By Paul Budde
As is the case with so many industries, the book industry also is facing massive changes. They left it rather late to face the reality of the digital economy and are now trying to catch up.
This is resulting in significant consolidation, in particular among printers and publishers. Perhaps the printing companies have moved furthest towards the new environment – new digital printing presses are allowing them to print books on demand in very small print runs (as small as one copy) at very low cost, as little as $2 per book. But the investment in these new technologies is large: around $8 million for a digital printing press.
However, once such a press is in place overseas publishers can simply send a digital file to the printer for the sales they make in Australia. This, of course, also works the other way round for Australian authors operating in the overseas market. Obviously printers would be able to build new business models around this, but it also brings them into a potential conflict with the publishing companies, who are important customers to them as well.
As happens in other industries, the middleman gets squeezed.
Printers could also build online structures around their new models, and there are even examples where online publications include video combined with printed elements of the products.
Also, as in other industries, a key problem has been ‘creative destruction’. Customers are bypassing traditional channels and obtaining their books cheaper, often faster, and in a more convenient way through online channels. This is taking the premium revenues out of the industry and that is what is causing the pain.
The effects of ebooks are still slight – between 1% and 3% of total book sales (8% in the USA) – however, the annual growth rate in sales is close to 20%. This is a whole new industry and it does not fit well in the old book industry model, creating a range of other challenges. There are different distribution channels for ebooks and there are different formats and technical standards, all of which move the industry into uncharted waters.
This industry transformation is also affecting the world of the libraries, since the traditional lending arrangements no longer apply to the new formats; this means that the relationship with publishers will require the development of new business models for them as well. The libraries are making good progress with their own transformation. This is not just about new ebook formats – the function of the library is also changing. They are becoming more central in a range of community activities, particularly in assisting in the improvement of digital literacy.
Back to the book industry itself … On the positive side, similar to other industries, the money that is saved by the consumers has not disappeared. Consumers will spend this ‘saved’ money elsewhere, and, interestingly, a significant part is spent on products related to the new digital economy – smartphones, tablets and ebooks, or having a cappuccino in the coffee shop next to the library.
Authors and small publishers are also finding new models to market their products online and they are rapidly establishing ‘fan clubs’ around their publications. This group is more agile and can quickly learn news skills and explore individual opportunities. Albeit from low levels, this market is also seeing growth percentages in the double digits. This is the market from which the new growth trends in the industry are emerging; again, not dissimilar to developments in other sectors that are facing ‘creative destruction’.
Both the trend among individual authors and the above-mentioned new printing technologies create economically viable options for self-publishing. Interestingly, this trend is also taking off in the business sector, although there it is mainly applied for promotional purposes. Government publications are also looking at these options. And, as mentioned, video-based applications are worked into these new models.
Independent authors and operators in these new niche markets are also exploring international opportunities, since the internet does not follow the traditional book industry boundaries.
This is where the industry will need to place its focus – where the customers are moving to, what areas the new opportunities will come from – and the industry will have to work out how they can become more and better involved in this. Trying to protect the old models, through government support or otherwise, is futile and only causes further delays.
The same applies to copyright issues. The industry is resolutely fighting change, but the reality is that new copyright business models will be needed. The industry is losing public – and therefore also political – support and different strategies are needed, aimed at protecting copyright.
Another heartening development is that some of the newspapers are seeing growth in their online portals. When they began putting their content behind paywalls readership dropped by 80 to 90%, but from that low basis they are now starting to achieve growth of around 15% per annum – definitely something they can use to rebuild their business and start growing their e-business.