The leading world economies have witnessed a decline in consumer disposable income in the past five years resulting in less spending on books in general. The mega trend to move from traditional publishing to digital publishing has also impacted the global book publishing industry significantly. The proliferation of new tablet and smart mobile devices coupled with personalized e-Book readers and competitive pricing of e-Books have impacted revenues. The investments necessary to transition to the new digital publishing world has led to consolidation in the industry, recently Random House and Penguin merged to form the largest publisher, Bertelsmann will own 53% and Pearson will own 47% of the new venture.
No one was able to predict that Jeff Bezos, dot-com billionaire, would purchase The Washington Post, but Kodak and Polaroid are two of the best examples of companies which fell victim to the digital disruptive process. Neither was fast enough to foresee and change their business to take advantage of digital technology and move to digital photography. Blockbuster started this trend when they missed their opportunity to purchase Netflix for $50 million in the early 2000s. The twin disruptive forces of tough economic times and technology innovation are giving birth to new thinking, new markets and new opportunities for the publishing industry as a whole.
Challenges faced by Publishers
Large publishers are only now playing catch-up by developing digital platforms with e-commerce capabilities that give them the ability to publish content across multiple device platforms and rebuild their relationship with authors and publishers. They are predominately focusing on a strategy of cost takeout from existing operations combined with nominal investments in innovation, but are the changes to their business models enough? Publishers are challenged on many fronts:
- Many self-publishing, open access and open source movements are gradually eroding the monopolies of large scale publishers
- Within the next 3 years, publishing has to move to a service based model
- On-demand published content, books, magazines and trade publications are expected to generate the majority of publishing revenues
- Voluminous print-on-paper encyclopedias, dictionaries, reference works, textbooks and other large books will diminish significantly
- Major printing plants will close down; replaced by printing and publishing on demand
- Social and self-publishing platforms, e.g., Facebook, LinkedIn and Amazon have already redefined the publishing industry
- Mobile / Device proliferation, e-Readers and apps are making it increasingly more difficult for publishers to keep up
Publishers need to get their disruptive groove on
Publishers do have some key advantages over up-and-coming publishing models from Amazon, LinkedIn, Apple andother self-publishing startups. Large publishers have the imprints, financial resources, quality control processes and brand recognition to increase the probability that the book will generate higher proceeds for authors. Publishing firms have the people who know the industry, and who have deep relationships with publishers and authors supported by a well defined set of business processes and systems, such as editorial, content management, rights management, royalty management, ERP, Websites, physical warehouses.
First, large publishers should think about creating a service-based model to offer authors and publishers a menu of service options that are priced competitively and offer a better value proposition; the editorial services delivered by Pearson are a good exemplar. Second, they should consider creating digital publishing units that are free from the chains of their legacy past. Third, publishers need to transform their legacy print businesses into the digital publishing world to create new revenue streams and new market opportunities. It might be self-evident for publishing firms, but publishers should:
- Select the right team to lead the Digital Unit – Think Millennial
- Align the new business units’ business processes to digital to compete against Publishing 3.0
- Define, market and price the new services against Publishing 3.0
- Create new digital centric platforms that are open, social and collaborative to support the new products
- De-commission the old business processes and systems
Publishers should not underestimate the seismic magnitude of disruption in the publishing industry, and this is true across books, magazines, education and news. Publishers are not going to be successful by dipping their toe into the water by adapting legacy processes and systems to incrementally capture revenue from Amazon, Apple – they have to go all in.