Live from New York: The Future of Book Publishing

June 27, 2008

In February of this year the O’Reilly fiefdom held its second “Tools of Change for Publishers” conference in New York City. Though the title of the conference suggests that it was not limited to book publishers, books were indeed the focus. Details from the conference have been slow to emerge in cogent form.

Steve Paxhia, my colleague at Gilbane, offers a thorough overview in the May 29, 2008 edition of The Seybold Report, but unfortunately access is limited only to subscribers ($499 per year for the online version). The conference site, linked above, now also offers many of the presentations and other coverage of the event.

I was pleased to find today equally thorough coverage in the July-August 2008 issue of The Futurist, fortunately available online without charge. Senior editor Patrick Tucker perhaps enjoys an advantage in his coverage not available to Steve Paxhia: he is not intimate with the publishing industry, and by the nature of his publication is more focused on the futurist perspective than the insider’s perspective.

And as a result he makes an additional effort to contextualize his coverage of the presentations and highlights of the event.

The article struggles with the issues of balancing social media, new technology and the value of content in a very cogent fashion. Some of the ideas are familiar; others quite fresh and provocative.

My favorite quote is from Lewis Lapham, until recently the long-time editor of Harper’s magazine, and now the publisher and editor of Lapham’s Quarterly. From Tucker’s report, “To Lapham, the crudeness, silliness, and uncultured quality of today’s Web culture is a symptom of the immaturity of the new medium and the youthfulness of its users. The change will be gradual. “We’re still playing with it like it’s a toy,” he said of the Web. “We don’t yet know how to make art with it. McLuhan points out that the printing press was (introduced in the West in) 1468; it (was) a hundred years before you (got) to Cervantes, to Shakespeare.”

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A More Solid Bet for Amazon

June 25, 2008

According to a press release on Amazon.com’s Web site today, the online seller announced the acquisition of Fabric.com, a leading online fabric store that offers custom measured and cut fabrics, as well as patterns, sewing tools and accessories.

 

This acquisition will enable “Fabric.com to further expand its selection of fabrics and accessories while enabling Amazon.com to offer its customers a wider variety of products in the sewing, craft and hobby segment Launched in 1999 by Stephen Friedman, Fabric.com has developed a significant and loyal customer base of sewing enthusiasts, and today offers a comprehensive line of fabrics in all three major fabric categories, including apparel, quilting and home decor.”

 

Now that’s more like it, Mr. Bezos. I’m sure your customers will be buying lots of custom measured and cut fabrics, as well as patterns, sewing tools and accessories in 2012. Perhaps not $2.5 billion worth, but it should be a solid little performer. It’s those e-books that worry me.

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The eBook Bubble

June 24, 2008

If you’ve read the section on this site about eBooks and (what I call) eContent, you’ll know that I’m not a big cheerleader for eBooks. I lived through the first eBook “revolution” — featuring the forgotten standalone eBook readers like the Rocket eBook and the SoftBook Reader. That revolution never took off, and wound down more-or-less at the same time as the burst of the Internet bubble. Microsoft used to offer the Microsoft Reader software for eBooks both for its PocketPC and for don’t fit-in-your-pocket PCs. For some reason this software can still be downloaded from a page (1-1-2012: Not any more.) on Microsoft’s website that notes “Updated: May 19, 2005.” Microsoft is obviously not currently interested in the eBook phenomena.

But when Jeff Bezos and Amazon caught the eBook fever last November with the release of the Kindle, he managed to somehow erase everyone’s short-term memory and has re-kindled an explosion of interest in the eBook format. (Even The Economist found its short-term memory damaged, stating in a June 5, 2008 article that the “Kindle and its kind are merely the first generation [emphasis mine] of a product that is sure to evolve quickly in the coming years.”

Yesterday I learned of CitiGroup’s Mark Mahaney who has calculated, with very slim data, that Kindle could add $750 million to Amazon’s top line by 2010. This prompted John Paczkowski on AllThingsDigital to label Mahaney as “an honor student at (the) Strained Credibility Academy.”

Well today I learned (once more with credit to Bob Sacks) that another student at The Strained Credibility Academy is looking for higher marks than Mark. According to a posting on paidContent.org, “Pacific Crest analyst Steve Weinstein argues that global e-book sales at Amazon could reach $2.5 billion by the year 2012,” and could add “as much as $330 million to operating income.” Wow!

Go back to my section on eBooks where you’ll see that the highest estimate of all eBook sales last year was $67 million. Then do the math on the CAGR through 2012, keeping in mind that Amazon, which was originally built on selling books online, currently accounts for only 6-8% of all book sales in the U.S.

Why did God give us analysts at investment banks? A Google search offers only one answer. According to an article on Innovating Tomorrow, “God gave some people the ability to analyze and measure situations. These are people who love to do this and have some deep-seeded [I assume they mean "deep-seated"] talent for it. These are people and gifts God has given us to use in ministry.”

I think not. God gave us analysts so that businesses would have an external justification for making bad decisions that they have already decided to go forward with. The e-book gold rush is one of them.

