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"Brave New World"
Presentation to International Booksellers Federation (IBF),
Cape Town , June 2007
Welcome to a Brave New World
Over 2.5K copies of the Brave New World report have been
downloaded from the Booksellers Association of the UK’s site and
a further 500 have been distributed as full eBooks, CDRoms and
POD copies. I am sure there are many here today who have read
it. If you are one of those who missed it, it is still is
available for download and although some parts have obviously
moved on in the last 6 months, much of which is still valid.
Many have also visited and subscribe to update feeds from the BA
Blog which I author and which has continued to add news as it
breaks albeit with some editorial comment. Entries are not
always about leading edge technology but are about digital
related issues and importantly, change.
This particular post refers to the recent UK trade press
obsession with the death of the physical Bookstore. Nearly every
week someone voices an opinion, many sadly shouldn’t have been
printed, many talk of doom and gloom and a few actually look at
the issues positively. My own opinion, for what’s worth, is that
generalist will find it hard going forward, this applies
especially to the chains. Many bookstores are mere franchises
who don’t select, but allow publishers to wallpaper their
shelves with the latest bestseller on a no risk sale or return
basis. Some of the independents that are making great strides
and are now building different business models. This particular
blog closes with a reference to the Countrybookstore in Bakewell,
Derbyshire. They sell everything, old, new, remaindered, have a
successful website and have built significant community links,
they now organising the successful Peak book festive and are
planning more festivals in other locations. They have realised
that tomorrow will be different and set out to proactively help
shape it. But I will leave the subject of retailing to the
expert – my wife.
With respect to the Brave New World report, what was
different about it to the many others that litter the publishing
landscape?
I doubt it was purely the timing of its publication, after
all, the PA and ALPS were among many others who had published on
digital themes around the same time.
In my opinion the thing that made it different was that it was a
collaborative effort. It was born from long and detailed
discussions and it drew input from many; booksellers,
wholesalers, publishers and even authors. It also covered not
just one sector or aspect, but a wide spectrum of sectors and
issues. Most importantly, it looked at the issues from the
channel, retailer and consumer perspective and asked the
questions about who will play potentially what role in this new
environment. Was there a role for the existing players?
It stated where we were, identified trends and offered some
insights as to where we could go. It was a diagnosis and not a
prescription.
We looked at the various sectors and channels to market. We
looked at:
The publishing process and publisher strategies, issues and
directives
• Consumer trends and drivers
• The existing players and the digital market
• The publishing value chain and what changes were likely to
happen with respect to roles and relationships
• The music marketplace and the impact that digitalisation had
had on the sector
• Finally we looked at the opportunities for booksellers and the
BA through SWOT and risk analysis.
Digitalisation is about Content, but it isn’t just about
ebooks, or audio downloads, ejournals, podcasts, social
community sites or blogs. These are only the delivery
mechanisms. Digital Content is about changing the publishing
process; what is produced, how it is produced, how it is
marketed and sold and how digital rights are managed.
It is about understanding and redefining the publishing value
chain and its relationships.
What is indisputable, is that without an Internet presence,
bookstores will not sell digital content. Some publishers now
see this as their opportunity to create a direct channel, but
let’s get real, it will only be a handful that succeed and it
will be a limited consumer offer.
A year ago Nigel Newton, CEO of Bloomsbury Group, stated that
he believed that 50% of fiction would be digital by 2016. I
personally don’t agree with the percentage but respect the
statement as a wake up call.
What is indisputable is that without an Internet presence you
will not sell digital content. Some publishers see this as their
opportunity to create a direct channel but let’s get real, it
will only be a handful and it will be a limited consumer offer.
If it’s anything like the current market, many publishers
will not want the hassle of customer service, single downloads
and pass the problems to others.
How will consumers want the digital content?
When we look at consumer behaviour, we recognise that we read
various types of books very differently. This is heavily
influenced by what we want from them, and the role that we are
playing when reading them.
We may find online reference material acceptable, but online
fiction not acceptable. We may welcome alerts and updates and
reference material on the move via a mobile, but would not wish
to read a monograph the same way. We may love to listen to an
audiobook in a car, but not in the comfort of own’s home.
There is no simple one size fits all and bundles of digital
and physical may prevail. The consumer will in the end dictate
the market.
But the questions we must also ask are:
• How will the consumer to find digital content?
