Archive for March, 2009

Economic crisis calls for changes in textbook publishing industry

Published by Rob Reynolds on March 5, 2009 in Digital Publishing. 0 Comments

(This article was published previously at Six Slides.com)

The current economic crisis is proving to be a game-changer in many industries. Car makers are re-evaluating their new car models and their expectations for sales. Financial institutions, beyond hoping for mere survival, are being forced to change their assumptions about profitability and regulation. Around the world people are evaluating the old way of doing things in business and trying to find the right paths for thriving in a world with new and different rules.

Textbook publishing, particularly in Higher Education, is certainly not immune from the changes heralded by changes in the global economy. By way of brief example, consider what my wife and I heard his past week.

A friend of ours — an associate professor at a large public university — has been assigned to a faculty committee charged with setting per-course spending limits for textbooks. The committee’s mandate, it seems, originates primarily from increased student pressure over the cost of course materials. This pressure isn’t new, mind you, but it has heightened severely due to the financial difficulties faced by so many families.

One of the things that shocked our friend most — she teaches upper-division courses with relatively low textbook costs — was the actual prices students pay for new course materials in many of their classes. She was shocked that students can pay as much as $200-$400 for new course materials for some required classes.

The first thing that I want to point out is that our friend’s reaction is actually validation of what textbook publishers have been claiming for years — university faculty are quite complicit in the price of new course materials.

While students actually buy the materials, it is the faculty who select the materials to be purchased. And, the reality is that price has not been much of a determining factor for selection by many faculty members in the past. My experience has been that most faculty members have been largely unaware of the actual price being charged for course materials.

I am not suggesting, however, that faculty are ultimately responsible for the price of course materials. Rather, I am merely pointing out that instructors have been participants — along with textbook publishers, bookstores, and institutions — in the escalation of the costs.

The good news is that the academy in general seems to be waking up and institutions along with their faculty members are taking increasing responsibility for providing solutions to a problem that has gone largely unchecked.

I bring all of this up because our friend’s experience is not unique. A number of universities in the Unites States are hoping ti set price limits on course materials. This, of course, is in addition to legislation in many states that attempts to enforce processes that will help keep the cost of course materials down.

The result, of course, is increased “squeeze” on the textbook industry. The harsh fact is that fewer new print textbooks will be sold in the future and that prices of books will level off and, in many cases, decrease. In this scenario of lower unit sales and prices, increased revenues cannot be maintained simply by raising prices. In addition, channels of production and distribution are changing rapidly and textbook companies are under pressure to remain competitive in a changed market landscape. Finally, textbook publishers may not want to believe it but the customers themselves are changing. Actually they have already changed.

The economy will not change overnight but textbook publishers will need to respond decisively to the new market challenges in order to remain viable. Here are some systemic changes I believe are necessary if they want to survive the next decade and maintain some level of fiscal health.

  • Move to a turnkey digital environment that places priority of digital rather than analog — Like newspaper and other publishing entities, textbook publishers have struggled with the simultaneous existence of highly-individual print products and templatized digital products and production. To date, companies have championed the print process with which they are familiar (analog), and simply added digital extensions to that process. This has provided them with digital products but not true digital processes. As a result, internal costs are too high and cannot be lowered without significant changes.
  • Adopt common, open, and customizable product templates — Ask any textbook publisher and he or she will tell you that the value of his/her company is in its brand and content. And yet, extraordinary costs are driven by individual product (i.e. book) differentiation through unique layouts and cover designs. Like the newspaper conglomerates, textbook publishers must find greater efficiencies through less product individualization and smart templatization.
  • Adopt open models of distribution — Another problem facing the textbook industry is that each company is trying to own or control their content as well as the means of production and distribution. This philosophy leads to a continuous churn and re-inventing of the wheel. In order to be successful, textbook companies need to focus more on partnership and existing models of distribution. Trying to control the channels has not worked for any company in the overall media industry and will not be a long-term solution for textbook publishers that thrive.
  • Become dynamic instead of static in terms of product vision — Current textbook publisher models are built around the creation of content for print products. These models are generally two to three-year cycles and view content as static and fairly immutable. Moving forward, textbook companies will need to re-invent their processes and concepts of product with a focus on learning materials as dynamic constructs that can be revised and updated as needed and customized instantaneously based on consumer demand and community focus.
  • Build real communities with customers — The current approach by textbook publishers is to drive textbook sales by focusing on committee adoptions at larger schools by selling and marketing aggressively and by signing up authors form those schools. In a nutshell, it’s about influencing individuals and it is an expensive process. Moving forward, textbook publishers would be well advised to start building real community partnerships with educational institutions across the board. To be clear, I’m not talking about lip service to partnership for the sake of closing a large adoption — I’m suggesting that textbook publishers form new kinds of partnerships with their users and communities that provide needed services and information, much like successful Web companies (including some newspaper and magazines) are starting to do.

