Thad McIlroy - The Future of Publishing

Michael Crichton's 1993 Prediction of Mass-Media Extinction Now Looks on Target

More credit where credit is due: I was alerted to this provocative May 2008 column on Slate.com by Bob Sacks in his "'Heard on the Web' Media Intelligence newsletter.

Back in the prehistoric era, i.e. 1993, mega-bestselling author Michael Crichton wrote an article for Wired magazine called Mediasaurus. In the article he made several predictions, expanding from the premise stated in his first paragraph, "To my mind, it is likely that what we now understand as the mass media will be gone within ten years. Vanished, without a trace."

Jack Shafer, Slate's "editor at large," revisits those predictions with Crichton, as well as referencing his earlier visit with Crichton in the same subject in 2002. When challenged that as of 2002 his predictions appeared still far from accurate, Crichton responded: "I assume that nobody can predict the future well. But in this particular case, I doubt I'm wrong; it's just too early."

Crichton complains bitterly (as many other commentators have noted) that the decline of newspapers and television are not simply because of the Web alternative, but also the ever-decreasing quality of those media.

Shafer notes Crichton's belief that "it will take a media visionary…somebody like Ted Turner --to create the high-quality information service he foresaw in his 1993 essay. In addition to building the service, the visionary will also have to convince news consumers that they need it."

The Future of Printing at drupa

Every four years in Dusseldorf, Germany an enormous printing trade show, called drupa (standing for Druck Und Papier [in German: printing and paper] gets underway. According to the official press release, "With 1,971 exhibitors from 52 countries spread across an exhibition area of over 175,000 square metres and an anticipated 400,000 visitors from around the globe, the world's No. 1 trade fair for the print and media industry (running) from 29 May to 11 June 2008, will be bigger than ever before. 'What the Olympic Games are to sportsmen and women, drupa is to the print media industry,' said Werner M. Dornscheidt, President and CEO of Messe Düsseldorf, highlighting drupa's status."

I don't know why Germany became the home to this paradigm of enormously exhausting and unbearably unworkable trade shows. Drupa is nearly two weeks long! I worked a booth there in the 1990s and am still in recovery.

This is the country that also hosts the annual CeBIT in Hanover, Germany, "the world's largest trade fair showcasing digital IT and telecommunications solutions for home and work environments." The 2008 show, held from March 4 to March 9, featured "5,845 exhibitors from 77 countries (with) attendance up three percent over the previous year, totaling 495,000." (There are numerous others, but I'll leave it there, to avoid repetition.)

The claim that drupa covers the "print and media industry" is something of an overstatement: it covers the printing industry. The great mystery for anyone reading a site called The Future of Publishing, which continually highlights the challenges to print, is how, in 2008, drupa manages another record year.

There may be a clue in this chart, taken from the October 2007 newsletter of the NPES, the U.S. organization of suppliers of printing equipment:

It's not surprising that with the fall of printing sales, printing equipment sales are falling also, down some 30% from their year 2000 high point.

The printing equipment industry needs to pry whatever remaining dollars exist in a slowly failing industry. The solution perhaps, in the immortal words of Lorenz Hart (from 1937's "Babes in Arms"), "I've got a barn, let's put on a show."

Barack Obama and the Future of Publishing

As I watched the news reports on Tuesday evening indicating that Barack Obama had captured the Democratic nomination for president, I quipped to myself, "Time for a new blog entry called 'Barack Obama and the Future of Publishing'." But, I thought, I didn't recall publishing as a theme of his campaign -- I couldn't recall Obama mentioning the "p" word once.

Google has 1,310 entries for "Barack Obama" AND "the future of publishing," and 434,000 entries for "Barack Obama" AND "publishing." I'll admit I didn't read them all, but the focus was that Mr. Obama had written two bestselling books, and a slew of new books about him are now anticipated.

Finally today it dawned on me: Barack Obama may not have talked about publishing or where it's headed. Instead he demonstrated from the first day of his campaign that he understands the future of publishing and put that understanding into robust practice. As a Wired blog headlined it on June 3^rd, "Obama, Propelled by the Net, Wins Democratic Nomination."

The blog entry states it bluntly: "Obama owes his victory to the internet." I agree. When you look at the strength of his main challenger, Hillary Clinton, as they headed out of the primary gate, it seemed impossible that Obama would gain the nomination. His margin of victory was not huge. But what other single factor can be established as the reason for his victory than the remarkable use of the full power of social networking, singularly enabled by the Internet?

There's some very good coverage of the mechanisms by which all of this was put into place, so I won't repeat them here. To understand this extraordinary moment in the future of publishing, examine these links: 

1. CIOZone: "The Barackobama.com Difference" (with good information on the technologies employed)

2. BBC News: "Internet Key to Obama Victories"

3. Rolling Stone magazine: "The Machinery of Hope"

4. Business Week: "On the Web, Obama Is the Clear Winner"

Steve Ballmer Forecasts the Death of Print Media

I am still reeling from Steve Ballmer's atrociously ill-considered remarks to The Washington Post  (Ballmer, as most recall, is CEO of Microsoft, when Bill G. is not at home) that "there will be no media consumption left in 10 years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form."

My retort: "in 10 years there will be no software that Microsoft will be able to profit from either in operating systems or as shrink-wrapped software."

Charging by the Byte to Curb Internet Traffic

The title of this blog entry is also the title of a piece in today's New York Times. The story is most simply stated by quoting from part of the second paragraph: "three of the country's largest Internet service providers are threatening to clamp down on their most active subscribers by placing monthly limits on their online activity."

Time Warner Cable, Comcast and AT&T are all experimenting with plans (read this as "about to implement said plans") to first of all offer tiered monthly pricing based on the amount of data that can be downloaded, and supplement that with additional "per gigabyte" charges for those who go beyond their contracted limit.

The Times article reads as very sympathetic to these ISPs, with quotes like "all three companies say that placing caps on broadband use will ensure fair access for all users" and "the goal, says Mitch Bowling, a senior vice president at Comcast, is 'ensuring that a small number of users don't impact the experience for everyone else.'"

But the actual strategy is obviously quite different that what's quoted in the article. Who are the heavy bandwidth users? People who are fully engaged in video on the Web. Much of the video is coming out of Hollywood and TV-land, and from sites like YouTube. These ISPs clearly just want their "vig" (short for "vigorish"): bookmakers' and gangsters' slang for a cut of the action. They make lots of money; why shouldn't we (even though we're already are raking it in)?

As the article notes: "Even if the caps are far above the average users' consumption, their mere existence could cause users to reduce their time online. Just ask people who carefully monitor their monthly allotments of cellphone minutes and text messages."

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."

Not a Good Week for Publishers

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 (3^rd 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.)

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-

The eBook Bubble

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 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 "… 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."

A More Solid Bet for Amazon

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."

Live from New York: The Future of Book Publishing

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. 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.