 

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Not a Good Week for Publishers

June 20, 2008


It’s not as if the last few months have been exactly

perky and upbeat around publishing offices across the U.S. But the last week seems

to have been completely inundated with a dismal torrent of bad news. Both Hearst

(3rd largest magazine publishing in the U.S.) and Hachette (dropped

out of the #10 spot in 2006, but presumably still in the top 15) lost their

chief executives  ̶  whatever language the companies used in

making the announcements, these guys got the boot.

 

Meanwhile the big newspaper companies were reporting

horrible financial results: Gannett Co., which publishes more than eighty U.S.

newspapers, acknowledged that publishing ad revenue fell 14.3% in May. Its smaller

rival McClatchy Co. reported a 15% drop in newspaper ad revenue for the first

five months of the year and announced a 10% cut of its work force. New York

Times Co. said last Wednesday that ad revenue dropped 12%. And on June 17,

Bloomberg reported

that “Los Angeles Times and Chicago Tribune controlling investor Sam

Zell may be unable to stop the loss of advertising revenue leading him and

other U.S. newspaper publishers closer to default on billions of dollars in

debt.”

 

My take on all of this is the opposite of Robert Schiller’s

well-known phrase (and book title) “Irrational Exuberance.” I call it Irrational Pessimism.

 

As I pointed out in my blog entry “Is

the Internet Really Destroying Newspapers?”, quoting from a PEW report, “Even with so

many new sources, more people now consume what old media newsrooms produce,

particularly from print, than before. Online, for instance, the top 10 news Web

sites, drawing mostly from old brands, are more of an oligarchy, commanding a

larger share of audience than in the legacy media.”

 

Yesterday I received the executive summary of PWC’s “Global

Entertainment and Media Outlook: 2008-2012” (at 112 pages, it’s a little more

than the average executive might expect in a summary!). The full report would

take me offline for weeks, but the executive summary represents a marvelous

chunk of research. Notable is PWC’s prognosis for the newspaper industry:

continuing declines through 2009, followed by a return to modest growth.

 

As this chart from PEW illustrates, Hearst is not

suffering in terms of revenue growth. The two firings, as suggested in several

media reports, may have much more to do with internal company politics than with

failed strategies. (A fascinating article in Fortune, “Intrigue

at Hearst’s Castle,” examines the intricacies of Hearst’s corporate

structure.)

TotalRevenue3Biggest-2002-06.jpg

 

These days it’s very easy to get on the newspapers-are-dying

bandwagon. I think that the conclusion to this story is still to be written.

 

-30-

 

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FedEx Kills Kinko’s Brand


In today’s edition of PrintAction‘s weekly newsletter, I

found the headline: FEDEX KILLS KINKO’S BRAND. I had read this elsewhere, but

had not previously encountered the embittered remarks of the company founder, Paul

Orfalea.


I could paraphrase the accompanying article, but as I’m a

contributing writer to the publication, I hope that editor Jon Robinson will

not object to my quoting it in full:

 

In a surprising move by the

shipping company, FedEx will be rebranding all of the FedEx Kinko’s stores into

entities known as FedEx Office. This move came just before the company

announced a $241-million loss, mainly attributed to Kinko’s. The name will cost

nearly $700 million.

 

“Kinko’s was primarily a copy and

print-service provider when it was acquired in 2004,” said Brian D. Philips,

president and chief executive officer of FedEx Office. “The name FedEx Office

more accurately represents our broader role of providing superior information

and services through our company-owned, digitally connected locations around

the world. We are a back office for small businesses and a branch office for

medium to large businesses and mobile professionals.”

 

Kinko’s founder Paul Orfalea issued

a statement about this move. The first Kinko’s store was founded in Isla Vista,

California in 1970; Orfalea left the company in 2000. “Friends, acquaintances

and journalists have been asking me for comments on FedEx’s recent decision to

drop the Kinko’s name from their copy and print centres. Although I sold my

financial interest in Kinko’s several years ago, this news hit me hard. I have

mixed emotions, because Kinko’s as I knew it has been gone for a very long

time.

 

“For 30 years, I worked with tens

of thousands of fellow Kinko’s co-workers to grow an innovative customer-driven

business. Every stage of life required Kinko’s: being a student, business

owner, bride, job-seeker, sales person, event planner, soccer parent and much

more. We took pride in helping customers achieve their goals and always put

customers first.

 

“Those of us who built the company

from a single site in a hamburger stand near the campus of UCSB in 1970 to an

international network at the millennium assumed our grandchildren would know

what it meant when we said we created Kinko’s. Sadly, they won’t. At Kinko’s

our motto was ‘In Ideas We Trust.’ Those ideas, expressed in the way we shared

power, shared profits, and shared knowledge, touched tens of thousands of

coworkers and millions of customers from 1970 to 2000. The signs may be coming

off the building, but when you next meet a former Kinko’s coworker and he or

she brightens up to tell you how it used to be, take note of the fire in their

eyes. That’s the Kinko’s I’ll remember.”

 

I think that most

business owners realize that when you sell your company, you’d best focus on

enjoying the payout — the new owners will do their best to remove any evidence

of your legacy as soon as humanly possible.

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