Is the publishing industry’s business model sustainable? That was the question for the London Book Fair’s 2012 CEO panel, chaired by Association of American Publishers president Tom Allen. With the industry facing “seismic change,” Allen said it was a fascinating time to be involved, and characterized his role at AAP as working to establish “rules of the road,” that will allow the publishing industry to survive, and thrive, mainly through copyright advocacy and legislative efforts. On that front Allen acknowledged that 2012 has yielded some “spectacular failures,” namely, the failures SOPA/PIPA, the controversial, publisher-backed copyright legislation in the U.S. That failure, Allen, noted, highlighted a new reality for publishers—they now compete with new, big industries with sometimes divergent business and legislative agendas—Apple, Amazon, Google, and Microsoft.
The first CEO to address the question of sustainability was Donald Katz, CEO of digital audio publisher Audible.com, now part of Amazon. Katz drew on his experience as an author, and with booksellers, as well as in the transition of audio from tapes and CDs to digital, observing the publishing business has always been in flux. He then seized on a theme that’s become popular at this year’s fair—that publishing must become more consumer-oriented. “Publishers should never start another imprint,” he noted, saying that imprints were inward facing models, and instead should focus on “developing consumer brands.” He also noted that territorial rights should go away. “It’s a global economy.”
Katz was followed by John Mitchinson, co-founder of Unbound, a reader-supported funding and publishing platform. Mitchinson said the current publishing model was “probably not sustainable,” and said there was a lot of “bad karma” in publishing. “Publishers like to come here to parade their inadequacy,” he quipped, “talk about how bad they are doing.” But publishers haven’t done a bad job of delivering content, he observed, as reading culture is in fact surging. Nevertheless, he described the publishing business as “broken,” and as madness, where books don’t earn out advances, retailers get high discounts, publishers lie to authors about how well their books are doing, and say no to everybody. Like Katz, Mitchinson also pegged the key problem for publishers as a lack of connection to readers, as publishers have traditionally outsourced that “critical piece” of the value chain to retailers. He urged a model “that brings readers and writers together,” that was format neutral, and that would help turn readers into "marketers."
Next up, George Lossius, CEO of tech provider Publishing Technology, said he made the decision six year ago that the publishing model was not sustainable, and began investing in “change." He also addressed the role of government, raised in Allen’s introduction. “I do think government plays a role, we can’t descend into lawlessness, but good business does not rely on government,” he said. He'd rather not worry about legislation or lobbying, because “most of those actions are defensive,” about “maintaining the status quo rather moving things on.” The danger, he said, is that publishers wait on government outcomes before deciding what path to take. And while publishing's current business may still be profitable, that will diminish, because the digital age is “content greedy.” It is about new ideas, new discovery, new search, new networks—and a new audience. “The digital age offers a vastly larger audience,” he observed, “but not necessarily from books, but sometimes from things that come from books.” Paper books may have served for a hundred years—but the age of formats surviving that long is over, Lossius said, noting the future will be one of constant change, new products, and new business models coming ad infinitum.
Closing was Bloomsbury’s Richard Charkin, who added a wise, and witty touch, “sort of agreeing” with his fellow panelists, but noting that the session’s question was wrong. The question is not whether the current publishing model is sustainable, but is it desirable? “With a print book, between manufacture and purchase, it is handled on average 24 times," Charkin said. "Now the price might be $5, $10, but no model can support 24 handlings of a $5 product.” Publishing in the digital age has the opportunity to create a new, environmentally and economically sound model, he noted, without the frustration of “piling up 10,000 books in Tesco only to have 9000 shipped back."
But the real problem was not with the models, he stressed, but with the "practices we understood, and shared,” Charkin said. The key concept under threat, is trust, he explained, trust that each party is doing their best work. He referred to ever-long contracts negotiated over terms, confidentiality agreements, and royalty reviews. “Trust is a more powerful weapon than the law," he said. "And we’re in danger of losing it.”
At the close of remarks, Allen confessed to being puzzled by the broad question, because there were many different kinds of publishers, like STM, and much innovation. Charkin responded by talking about STM publishing, an example, he said, of the publishing industry successfully changing, within a short period, from a print model to a nearly wholly digital model, and investing in costly new platforms, skills, and business models which have proven very profitable. While Charkin noted that business is now facing a challenge from open access advocates, he said it proved flexibility--whether subscription, or author pays, or funder pays, the industry, he noted, can adapt.
In the brief Q&A that followed, an audience member siezed on Charkin's trust comment, with thoughtful question about Amazon during the Q&A period, which led Charkin and Katz to briefly spar somewhat over the e-tailers' role. The questioner essentially asked whether, in light of the recent DoJ action and other business decisions, Amazon may be facing a trust deficit. Charkin suggested that Amazon was making some decisions perhaps "damaging to his suppliers core interests." Mitchinson suggested Amazon might not be as powerful as some believe. "When you look at Amazon as a deaths star a s most publishers do, and you size it up for weaknesses, it might have the names and addresses of everyone that buys books, but it doesn't have a community," he observed. "We have to invest in relationships with readers.
Katz said he found Charkin's indictment "a little ironic," given the money Amazon makes for authors, and said he has invested more money in marketing in the last year than he had in revenue five years ago. He also took umbrage at the suggestion that traditional publishers care for authors more than Amazon. "Not sure I get that," he said. "I'm having trouble seeing it." With that the panel ended, right where it probably should have started.