Home » Big Publishing, Disruptive Innovation, Ebooks » Big Publishing’s Optimism About the Future is Tanking

Big Publishing’s Optimism About the Future is Tanking

24 February 2012

Here’s a classic snapshot of an industry that is realizing its world is changing, that the big players may not survive and the people they employ don’t possess the skills necessary to compete in the new world.

The interesting thing about disruptive change is that it’s happened to lots of different industries before and the overall pattern is relatively predictable (although details and timing are not) but none of the top people in an industry being disrupted ever seem to believe it can happen to them. Denial is death under those circumstances.

Big Publishing, Disruptive Innovation, Ebooks

38 Comments to “Big Publishing’s Optimism About the Future is Tanking”

  1. I admit I was in denial until the fall of 2010 until DH shoved hard numbers in my face. It’s going to take someone/something from the outside to change publisher’s perceptions, and even then, many will remain in denial.

    Morale means nothing. Are these execs actually looking for answers or are they just wringing their hands? The publishers that figure out how to make the infrastructure change from acquisition-based only to tech-based will survive. Will the execs put in the money to retain their staff? Probably not. I’ve only worked for one comapny (DuPont) in the last twenty-five years who has been willing to re-train current employees.

    The publishers that aren’t willing to change will eventually be cut loose from their corporate parent to die a slow, ugly death. Honestly, I don’t wish that on anybody. The smart people in the publishers houses will have started taking computer courses at NYU two years ago.

    The rest? I hope they have a decent fund in their savings accounts.

    • The executives worry that they’ll never get another gig that pays as well as their current one, so they’ll hang on until the bitter end.

      The low and mid-level employees are where the cuts have hit and will continue to hit as management tries to stretch the decline for as long as possible.

      • You hit it on the head, PG. One wonders why, then, that these same low and mid level employees are the first ones to come to the defense of an industry that considers them expendable. I guess it is a kind of Stockholm Syndrome.

      • You mean like Ken Lay and Jeff Skilling? I lost one of my businesses as collateral damage to these two idiots.

        • Idiots? Deluded, maybe. Unethical certainly. But those two were hardly idiots. It’s a bit of a stretch to compare what’s going on in publishing with Enron. There was actual fraud on a wide scale, along with a host of other illegal and unethical things, going on there.

      • Ugh. I saw the same thing at GM, where jobs were combined and lower level supervisors had to do the jobs of 2 or 3 people. It’s a bad, unpleasent spiral, where people get more and more frazzled, and make poor decisions.

  2. This is an excellent blog. Very useful, clear and concise. Thanks.

  3. “–and bless them for being so naive–”

    This was my favorite line.

    (Maybe it’s because so many of the people he was referring to had a tendency to pat everyone else on the head and tell them how naive they were….)

    • That did make me smile. Because publishers are truly naive when it comes to what’s going on with ebooks, and it’s nice to see someone treating them as such. That could be slight bitterness talking though. I don’t like how know-it-all traditional publishers seem to act.

  4. “…the money has to come from somewhere…”

    Oh noes! No more 4 million dollar advances to celebrities? The pain!

    • Now what is Snooki going to do?!? Oh wait…what exactly does Snooki do?

    • And yet… Amanda Knox just sold her story for 4 million. Hmm.

      • I know. The Knox money really surprised me. I don’t know why these things still surprise me.

      • Actually, I find the Amanda Knox deal much worse than the Snookie deals. As far as I see it from here (I’m not American and have never seen her show), Snookie is stupid but basically harmless. Amanda Knox, meanwhile, was convicted of murder and hired a PR agency to change her image from “angel with the ice-cold eyes” to “poor innocent girl entrapped by those nasty foreigners” to get the verdict overturned. I don’t know if Amanda Knox committed the murder or not, but the fact that she is using the whole thing to make money does not really make me inclined to sympathize with her. And a publisher giving a huge advance to Amanda Knox is about as immoral as publishing O.J. Simpson’s book.

        • Not to mention that she admittedly lied and tried to finger someone for the murder who was totally innocent. Like that wouldn’t put you on the top of the suspect list in the good old US of A.

    • Unfortunately, CELEBRITY advances will only go up, not down. Publisher advances will be spent competitively on the books the publishers KNOW will sell. Its everyone else who gets the screws put to their advances. When margins are low, companies take no more chances.

      Hollywood does the same thing. It’s why Will Smith and (previously) Bruce Willis got $20M+ for average films. They were guaranteed to make the money back, or at least break even. No risk.

  5. Their competition? Writers.

  6. The analyst has it all wrong (which pretty much seems to be par for the course for analysts). The good news is that the execs are less optimistic about their own companies future. They should be in total panic mode, but they aren’t.

