What Business Are You Really In
I just finished listening to Chris Anderson’s latest book, Free, and I was particularly fascinated by the portion which discussed the changes in music distribution in China. I’ve been thinking a lot about how the book publishing business is experiencing some dramatic challenges and I believe there may be some important takeaways for book publishers from the changes that Chris describes in his book.
The changes actually made me think about business evolution in general. The following thoughts are about the book publishing industry, but I think they can apply to any industry or company that is seeing the fundamental dynamics of their business change and is trying to figure out a way to proactively lead the change and benefit from it — as opposed to seeing themselves being victims of circumstances and simply reacting to the change. One caveat is that I really don’t know nearly as much about book publishing as I should to be writing this post — but because I believe the principles apply more broadly, I wanted to get these thoughts out there. So I’d like some feedback not only on the implications for the book publishing industry specifically, but perhaps more importantly reactions to the overall application of these ideas to business evolution in general.
what’s going on in china
Chris talks about how the music industry in China has changed the way it views what it is it does. The change has come about due to rampant piracy problems in the region (Chris reports that 70% of China’s music consumption is pirated). “Since they can’t make money by selling [music] on plastic discs,” Chris explains, “they package it in other ways. They ask music artists to record singles for radio play instead of albums for consumers. They serve as a personal talent agent for their artists, getting a cut of their fees from commercials and radio spots. And even concerts are paid for by advertisers brokered by the labels…The ring tone and ring back business is huge [because of this new approach.]”
Chinese music producers have been so successful at making money in these new ways, Chris envisions a future in which American labels will follow suit, “…letting music go free to become marketing for the talent whom they monetize in non-traditional ways such as endorsements and sponsorships.”
Making this change has revealed the music industry’s savvy-ness not only in terms of having such a clear understanding of the unique value it delivers to customers, but also in then being willing to change everything about its business model in order to continue to deliver that value — and actually improve on it.
what it might mean for book publishers
As I’ve gotten to know the book publishing industry a bit lately, I’ve found it is in need of a similar change. Conventional wisdom is that one of the big values publishers offer to authors is distribution. They’re able to get your book into brick and mortar retailers such as Barnes & Noble and Borders and increasingly important airport book stores, as well as onto Amazon and other e-tailers’ sites.
However, with the change in the dynamics of publishing and media, the value of that distribution advantage seems to be decreasing. Not only is it getting more difficult for anybody — even a large publisher — to get into distribution, getting a book into that distribution seems to be less important these days. There are so many other ways authors can get their content into the hands and heads of their audiences – faster, cheaper, easier ways.
So one view of the book publishing business is to say that its value is on the decline and most players will be out of business within 5 years. But I think if they are able to take a page out of the lesson book from the music distribution business in China, book publishers might see that they deliver value in other unique, important, and ultimately money-making ways — first, in curating content; and second, in packaging it.
- curating — Good book publishers are very in touch with the content that customers want to access. Whether it is current business trends or popular topics or emerging themes, good publishers are in an ideal position to identify great content and the producers of it. They dialog with distribution channels about what sells and what doesn’t, they have tons of authors submitting content to them, and they are participants in the important conversations of today’s culture. I recognize that different publishers do these things to different degrees, but the good ones are certainly reliable arbiters of content.
- packaging — Also publishers play an important role in packaging content. Not only do they shape the actual content itself, but also in choosing the title of the book and the design and the format of the book, they make the critical decisions about the sales angle of the book. People may not know that the title of a book is rarely the title that the author wants and is almost always the title that the publisher wants. This is because the publishers understand what their readers are looking for and are able to translate those insights into a better product through a title that serves as a hook to draw in readers, a format that serves up the ideas in the most compelling way, and edits of the actual content.
As a result of their critical role in curating and packaging content, book publishers might consider functioning more like agents of rather than distributors for authors. They would serve as agents in terms of representing select authors and all of the content that those authors produce — whether it is in book form, e-book form, webinars, training packages, and even speaking engagements. And they would even commission new works based on their knowledge of the market and the author’s capabilities. They could also act like agents to their customers in terms of building a reputation and relationship based on the quality of the authors/content they represent.
This of course would require a complete overhaul of the book publishing model. The industry would need ways to translate multiple, possibly smaller, and definitely varied content streams into profitable revenue streams and an overall profitable business. It would need to change the nature of its relationships with authors, from one-offs to ongoing partnerships and from advance-and-royalties payment arrangements to fees and commissions. And instead of working on building quarterly catalogs and lists of books and promoting them to the retail/e-tail channel, publishers would cultivate a portfolio of thought-leaders to represent to a broad array of media channels, distribution outlets, and venues.
what it might mean for the rest of us
As I said in the beginning, I’m sure others who know more about the publishing business are in a better position to speak to publishers’ unique advantages, the realities of the business, and the changes that need to be made. So my objective is simply to point out a new way of thinking.
I would encourage all businesses to carefully consider the unique value they deliver and not to cling to a business model or identity that no longer best delivers that value. As the marketplace evolves, we must be willing to change our businesses in order to best deliver our value to customers.
I suppose, this really just goes back to the idea advanced by Theodore Levitt in his seminal paper, Marketing Myopia. In it he encourages companies to ask themselves, “What business are we really in?”