Business and Technology Tools of Change in Publishing by David Katz July 1, 2007 The publishing industry, like the music industry, films and news media, is facing a technological revolution that has made some of the its functions obsolete, altered the way others are performed, and generated new opportunities to serve the public and make money. At its June, 2007 Tools of Change in Publishing conference, held in San Jose, O'Reilly Media brought together leaders from publishing and technology to discuss these changes and talk of the future. Unlike the music business (see our March 3, 2007 article on Digital Music Form – East), publishers seems to have a clearer idea of what's in store for them and how to monetise it, and are exhibiting a flexibility unheard of in the films/video industry.

With the advent of digital media, video and games, newspapers have been losing readers, book sales are flat, and search engines are delivering consumers to news sites. Younger readers are reading less. All of this provides a challenge to publishers. Some of the more progressive publishers, such as Harper Collins, finding ample motivation to go on line, are concentrating on digitising books and building a digital warehouse. This not only allows for alternative methods of sale ad dsitribution, but also takes advantage of the “long tail” - the low volume sale over a long period of time of publications that have passed their peak sale period. Previously, tax laws and warehousing costs made maintaining a comprehensive backlist prohibitively expensive. With digital distribution and print-on-demand, the cost of maintaining books with a low sale rate become negligible, permitting these older books to continue generating revenue for the publisher and author. The role of the publisher now becomes that of a digital warehouse, a promoter and marketer of content to the digital consumer, and a protector of authors' copyrights.

Other discussions at the TOC conference dealt with the problems and opportunities of marginal costs approaching zero. With marginal costs negligible, it makes sense to treat the content as essentially free, and to give it away, getting your money elsewhere. This has been done for decades in the broadcast media, where listening to radio and viewing television cost the consumer nothing; revenues were raised through advertising or subsidy. Similarly, and perhaps more apropos to the publishing industry, magazines are essentially free; magazine subscription prices do not begin to defray the magazine's cost, and serve more as a filter to select the audience the magazine is striving for. Again, profitability depends on advertising or subsidy. The music business is beginning to buy in to this philosophy, especially as the revenue balance begins to shift from record sales to concert income and sales of ancillary goods: t-shirts, posters, ring tones, etc. Here it makes sense to give the albums away to grow audiences. Books are the last medium not approaching free, in part because the physical book is still better than the digital product.

Actually, as one of the conference participants pointed out, “free” is the business model of the 21^st Century. Making books free increases audience, or “reach”. Monetising free books can take one of several forms: a sponsored book, in which the book is paid for by a company or organization with an interest in the book's message; by advertising in the book; and by building audience for other authorial activities, such as lectures, paid speeches and personal appearances. To some extent, publishers' and authors' interest may be misaligned: authors are marketing themselves, whereas publishers are marketing books.

Digitising books allows a book to be easily distributed in a variety of formats, allows potential buyers to sample the book's content before buying, permits rich content (that is, the inclusion of sound and video), encourages links to be made from book content to other books and media, and means no book need ever go out of print. Electronic book readers, or e-books, enable the user to carry a whole library around without weight or bulk. Several things are holding back the acceptance of e-book readers: The price currently being charged for content; the fact that there is no standard e-book format for the content; poor ease of use; a poor selection of digitised books; and digital rights management software and structures that inhibit usability. These drawbacks are beginning to fade with the availability of some of the latest e-book readers (see our July XX, 2007 article “iRex Ilead E-book Reader).

Oddly, while publishers thought that science fiction would be the big e-book seller due to the technical interests of the SF audience, in fact romance novels are the heaviest sellers in electronic form. E-readers, laptops and PCs, PDAs and even cell phones all have the capability of providing some kind of electronic reading experience. Perhaps the adoption of electronic readers by a mass audience is not so far away.

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