• How will they qualify it?
• Who will provide the digital distribution channels?
Who is the consumer?
Is it the young technically savvy youth, or the older, Silver
Surfers. After all in countries such as the UK, the silver
surfers have been getting logged on in droves; they have higher
disposable income and importantly, a propensity to reading and
buying books.
Will the consumer only want digital content, or as seems
logical will they want to find physical, digital, audio together
and choice? Will they want one stop aggregation services, or
niche ones? Will they want to visit many sites, or just one
authoritative one? As an industry we are good at assuming the
answers to consumer behaviour and poor at researching it.
Earlier this year I listened to an insightful presentation
given by Glen Davison of Booksite, South Africa, at the London
Book Fair. He looked at the position of the Internet penetration
and use within the developing World.
In South America, the Internet is starting to be universally
adopted. If we ignore the special case of the Falklands, the two
economic powerhouses of Brazil and Argentina clearly are moving
ahead in terms of penetration and adoption.
If we look at Asia the picture is somewhat more confusing,
comparing highly developed countries such as Japan, Taiwan, and
South Korea, with strong growing economies such as India and
China and less developed ones such as Bangladesh is difficult.
However, we can’t ignore the percentage of overall users already
connected in India and China and can only expect this to rise
significantly. This geographic region is significantly advanced
in terms of infrastructure and the technology investment and
these will fuel further growth.
Africa’s lights are still switch off. Those countries that
are potentially moving are those closely aligned to the western
economies, South Africa, Morocco, Egypt and Nigeria. Africa
doesn’t have the telecommunications infrastructure to fuel
growth and in particular South Africa is still heavily reliant
on that old sea cable. Things will change with mobile GPS, Wi Fi
etc, but growth is restricted today and the resultant
environment and initial usage may well be different as a result.
It appears that the Internet needs somewhere around 60% to
80% perpetration to take off, which is a long way to go for many
in the developing world.
We must also look at consumer behaviour in the developing
world. Consumers may have a PC in the house but if it doesn’t
have high speed connection it is very limited it will limits the
potential. Many in these countries have connectivity in the
office but not in the home.
The Indian government has recently declared its intent to
connect all citizens to high speed broadband by 2009. Although
the word ‘all’ is a bit loose, the intent and impact is
potentially massive.
In many countries, initiatives are coming from the government
and specific sectors such as education. Libya is investing in
the $50 PC programme and China’s has stated its aim to replace
text books with 165 million ebook readers. We may find ourselves
no longer talking about the haves and have nots, but the
connected and the unconnected.
Consumers relationships with content providers?
We are now moving from yesterday’s top ten bestsellers to a
market that must also accommodate the “long tail”. We are also
entering a consumer-centric environment, where the consumer
increasingly wants a personalised view – “My World”.
The consumer spends the money. They will choose who they want
a relationship with. They will vote with their clicks.
So do we understand the market?
For example; do maps belong exclusively to travel? If not
what are the alignments, differences and usages envisaged in the
digital environment? Does the historian want the same from a map
as the tourist or the civil engineer or the property developer
or social studies student? Will they want the deliver in one
media, or multi media? One device, or many?
You now need to understand the consumer far better than
before.
Digital Publishing is Publishing
Before we look forward, it often wise to look back.
When the Internet first appeared many publishers thought they
would cut out the existing channel and go direct and as a result
vanity web sites mushroomed. Today there are many publisher
websites, but when it comes to fulfilment many pass their orders
over to Amazon or a drop ship wholesaler.
Many retailers thought that the internet would remain the
digital dirt track, was high risk and an expense distraction and
did not rise to the early challenge. Many failed to understand
Amazon’s offer, global branding and consumer attitudes.
Today, Amazon is now integral to the book industry and its
city valuation is higher than the chains. The parallels are
poignant. Amazon has some 15% of UK market share, a global brand
and has positioned itself right across the value chain. The only
thing it isn’t today is a publisher and that is no longer true
with its recent acquisition of Brilliance.
We now find an industry that was once joined together by a
common format – the book. The industry is now starting to
diverge into different digital sectors. Some will move faster
than others and what is certain, is that digitisation will
affect all.
• Reed Elsevier has grown its electronic business to some
$3.7 billion and is now no longer just a content developer and
deliverer but delivering real time content based on workflow
solutions. Six years ago it employed 400 technicians it now
employs 4,000.
