Everyone knows that publishing is changing more than at any time since Gutenberg. But is it? I’ve always believed e-books are much less of a disruption than was supposed. They require all the same basic processes as print books, from editorial to marketing and publicity. E-books actually resemble print books in almost every way—including their business model. Publishers know this. It’s why e-books have become the new normal so quickly. The real radical change, which is to say, a change in the business model, has been surfacing in academic publishing for years. Many of us on the trade side have been involved in numerous discussions about the much-hyped, near mythical “Spotify for e-books.” Yet the stately progress of the unit-download model, as it might catchingly be dubbed, continues. Despite the endless chat, not much has changed. Journals and monographs aside, books still tend to be bought in the same old way, whether print or digital.
That is poised to change. When it does, the shift will happen faster than you think and with more far-reaching consequences.
Go back five years and streaming made up a fraction of the total revenue of record companies. Even though music was being listened to digitally, it was either pirated or purchased. Today, streaming makes up 41% of digital music revenue (which is more than 50% of record industry income). It’s still growing in double digit figures.
The once mighty iTunes registered its first fall—of 5.7%—in 2013, as users migrated to streaming services. Industry commentators expect the trend to continue. One insider told me he expected streaming to be by far the biggest revenue source for record labels within five years, if not sooner. At this stage someone usually points out the many and well-documented flaws in the publishing/music analogy. Whereupon someone else roles out Exhibit B: Netflix and movie streaming. (Bear with me here.)
Netflix, like Spotify, is a media powerhouse and now, incidentally, with series like House of Cards, a top-tier content producer and owner. It’s content acquisition strategy, despite being full of gaps, has made progress with coups such as the exclusive streaming rights to must-watch TV like Breaking Bad. Both Spotify and Netflix are immensely sophisticated at what they do. These are businesses whose immense growth has been fueled by understanding content.
Books are behind the curve on this front, but are about to catch up. Oyster, a New York–based subscription reading company, recently took $14 million from Highland Capital Partners and Peter Thiel’s Foundation Fund, among others. For publishing, this is a significant investment. Scribd started its own subscription service last summer as well. Other operators, such as 24 Symbols, have been around for some time. New models, like that of Valobox, are becoming more accepted. In the run up to the fair this year I have seen several presentations of new business models, variants essentially on streaming and subscription, which promise a lot. And Amazon always has the power to shake things up.
Two things make this a pivotal moment. First is what I have already indicated—in music and increasingly in film, downloads are not just plateauing, they are declining. People who believed streaming was the natural way of consuming digital content now have hard evidence that the public thinks the same way.
Secondly, publishers’ attitudes are evolving. They are, like I am, studying and understanding the metrics of the business model in more and more detail. With that familiarity comes understanding and a greater willingness to experiment. Publishers, such as HarperCollins, have recently shown themselves amendable to new start-ups and models. Anecdotally, I get the impression attitudes are changing.
The question is no longer whether streaming will be significant. It’s whether publishers will embrace it. This won’t be easy. For trade publishers in particular, moving to an entirely new business model, one where content is a service, is an enormous change. Change, as we know, is hard. Despite the evidence and the hints of an attitudinal shift, it is still up for debate whether publishers will make this happen. For all kinds of publishers, book content will start resembling Web content, breaking free from the confines of the unit model. This is tremendously exciting and incredibly scary. There are huge dangers involved. Our relationship to reading and books will change at a deep level. Much of what we know about Web content and revenue means that if this shift does happen, as looks likely, publishers will need to be clever. If I had to call it, publishers will move to streaming, but not for another two or three years. When they do, the download model will be finished. We’ll be in a new world.
