The New Publishing Economy

Professor Andrew WheatcroftChief Consultant

Maclean Veit Associates

Getting Focused• All Publishers/Communicators Now Confront

– Disruptive Innovation– Technical Change– Unreliable Business Models– Unstable Markets– Price Volatility– Constraints on development– Disruption Revisited

• Digital Policies covering– Short Term : up to 2 years– Mid Term: 2 to 5 years– Long Term: 5 to 10 years

Disruptive Innovation 1

• From 1994 Professor Clayton M. Christensen of the Harvard Business School began to develop his concept of ‘Disruptive Innovation’

• Christensen’s four main observations

1. Successful big companies dominate their markets by getting better and better at doing what they do best .

2. This becomes the effective Core Business.

3. Yet, In the process, they weaken their capacity develop outside their Core Business.

4. This gives advantage to new, smaller, more expert and agile entrants to the market

•

Where we are now

• The Digital Transformation is a highly disruptive innovation

• Nothing will be the same again• The dominant publishing businesses of today will

be challenged by new entrants in the next decade• The Digital Transformation is a great equaliser

between Incumbents (current market leaders) and Entrants (new enterprises with new expertise)

Christensen’s Proposition

How Market Leaders Respond to Change

• They behave rationally, because they make most money from what they do best .

• This is their key expertise and their competitive advantage

• They compare the sure returns they make from their core business with the small returns and high risk of innovation

How Publishing Leaders have Responded to the ‘Digital Transformation’

• Academic, professional scientific, technical and medical publishers have made it the core of their business process.

• Journal publishers have used it to develop new types of product

• Most general publishers have responded warmly in theory, but cautiously in practice

• No common and uniform response – is it wise for our company’s publishing model.

How should Smaller Publishers respond the ‘Digital Transformation’

• What can you gain and what can you lose? • How much do you know about the risks and benefits ?

• What can you gain from digital marketing ?• What can you gain from online sales ? • What can you gain from electronic publishing?• Can you afford to wait and see, or do you have to

decide now and be an ‘early adopter’• What can we do now?

Digital Marketing

• Promoting and marketing your book electronically

• Be an early adopter – cost effective• Extend the range and potential of

communicating to your book buyers• Build up networks of repeat purchasers• Increase the rate and scale of promotion• Enhance your market knowledge

Online Sales

• Selling your printed book or electronic book through an online retailer

• Be cautious and ask questions• Quality of service varies• High service costs may operate• Quality of user interface and information• Who does it actually reach?

Digital Publishing

• Two approaches• On-Paper publication from an electronic data

file• Print on Demand or Short Run Printing

• Supplying the publication as a electronic file or online

• Offer both

On-Demand Publishing

• Can be cost-effective, cutting investment and stock

• Production quality constantly improving• Up to 500 copies – tipping point with with offset

litho advancing• Requires effective digital asset management– Example CodeMantra software

• All publishers should investigate for short run reprints

Electronic Publishing 1

• Selling an electronic file – paperless publishing from the publisher’s perspective

• Springer Verlag , for example, normally supplies an electronic file

• Media agnostic – computer screen, phone, iPad, Kindle, SONY

Electronic Publishing 2

• Caution required• Format problems – many proprietary like Kindle -

and difficult to change from reader to reader• Software still limited in applying normal features

common in printed books – pictures, indexes, notes.

• Rapid obsolescence and high cost.• Need to beat $ 100 price barrier for a fully

featured coloured reader before general use.

Electronic Publishing 3

• Most important new markets– Primary to Higher Education– Business– Reference– Language Learning– Journal access– New book formats – short texts, reduced books.

Look at the Chinese and Japanese experience

Unreliable Business Models• Problem: not what you can do, but how you can make money from

doing it.• Google, Yahoo, Baidu China , and Craig’s List USA all make money

through advertising• Of social media only Facebook, and LinkedIn consistently make money,

through an effective advertising model• MySpace and Bebo have had their moment – they are losing

thousands of active users every day.• Twitter dominates special media but as yet has no effective revenue

model . Buzz from Google : too early to say.

• Publishers– can use any of these media, but only increased sale volumes will compensate for lower cover price

Unstable Markets

• What is a book worth?• Is a book a cultural object or a commodity?• Should a book be cheaper in a digital format

than in paper format? • Who should control a book’s pricing?

Price Volatility• Do lower prices increase sales volumes?

• Pricing by perceived value –journal articles online

• Secondary markets – used books + surplus books

• Reduce the cost of your inventory and you can offer a increased variety for sale

• Expose your inventory for sale to a wider range of customers

• Creation of distributed online sales network :– ZVAB, Abebooks

• Chris Anderson THE LONG TAIL – continuing sales of small sales over the long period if available in print

The New Publishing Economy• The New Publishing Economy is steadily being developed. It will based on five key

elements

1. Remember the changed dynamics in publishing over the last ten years were never predicted.

2. Uncertainty will become the norm

3. Creative flexibility and business agility will be the primary route to success

4. Publishing’s entire asset base will remain fixed in the system of copyrights and intellectual property.

5. Publishing will quickly learn more and more from the rest of the communications industry

Disruption Revisited• Disruption not stability will be the absolute norm for future publishing.• Those working in future publishing will have to flourish in a world of risk

and instability.

• Publishing will eventually split down the middle: into separate creative and management businesses.

• Money will flow into creating and building profitable ideas through venture enterprises – packaging them for the market

• Once these packages reach the plateau of development, they will be sold on to service management companies, which will enhance what has become a Core Business

Digital Policy for Senior Managers 1

Short term – next 2 years: Develop your personal expertiseAppoint digital project manager to develop digital

options, You personally assess risks and benefits –

Digital Policy for Senior Managers 2

Mid term – 2 to 5 years– Develop trial programmes for digital

publishing– Build an internal team, from across the

business, to become the core of your digital publishing strategy.

– Begin a tactical digital operation to improve profitability

– You evaluate the outcomes

Digital Policies for Senior Managers 3

Long term – 5 to 10 years

1. Learn from any mistakes made in years 2 to 52. Refine your company’s Digital Policy3. This becomes the digital culture company wide4. The task: content-centred, medium-agnostic5. Message to your customers: “ the best content,

when you want it, how you want it, at a price you can accept”

The Message

• “Take your time, and do it right”• “Vegyünk helyi idő és nem helyes”