing positions was going during baseball’s pre-season. We mainly used Internet sources for information, but this was quite different than the Library, in that there was no static legacy content. This was a “newsroom” function; we created it each day.

The way we originally set it up, though, required us to do it for only one month, during Spring Training, baseball’s pre-season. So we did it in 1996 and, under our revenue-sharing arrangement with Sportsline, earned $850. So we did it again in 1997; that March we earned $2500.

Because the Library went up in the Fall of 1997, providing a modest additional revenue stream, we got a new staff member in December of that year to work largely, we thought then, on updating the Library. His first suggestion: make Fight for Jobs a year-round feature. In January of 1998 we earned more than we had in both previous years in March, which we knew would be the prime month. In March 1998, our revenue-splitting deal, the growth in the Internet, and the foundation Fight for Jobs had created in its first two seasons, boosted the audience so that we earned fourteen THOUSAND dollars on it in one month.

This led very shortly thereafter to our providing the same sort of feature to Sportsline for football under a renegotiated contract that no longer split revenues but gave us a reliable monthly income for three years to provide Baseball Fight for Jobs, Football Fight for Jobs, and The Baseball Online Library. If we had chosen to maximize our cash flow, we could have pocketed a handsome profit from that contract. But we chose instead to keep investing in creating relevant features, capitalizing on the exposure through a major outlet like Sportsline.

Just having linked up The Ballplayers and The Chronology delivered a pretty interesting offering for baseball fans, probably the richest assembly of hyperlinked baseball history anywhere. And even though its core material was created before 1990 and not updated, it got a good audience from the time it first went up on Sportsline in September of 1997.

But we’ve had a bigger vision all along for what The Baseball Online Library could become, which we expressed this way:

Every word, every picture, every sound, and every moving image pertaining to the history of baseball, logically organized in one coherent library, searchable and extensively hyperlinked with experts to help the less-expert navigate the information.

Fulfilling the vision was something we would have to do with our own resources. Remember that Sportsline now pays us a flat fee for the library on a multi-year license. We get the same amount of money each month whether we build it or leave it alone.

But two things drove us to make that investment. One is that we really like baseball history; we know a lot about it and we think we know what will be useful and appreciated by the baseball history community, creators and consumers alike. The second is that we interpret the initial success we have had with Sportsline as a reward for the inherent value of the biographical database first published as The Ballplayers. We know the licensing agreement with Sportsline that pays us a flat fee, will end after three years, and we feel our ability to earn revenue from our database beyond that agreement, whether from Sportsline or anybody else, is proportional in some way to the value of the database we possess when this deal is over.

So, without a real business plan or any precise sense of how we’d get money back, we decided to invest what we could in growing and improving our database and working towards our vision. We took a broad view of what that meant, so we also created baseball history “features” that did not precisely fit the A-to-Z format of The Ballplayers. These had the additional advantage of showcasing other content development capabilities resident in our organization.

In March this year, we opened The Baseball Online Library to all relevant content, starting with excerpts from published books in a feature area we call The Bookshelf. The offer to content holders, which for now means publishers, was very simple, and a win-win-win. Publishers would allow us to mount their content on our site for no fee; we’d promote and identify it prominently and provide a link to an online bookseller to generate sales for the publisher; we and Sportsline thereby earn referral fees from the online bookseller. The “term” of our display of the content is open-ended and our intention is to build a reasonably permanent database, but we’ll take any piece of content down at any time the publisher asks.

The power of the proposition we offer has already become apparent to us. There was a wide range of initial reactions among publishers large and small when we announced our plans. Some responded enthusastically to the opportunity as presented from the first moment. Others were initially skeptical of any scheme to expose their content without us paying them some licensing fee. One publisher understood and accepted the proposition from the beginning, but sent along an 8-page contract for us to sign. It had some fine points of editorial control and requirements for us to link back to their site which, while mostly innocuous, would have required some negotiating to conclude.

Who knows how we would have reacted if we hadn’t been flooded with good and useful books right from the start, but, as it was, we were in a position to shrug our shoulders at the ones who asked for licensing fees and simply decline to engage in a complex written agreement with the one publisher who asked for that. Already, one of the small publishers which had not wanted to discuss this arrangement with us less than 60 days ago has come around and is now prepared to work with us on our terms.

Why? Because we’re adding value to the content we put on the site, and the authors know it. Because of the same rich database of biographical information that was such a boon for internal hyperlinking when the site was first created, we are able to create useful hyperlinks on virtually every page of any book about baseball history. Automatically. And, of course, we create referential links back to the book excerpt content from the corresponding bio pages to create another way our site visitors can find the books, as well.

