Speaker Comments
Consider yourself lucky. Imagine your counterpart in the music business staring ruefully at his
daughter’s iPod and seeing therein the end game of his current business model.
There is not yet an iPod for your industry, but there will be. An ebook reader
that will wholly eclipse the printed book, however, is doubtful. Unlike the
wholly unlovable optical disk medium, people love books, pages, covers, dust
jackets, spines, graphics, book shelves, book stores and libraries. There is
intrinsic value in your medium as well as in your content. There is little or
none in optical disc beyond the content and liner notes they convey. Books are
an enduring part of our culture and will be for some time.
Of greater concern to publishers should be the way that communications technology has altered sales
channels, business models and the markets they serve. These changes, the topic
of my remarks, offer both grave threats and real opportunities to those
willing to “carp the diem” as a farmer neighbor often says in Vermont.
The most important ideas I will share with you today are based on my own company, Resolution’s,
23-year experience dealing with 5 million customers and helping our clients
enrich and profit from those customer relationships through converting data to
information and then to useful knowledge.
When the sidereal nights of publishing were marked by stars like Roger Straus, Alfred Knopf and
Bennett Cerf, authors wanted and needed the great value and notoriety these
legendary publishers could bring them. The editorial relationships were deeply
personal and had at their heart an aesthetic or philosophical camaraderie that
was fundamental to the author-publisher relationship.
Publishers had, and exercised, a high-handed relationship with the countless local book shops and
incipient chains that dotted our communities. I worked in one for several
years, The Vermont Book Shop in Middlebury. Its congenial prop, Robert Dyke
Blair, served at an earlier time on the Board of this organization when it was
called the American Booksellers Association. Knowledgeable publisher’s reps
stopped in, gave us advance copies which we dutifully read and then ordered,
recommended and sold. The backlist business of evergreen titles was also
vibrant. We ordered what we thought we could sell, not what we were told to
buy and returned the few we could not for full credit.
Books moved through a two-tier distribution system from publishers to wholesalers to retailers and
each took their slice of the value equation.
A number of commercial, technical and market factors have radically altered this picture.
First, there is the unfettered roll-up of sales channel ownership. The diversity of conventional
distribution options suffered. It began with the likes of Waldenbooks, B.
Dalton and Barnes & Noble and today includes those as well as the “price
clubs” like Costco and Sam’s, and online sellers like Amazon, B&N and ABE. It
has driven the lion’s share of “mom and pops” from the retail scene or into the café and bakery business.
The biggest equation-altering factor is, of course, e-commerce. Pooh-poohed at its birth
as a niche technology, Amazon, B & N and, to a less successful degree, Borders
blazed the trail and today the two former own the lion’s share of that channel.
So if today, we have some wary publishers, themselves rolled up into fewer large media companies,
and a bevy of vibrant independent publishers, a redundant two-tier
distribution system, and a cyber-pipe direct to readers via the Internet,
dominated and managed by Amazon and B&N, what will the future opportunity be
to level and enhance the value chain of distribution and sales relationships?
One could argue that these changes constituted a leveling of playing fields that adjusted, through
technological evolution, the inequitable earlier power of the publishing
companies over authors, assets, distribution and retail, an ‘umble pie so to speak.
Let’s look at the industry through the three lenticular objectives of asset strength, channel
strength and market strength. Assets are the intellectual properties one has
to sell, channel strength is the logistical conduit to market, and market
strength is the quantity and quality of available buyers. Two are in flux.
Asset strength is relatively fixed. There are ebbs and flows in what writers create and
publishers bring to market, but the output of good writers appears to be a
relative constant. Production of assets is largely with writers, of course,
who transfer those assets contractually to publishers for exploitation.
Technical innovation, however, is slowly eroding the role of publishers for certain types of
writers, but will continue to be of value and import to others. In essence,
writers who have become brands, like Stephen King, Stephen Covey, Thomas
Friedman or Deepak Chopra, or those entities which have created branded
communities like Oprah’s, are less dependent on traditional publishers for
brand creation, promotion and distribution. They are beginning to envisage other options to market.
And now to market strength because the market is surely changing. First the phonograph, then
film, then radio, then television and now, the Web, have all staked claims to
the consumer’s finite 24-hour day. People are still reading, buying and
checking books out of libraries, but their available time is still a zero sum
game, constantly reparsed against other informational and entertainment
options. The most cheerful note is that a sector of the market still seems
willing to pay an astonishing $20-$30 to be first to read a literary debut.
