Start-ups, Amazon and Going Outside the Publisher Ecosystem

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

In a very interesting interview with Jeremy Greenfield, Mike Shatzkin posits that big publishers don’t “need” start-ups.

Start-ups in this context means “[high growth] technology start-ups”, as it so often does, because Silicon Valley has crowded out the notion that there other kinds of start-ups (which are sometimes politely referred to as “SMEs” = small- and medium-sized companies) and “publishers” in this context also means (as so often) the “big five” trade publishers (though many of the truths also apply to university presses, textbook publishers and others).

I fundamentally don’t disagree with Mike Shatzkin in that:

A big company focused on its quarterly numbers makes exactly the kind of tactical decision he describes (not to work with start-ups, instead to wait and see what the market does) and that within the narrow reference of managing sales channels, a major supplier can just sit back and use a strategy of:

— Waiting until it’s clear which channels matter and
— Deal direct only with channels of a certain scale (“major accounts”) and
— Use intermediaries (“distributors”) for everything else


Learn more about the future of digital publishing start-ups at Digital Book World 2014. Full schedule. To participate, take our start-up survey!


 

However…

It is pretty clear from the watering holes of publishing, be that conferences, Twitter or Friday night pub outings, that most of the “big five” (Hachette, HarperCollins, Macmillan, Penguin Random House and Simon & Schuster) wish there was a different industry structure (read: a less powerful Amazon), but each of them wishes that somebody else brings this about. In other words, it is a form of the “prisoner’s dilemma” as in “let the other guys do the hard work”; or, that a competitor as big and meaningful as Amazon (i.e. an Apple or Google that cares as much about books as Jeff Bezos does) would emerge.

Publishing is actually too small and ebooks too marginal to early adopters for Apple, Google or Facebook (the other members of the “gang of four major tech companies” that shape the digital world) to care. Luckily, Amazon cares or we would not have an ebook revolution at all. Off course, if each of the big five pursues the same strategy dictated by near-term pressures, nothing much will change in that segment of the industry long-term, i.e. Amazon will continue to dominate. That is a relatively safe bet to make.

It is also true, as Arthur Attwell writes in “Tough Truths Selling to Publishers”:

That the big five can ruin a start-up and start-ups are generally are well advised to stay away from those large publishers. Yes, folks at the big five love to have meetings and hear about the new and shiny, but in so doing they waste the resources of most start-ups and can be seriously damaging to their prospects. Start-ups have to drop any idea or initiative that doesn’t gain traction within a relatively short period of time. That’s the pressure of the angel or venture capital funded model.

That being said, there are a lot of more entrepreneurial publishers beyond the big five that are willing to experiment and explore alternative paths for the industry. The problem arises that start-ups pursuing strategies, such as a “Netflix for ebooks” or “being an Amazon killer with feature X, Y or Z,” that require big five titles will find themselves in a tough situation. This is why the ebook subscription business is likely to be dominated by Amazon as well, once again. All a big five publisher focused on quarterly numbers needs to do is focus on Amazon (sarcastic grin).

There  is an even more entrepreneurial class of “publishers”: self-published authors. A lot of the future innovation in the “publishing” industry will come from that corner. The big five can argue that they can sit back and watch to see what happens, but that’s like the United Kingdom saying it does not need to be a member of the European Union, because it is too big for the other states of Europe not to trade with it. The catch however is that the UK outside the EU would be excluded from all decision making. It would have to adopt whatever others had decided (or innovated) with very little ability to shape what happens “inside the club.”

Plenty of evidence can be found in the technology industries of companies who thought they could simply wait until a particular trend had proven itself. Typically by the time the answer is clear, it is too late to learn and adapt to the change.

On the other hand, start-ups that don’t have the cooperation of publishers (because they rely on fan-fiction, for instance, like Wattpad), can grow and prosper.

Mike Shatzkin argues that the big five are simply not profitable enough to worry about the long-term. Makes you wonder though, doesn’t it? The big five thought they had a  credible alternative by starting Bookish and Anobii and one can only wonder what could have been created, if they used the same money to create either standardized contracts, open APIs or other scalable structures that would have accelerated new solutions to discovery, marketing, retailing, editing, authoring and reading across the industry.

I for one am looking forward to a lively debate on the topic to be held at the DBW conference, where there will be a focus this year on start-ups and how publishers interact with them.

The above also encapsulates some lessons we learned at Jellybooks when proposing new solutions for book discovery to the big five. These days we focus on “Tools for Authors”. Do we @Jellybooks still talk with the big five? Yes, we do, but we view them more as meetings one would have with friends: fun and entertaining and involving the exchange of lots of gossip, but best done during “spare time” and not be viewed as something that will lead to any tangible outcomes. We have learned to pay more attention to the wishes and feedback of self-published authors and small publishers and delivering tools for what Mike Shatzkin calls “atomizing the publishing industry” rather than what the big five suggest we should be doing (quick route to bankruptcy).

9 thoughts on “Start-ups, Amazon and Going Outside the Publisher Ecosystem

  1. Pingback: Faber Factory Start-ups, Amazon and Going Outside the Publisher Ecosystem - Faber Factory

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  3. PeterTurner

    \Mike Shatzkin argues that the big five are simply not profitable enough to worry about the long-term.\

    Really? These are large companies with lots of available credit if not cash. And while stockholders are often blamed for being too driven by quarterly results, the long-term strength of a company has a direct impact on its stock value.

    I don’t have any inside knowledge about the big publishers’ profitability (often a squishier notion than the public releases of financial results make it seem). But I would guess that publishers aren’t investing more in start-ups and new technology because their strategic needs aren’t clear.

    Reply
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  5. Anne-Sophie Lanier

    Enjoyable read Andrew! I wonder though if the issue is really around start-ups. Is it not a size matters kind of problem? Small businesses on the retail / distribution side are having a tough time in general, whether they’re just starting their business or have been around for a while.

    Reply
    1. Andrew Rhomberg

      Yes and no

      Yes, there is always tension between large and small companies in any industry or as Santos Palazzi from Grupo Planeta, Spain’s largest trade publishers, put it to so nicely in a comment over on Google+ “We are an elephant, you are a hummingbird”

      No, because the publishing industry by its own account is slower and more inward looking than others in the creative sector. Off course leave the creative sector and you find even more snail-like industries, the car industry for one…

      My central thesis is always: “Don’t complain about the current ecosystem (Amazon’s dominance), if you are not willing to substantially engage in creating a different kind of ecosystem (which in my opinion means opening up much more to engagement with start-ups and external innovation in general).

      I also think many book publishers underestimate how much change there is yet to come.

      The stories, they stay the same, how they stories pass from author to reader, well that is still in flux.

      Reply

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