The technology-driven change we are headed for in the months and years to come is going to dwarf all the change we have seen in publishing throughout our entire careers until now. Yet the next round of changes we will experience are really preliminary, permitting us to maintain the basic forms of the book business as we have understood it, at least for a little while longer.
Beyond the near horizon lie changes that are very difficult to contemplate, when ebooks will be commonplace and newly-printed books will be rare. In that world, maybe 20 or more years away, the distinctions among books, magazines, newspapers, journals, and the memo you send to your staff will be much less clearly drawn than they are now.
From the outside, the changes that are right in front of us are minor. The basic forms of information delivery will still pertain for the next five or ten years. But we all know that dramatic changes are occurring beneath the surface of our business; changes that will confront the unaware and unprepared with threats to their enterprise in the immediate future.
Largely because they know that change is coming, but they’re not sure what it is, many publishing executives today are struggling to decide what IT investments make sense for them. Even within the past 12 months, the CEO of a major US book publishing operation wondered out loud to me about whether it was really worth it to give email capability to everybody in his company. Another was quoted in PW questioning the commercial value of out-of-print books, simply dismissing the economic impact of ebook or print-one technology.
While the best publishers are stumped by technology, the technologists stumble over publishing problems. Huge sums have been invested in the ebook and in various print-one capabilities without anybody having figured out in advance how to bring the big authors on board for the former and how to get the publishers to sensibly exploit the economic potential of the latter.
So the publishing people are still struggling with the technology and the technology people are still struggling with the publishing. This is the dynamic that has made the past few years so difficult, and which will confound our lives with increasingly frequent and knotty problems in the months and years to come.
You have heard about a lot of technology today, all of it ultimately relevant, probably important, possibly crucial to your business. My attempt today is to provide a business context to the technology: to provide the big-picture framework publishing executives need to assess opportunities and drive change in their own organizations.
The key competencies of 21st century publishing are expressed in two words: databases and networks. Virtually every challenge publishers will face, every opportunity to be seized, every paradigm-shift to be accommodated, arises from the new possibilities offered by the increasing power of databases and networks. Databases and networks have to drive the modern publishing executive’s view of the business, the markets, the processes. Each presentation you have heard today, in its own way, is about a databases- and networks-driven opportunity.
Recognition of the primary importance of databases and networks must extend up and down the publishing organization. New hires should be appropriately screened for their comfort level with database and network applications. Entry and lower level staff positions should require basic technological competence. And the day is past when one can readily excuse any resume lacking an email address, even for the most senior positions.
The biggest mistake being made by most companies today is to try to centralize a high level of control in the use of the World Wide Web. Companies establish corporate Web sites, creating built-in constituencies for a level of design and integration. They seek to establish some coherence in the use of domains, sometimes with a high consciousness of building the overall corporate brands. Those intranets that exist are usually set up, structured, and managed by the corporate IT departments.
If the big companies keep this up, they will lose ground to smaller companies as quickly as the Web increases its mindshare, which, as we know, is pretty quickly.
Throwing up a Web page is increasingly cheap and simple. Establishing a domain especially and specifically for a book or for an author is too. Tools that permit collecting email lists are easy to find and use. Authors are increasingly using Web sites to research their books or to communicate with their core communities.
The great beauty of the Internet is that basic Web technology is very cheap and very accessible. Knowing the right links and the right message to find and satisfy an audience will more and more frequently beat a very expensive marketing campaign using more conventional means. It will be true more and more often that authors and editors will know these things better than marketers and publishers. It may be too much to expect, in the short run, that publishers reorganize and reassign responsibilities to respond to this emerging reality. But, at the very least, it is important not to have corporate procedures and bureaucracy that stifle critical marketing contributions before they can even be made.
Remember that most publishing, even consumer trade and what we call mass-market, is not about mass markets. Many successful publishing houses and publishing programs have been built on the consistent ability to sell 3,000 or 5,000 or 15,000 copies of a book, time after time, using the same techniques repeatedly.
The Web is also a niche medium, although it has mass reach. There are dozens or hundreds or thousands of Web sites of related interest for any book that is published. Each book published will provoke some email, with the potential that those names and email addresses could be used to sell a related book in the future. Of course, this is an even more powerful tool in the hands of a bookseller, who has a wider range of future books to choose from.
So, in addition to avoiding a Web bureaucracy that will stifle small initiatives, publishers need a corporate capability to ENABLE small initiatives by, among other things, collecting Web and email addresses identified by market niche for future marketing campaigns. The more tightly niched the lists one maintains, the more effective they will be. Don’t assume a baseball fan is also a football fan, or that a knitter is also a sewer, or that an interest in interior decoration implies an interest in art.
Of all the requirements for publishing success in an era of change, perhaps the most fundamental is what one client of mine calls “content agility”, which is the easy ability to output content to the many potential formats in which it could be purchased. Publishers in the past couple of years have been shocked to find that the digital files they created to send to a printer to order an offset printing are Greek to all of the ebook readers or the print-one solutions.
This is a trap no smart publisher should be caught in twice. Tools do exist now to encode content so that offset printing, digital printing, ebook distribution, and Web distribution can all be handled from a single file. It requires care more than money to make content agile if the requirement is anticipated from the beginning.
