Publishing Case Studies and Papers

Paper - Brave New World II

Martyn Daniels, VP Marketing, Media Publishing, VCIL

Delivered to National Association of College Stores, 'Innovate 2008' conference, Minneapolis, July 2008

Digitization is a complex publishing issue and is not unlike climate change in that we all know that it’s happening and we all know the impact is going to be significant, however, no one knows when, by how much and what the result will be. Like climate change it also has its dome mongers, prophets and analysts and wild predictions.

So will the book die? No, unlike music it is already the content, the format and a reader. It will be the major format for many years and represent the major sales revenue for all.

However there are two issues.

Firstly, the book has joined together a number of different sectors into one. As we digitize then these differences will become more distinct and the various sectors will diverge often in different directions and at different speeds.

Secondly, we all love and are comfortable with books. Authors love to write them, editors love to edit them and readers love to read them. We have been educated with them and have grown up with them.

However, digitization now creates the opportunity to explode the spine of what we have known for the last few centuries and present content differently. Will it replace the book? No. Will it help redefine it and how we develop and sell it – most definitely? Will the digital book be the same as the physical one? I hope not otherwise we will have fallen into the same trap as we did between the hardback and the paperback.

Some two years ago I was part of a working group under the UK Booksellers Association. The task was to establish the digital opportunities for retailers Many believed there were little opportunities and that it was a publisher centric world with publishers increasingly bypassing the retailer and existing channel? Some believed it was to be a world dominated by new entrants from outside the industry? Many feared for the future role for the retailers.

Many questions were being asked and there was much doomongering.

I wrote the report BA’s Brave New World report which was the first to focus on the opportunities for retailers. It clearly looked at the glass as half full not half empty. It reviewed:

• 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
• The retail opportunities.

It acceptance by all was a watershed, a turning point for retailers and an acceptance that retailers had a vital role to play in the digital environment. It was taken up by many bodies around the world including the ABA who established its own task force.

I moved on at that stage and agreed to update events and trends via a blog sponsored by the BA aptly titled Brave New World. The blog now has close to 500 articles, is widely read and referred to within the industry.

When I wrote the Brave New World report there were many changes that we recognized impacted the digital environment. Time doesn’t permit me to go through them all, but here are three which I would like to share with you today.

First - When we read we all read differently according to the role we play the relevance and the urgency we apply to the content and what we want from it.

If you were to place an academic book in front of a student, a researcher, a lecturer, a librarian they would probably use and digest the content differently. This doesn’t matter when they are all reading the same physical book but when the content is digital these differences can become marked. Therefore when content is presented digitally we all now need to understand the demands of the audience reading it. Publishers need to respect that the audience may have different demands and may not all wish to digest the same way. In developing the content Publishers now have to consider the audience.

Secondly the world is now consumer centric.

Digitization has broken down the communication barriers that once existed in the old world and has created ‘My World’ and social networking. This has even extended to consumers contributing to as well as commenting on content. The reader now can communicate effectively with the creator and the creators communicate directly with their audience. They no longer need an intermediary or interpreter. So do publishers provide the total platform and experience or merely the content and leave others and retailers such as yourselves to build the relationships?

Thirdly, the value chain between the creator and the reader changes when the transaction and communication go online.

In the pure physical world readers value the selection of the bookseller, the quality of the content provided by the publisher and access to what they need in the bookstore. In the digital online world irrespective of whether the readers want a physical or digital rendition, the value flips. They now seek aggregation, search and discovery, authentication and relevance, and trusted and reliable management and fulfillment. This change is both significant and can influence the channel to market. It is not just a case of putting your inventory and offer online, you have to offer value.

We have ebooks, audio downloads, kiosks, online, social sites, print on demand and what appears to be a new digital device every 6 months. The Sony reader is less than eighteen months old and is about to launch its third version. When I was with Sony recently they rumoured that version 4 could soon be on its way.

But this is where we have to understand that digitisation is not about ebooks, audio downloads, online, podcasts, blogs, widgets etc. these are merely the delivery and marketing formats. It is about the creation, development and distribution of content, the development and distribution of the contextual information that supports and helps qualify content and rights that are acquired, developed, produced, marketed, sold and read. It is also about the changing roles and relationships right across the life cycle from Author to Reader.

It is about Publishing and digital publishing being publishing.

When you look at the current roles within the publishing life cycle. We see the Author as the content creator, the publisher as the content Manger, the retailers and libraries as the content portals and the readers as the content consumers.

When we look at it this we have to ask what it means to manage content and is it different from managing books. What does it means to be a portal and is that different from a bookstore or library. What is the relationship between the bookstore and the library? Who is your customer if you are a content portal?

There was one piece of innovation within the Brave New World report on page 57 which was missed by almost all. The section covered the value chain and identified how the retailers could participate fully in the digital sales through what I now refer to as Digital Drop Ship.

Let’s look at the challenge.

