Cover Story: Hitting a Moving Target
Publishers are faced with strategy decisions like never before. As publishing options continue to grow and business models shift seemingly every few months with the introduction of new digital devices or growth of some external pressure, publishers must plan for the future while reacting to the present—a tough situation even without the need to deal with the effects of a down economy.
Given the current downturn, there is little room for making mistakes when it comes to investing precious funds in new ventures. Yet the right sort of investment is essential if publishers are to position themselves for a post-recession book market.
"The first rule of holes is to stop digging," says Mike Shatzkin, chief executive of Idea Logical Co., a strategic adviser to publishers and their trading partners. "The first concern is not the backlist. The first concern is to have creation properties in place today that mean that you won't be worried about 2010 books in 2013. So the first thing to do is to go to a digital workflow."
Once a digital workflow is in place, publishers must begin taking advantage of the opportunities it presents, Shatzkin says. While editors have always known to work with an eye to the end product, this now means encouraging authors to provide URLs for resource material related to their book topics, photos, videos and other multimedia. Publishers must put resources into place that anticipate emerging products such as enhanced e-books.
With so much focus on e-reader devices, there may be a temptation to move into device making, as Hearst recently has done with its Skiff e-reader. Shatzkin believes this is a bad idea.
"I don't think the publisher can create the technological or distribution infrastructure," Shatzkin says. "They never tried to own all the bookstores. I'm skeptical about whether content and audience machines, which is what publishers are, should become technology machines. They really don't know the business. … I would say just about the last thing they should do is create their own proprietary platforms or devices."
On the other hand, publishers must deal with a situation where they are less and less able to set the terms and conditions of distribution. With each successive new digital device, from the Sony Reader to the Amazon Kindle to the new Apple iPad, publishers have been forced into a reactive mode, scrambling to adapt to new capabilities and markets made possible by emerging technologies, while ceding key aspects of the business—such as pricing—to device makers or retailers.
"[Publishers] need to take a step back and look at what they are really doing in the area of e-books," says Todd Eckler, executive vice president, print and publishing, at publishing solutions provider North Plains Systems. "What they're doing is becoming victims to the device manufacturers, to their whims, because they are not controlling their content."
Whatever one may think of electronic media, and without denying that print sales still make up the bulk of book sales, Eckler says it needs to be universally accepted that e-books have carved out a permanent niche that requires an overall strategy re-evaluation. The core of that strategy, he says, is "flexibility with a capital 'F.'"
Being flexible means putting oneself in a position to quickly adapt and take advantage of changes and emerging capabilities—such as the new frontiers in color, interactivity, video and Web integration represented by Apple's iPad.
"They did it right," Eckler says of Apple's new device, "and it really has an impact on all different types of content. The Kindle is fine for traditional fiction-based novels where you are just reading through text, but that is just a fraction of the market that's out there for publishers. You've got children's books; you've got aca-demic books; you've got reference books, things like that. The iPad gives you the capability to reference that content."
Still, a year from now (or sooner), something may come along to rewrite the rules again. Eckler says the publisher's focus at this point, therefore, should be making content available in a raw format in a database—utilizing XML and metadata tagging to easily manipulate text, images, video and animation. Storing components in discrete chunks ensures that material is compatible with a range of platforms for quick conversion on the digital scale.
Book publishers, in other words, must learn the lesson magazine publishers have struggled to come to grips with as their market has transformed in recent years—the idea of conceptualizing content as divorced from any one particular medium.
"What we preach and what our technology is all about is taking away the concept of the book," Eckler says. "What I'm doing is I'm producing high-value content that I want to sell. The fact that I want to sell it as ink on paper in this or that size, or as an e-book or subscription on the Web, that should not enter into the equation up front. You should be device-agnostic.
"That is also a philosophical thought change for publishers," he adds, "bec- ause from top to bottom it [has been] all about the design, the look and feel, the tactile approach. Yes, the fonts need to look good, but at the end of the day, people are not saying, 'Wow, what a good use of Helvetica bold in that book.' No, it is: 'That was a great story line.'"
Balancing Short- and
For book publishers, this idea can be a tough sell—especially as so much of the business still is wrapped up in print sales. But nothing in this conceptualization precludes the importance of print in the mix, Eckler says. It is simply the case that publishers must think of print as one in a suite of options available to them as consumer habits and market conditions shift.
Of course, the production and manufacturing infrastructure required to produce print books is not going anywhere soon, nor are the associated costs. This presents publishers with a challenge as far as balancing short-term return on investment with longer-term investment.
