Thursday, 23 December 2010

Trade Publishing’s Digital Future – An Open Book

A couple of weeks ago I went along to The Futurebook Conference in London organised by trade bible ‘The Bookseller’.

I wanted to get a sense of how much had been learned from other parts of the media industry who have already experienced a digital transition, and how prepared the business was for the challenges and opportunities ahead.

The good news is it seems like book publishers have wised up that major change is imminent, and are beginning to equip themselves with the skills, expertise, and technology to compete in the new digital world.

The bad news is that many publishers have not, I think, fully grasped the scale of the opportunity that digital can offer, and how fast & decisively they need to move to realise it.

In my view, if the book business plays its cards right it could emerge bigger, stronger and far more profitable from the transition to digital formats, in stark contrast to the music and newspaper businesses. However the industry needs to be making some bigger plays in 2011 to shape its digital future.

So why the optimism about the future ?

Firstly digital boosts consumer demand.

The convenience of enjoying content on demand & the opportunity to access vast digital libraries has contributed to more consumption of news, music and TV programming, and will drive more consumption of books (and author led content). This is borne out by E-Reader owners who buy more books, after their device purchase than before (according to a recent study by consultants Bain, 42% of E-reader owners buy more books than before – while only 7% buy less ).

Furthermore the book business is still in a position to translate higher volume into more revenue by learning from the mistakes of the music and newspaper industry in pricing & packaging its content, combatting piracy, and in structuring relationships with key digital distributors.

Secondly it creates opportunities for innovation and added customer value.

Publishers that take a broader view of their business, and see themselves as managers of intellectual property, can make more relevant & valuable products in the digital world.

Whether by reimagining children’s, cooking and travel titles as interactive multimedia experiences, or seeding fan communities which connect readers to their favourite authors, or creating different versions of hit titles purposed specifically for a range of platforms . The publishers that have created exciting new digital customer propositions (like Pearson’s Poptropica) have found their investments can pay off handsomely.

And critically by creating more customer value publishers should be able to maintain premium price points, and protect against aggressive discounting.

Thirdly digital creates the scope for improved profit margins.

If price points can be maintained at a reasonable level then publishers should see margin improvement from digital’s reduced costs of storage & delivery. In addition, there are further significant potential upsides from packaging and windowing content in new ways.

To complement current a la carte pricing, publishers should consider packaging subscription offers which give customers access to recommended titles & the benefits of club membership. Not only are the economics of subscription more attractive, there is a growing body of evidence from the digital music (e.g. Spotfiy) & video (e.g. Netflix) markets that this model resonates with customers.

Publishers should also think about creating a new ‘Digital’ window timed to complement current hardback and paperback release windows, and positioned to offer customers something new over and above a standard e-book. This approach will help to squeeze more value out of existing IP, create excitement and noise around digital product launches, and draws on best practice from the movie industry where digital windows have been rolled out successfully.

However to take advantage of these opportunities the industry needs to take the initiative and act with a more unified voice in a number of key areas to positively shape market development. I really think this should be a priority for 2011.

For example:

A collective view on the timing & product offered in a new Digital window will help digital to become additive rather than competitive to physical products.

Collaboration between publishers on new packaging opportunities like subscription will create a better customer offer, and help this market to take off.

And a partnership between publishers and OEM’s to agree rules around E-publishing DRM, will enable consumers who buy an e-book to enjoy it on all authorised devices removing a key barrier to adoption.

Whilst it is understandable that many publishers remain fearful & anxious about the future, and resistant to making big investment bets, (and this was certainly my takeout from conversations at the Futurebook conference) the lessons learned from the music, video, and newspaper’s industry’s experience are that the waiting game does not pay off.

There are no doubt a large number of very complex rights, pricing, distribution, technology & workflow issues that need to be resolved if publishers are to make a successful digital transition.

However those publishers that systematically deal with these issues AND have the foresight to make considered strategic plays in the next 18 months will be more in control of their digital destiny, and will be better equipped to survive and prosper in a fast changing market.

Those that fail to do this will miss out on a digital boost to their business, and will open the door to a new wave of competitors intent on disrupting the industry.

As a momentous 2010 draws to a close for the book industry where e-books reached a tipping point & publishers caught a glimpse of what the new digital landscape might look like , I predict 2011 will be an even more interesting year where the business moves beyond experimentation to building sustainable & material new digital businesses. I for one, will be looking forward to it with optimism.

Google's E-Books play - addressing interoperability

Poptropica - Already digital business of scale pioneering subscriptions in the academic text book market

Amazon Singles - A new publishing format for the digital age

Scribd - A social network for book lovers that is starting to break through