How do Publishers:
1. Keep control of their digital content and avoid merely handing over to hundreds of digital files to 3rd parties whilst maximising the opportunities to sell?
2. Quickly respond to new entrants, new requirements?
3. Reduce their risk of digital piracy?
4. Ensure that all manifestations of all title are visible and available to all channels?
5. Sell digital content to everyone?
6. Control digital content in a global market?
7. Respond to both digital rental and purchase demands through a consistent approach?
8. Quickly accommodate online content subscription demands?
9. Satisfy the trade and library channels through a consistent approach?

How do retailers:
1. Sell digital downloads, online subscriptions alongside their existing physical offer?
2. How do they retain the consumer interface and relationship?
3. How do they retain the transaction and pricing?
4. How do they sell everything digital without huge technology investment?
5. How do they manage technical and after sales support?
6. How they retain and grow footfall within the store?
7. How do they do all this and continue to do business as usual?

The answer follows the same model that has been so successful in the physical world – that of customer fulfilment or drop ship.

In this case there are four basic steps

1. Customer searches, discovers and selects a title and places an order at a website. This should an integrated basket and single transaction capable of handling both physical and digital content sales. They pay once and buy what they want.

2. Digital Order is forwarded from the website to Digital Drop Ship Clearing House which automatically identifies the appropriate repository and sends a request for a digital token which is sent back to the Drop Ship Service.

3. The Drop Ship Service then forward the unique digital token to the user via email (this should be via the retailer or seller but may be direct if required)

4. The customer, on receipt of the token, activates it and the download. The file is downloaded from whichever repository it is stored with the appropriate DRM. All parties are then notified of the successful completion of the transaction. If part of a mixed drop ship the physical and digital transactions are consolidated for the retailer.

The customer relationship is with the retailer, their transaction is with the retailer and the pick, pack and dispatch is performed by the third party totally transparent to the customer.

What are the benefits of Digital Drop Ship:

1. Publisher can retain digital content and control of their files reducing the risk of theft and piracy
2. Easily to implement simple interfaces can be provided to integrate the e-book ordering/fulfilment option to retail platforms
3. e-books can be sold alongside the physical books on the current eCommerce platform
4. e-books can be sold by multiple retail platforms with the content residing once in a central or distributed repositories
5. Time to market – Everyone can be up and running in days and weeks not months and years
6. Digital Drop Ship can accommodate downloadable and / or online content
7. Digital Drop Ship Can accommodate full purchase or time based rental models on full content or part works
8. Total transparency on all commercial sales and mirrors the physical world
9. Retailers can participate and continue to add value
10. Everyone can reconcile transactions in real time online no more waiting for reports from often disparate services.

Four examples of Digital Drop Ship:
An English education publisher, is taking orders over the phone on their customer service desk, and via a Digital Drop Ship web service servicing these to students as downloadable ebooks. They have not needed to touch any systems to participate. Within one month, hardly any marketing, some obvious teething issues and on only 7 titles they had sold over 150 downloads. Having proved concept, they are now stepping up the programme and plan to fully integrate it within their websites.

A Textbook retailer/social network site who today sells used text books is now going to not just sell drop ship downloads of some 20,000 titles. They will also sell online drop ship subscriptions, on time based rental. It is not just about selling downloads it can be about selling subscription to online databases and subscriptions to downloads too. This means retailers can sell subscriptions to online content and in doing so retain their relationships with their customers.

The leading Danish digital aggregator and library supplier who is already servicing the Danish market has signed up a number of major global academic publishers to sell digital drop ships of tens of thousands of academic titles. They have just gone live with 18,000 titles and are loading up 250,000 chapters for sale and rent. A further 6 major academic publishers are in contractual negotiations to follow.

The largest UK trade wholesaler is rolling out a digital drop ship service which mirrors their physical service enabling literally thousands of publishers to sell digital content through 1,500 Internet retailers. They will also be using the same Digital Drop Ship service to sell audiobook downloads and to distribute digital marketing materials.

Retailers who would be unable to participate in the digital world, now can fully participate and do not need to tie themselves to an exclusive aggregator.

Which leads nicely to the issue of Digital Marketing Material.

Widgets

Many of you will have seen a book widget. Search Inside, Browse Inside, View Inside even Hear Inside. It’s all about providing a look inside the book, to see the table of content and sample pages and enabling better qualification. They enable the consumer to see what they a buying before they buy it. They can search the table of contents, look at the index and view whatever the publisher has permitted. They can’t copy it, or print it, but its certainly the closest to having the book in the hand. Many even provide full text search across the total book.

People once said that you had to pick it up, smell it and feel it to be able to buy it but widgets are changing that. Even children’s books and heavily illustrated books can be presented through widgets. Importantly widgets can help sell physical as well as digital formats, even of the same book.

Remember when we first saw the emergence of the first jacket images on the web in the mid 90’s. It took time but you would be hard pressed to find a web site today that doesn’t have a jacket image for every title. Widgets will be the same in the future. One of our academic clients will have some 20,000 widgets in the market by September with all new titles automatically generated and distributed to major partners. Another is generating them automatically for its new 1,500 titles and selected back list.

