Thursday, December 16, 2004
Next Big Things - Publishing 2.0
I think that the next media industry to be vaporized by IntarWeb 2.0 is going to be the publishing industry - as opposed to everyone's current favorite candidate, the movie industry.
Now, we've heard a lot of talk lately about 'citizen journalism' etc. This is the tip of the iceberg - publishing is a much bigger industry than simply journalism: it encompasses books, journals, magazines, and various other periodicals.
There's no lack of well-trained analysts, but there has been a lack of well thought out analysis of the the impact of technological disruption on this space. Most of the publishing industry is complicit of the same kind of moral hazard that the music industry's been (model here). They foist dumbed-down authors on an audience that deserves better, because their hit-driven business model is basically a vicious circle of rising marketing costs and winner-take-all markets.
At the same time, the vast majority of them have adopted a walled garden Net strategy - if you don't pay, you can't play. Others offer the same value prop as Publishing 1.0, but giftwrapped in pretty, but valueless technology (ebooks etc). Even the 'innovators' in this space - like KeepMedia - offer essentially the same value proposition, with cosmetic changes in terms of the timing of revenue streams.
The point is that the IntarWeb demands a fundamentally strategy, because it's economics are radically different. Walled gardens don't work as markets expand. They're massively exposed vital points for smarter, nimbler competitors to strike. Look at the multitude of uses Blogger's being put to - this is how strategy decay happens: at the edges of the network.
Right now every blogger's dream is to grab a book deal. In a few years, the opposite will be true: market dynamics will experience a tectonic shift all parts of the publishing industry. Winner-take-all dynamics will disappear, and gains will be redistributed across multiple authors (ie, Tom Clancy won't be the only war novelist people pay to read). When everyone's got a book deal, a book deal simply won't be worth that much - but a reputation will be. That's what will be both costly and valuable.
This will happen as open-source/open-access solutions with bundled, viral revenue chain micropayment models emerge. These will destroy barriers to competition for authors and readers alike. Because of this, switching costs will be vaporized (so winner-take-all dynamics will disappear). As the distribution of readership itself changes, so more people read a broader variety of things, profits will get taken away from incumbents, who are still focused on building walled gardens, and redistributed to real innovators. Consumers, of course, will realize a significant surplus, as production and distribution costs are driven down.
Where will pricing end up? It's an interesting question. I think we'll see dynamic pricing mechanisms emerge (ie, different prices over time for the same product). Of course, most media industries attempt a crude version of this - the latest Britney CD costs you 15 bucks when it's released, and 10 bucks a few weeks later (or at least it did a couple of years ago). The problem is that strategists in the industry see this as price discrimination - charging early adopters who value new products more.
But it's not - at it's heart, the dynamic pricing model (like in our licenses) isn't focused on producers - it's focused on viral consumption. The price of a digital good, in this model, is a function of the present value of all viral revenue streams any consumer stands to gain from redistributing a digital good. This is a radically different notion of pricing than price discrimination, because it requires models of viral consumption - not just according to a simple utility function.
But this is getting away from the main point I wanna make: the publishing industry is living on borrowed time. Of course, it has been for a while. But I suspect the tectonic shifts unleashed by massively distributed business architectures and open-access technologies are going to hugely accelerate the rate of innovation for Publishing 2.0. I expect to see exponentially increasing new entry in the next year or two.
Another interesting point to note: unlike music and film, there won't be significant Replication Wars in this space. That's simply because the publishing industry hasn't played the patent thicket strategy with the same fervor as the music and film industries. So the evaporation of Publishing 1.0 will be relatively quicker than that of Music 1.0 - but the key point is that the publishing industry, because it hasn't destroyed it's perceptual capability with silly protection tactics, has a good chance to play a significant role in rebuilding it's own business model and industry economics.
Apologies if this is rough - no time to edit today.
The only problem with your democratisation-of-publishing argument is the perennial one of too much choice. Working in the industry myself, I get to see the enormous amount of mediocre material that gets sent in to the average house. Everyone thinks that they can write, even more people than think they can create music. How do you filter that in the age of the internet? How do you avoid readers drowning in the sea of semi-autobiographical novels about x's childhood?
