Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Wednesday, March 30, 2005

More Publishing 2.0

A nice post about the end of publishing as we know it. I think the example it uses - newspapers - is a little off.

Newspapers are, as the post points out, cash cows. But they're cash cows that can hide massive strategy decay. That's because they're natural monopolies - the average cost falls for the paper with the largest circulation. This leads to increasing returns to scale. That's why there's only really one major paper in most local markets. That's also why Warren Buffett got rich by investing heavily in local papers.

But total circulation has been falling for decades. I believe it peaked in the 80s and is now down to about 1/3 of the peak number. The issue is that newspapers can stay profitable in the face of falling readership - until total revenues dip below total fixed costs (of plant, distribution, admin, etc). Once this happens, not only will newspapers be unprofitable - it's unlikely they'll ever be profitable again.

So newspapers are a bad way to judge whether the publishing industry's in trouble - by the time they're unprofitable, the industry will be six feet under.

If you wanna read my general thoughts on Publishing 2.0, they're here.

-- umair // 4:27 PM // 0 comments


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