• Taylor and Francis now generate some 10% of book revenues from
digital sales of its 16,500 digitised titles and has over 150
web sites.
• CUP has driven a 30% increase in sales revenues from its short
run POD reprint programme.
These are not alone. It is easy to see travel, religion and
other genre going digital at speed and offering potentially a
different consumer proposition and even further divergence.
Forget the latest ebook reader, where’s the content today?
After all consumer demand and markets rarely take off in a
vacuum and content has to be promoted and available. We must
also recognise that on the Internet, the consumer often
perceives content as free, or at best, cheap.
However, what will be the impact over the next 10 years, if
digital content were to only capture, say 15% booktrade market
share, or a similar market share to that attained by Amazon over
the last 10 years?
Digital Publishing is Publishing
It is about relationships and value contribution across the
total value chain from originator to consumer.
When you look at any value chain you have to recognise that
there is the value that the originator puts in and the value
perceived by the consumer, who puts money in. All the steps
between are up for grabs, add cost and if not perceived as
adding value can be disintermediated. No one has a god given
right to exist in the chain they have to earn their place and no
one is immune.
In comparing what consumers valued in the physical world with
what they valued in the online world, we find that, irrespective
of whether they wanted a digital or physical book, the areas of
greater value are not the same. In the digital world, the
consumer seeks aggregation, search, discovery and qualification.
It is a case of being able to find a book in the haystack.
It is also about the total publishing process from the
originator to the consumer.
It is about content, context and rights.
We must all recognise that in this digital world of plenty,
Digital Content is lost without digital context. This is the
metadata that describes the content, enables you to find and
value it. Digital Content is the richest contextual information
and as proven by initiatives such as Amazon’s “Search Inside”,
it offers opportunities not only to sell digital content, but
physical content too.
But beware. We now see moves into the book trade by the large
search engines, or I call omnivores. They are often less focused
on books and more focused on selling advertising space and
supporting their different business models.
The potential shift of business models brings us conveniently
to the music industry.
We found that they:
• reacted late and weren’t ready
• didn’t understand the “long tail” and continued to focus on
the bestselling charts.
• Were not ready for the flip from buying compilations to buying
individual tracks
• Failed to address global pricing and later digital pricing
• Missed Napster, Kazza, iTunes and will probably miss the new
potential threat of Spiral Frog
• Failed to fully engage and support artists which led many to
create their own direct communities
• Ignored their existing physical channel
Ged Doherty, Chairman of Sony BMG UK is reported as saying
last November that “CD sales will halve in value over the next 3
years.”
There are certainly lessons to be learnt from looking at
other markets.
Is there a future for the physical book and bricks and mortar
booksellers?
Yes – the printed book will continue to be the dominant
format and bookshops the major channel to market for many
sectors for the foreseeable future but in order to achieve this
the Internet is a must do and they now need to enable themselves
to sell all formats
Will they need help, guidance and leadership?
Yes – and the BA is taking the first bold steps through this
exercise
In the digital world, the content and the transaction can be
separated.
Along with being a trusted partner and providing value through
their selection, retailers can and should continue to own the
customer relationship and the transaction. These are their
strengths.
Publishers need to develop the digital content and control
its distribution, together with comprehensive rights management
and the distribution of rich digital context to the market. This
is their strength. Some publishers will succeed in a direct
channel but many will not. Publishers should support and
recognise the strength of the existing channel.
The key is to keep it simple and recognise that consumers
will want to buy physical and digital books together, a trick
that appears to have missed many today.
I am pleased that Value Chain are partnering with Gardners
Books, the UK’s largest book wholesaler, who have stepped up to
the challenge and announced Gardners Digital Services. The
approach and model are simple. They follow that suggested in the
Brave New World report. They have embraced content, context and
rights and most importantly the existing channel and practices.
They have given their 3,000 publishers the opportunity to
digitise, promote and market their titles. They have enabled
their 1,000 Internet etailor accounts the opportunity to enrich
the consumer experience and sell digital titles alongside
physical ones. They have embraced standards. Importantly they
have adopted an inclusive not exclusive approach.
Finally, the book trade needs to recognise the existing
retail channel, who will still generate the majority of revenues
and not bypass it.
It is about strenghtening and not weakening today’s channel
and enabling it to respond in this Brave New World.
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