2008 was the most significant year for print publishing in the past 40. That was the year that ebook revenue took off, coincident with a decline in print sales. An inflexion point was reached. According to Price Waterhouse Coopers, by 2017, ebook sales are expected to eclipse print and audio books.
Print publishers have long dabbled in a variety of digital enterprises, including interactive courseware, CDROM products, online marketing, free companion web sites, course-packs for learning management systems, and more recently mobile apps. These activities were largely peripheral, and done primarily to answer competitive threats and to bolster the publisher’s brand, as opposed to creating new value and revenue. Revenues generated by works on paper supported most of these programs.
But 2008 was different. Real customer dollars were moving from traditional revenue sources to digital delivery formats, and represented a watershed event in the industry. A few years before, a similar pattern was seen in the shift of retail activity to online commerce, and the shift of advertising media budgets to digital. These shifts demanded a strategic response from those who wish to continue to engage in the marketplace. And so in 2008 it was with book publishers: lead, follow, or get out of the way.
Publishers heard the clarion call for change. The Transformation Era was upon us. Many publishers saw that strategic changes of core business practices were required in order to to respond to the new opportunities and anticipated threats in the increasingly digital marketplace.
To fully realize these digital opportunities, every aspect of the organization needed to be examined:
- Sales and marketing teams must create and maintain direct, digitally mediated customer relationships, and use that dialog to better understand the needs of the marketplace and increase customer value.
- Production must evolve from a print-centric to a cross-platform production approach, in which design (presentation) is separated from content so it can efficiently be delivered in a variety of ways, to a variety of devices.
- Editorial teams must evolve editorial processes to support more continuous publishing and greater frequency of updates than can be supported by digital delivery.
- Financial managers must architect the P&L structures of the organization, as the creation and management of dynamic content services are far different from the established P&L structure of traditional book publishing.
- Technology teams and their partners must bring online new systems to support digital content creation, management, distribution and delivery.
Many publishers have embarked on the path to digital transformation, and learned a lot along the way. One of the key lessons learned is that the course of transformation may need to be adjusted from time to time, as assumptions are tested and proven or disproven, and as new understanding of the marketplace emerges.
On the other hand, other organizations have resisted fundamental change, despite the clear impetus for doing so. Some reasons why they have resisted change include:
- (Perceived) Lack of Resources: With print revenue down and margins thin, organizations – particularly smaller publishers — feel squeezed. Publishers that do not have access to investment resources believe they cannot entertain efforts of digital transformation that may require investment. (Unfortunately vendors often overstate these capital requirements.) More significantly is the pressure on internal resources: people are already stretched doing their “day jobs” and cannot take on any additional work that transformation may require.
- Incentive: Many who hold positions of responsibility are often not give the incentives to pursue change, even though the long-term viability of the organization depends upon it. P&L leaders commit to their boards the execution of the financial objectives of the current model, not investigation of new ones. And for that they are richly compensated. One level down in the organization, functional managers have grown dependent upon the relationships they have built with third party service providers. These relationships become strained when new models are contemplated.
2013 will be known as the year in which the current cycle of digital transformation will draw to a close. Those organizations that will execute significant changes to core business functions in order to realize new digital opportunities have already done so, or at least begun. Those that have not begun these changes are unlike likely ever to do so.
A number of recent events signal the end of the Transformation Era:
- O’reilly’s popular Tools of Change conference, the annual touchstone for publishing transformation, is no more. The rallying cry for PUBLISHING CHANGE is no longer such an intriguing draw. As Tim O’reilly said when TOC was shuttered “Seven years on, ‘digital publishing’ is well on its way to simply being ‘publishing.’ ”
- MarkLogic’s XML database platform, once thought to be a requirement for any serious cross-platform publisher, is little mentioned. Publishers now realize that digital success cannot be found within a magical software project, such an XML database or “a DAM”. MarkLogic has clearly signaled an end to their wooing of the publishing industry: their annual Digital Publishing Summit, like TOC, is no more.
- At BookExpo this year, there was neither the deer-in-the-headlights fatalism that publishers displayed in years past, nor the unbridled optimism and daydreams of endless ebook sales trajectories, as seen last year. Publishers are viewing opportunities in the digital publishing marketplace in increasingly rationale and realistic way. Digital publishing is indeed “publishing”.
The impetus for change has been replaced by steadfastness of execution by those publishers with committed courses of digital change. For them, it is a time of execution.
In those organizations that have not adopted a program of change, complacency prevails. However, without having executed some fundamental changes, without the means to engage with customers directly and without the ability to support platform-agnostic content creation, these organizations will have a difficult time maintaining their momentum and autonomy in the digital marketplace.
Most significant for the growth of the industry will be the new entrants. The “born digital” publishing organizations, with a publishing mission – as opposed to technology companies like Apple or Inkling — focused on the creation and delivery of information and media services but unburdened by legacy business models and processes. Companies like Knovel and Atavist. While they face the challenges of any new company, they need not concern themselves with transitioning from the past. They can hit the ground running with new modes of delivery.
The Transformation Era will be followed by the Consolidation Era. This consolidation will not only consist of the acquisition of small publishers by large ones, but also the acquisition of publishers unprepared to engage in a vastly different publishing landscape by those that are.