Changing the Publishing Business Model: Consider the Whole Value Chain, Not Just Unit Price

Consumers are moving quickly to new technologies that give them access to the exact people and information they want, when they want it. This same technology is affecting publishing, changing how content is created, distributed, and consumed. In fact, content is more available today than ever before, and this accessibility is driving the creation of more titles on niche subjects, as well as the rise of the self-publisher.

To keep up with the content explosion and consumer demand, publishers need to change their last-century business models. They must be nimble enough to address these trends, instead of tied to a warehouse of inventory generated by outdated, inaccurate forecasting and manufacturing methods.

Historically, publishers' business models have been divided between editorial and supply chain staff. However, today's economic and market conditions require that organizations understand end-to-end cost of book printing in order to embrace savings offered through new models like digital book printing.

The editors' profit and loss (P&Ls) statements generally look at unit acquisition, but do not account for unsold inventory costs. The supply chain staff P&Ls look at all parts of manufacturing, but generally do not include shipping or cost of capital in the calculations. With each group limited in their views of the total picture, they are not able to make the best decisions for the business.

Old ways are hard to change, but publishers have to empower their supply chain professionals and editorial staff to see the end-to-end cost printing picture. It is not just about unit acquisition cost any more. It is about the total cost of a unit, what is the most cost-effective way to produce it, and how many units are really needed today.

Consider this: a publisher could invest $10,000 to publish 1 title a year, 100 copies a month. In this example the publisher prints 12,000 copies up front, and pays carrying costs of the excess inventory in the warehouse and the cost of the capital (units) until month 12. In a best-case scenario this reduces the use of the full capital to once per year and carries the risk of the inventory becoming obsolete or damaged.

The alternative scenario is that a publisher could invest $10,000 to publish 12 titles a month, creating 100 copies a month for each of those 12 titles by printing on-demand. It's the same $10,000, but over a month instead of a year, and in this example they sell 100% of what is needed each month, have no carrying costs, and are able to reuse the capital 11 more times per year. Should a title not perform or become out of date, they are not tied to inventory and dramatically reduce risks.

Option 1: 1,200 books at a cost of $10,000 sold over 12 months

Option 2: 1,200 books at a cost of $10,000 sold each month = more titles, less risk, and more use of the original capital

Additionally, the publishers' business model does not require 100% digital print production, as there are many successful hybrid models today that leverage a combination of digital and analog printing. Hybrid models allow smaller and less risky productions to be run on offset with any shortfall made up through digital production. This model enables publishers to get to market faster with initial production on digital while waiting for offset lead times. Publishers can also test market any title using digital book printing before going to full production. After using the test market to gauge demand, the publisher can determine whether offset or digital print is most cost-effective for the first-run, and then use digital to keep titles in print.

There is no right or wrong way to increase end-to-end efficiency, but publishers should consider the whole value chain, not just the unit price. Publishers that rethink their existing business model to match today's publishing market and consider new digital book printing technology can make changes that positively affect profitability.

Boris Hughes is responsible for HP's business development for the publishing market in North America. He has helped many organizations with electronic and printed content, go to market, communication, sales training and leadership.