The biggest challenge to effecting changes like the ones listed above is that tit would require textbook publishers to overhaul their accounting systems, sales organizations, and general company structures. Carol Bartz at Yahoo can probably tell us a thing or two about how difficult real company change can be. It certainly ain’t easy.

In the end, however, textbook publishers aren’t any different than other companies whose survival is challenged by the economic shift. The old way was destined to be replaced eventually. It just hapened sooner than folks thought it would. Now is definitely the time for change if companies want to be viable within ten ten years.

E-readers are only part of the decision-making process for publishers

Published by Rob Reynolds on March 1, 2009 in Digital Publishing. 0 Comments

(This article was originally posted at Six Slides.com)

The WSJ ran an article Friday, detailing plans of a Hearst project to develop an electronic reader for newspapers and magazines. This news points to the evolving tension between form factor and content, and between free and premium e-content in the newspaper industry. More important, the Hearst project provides and outline for decision-making processes that are facing other publishers.

The Hearst announcement indicates an important trend as they represent one of the major owners and influencers of important newspapers and magazines. Their e-reader will be a handheld device that is designed specifically for their newspaper and magazine e-content. In contrast to Amazon’s Kindle or Sony’s Reader Digital Book, Hearst’s e-reader will have a larger form factor designed specifically for newspaper and magazine formats.

For Hearst, of course, the e-reader represents more than a fanciful foray into the digital product marketplace. Rather, it is s bold — if too late — attempt at reversing the fortunes of an industry whose processes and vision did not evolve with the times.

Like other newspaper owners who see their revenues dwindling, Hearst is hoping to find success with premium online content. The company wants to find the magic market coordinates where users will pay for some of its online content while continuing to offer the rest for free via the ad-supported model. The premium content model has been elusive for newspaper publishers thus far and Hearst must be hoping that the e-reader will give it an advantage.

The general problem in the newspaper industry is that subscription revenues have dropped precipitously while ad revenue has not increased enough to offset that loss. Making matters worse is that fact that the publishers have been forced to support both print and online news with 24/7 update expectations from their users.

Steven Swartz, the president of Hearst newspapers, puts it this way. “Our cost base is significantly out of line with the revenue available in our business today,” He goes on to add, “It is equally inescapable that during good times, our industry developed business practices that were, at best, inefficient.”

Of course, there is more at play here than a simple case of getting costs under control and finding a technological magic bullet. The newspaper industry is also beleaguered by some deep philosophical issues. Chief among these is its conundrum that the marketplace is demanding more community presence and a greater voice in the news process while the industry itself is founded on value through expertise. This is summed up quite succinctly in a headline from last Friday — “Facebook gets it. Bummer newspapers didn’t.”

I do believe, however, that the decision-making process Hearst seems to be going through is the right one — even if too late — and that other publishing entities can learn from it. The road from analog to digital in the content business has a common set of forking paths at which each company or organization must make decisions.

  • Scarcity vs. abundance — When I was a kid I only had easy access to my local paper. Today, I have easy access to papers and other types of news sources all over the world. There is an abundance of information which means consumers can afford to be more demanding and more discerning with regards to what they are willing to pay for. In a world of information abundance, how do publishers manage the concept of value? Premium vs. public content — This is a case of the chicken and the egg for most publishers. If a company loses its reader base then its content has no value, regardless of how “premium” it may seen to be. On the other hand, if a company has no unique content or premium value, there is no differentiation from competitors. How much free content must companies provide in order to keep their readerships? What do they have by way of premium content that is valuable enough to get people to pay for it?
  • Experts vs. community — Historically, publishing has been about the few providing an information or entertainment service to the many. Experts ply their craft for a wage so that the rest of us can have high-quality content. What happens, however, when the marketplace announces that it puts less value on expertise and increased value on community participation? What happens when the readership demands a place of the decision-making table?
  • Singular, proprietary formats vs. common (open) templates — Hearst owns sixteen major newspapers and came to the realization that, while the differences between the newspapers weren’t that great, they had not been able to harness any efficiencies around that sameness. Is it possible to have a common design that lends itself to production efficiencies without lowering the perceived identities or value of the products?
  • Closed delivery models vs. open distribution — At this juncture, Hearst is betting on the idea that a single form factor will help them find production efficiencies and drive the value of their premium content. This is contrasted with another prevailing philosophy that says the value of content is its availability anytime, anywhere, and in any form factor. A digital newspaper reader is cool but I don’t have to have one. I need my smartphone and notebook/netbook, however, and would rather not carry another device.

Certainly, here are other decisions that need to be made, and a number of lurking issues around cost to the marketplace and the fair treatment of content authors. Overall, however, the Hearst example provides a nice list of questions that must be answered for publisher to have any hope of managing successful transitions into the digital present/future.