If you drop by this blog once in a while, you probably already read few articles with examples and ideas on how existing business models could evolve.
Technology? It is a mean- but its side-effects are usually underestimated by those who see the technology as an incremental development of existing technologies.
It is now customary to present everything as a “2.0” version of an existing industry (I look forward to Diplomacy 2.0, based on Twitter and other social networks).
Usually, the most prepared to exploit any new technology to its fullest potential are those who are “embedded” into that technology (or the other way around).
I prefer to avoid the digital native/immigrant dichotomy, as I believe that it is forcing a more nuanced reality into a black/white framework.
It is true that most natives will follow their times, and behave as natives- but some will anyway will be focused on past or possibly future models.
While some digital immigrants (I had few examples- both younger and older than me) will move beyond the technology, and focus on what it delivers on the social side.
I consider myself an hybrid, as I wrote my first test program at 14, in Fortran IV on punched cards (thanks for some networking- I was invited only in my role as number cruncher), and thereafter I kept by chance and design getting in the middle of new computing technologies- as a seller, user, consultant.
Each technology is the expression of a cultural framework: and most attempts to migrate an existing industry online start often with the replication of approaches that had sense in the cultural framework of the founders.
Often, this results in startups that deliver a product or service that misreads the market.
An interesting visible case study is the publishing industry.
The publishing industry: news
I posted online few articles on different side-effects of Internet on the newspaper industry.
It is a common shared experience: everybody can observe various attempts to adapt, from moving the newspaper completely online, to attempting to use the new channels.
I am not the first, and certainly I will not be the last, to criticize some attempts, such as adding a blog that is managed as a blog (typos and blatant factual errors included, also in economic newspapers), not as part of the ordinary activities.
Or mailing lists that keep switching from free to paid approaches.
I think that nobody in the industry would do something similar on paper- confuse the audience, and they will go elsewhere.
Lower your quality, and you will be as good as any free blogger ranting and confusing data with perception (e.g. I recently read an article in the blog section of an economic newspaper shifting some events in a precursor of the Euro from 1992 to 2002).
Personally- I would try to consider that blogs are not a natural part of a magazine- better to spin it off, to the authors, or let the readers comment on articles, and authors respond or intervene, or close a discussion on an article (yes, the old “author’s reply model”), instead of trying to write quick-and-dirty blogs that affect negatively the visibility of the magazine.
But, in the end, newspapers can recover their “niche”- professional expertise in reading and interpreting news, as done by the Wall Street Journal after the G20 in Toronto.
Instead of just publishing a link to the final document, WSJ added an interactive point-by-point commentary on the 26 pages of the document.
You can agree or disagree on the commentary, but the approach (converting the online newspaper into an educational platform) is shared also by other leading newspapers (e.g. El Pais or Le Monde), after few years toying with different options.
And if you ask: yes, I have been a paid subscriber to all the three, to study their model and see how it evolved (because I read them in paper).
Balancing between free and paid online content has never been an easy task- and it is even more difficult now, when everybody can publish online.
Sometimes the “heart” of an article is a couple of paragraphs or a joke- and that is “fair use” (i.e. you can usually quote that much if it is functional to your own article).
But, taken outside the context, you can get the quote- with nobody ever reading the source (i.e. bringing traffic, revenue, potential new readers to your site).
Being popular does not imply being a best-seller: how many people quoting F. Fukuyama famous book about the end of history actually read it?
The publishing industry- books etc
Probably, eventually it will be common to see new best-seller authors “born” online.
But while newspapers and magazine have a relatively fast cycle, books and music have a different approach.
The music industry was transformed more by iTunes than by the MP3 legal/illegal copies.
And iTunes itself was at first viable because it allowed customers to pay and choose only the songs worth (in their opinion) buying- not for a full CD that sometimes had 2 out of 13 or 16 songs worth listening to.
iTunes is an example of what I call “end-user unbundling”- customers can choose different components from different “suppliers”, e.g. by creating their own compilation of a music group.
It is as if people were able to buy Shakespeare paying only for the “quotable” phrases, not for the whole book (disclosure: have both a digital and a paper edition of his works, not just the quotes).
As a consumer, I think that it was to be expected- usually, you would never be able to sell a book that is 85% “skippable”.
The sheer number of books being published yearly is staggering- and some books are “rediscovered” just because a newly famous writer quotes them (starting a “long tail”, and ending up with a new peak in sales).
While individual news generally belong to nobody, individual books are linked to specific authors- i.e. authors create a “brand”.
Listen a CD: no matter how much you liked the artist(s) before, if it does not sound “right” after a couple of songs, you will feel deceived.
Instead, some writers are able to build a following based not just on quality- but on their own unique mix (notably fiction writers and polemicists).
In our times, a successful author does not publish once every twenty year- as soon as one of his book is successful, the PR machine surrounding the authors “creates” a brand on past and future books from the same author- and starts a mini-industry around the author.
Arthur Clarke and Tom Clancy are two good examples of how you can multiple your “production pipeline”, while others are able to produce script-ready books that can easily converted into movies.
It is not my interest or role to discuss about “quality”: because in books (and music, movies, etc) this a subjective matter- de gustibus… (again: I like the books from both those authors).