For the purpose of this talk, we will assume that assets (writers and their output) and markets
(reader/buyers), although in flux, will together provide a continuum of
opportunity, we will focus on what links them, channel strength and what
options its own changes afford publishers.
I want to buy a book by Rose Tremain. You want to sell it to me. You must ask the question, “What
is intuitive to me the buyer?” In reality, there are only two things, the
author’s name or Amazon. They are both brands familiar to me. Her imprint,
Washington Square Press, her publisher, Simon and Schuster, or their holding
company Viacom, if known at all to me, are definitely not intuitive. Most
probably, I will do a Google search on Rose Tremain or go to Amazon and let
Amazon search on Rose Tremain. Either choice will yield an Amazon offer unless
you, the publisher, pay Google to yield you or Ms. Tremain pays them to yield
her own site. On Amazon, the publisher’s brand is never evident unless one
uses their “Go inside the book feature” and accesses the colophon page. It is
never mentioned otherwise. If one types in Simon and Schuster into the Amazon
search engine, only books with that name in their title will emerge. This is,
of course, by strategic design. Amazon and Barnes & Noble both know how to
harvest buyer intuition. As a buyer, I want an intuitive way in, an efficient
search and an array of intelligent, competitive offers. I get that with Amazon
or Barnes & Noble. I actually find the Barnes & Noble search engine and site
navigation better now than Amazon’s.
The opportunity afforded by Google’s new Page Scan Service will, yet again, alter the
competitive landscape and may afford publishers a way in to forging a
relationship with readers. As rights issues resolve, this will, in time,
become a major traffic driver as the ubiquity of scans and the sophistication
of searches improve. Amazon or Barnes & Noble are poised to acquire the
results of those searches. You can invest in the diversion of that search to
your site or preferably your author’s site when it eventuates in one of his or
her titles. Pay this short shrift at your strategic peril. Don’t miss this
opportunity. It can be your jump start into e-commerce.
In the current concentration of channel strength, many publishers have little choice but to
bring a best seller to market largely through Amazon, B&N and the club stores.
This ever smaller number of ever larger pipes means that traditional publisher
authority continues to erode in favor of the consolidated retail channels
which can now more effectively dictate or at least influence, wholesale price,
margin, terms and return policies. This shift is the inevitable result of an
unregulated roll up and concentration of market channels. It is dwarfed,
however, in significance to the publisher when compared to their lost
opportunity on the Web and in e-commerce.
The lost opportunity was largely driven by a strategic failure to look ahead, take risk, but most
of all by an abiding fear of annoying or compromising existing distribution
channels, the same primitive fear that engendered nay saying around the debut
of book and record clubs in the late fifties and sixties when bookstore chains
and the additional costs of two-tier distribution were already eroding margins
in the industry. The debut of e-commerce was not fully understood or explored
and what is now the dominant channel of distribution was simply abdicated to
technical entrepreneurs in the mid and late nineties.
In addition, the roll up of publishers into international entertainment conglomerates has placed
inordinate pressure on them to perform quarterly, ever enhancing sales and
margins going forward. This short term focus distracts from long-term success
and the measured development of strategic options that build brand and
business in the future. This is precisely where e-commerce offers the biggest win.
If we jump to end game, one might imagine and reinvent the system at least in theory.
Going back to our analysis of assets, channels and markets, focus for a moment on the first and
last, the writer and the reader. How might we imagine a channel based on the needs of those two?
In any e-commerce transaction, two opportunities are present. One is in the sale and its
elevated margin. The second is much more valuable and, although elusive to
publishers, it was intuitive to Amazon and is beginning to be understood by
writers. It is the opportunity to acquire a long-term customer/reader with brand or sub-brand allegiance.
The writer with no established branding needs introduction, promotion, tour management, media
manufacturing, distribution and accounting, all traditional publishing roles
and responsibilities. The writer who is already a strong brand needs new
release management, media manufacturing, distribution and accounting. A
strongly branded writer in theory might eventually succeed with only a heavily
trafficked author Web site augmented by appropriate navigational and search
links and a book manufacturer/fulfillment service. The good news for
publishers is that most writers want to write rather than manage their
intellectual assets and the logistics of books distribution, the bad news is
that their role in the value equation is changing and they are reacting rather
than inventing. The wise publisher-marketer is channel-agnostic and allows the
reader to use their preferred retail channel to find, sample and acquire
books. It may be a location-based bookseller. It may be an Amazon or, better
yet, it may be an author site hosted and managed by the publisher.