My feeling is that whilst the model will definitely change (though not as quick as you believe - how many people actually download books from the internet at the moment? Let alone read them on their computer. It's not like music or films where you are consuming the product in exactly the same way), it will benefit the big brand name authors not harm them and it will be just as hard for new authors to get noticed. As you yourself admit, reputation will be everything and how will that reputation be created without marketing, reviews, author tours, press profiles and all that publishers do to make their writers successful? Whilst I'm interested in your 'micro-payment' viral idea, human nature is fundamentally conservative, we are reluctant to explore new things unless persuaded to do so first - whether it's by advertising, friends, book groups or newspaper columnists.
Of course, some real talents will still be spotted on the net - the bloggers, poets, journos and novelists who manage to gain a following - but finding them will continue to be a full time job..
Admittedly, as people start to read on their PDA's or listen to audiobooks on their ipods distribution will change enormously but I just don't believe the other shifts will be as significant as you say. Look at the music industry. After all the court battles and hype, the music companies finally got their act together and now what are they doing? Selling you Britney Spears on iTunes. Yep, you pay �7.99 (or you nick it) not �13.99. But apart from that, what's changed?
That's very interesting stuff. I would just say that books - even more so than movies or music - are a risky purchase. I don't just mean the consumer risks their money on an unknown quantity, I mean they don't like gambline with the time and attention they invest in a book - so they seek assurances up front about what they're buying. You're right (I'd say) that reputation will become big - in books it already is the most influential factor when a consumer buys a particular book. Buying a new title from an author they already like enables a consumer to lower their risk in a way that no other factor will. But reputation, when you're talking about producing new products, is just another word for brand and old-tech companies are good at building and managing brands. I didn't see anything in what you were saying that would make it easier for a new author - without corporate ad-spend and inside connections - to gain widespread popularity. I also think that until electronic paper really and truly comes of age - and I'm talking about some gadget that hordes of people admit is as good as a book, emotionally, in tactile terms, in ease of use and portability, all that stuff - until then the physical nature of books will continue to tie them to physical book stores. Physical books stores clearly aren't the only way to buy books, but I would submit that they are the most important, they set the trends (in collaboration with major publishers) and until paper books cease to be the dominant format, these gatekeepers will wield enough power to keep the old institutions in place and in profit. I see the trend towards 'buying your gross' and 'one day laydowns' accelerating. Big companies would rather create, through hype, a manageable number of huge hits than allow the market to pick its own winners. Consumers can't break away from that system unless they have some alternative way to guide their purchases, beyond hype - and such a thing doesn't yet exist. You can only go by author reputation they're a known quantity. And being steered by hype guarantees you're reading the same books as those around you - so you get to show off rather than baffle your peers - you have common ground with other readers - and hype imposes an order (albeit a questionable one) on what would otherwise be a vast and unnavigable sea of titles. I think that what you call Publishing 2.0 will have to wait for electronic paper and a source of influential endorsements not controlled by the old guard). Rob.
Print is hard to kill. The printed book is especially hard to kill. Why is that? Because it embodies its technology. It needs no device to make it work. What musical reproduction technology is comparable? The music box? The player piano? Books are relatively inexpensive, quite portable, very durable, and easy to use. Good luck trying to replace it.
Hi, thanks for the comments. I will respond to them on the site today and tomorrow.
It�s already happening. A book deal now is meaningless. The blogger books will likely sell less than 5,000 copies in their lifetimes, most of them will not earn out the advance.
The thing about books is that the Walled Garden is the bookstore, and there is only so much physical shelf space there. Amazon has reached the upper limit of online booksales in the US market. They will sell the hell out of the hits, (the Harry Potters, Da Vinci Codes, and Diet books,) but overall they represent a small fraction of the bookselling pie. Bricks and mortar chains are still where the sales (such as they are) are happening. For that dynamic to change, the product itself would have to change
When people are finally comfortable with reading long pieces online the book business will change for good. And you�re right, those networks will be what drives sales. The question I have is whether the micro pricing makes a difference. My sense is that a books sales ceiling is not high enough to make micro payments work.