Twenty years ago the web promised a relentless march of disintermediation. For publishers, often seen as the classic middle-man, the prospect was scary. But all has not been lost…
It’s hardly news, after more than a decade of declining sales, but newspapers are not faring well in the digital age. Books are also suffering – with UK sales of printed volumes down again in 2013. But then, the web has always been seen as a massive threat to publishers. Here’s tech legend Nicholas Negroponte writing in Wired magazine in 1997:
“Whether you read Grisham or Goethe, you read the author, not the publisher. That's why traditional book publishers will slowly but inevitably disappear. Bookstores will vanish even sooner, as they bring almost no value over a Web site like Amazon.com.”
He went on:
“The people who really ought to be disintermediated are publishers. Here I draw a distinction between magazines (of course) and books: the former sells context, and the latter sells content. The content side of the equation can and will go direct the fastest.”
But in the 17 years since Negroponte wrote that, the changes have been far more subtle than he anticipated. Yes, we buy much more of our 'content' from Amazon – no longer the upstart Negroponte was highlighting in 1997. And many traditional, smaller publishers have been caught out – the number shutting up shop continues to rise. But we still have publishers – for books, but also games, music and educational texts.
And even with the mass user-ratings systems employed by the likes of Amazon and iTunes, his hoped-for utopia of self-published 'content' that’s marketed by digital word of mouth has not yet come to pass. And magazines, which he thought would survive longer thanks to 'context'? Wired is one of the lucky ones that has escaped industry decimation (for now).
The smart get smarter
So what happened? Simply put, the shrewder publishers got smarter about their supply chain. Publishers could have fought the e-books revolution, refusing to sanction the use of text anywhere but on the paper they so profitably printed. But instead, most took a more enlightened view, perhaps learning from their colleagues in the music industry who won lots of battles against digital downloads, but ultimately lost the war. (Note, however, even the music publishers now 'get' digital and are profiting from it handsomely – plus there is a quiet resurgence of demand for vinyl, bringing the lifecycle full circle.)
In addition, these ‘smarter’ publishers understood that the new digital landscape required a different set of skills and tools to operate effectively in the new digital environment. Those who simply overlaid the ‘old rules’ of traditional physical publishing onto the new digital environment found that having a digital presence also required new infrastructure, systems and processes to support customers 24/7/365. However, many of these companies were left with nothing more than a digital store front, which relied on the same manual processes behind it to service the demand (increasing costs and eroding margins).
Many specialist providers began to pop-up, and larger agencies began to up-skill their workforces, to support publishers in their pursuit of a digital presence. The problem though was that the people responsible for managing these specialist providers (not always procurement given the business criticality of getting this right) again, simply applied the traditional ‘physical’ thinking to these supplier interactions – leaving business models relatively unchanged.
The instantaneous nature of digital requires a tightly managed and integrated supply chain – one that understands and conforms with the nuances of digital rights/asset management (DRM), global copyright laws, social technologies (and behaviours) and user consumption habits. Many publishers (and retailers for that matter) failed to grasp these nuances and as sales began to dry up, headcount was reduced and stores were closed.
Those who accepted the ‘new normal’ engaged with their suppliers from the start to understand why the digital world was different and how they needed to adapt business models to fit.
Further, the successful publishers realised that their immediate customers – fellow middle-men in book retailing – were going to struggle. So they got alongside businesses like Amazon (which saw sales of e-books overtake paper ones as late as 2012) and Apple, and worked with them to offer consumers a choice. Their traditional customer became a more complex blend of part supplier and part client; a part-ner.
The new publishing value chain
Many publishers worked out that their role in this content value chain was splintering. Where a book deal could once be done at one lunch (“brilliant author, meet book shop chain CEO, our marketing manager will order the wine before presenting some cover ideas…”) now it’s about lots of different tasks – from social media promotion to talent scouting, from dynamic pricing to market research. You can specialise and/or outsource to add value. And you can leverage the R&D of organisations that might have been seen as mere suppliers or, worse, rivals to your advantage.
How do we know the smart ones learned this lesson? Data from The Publishers’ Association shows that the invoiced value of UK publisher sales of books actually rose 4% in 2012 to £3.3bn – thanks to a 66% increase in digital sales offsetting the ongoing decline of physical books. And the number of UK publishers registering for their first ISBN prefix has been rising steadily since 2009.
We’ll come back to Nicholas Negroponte and his predictions around content supply chains in a later blog, but for now I’d be interested to hear your views on the future of publishing – what should we expect to see over the next three to five years? Will print publishing follow in the steps of music publishing? What will be the further impact of the changing nature of print publishing on sectors such as education?