Thursday, 17 June 2010

On Technological Change, Publishers & Customers

On the plane to the AAUP Meeting just over a month after I attended the Book Industry Conference in London - and I am dwelling on the most challenging presentation of that last conference. In retrospect it should be no surprise that it came from someone outside the book world: Benedict Evans of Enders Analysis. Taking an overview of the impact of new technologies, he made some salutary points - most notably that our business environment is rapidly becoming dominated by international companies that are neither publishers nor retailers.

  • Google: which is not a technology company - it is an advertising business - using cash flow to build a dominant content position so that the journey is always started from Google, thus maximising the opportunity to derive advertising revenues.
  • Amazon: which pushes physical products through its logistics chain to the end consumer, thereby deriving revenues. Although Amazon has made significant investments in kindle and e-books, this is not their core business - but a way of retaining the buying relationship. (Indeed Evans suggested that the fact that there is no logistics business model in ebooks explains Amazon's "latent aggression" regarding ebooks.)
  • Apple (and other platform manufacturers): which are consumer technology companies whose strategic objective is to create products that people want to buy (and upgrade, and own the next model soonest).

Evans then drew our attention to the cash reserves of these three companies:

  • Apple: $41.7 billion cash on hand
  • Amazon: $5.6 billion cash on hand
  • Google; $26.5 billion cash on hand

He then suggested that we compare those figures with the cash reserves of any of the key book industry players. It's a sobering thought particularly when combined with the anonymous adage doing the rounds: "Google kills industries without noticing". Listening to this - and feeling chilled - made me think of Gavin Weightman's immensely readable book The Frozen Water Trade, which charts the rise and fall of the business of shipping ice from New England down the East Coast of America and on to the Caribbean; a once thriving enterprise that was completely annihilated by the advent of the domestic fridge and freezer. (How many homes do you know that still have ice-houses?)

If there is any good news it is that - none of the three dominant companies is a content generator- and their core business models lie a long way from the business of creating content. (Although it seems to me they could all clearly afford to buy content generators from out of the petty cash tin - should they decide they want to do so).

As Benedict Evans pointed out - bolting new technologies into old ways of doing things does not remain a viable model for long. Therefore now - more than ever - is time for publishers to pay close attention to their customers, and to the value that they provide to those customers. Our new techno-charged world is one where wealthy companies can change the destiny of traditional industries without setting out to do so. Systemic and structural change throughout the book industry - from the perspective of these highly capitalised companies - will be an accidental by-product of what they are doing in their own core businesses.

To remodel themselves for a world dominated by Google, Amazon and Apple publishers need to focus on their unique abilities to commission top-class content, nurture authors, and create pleasurable information and entertainment products - regardless of the customer's method of consumption - be it print, ipod, ipad, Kindle, nook, library platform, desktop, smartphone, Nintendo DS, or the next generation of far more radical interactive and virtual world technologies.

I am often asked if - employed as I am in the physical supply chain for books - I fear for the future of our business (and therefore my job). In a way I feel I am at an advantage, because it is so obvious that our business has to reconfigure itself for its medium to long-term future. The great thing about working in distribution is that it teaches you to think about books as products that customers want with the shortest possible time frame in between making that choice and receiving the book. Inhabiting the supply chain also teaches one to draw distinctions between "customers" (who may in fact be intermediaries) and the end "consumer" of the book. In that sense the mind[set of those of us in the academic and reference supply chain is way ahead of many publishers, particularly many in the mainstream "trade".

Distribution is driven by the customer's needs, and a perception of the book as a consumer item. Yes, in my private life I may also consider individual books to be desirable to own and pleasurable to read. But professionally I know that publishers have to be more aware than ever of precisely what value they add to the experience(s) of accessing content that the consumer wants - and able to deliver those experiences in multiple ways - depending upon the consumer's preference and choice.

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