But wigets are not just about look inside a single title. We see the development of a ‘super widget’. Where the widget just becomes a container that can hold many things such as; associated titles and links, rights information, structured metadata, author videos or podcasts. What I call a real Trojan Horse.

Inspection Copies

I couldn’t speak to a group of campus booksellers without speaking about inspection copies.
It is estimated that between 6 and 15% of all academic print runs are given away as inspection copies. Although it doesn’t cost a lot to run on production and produce extra copies, if you add in the post and administration and you don’t have to be clever to do the maths. Some are replacing the physical copy with the digital one. There are initiatives such as Coursesmart that aim solve the problem. However the major publishers behind it may be the volume and where the value is, but the opportunity is about fixing the others and making it simple and efficient for all. Also the key is not the content but the reviewer. Someone said to me recently that dealing with these people was ‘like herding cats’. Well hello - herding cats may be is what it is about. If every publisher did it differently why would lecturers and reviewers accept it? After all it is they are key to the process and they will want to see value and benefit and not learn many ways to do the same thing.

We are working with a number of publishers to develop an online inspection copy service that not only will reduce the cost of inventory and postage but also enable publishers to see who actually reads what, potentially capture and share annotations, bookmarks and recommendations and even help create ecompile customised works made up of chunks that can be used by the reviewer or sold to others.

However the real trick is to go that extra mile and build a community where the reviewers can share their thoughts and gain value. It would be also logical to include the campus stores to automatically alert them to adoptions and enable them to feedback sales into the loop.

Many are looking at the same issues but merely replacing the physical with digital copy. They miss the prize of developing closure relationships, understanding their clients and closing the marketing loop. If we save only 50% of today’s waste it will be good but if we increase sales and adoptions as well then it is not an opportunity to be missed.

eInspection Copies close the full marketing circle, 360% and make more sense than just replacing the physical book.

508 Compliance

How many here today are thinking about 508 compliance? Disability is painful enough but being able to provide a solution doesn’t have to be. The capability to do it is here today and why shouldn’t campus stores help provide it?

Finally Print on demand.

I hope that you have seen that Blackwell retail in the UK is to start to trail the Espresso Print on demand machines in store next month with view to a full roll out to all its stores. The inventory they will be linking to includes Ingram’s Lightening Source so will be extensive. Will it work – I think so. Will it be profitable – I hope so.

Whatever, it moves the model from the old print and distribute to distribute and print. This changes the inventory, the economics of distribution and offers an interesting consumer offer. If successful it places them strategically as potentially the service provider in all the major academic locations. This is not just about campus sales as these locations also support the heaviest book readers. It is a very smart and brave move.

As a result, I would expect the unit costs of POD equipment to fall and the model become attractive to many others. At a time of soaring fuel costs, high cost logistics and environmental awareness. It is a very brave and smart move.

I hope I have conveyed the significant opportunities that I believe are open to you all. The campus store is not dead it is merely changing and adapting to new opportunities. Will it survive – I believe so but it will be different and will be built on its existing relationships with its community and its publishers.

Many people offer vision but no road map and it would be wrong of me to stand here and lecture you on what you should and should not consider without making some recommendations for you to consider. After all you will all walk away from today, look at your notes and no doubt ask yourselves, ‘but what should I do?’

I am an outsider but that doesn’t stop me from offering five opportunities which I believe as a collective under NACSCORP will move you significantly forward and position you to respond quickly and positively to what is clearly an uncertain, challenging and dynamic future.

1. Adopt Digital Drop Ship as the model to engage all bookstore into an effective channel for all publishers. Some would argue that the aggregators do this today but look at the exclusive models and demand more. You need an inclusive, integrated and independent model that is inclusive not exclusive and builds on the relationships you have today not one that merely put someone else between you and your supply.

2. Widgets. Ask yourself how you can maximise this within your environment to sell more books. You could even use them instore to qualify stock you don’t carry. If I am right and they become ubiquitous how are you going to manage them. I believe the association has a clear role to play to make sure the right widgets are create and distributed to its members in a way that they can be fully exploited and increase revenues today. Don’t wait for someone to sell you the package do it yourselves. Solutions here need to offer development and be built to be ‘out of the box’

3. Einspection copies. I believe you are integral to the process today and going forward. If you aren’t plugged into the process where will the sales go. Only by working collectively and with others will the real benefits on offer here be realised. After all the reviewers are your customers, the students are your customers and the books are what you should be selling why wouldn’t you work with others to secure it?

4. Print on demand offers much but is a significant change. It may work in one store but not in another today. However if you became the first movers and viewed it as a local resource could it secure a bigger market. If you wait someone will do it first. That may be a competitor, a print shop, a library, even a coffee shop. What being a follower mean to your business and community relationships.

5. I said 5 and 508 is my last suggestion. This is not an individual store option today as much as a co-operative one which could provide high visibility, take away a painful exercise for publishers, provide a real service and relationship link to the thousands of disability officers and the solution is not difficult not expensive.

Unlike climate change, it is not time to defend yourselves against the threat, but a time to engage with it.

For retailers it clearly can be a glass half full and offering all new and exciting opportunities to build yourselves into the future. .