Why the publisher now changing its mind is doing so is not something we’ll necessarily ever know. But we do know that several of their authors who, it is not surprising, knew our site, wanted their books on it and told us they would lobby the publisher to permit it.

For several years at the VISTA conferences, we, and especially my colleague Mark Bide, have made the point that context trumps content. As Mark has put it, “disaggregated content has very little value.” This concept comes alive for us as we build The Baseball Online Library. Not only do we see the value of context in every piece of content, now loaded with useful links, that we place on our site, we also know what the authors of these books know: that increasingly the baseball history audience will look to us for their information.

This is in very early stages now; we have about 25 book excerpts up on the site with more going up every week. We have streamlined the logistics of selecting good exerpts, mounting them with a uniform look and feel, and making sure they are completely linked. We have a constant challenge to rearrange our presentation. Right now we show the covers of all the books we are excerpting on one long Web page. That will shortly become impractical. Right now we show all the “related links” inside a box for each player; over time that will require more arrangement and judgment as well.

We will move on to get content from out-of-print books and then from original sources, perhaps never-before-published material. The opportunity to publish some of what we find from sources other than publishers, particularly in a low-investment print-on-demand or e-book way, is rather obviously in our path.

Getting “free content” still requires work to create value. We have to think through the presentation context. We have to provide the linking, which is now largely automated but which we had to build to be that way. I can imagine a situation developing where someday some people will pay us to put their content into our context, partly for the added-value of the surrounding content and partly for the exposure to our growing community.

We have begun a “dead trees” book publishing program with a print-on-demand edition of the original version of The Ballplayers; we are starting to sell modest numbers through a link to online booksellers who get their copies from Ingram’s Lightning Print service. We have made the judgment that we shouldn’t offer an ebook version of The Ballplayers ourselves until it is updated, but we have proceeded to license a NetLibrary edition to deliver additional revenue.

Before the end of the year, we will have a program for no-inventory publishing of previously published books where rights have reverted to the author, both in print-on-demand and ebook form. As more and more eyeballs shift to the Internet, while at the same time the value of our site is growing with each piece of content we add to it, we expect to see our pbook and ebook sales rise accordingly.

And because we don’t in any way require content to be book-length to be useful to us, we will also invite authors to post material from partially written books on our site. Of course, all trained book publishers resist promoting a book before it is available for sale, and that is probably a wise commercial instinct for a publisher trying to recover the investment in a manuscript. But authors write for non-pecuniary reasons as well; they seek recognition, feedback, and an audience. Some will see exposure on our site as a way to promote their book to publishers, including us, to deliver a deal for the author.

We believe all of this will, in not too many years, make us the “publisher of choice” for baseball history. We’ll have the community of interest.

In the meantime, our investment in experience and exposure in content generation is paying off in other ways. Besides turnkey Internet solutions like iSyndicate and Screaming Media, the Silicon Valley Content Awakening has spawned sales agents. We hired one last month. In his first 30 days on the job, he has delivered six-figures worth of immediate work and has opened up discussions for much, much more. The work we have done on Sportsline is our portfolio and some of the extra features we have delivered that we didn’t really have to, like a cute little game called “Believe It or Else”, are attracting the most attention.

There are really two ways that today’s publishers have to think about the lessons of our experience, which, put in a sports context might be called a “defensive” view and an “offensive” view.

The core “defensive” question is this: who is building the kind of position we are building in baseball history for the niches YOU want to publish in? What danger is there that somebody else will capture the audience for French cooking, or battles of World War II, or travelling with a backpack the way we are trying to capture it for baseball history?

And that leads to a series of other important “defensive” questions. What do you do? Compete for the Internet space? Get close to the potential competitor who must know, as we do, that they must work productively with many resources for content in their chosen area to succeed? Or abandon the area yourself and refocus your publishng program to exclude it?

What might be called the core “offensive” question is: can you morph your publishing company into a content creation company? Do you have, or can you create, the core reference that can add excitement and context to a whole range of content in an identifiable market niche as Idea Logical is doing for baseball history? Can you convert from a company that principally licensed other people’s creativity to one that delivers at least some creativity on its own? Do you have the market niche insight to suss Web content problems and provide Web content solutions?

Most of all, are you willing to invest in moving yourself into a business you are not in now?

After all, you can stay in the business you ARE in now only as long as it continues to exist. And how long that will be is not up to you to decide.

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Mike Shatzkin

Mike Shatzkin is the Founder & CEO of The Idea Logical Company and a widely-acknowledged thought leader about digital change in the book publishing industry. Read more.

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