It’s clear that, from the customer viewpoint, there is little brand allegiance to most publishers.
Some niche publishers may enjoy brand allegiance, a Chelsea Green, Harlequin,
Peachpit Press, National Geographic, Taschen, Harry Abrams or Shambala all
evoke in the reading customer a suite of titles, authors or topics that are
coherent. But a Random House, Harper Collins, Norton or Simon and Schuster
offer no content-specific recall to the reader. Just ask any reader whether
they go into a book store and ask, “What’s new from Penguin (insert any publisher)?”
The real opportunity for publishers is to develop and broker relationships between their writers
and their readers. The writers are their brands. That said, there are also
opportunities to brand niche markets such as food, mystery, home improvement,
getting rich, getting thin, getting well, getting sexy, getting sane and such.
But publishers must start by understanding their writers and readers.
The risk for publishers entering direct-to-consumer e-commerce is that they will see it
only as an opportunity to capture ad hoc sales off their branded publisher
sites as conventional trade channel margins decline and strong retail channels
toss them back more logistical expense, in effect, a late-stage effort to add
a high margin revenue stream to their sales mix.
I would not enter e-commerce to enhance sales and margin. I would only enter e-commerce to build
a new business model, one based on strategic planning and considerable thought
and investment. Amazon started not with products, but with customers. You will
need to do the same. Their success was built on billions in available capital
that allowed them to experiment over a long period of time trying different
things to entice and satisfy customers. You will not need billions. The early
research is done. The learning curve is flattening. You will need several
hundred thousand, however, to get this right. There is no longer any
worthwhile “cheap and dirty” entrance to successful e-commerce. Connecting a
shopping cart to a list of titles and adding “buy now” buttons will, at best,
earn you some pocket change and not erode your brand value. It offers nothing
new to the reader-customer.
You will want instead to build a site that transforms your business with agile merchandising,
usability and intelligent data distillation. Driving traffic to that site when
your company name is not necessarily a brand can be daunting, especially in
today’s highly manipulated Web search environment. The existence, however, of
such a site affords what I call e-commerce agility, the ability to respond
quickly to ad-hoc demand, perhaps generated by broadcast activity or current
events, the ability to link and partner, use other people’s traffic and to
share in the harvest of ad hoc sales opportunities.
Imagine you are a restaurateur, a broker between the artistry of your star chef and your many
patrons. You supply an environment, infrastructure and raw materials in which
the chef can be creative and thrive. He or she is your champion. You create a
pleasing showcase for their cuisine, ensure the pleasure and satisfaction of
their fans and your guests and make the whole transaction rewarding for all.
The success of your restaurant is the success of your chef and his cuisine,
but also in the desire of your guests to come back again and again and to pass
the word to other customers.
Your role in entering e-commerce should be to enhance your standing with your two greatest assets,
your writers and their readers. In your business, the reader is compelling to
the writer and the writer is compelling to the reader. The publisher is not
necessarily compelling to either. You can however, manage the relationship,
accounting and logistics between the two. Build that bridge, but do so on your
platform. The key to all e-commerce is disintermediated communities of
interest. Your strategies should be to add value to your author and reader
relationships, control the platform on which their relationship develops and
manage the transactions, revenue and information. Don’t worry about your
brand. There is no surer way to waste money than to try and create a coherent
brand out of diversity. Proctor and Gamble is a financial brand, as is
Bertelsmann. Its consumer brands are its assets. Let your authors be your
brands and create “community of interest” brands around your strongest
publishing genres.
The components of success are search capability, intuitive navigation, ease of transaction, all
called “usability.” Price, delivery, and human customer service will play a
role in your success or failure. Amazon has combined all these into a
state-of-the-art model with the exception of their lack of human customer
service when needed and it is always needed. It is not your model, however.
Theirs is not your business. Your business will be the disintermediation and
transparent channels you can create between your writers and their readers.
The design of these channels will need to be informed by both. You will be the
architect, construction manager and overseer.
I will be even more specific. Build author Web sites on a common platform like IBM’s Websphere.
