Improved Productivity is the Reason Publishers Must Adopt AI

July 26th, 2023

Yesterday Lagardère Publishing released its six-month financial data. Sales declined at Hachette Book Group by 8.6%. In its earnings release the company said that “operational efficiency plans, particularly in the United States,” mitigated some of the impact of revenue declines.

In May, HarperCollins reported flat sales and profits declines, “driven by ongoing supply chain, inventory and inflationary pressures on manufacturing, freight and distribution costs… These pressures are expected to continue to impact the business in the near term.”

Publishing is challenged in 2023 by increased costs and a market unwilling to absorb retail price increases. Indeed the June Consumer Price Index survey (PDF) showed the prices of “recreational books” to have declined 3.1 % between June 2022 and June 2023, during a period of relatively high inflation. (Prices of “educational books and supplies” declined by 2.7%, and college textbook prices by 3.3%.)

There’s an article in The Economist this week titled “Your Employer is (Probably) Unprepared for Artificial Intelligence.” (If firewalled, another link here.) That sounds like it could be about publishing. But its focus is wider. The essence of the article is (I asked ChatGPT to summarize the 1500 words article in 100 words):

Robot reading book

“For AI to significantly impact the economy, it must be widely adopted, necessitating substantial changes in business structures and practices. However, businesses have become cautious in adopting new technologies, resulting in a two-tier economy where tech-embracing firms significantly outperform others. This has led to increased wage inequality as workers at less productive firms suffer. Factors contributing to this lack of tech diffusion include the incremental nature of new technologies, diminished competition, and growing regulation. While the potential for AI to rapidly diffuse exists, the readiness of businesses, particularly regarding costs and security concerns, for this revolutionary change remains uncertain.”

More specifically, what stood out for me in the article was statistical data showing that “firms that embrace tech are pulling away from the competition.” Various examples and stats are provided, such as that in Canada, from 2000 to 2015, companies that invested in technology saw productivity growth three times higher than those that had not.

More troubling was the impact on workers. Again a number of stats are deployed, essentially indicating that workers at firms that fail to invest in tech saw wage decreases, while “average wages at the best firms have risen strongly.”

I’ve been working at the intersection of technology and traditional publishing practices since 1988. As I’ve noted elsewhere, my observation overall is that “book publishing has never been a technology-adept industry, rather it is historically technology-averse.”

This is not a good time to be technology-averse. Artificial intelligence stands to drive significant productivity gains in book publishing processes, from editorial to marketing. The companies that embrace AI will almost certainly pull ahead of those that don’t.

Other data sources:

Just one of numerous academic papers: The Effect Of Technology Use On Productivity Growth by Robert H. McGuckin, Mary L. Streitwieser & Mark Doms (cited by 128)
“We find that establishments that use advanced technologies exhibit higher productivity. This relationship is observed in both 1988 and 1993 even after accounting for other important factors associated with productivity: size, age, capital intensity, labor skill mix, and other controls for plant characteristics such as industry and region. In addition, the relationship between productivity and advanced technology use is observed both in the extent of technologies used and the intensity of their use.”

Some skepticism to be found here: Why Isn’t New Technology Making Us More Productive? by Steve Lohr: AI’s feats, “according to Mr. Gordon, are ‘impressive but not transformational’ in the way that electricity and the internal combustion engine were.”