The technical problems have not been the greatest barrier to building robust content libraries for the various ebook formats. The real roadblock has been rights. Publishers just can’t seem to understand why agents are reluctant to deal these rights, despite movement by publishers to offer terms for ebook sales that “protect” authors, giving them the same revenue from an ebook sale that they would get from the sale of a hard-copy book itself.
Pardon me for repeating an argument many of you may have read from me in print, but I am in total sympathy with agents who won’t license these rights into the unforeseeable future, which is anything more than six months or a year away. We simply don’t know what the division of revenue across the supply chain will be in the coming digital world. The current conventions, which include that the retailer gets 40-to-50 percent of the publisher’s suggested retail price and the author gets 10-to-15 percent of that price, may bear absolutely no relationship to what will happen in the future. My own hunch is that the retailer’s take will go down and the author’s take will go up. I would also guess that the present uniformity of royalty rate across all authors will become a thing of the past; there are legal barriers to as much variation being introduced among retailer margins.
But the division of revenue is not the only thing we don’t know. We also don’t know how much business is going to move to the ebook channel in the next year or two or five. What we DO know is that the current revenue from ebooks can only be a pittance, because so few readers are in consumer hands.
Now, honestly, would YOU make a deal for very little present revenue that could compromise substantial future revenues? I don’t think so. So the solution, and it seems to me the ONLY solution, is very short-term deals that assure an agent that the author’s position can be renegotiated as the ebook market grows and, possibly, as new conventions for revenue division are created. When publishers offer ebook arrangements that include renegotiation on 90 days’ notice by the author, the bottleneck in ebook rights will disappear like magic.
Of course, this suggestion runs counter to the historical rhythms of publishing. Publishers are generally used to lifetime rights, lifetime deals. Even in the mass-market business, where reprint licenses have a term shorter than life, it is measured in years, not in months. Even with the pressure from major accounts which has driven up discounts to intermediaries over the past two or three decades, publishers are used to glacial changes in their basic economics. And they are used to deals that are made once and pay off for years.
The publishing world of the near future is not likely to be like that. We are headed to a much faster-paced marketplace. Books tied to Web sites will get publishers involved in much more timely maintenance of current content. Database publishing will often occur in real time. Technology will enable more repurposing of content and combining of pieces of one book with pieces of another, all of which will require deals that don’t arise very frequently now. The publishing marketplace we are headed into will probably require more deals for each million dollars of revenue than we had to make in the past. Making, tracking, and maintaining an exploding number of deals and business relationships will be one of the great transitional challenges of the next few years.
In the recent past, several large publishers have tried to overcome the inherent complexity of the book business by seeking to grow revenues from a diminishing number of new titles in development. Assertions that this strategy is driven by the great advantages of marketing fewer titles rather than admitting the inability to manage robust programs of new title development seem disingenuous. After all, many of the same companies seek growth in their title base through acquisition.
Print-on-demand and ebook technologies, because they enable a title to be available without the requirement of maintaining an inventory in advance of demand, will inevitably multiply the base of available titles. Out-of-print books that have become newly available and many books that would not have been published if they required an inventory investment will arrive as competitors in the marketplace to the titles published under the old rules.
At the same time, of course, the actual cost of taking a title from manuscript to press keeps dropping as PC tools, and the number of people comfortable using them, become increasingly ubiquitous. This is another factor making it easier and cheaper to put books into print and further accelerating the growth of titles in the marketplace, regardless of what the biggest five, ten, or twenty publishers choose to do.
If the title base is going to grow rapidly and the big publishers continue list-reduction title acquisition strategies, the big publishers’ share of new titles published will drop. If that happens, as sure as night follows day, the big publishers’ share of sales will also drop. There is some evidence that this may be happening already.
List-cutting strategies have been seen as more careful and more prudent acquisition, even as they have led to bigger and bigger per-title risks in advances to authors. Because advances are often determinants of print runs and marketing expenditures, those risks have escalated as well. Can this really be called a prudent approach in an environment where the title base is proliferating? I don’t think so.
This neatly takes us back to the beginning: the mastery of databases and networks. Seeking to manage fewer titles is de facto evidence that a database- and network-centric view has not taken hold in an organization. Modern database- and network-technologies make managing more titles easier than it was to manage fewer titles five or ten years ago. They make it easier to track development schedules and potential marketing conflicts. They make it easier to use remote creative resources, which are often cheaper than local ones, particularly in New York or London. And they foster systems that tend not to care how many titles or events they are tracking and, in many ways, permit efficiency to RISE with the number of titles in the system.
More titles, more publishers, more deals, and more avenues to the reader will characterize the book publishing environment over the next five years. But the proliferation of available titles from all sources will be faster than the growth of distribution, so there will be lower overall sales per title published and more of those sales will be made to identifiable market niches and less to generalized masses.
The organizations that make the best use of technology will win in this environment, whether they are large or small. There will still be many advantages to being large and many opportunities to employ scale, but large organizations are more resistant to adopting new technologies and techniques than smaller ones. That is the disadvantage to size and scale. That is their challenge.