Make the author’s identity paramount to your own. Build in what the author
needs, like a news section they control, email correspondence, blogs, chapter
samples, their bio and bibliography with links to buy their books even if they
are not yours. Those orders can be parsed and fulfilled. Insert the link
everywhere, into all of your publicity, even the book itself. The author’s Web
address should be as accessible as the ISBN number or the copyright notice.
You will manage all transactions, customer service, accounting and
fulfillment. You can calculate and pay royalties live off the site. It is also
a cost-effective way to manage the distribution of promotional copy requests
generated either by the author or your own sales force.
The big win for you is the customer and transactional data flowing from your management of this
relationship. You also make money, lots of it.
I mentioned earlier the continuum of music, film, books, TV and the Web and their relentless
yammer for attention in our finite days. Even as they present competition,
they, too, afford opportunity. As I said here three years ago, customers don’t
usually buy a medium, they buy the content on the medium. Their interests may
well trespass into other media. A person interested in New Orleans jazz may
buy disks, books and films with common content. In developing an e-commerce
strategy, you will want to build in the agility to accommodate and harvest
their content interest, not the medium of your business. I cringe when I hear
someone say I am in the book business. Your customers will define their areas
of interest to you in their navigational habits, their choice of author sites
to visit and ultimately the sales histories of their content purchases. Their
interests, however, will inevitably transgress your medium. A properly
designed e-commerce site affords you the agility to partner and harvest that
content interest, the “ad hoc sales” opportunity to which I alluded earlier.
When either Terry Gross of Fresh Air or Leanne Hanson of NPR’s Weekend Edition spend 20-30
minutes with one of your authors and several million people are listening -
overall NPR has about 23M listeners - a tremendous demand for the book may
develop. Our experience shows that the demand decays over the next few days
and weeks to a fixed demand which may be satisfied with either an online
purchase or a retail visit. The key here, however, is the proximity of the
online or on-air offer and its fulfillment to the broadcast event. Consumer
orders will inevitably wane as time elapses. If you are smart and can capture
and fulfill that demand with the agility that e-commerce offers, it is a
tremendous win. It may mean letting NPR take the offer for you or linking from
their site. Either way it is found revenue. Many of my own company’s clients
are, in fact, broadcasters and we have managed and measured this opportunity
for a decade. The new opportunity afforded by agile e-commerce is the
cross-medium, cross-channel and cross-brand selling opportunity.
Furthermore, I urge you to read Chris Anderson’s excellent piece in Wired last year entitled “The
Long Tail.” Its basic rationale should be key in your online strategy
especially as it relates to backlist. Anderson wisely notes that the
hit-driven business became so, largely because of the logistical limitations
of distribution. The business model based on one out of every ten titles, CD
releases or film debuts being profitable, is driven less, in fact, by actual
consumer interest than by physical limitations on distribution and retail
display and shelf space, airtime on radio and TV, and screen time in theaters.
What’s important is that Web-based technological innovation has largely
eliminated that logistical barrier. This brings immense new opportunity to
draw on backlist and even deleted intellectual properties now that they are
made searchable either by identifier or by affinity. How many titles have you
deleted, not because they weren’t evergreen, but because you could not get
shelf space at retail? Our own company is now making huge backlists of film,
video, documentary, fine art prints and photography available to consumers on
a build-to-order basis. Books can be built to order as well, although the cost
of goods is still a challenge.
As you go direct and forge relationships with readers and add value to your author relationships,
you have two choices. You can do a “quick and dirty” and simply put “buy now”
buttons on your existing site and harvest the few readers who stumble onto
your publisher site. The chance of them becoming repeat buyers is slim and the
value of the transactional and customer data is questionable.
Or you can make an enterprise commitment, articulate, test and execute your strategy by building
and managing multiple communities of authors and genres, becoming the trusted
broker of relationships between those communities and a new universe of readers.
Be strategic. Be agile. Be successful.
Bill Schubart is CEO of Resolution, Inc., a leader in e-commerce
customer care, consumer & educational fulfillment and wholesale distribution
from a single inventory for major publishers, broadcasters and marketers.
Resolution offers Media Just in Time® services for DVD, CD, VHS, and fine art prints.
Resolution, Inc. — 802-862-8881, ext. 111; Fax: 802-865-2308.
Email: schubart@resodirect.com.
Web: http://www.resodirect.com.