"I think you have to look at them as two separate questions," Shatzkin says. "You must optimize your current processes. You cannot afford to be wasting money in any way at all, so you've got to not print books you do not need. You have to go to XML processes, so you're not spending money on conversion and quality control in order to go to digital books. You also have to keep reassessing your deployment of personnel."
Shatzkin points to recent internal reorganization at Simon & Schuster (S&S) as the type of tough, but necessary, changes publishers need to make. S&S reorganized its sales force, substituting some salespeople in the field with phone reps. "I'm sure [it] was a painful decision and not well-received by many bookstores, but it probably made financial sense."
If one side of the coin is cost savings, the other is what to do with the money saved. Both Shatzkin and Eckler say investment in the digital workflow is critical, but Shatzkin also says publishers should think in terms of verticalization.
"Think eyeballs first," he says. "In other words, you need to aggregate a lot of eyeballs, and you can't do that across an unlimited number of subjects. Nobody can."
'Having a Clear, Strategic Focus'
Shatzkin believes the future lies in niche markets. "I think one of the things which is not yet appreciated is that the Internet will reward you for focusing on subject matters, and it will punish you for trying to publish in too many subject areas," he says. "Most successful large trade publishers have never thought about that before."
Specialization in a few key markets facilitates the kind of marketing—such as online social media—that is quickly replacing the old-style media-promotion infrastructure based in TV, radio and in-person author appearances. More fundamentally, it opens up a new world of revenue and product potential heretofore unexplored in book publishing.
According to Shatzkin, San Francisco publisher Hay House has amassed an e-mail list of 1 million customers for its mind-body-spirit titles, a hugely valuable database it can leverage for its own use or offer to others. "Whether they end up simply driving all the other publishers [in their niche] out of the game … or they acquire the lists of other publishers, or they give some sort of access to that audience on a paid basis, the point is they've got the audience they built on [the] back of content, but now the audience is loyal to them," he notes. In other words, book publishers can move into exploring data-driven revenue models—such as lead generation—previously reserved for other publishing markets. Some niche publishers (such as Rodale) are already exploring this territory, seeing books as one of a suite of products available for targeted integrated marketing programs. While vertical product development is not the only way to do this, Shatzkin believes it will be easier for publishers that specialize in specific audiences.
Not surprisingly, then, publishers with years of experience catering to specific niches are, in some cases, finding it easier to transition into the digital space.
"[In] times like these, having a clear, strategic focus is essential," notes Brent Lewis, executive vice president of digital and Internet at Harlequin Enterprises Ltd. "Our focus remains on delivering great reading entertainment to women around the world. This strategy ensures we deliver a great reading experience to women regardless if it's a woman reading a paper book in America, an e-book in Spain or a manga story delivered via mobile in Japan. The stories our authors create are the key; we want to ensure readers can enjoy these stories whenever they want, in any format they want.
"At Harlequin, we are in a unique position amongst publishers; we have a consumer brand," Lewis adds. "Maintaining our brand and continuing to build on our strong relationship with readers is very important for today and tomorrow."
Marrying a Print Focus
With a Flexible Future
Harlequin currently publishes an e-book version simultaneously with every print edition. "However," Lewis says, "the market is changing quickly, so we're always reviewing to ensure authors', readers' and Harlequin's best interests are being met"—whether through e-reader, mobile phone or personal computer.
Still, Lewis notes, print is by far the largest portion of Harlequin's business and is expected to be "for a long time." Even as the company proceeds with a massive backlist-digitizing process (approximately 2,000 backlist titles this year), the primary focus continues to be on print.
All of which is fine, Shatzkin says, as long as publishers recognize the fact that the print market is shifting.
"When you make an acquisition decision for a book that's going to be published in two years, that book will be published into a print market that will not be as robust as the print market is now," he says. "So you need to lead the target on those kind of decisions. Your algorithms and models need to take into account that print is diminishing."
Some publishers remain "once bitten, twice shy" with e-books because the technology was supposed to take off in the mid-'90s, Eckler says. But recent growth in the market has made the ascendency of e-books too real to ignore. We've entered a phase, he says, where those publishers who know how to be flexible and opportunistic in the face of readership trends will be rewarded.
"Look at your production process now," Eckler says. "Even if you're not willing to swallow backlist conversion … today, you can very easily start making choices in your production process to be able to support e-fill-in-the- blank processes."
In the end, Shatzkin says, successful strategizing is rooted in publishers doing what they have always known how to do best, but in new contexts.
"A big publisher has the relationships and infrastructure to put a book on every shelf where a consumer might see it. That's what makes them powerful publishers, and it's the same [with digital]," he says. "There will be many devices. The devices will all have their own retailing apparatus. The discovery is taking place in a lot of places … Facebook, Twitter, Google—and a publisher's job is to optimize all those channels. That's their job."