A common complaint from authors is the really limited value that they receive from the sales of their books (often hovering around 10%).
But publishing is not just writing- it involves editors, lawyers, PR, researchers, and so on.
The supply chain of publishing
For the time being, a book is a physical product: it requires a distribution network.
The market is already overcrowded with startups or wannabe-Amazon that claim to offer a better deal- trying to emulate the iTunes success by using the same model (forgetting that neither is a publisher).
The reasoning? Cut down the distribution costs (say, 30%), and split that with the author, or, in some cases, just simply go 50/50.
It could make sense for iTunes- it was the offspring of Apple, a “brand” that has a loyal following of buyers, and a company able to create an instant marketing sensation whenever a new product or service is announced.
But a new startup, with no further services to offer to the author? It is a misreading of the market.
This Monday I read an interesting article in El Pais, where an author (Lorenzo Silva) suggested a slightly better model.
“Mis libros de hace 15 años ya están más que amortizados en papel: ¿por qué no voy a llevarme yo, pongamos, el 70% del precio? ¿O qué me impide ofrecerle por 15 euros el resto de mi obra a alguien que ha comprado un título nuevo? ¿Que me llevo poco? Menos saco si se sigue dejando que nos pirateen” (read the original article- it is worth your time with translate.google.com).
If you want- considering your own books as any other product- and, once the initial investment is paid back by sales, offer the old books heavily discounted or as a “bundle” to ensure the loyalty of new customers.
It could work for few established authors, again those with a loyal following (in music, it was the same with Radiohead, and their “pay as much as you feel like paying” music CD offer).
But, for everybody else, including aspiring authors, probably there could be two different market segments: authors who need support, and authors who just need an “electronic window”- they have the visibility, but are unwilling or unable to finance or manage their own publishing infrastructure.
A new model
I worked for a long time in the outsourcing industry, mainly in banking (but before that I was involved in projects that were managed with a similar “service” approach).
Before that, to define DSS models, usually I studied the logic of the business processes and activities of each customer, in industries ranging from electronics, to retail, logistics, airline transportation, infrastructure, automotive, insurance, and, of course, banking.
Building a model for a business (new or existing) implies understanding what is relevant to its market, and therefore which key data need to be considered to validate if a model is an appropriate representation of the reality.
I am now talking also about books- but a book is a product, treated and managed as a product, sometimes approaching the same status of other fast-moving consumer goods.
You want to know how your book is distributing, in which markets, if it is discounted or not, and probably which other books are usually purchased along, and so on (part of this information is delivered by Amazon to any visitor): and this is information that an online publisher should provide to any author (and their agent).
My view on strategic outsourcing was first posted online in July 2003.
The basic concept: transferring some activities that are not your core business to a supplier delivering the same service to multiple customers makes sense- but you have to keep the knowledge that will allow you to evolve your product- and to monitor your market.
And differentiate clearly between your role, and the role(s) assigned to your suppliers.
Of course- if you plan to develop your own mini-industry.
Re-think your supply chain
A simple model would involve offering to authors the possibility of being published, but paying differential commissions, based on the services that they receive- and their “inherent risk” (i.e. successful authors have a lower risk).
It seems just an evolution of the old “vanity publishing” model- but it is actually a merge of the dotcom distribution model with the “niche” publisher.
If your website offers only the equivalent of a “spot” inside a mall- probably 10 or 15% of the cover price is what your service is worth.
If your website offers a “black box” to allow authors to have their own “shop window”, then is more appropriate a fixed “space rental” and “per unit sold” commission (supporting their online presence has a value; anyway- also retailers do the same to give you shelf space beyond few days).
And do not look at iTunes and Amazon: they are not publishers.
Unfortunately, the “digital divide” is stronger in this industry- also as a consequence of the idea that anything practical or technical has a lower intellectual status.
So, you have startups founded by technical experts and online marketeers- with a perception of their value that has no relationship to the actual value perceived by the authors- and viceversa.
Probably, in a new publishing approach, online visibility providers should forge an alliance with the writers- more as a guild than as a company.
As for the existing publishers: have a look at your supply chain and organizational structure.
How many activities and positions within a publisher are relevant only to the old “print” model?
Publishers themselves started long ago “outsourcing” printing and other services (sometimes following the IPR management model introduced in the early XX century by Hollywood).
Large “niche” publishers positioned themselves as IPR management companies, offering services way beyond what we usually associate with book publishing.
But smaller publishers are probably the best partner of the new “online publishing startups”, as they can leverage on their experience, without transferring their own overhead.
Probably some smaller publishers could become a “virtual publisher”- focusing mainly on talent discovery and nurturing, with a corresponding higher commission (talking about models: getting back to the Mc Cormack’s IMG model, adapted to the low-infrastructure and all-outsourced XXI century).
And knowing quite well what means managing end-to-end an author, they will be able to find the right partners for services such as online publishing, IPR protection, and so on.
If you already created your “online publishing startup”: listen to your potential customers, and then reassess if you are really a publisher- or you actually need to expand your industry skills.
Tags: 2.0, authors, print, publishers, publishing