    Worse is the analyst idea of what the companies are realizing. Listen to his description of the changes that need to be made. They are all marginal changes to the way the publishers market their books. That will not help them survive. They don’t need to “re-imagine the book”, they need to re-imagine their fundamental business processes. Those business processes are as broken as anything I have ever seen. In the print side of their business, they are clinging to insanity. The “returns” bit is the craziest. What other industry plans (actually plans) to produce excess supply that they buy back from their business partners? Why would you ever expect a business that does that to stay in business when they are competing against other folks who don’t do that? Meanwhile they are deliberately not exploiting the only thing of value that they control uniquely (the digital rights to their backlist) while that thing gradually loses value as those rights begin reverting to the authors.

    • Yes, this is exactly right and something not mentioned in the video or yet on this comment thread. The “returns” business practice is the most asinine thing I’ve ever heard of, not to mention the fact that publishers are pricing themselves out of the e-book market. The prices they set are ridiculous.

      I overheard someone at my office – someone who doesn’t know anything about the publishing industry, but who is a reader and uses his kindle – saying that he thought it was a rip-off how much e-books cost. He said it was obvious that it was a rip-off because it doesn’t cost that much to publish them. Even he knew that. I explained to him why certain e-books are priced too high – that it is the traditional publishers who do that for a reason. To keep print alive.

      Everything these publishers are doing is wrong.

      • Another obviously assinine business practice: insisting one must have big fancy office buildings in one of the most expensive cities in the world.

        • At least Random House never owned their fancy office building in New York City. The building was always owned by some investment fond and only leased to Random House. Which doesn’t make the practice of paying rent for a fancy building in one of the most expensive cities in the world any less insane.

    • Yeah, I feel like the first priority with any industry analyst is to kiss @ss so that they aren’t perceived as an enemy and continue to get hired by people in the industry.

      So he doesn’t mention the whole disintermediation thing, which is actually the big thing. Writers get paid more. Readers pay less. Publishers…????

  7. They’ve spent years complaining about declining margins and sales, but not trying to innovate. In the tech world, as soon as you have one successful product, you’re immediately looking for the next one, because you know the first one won’t pay the bills forever. If you’re lucky, the first one is successful enough long enough for you to have several attempts at finding the next cash cow, but any tech company that has survived has had to do this. Publishing seems shocked that anything has to change.

  8. Great clip! I too love, “… and bless them for being so naive.”

    So what we self-publishers do is easy, right? And you guys can probably do it with your hands tied behind your back? I don’t think so. Like anything of value, it takes time and has to be learned. I’ve been doing that for a year now. How about you, Mr. Big 6?

    Send me a letter with an SASE enclosed and I’ll get back to you.

  9. “We polled all the top executives in the publishing business, you know, the ones who represent 3/4 of trade books, and what we found is as the ship settled by the bow in the sea, and writers jumped the rails, and are leaving via Amazon life boats, these executives are concerned about who will man the bar. They are also less optomistic that breakfast will be served, and are becomming worried about the trend to head towards the rear of the ship. A few have complained and expressed dismay that life jackets are actually meant to make them float, and they at first believed they were just fancy cork vest to keep them warm. So, there has been progress. They are now aware that things are changing and do seem to understand it is not really in their favor, but they are still not exactly sure if they are going inside to get a drink, walk towards the rear of the ship, or just sit down on a deck chair to wait and see what happesn.”

  10. The publishing industry reminds me of the auto industry in the 1970’s. Smaller, fuel efficient cars? No one wants those. Let’s keep making gigantic gas hogs. That’s what Americans want.

    Enter Toyota.

    • A common asssumption, mostly wrong.

      In the Fifties and Sixties car companies didn’t have much in the way of testing facilities, and computer modeling was three or four decades in the future. The only real way they had of extended testing was to build the cars and see what happened.

      Enter the Corvair. GM knew from the start that they would have problems with it, but they didn’t know what those problems would be because they didn’t have a way to test extensively enough. By the time Unsafe at Any Speed was actually published in 1965, all of the problems Nader cited had been corrected. It failed to matter. The combination of lawsuits and bad publicity killed the car.

      And the message the car companies got was “innovate and we will crucify you.” The barges of the late Sixties and Seventies were basically 1959 models with different bodies. But that was the way it had always been done, so it was “industry standard practice” and reasonably safe from the tort bar.

      Foreign manufacturers were, of course, exempt. The worst Corvair ever built was better and safer than the best Volkswagen — but the lawyers profiting from the Corvair were also sending their daughters off to Bryn Mawr in Bugs, so they couldn’t possibly be bad. That left the door open for Toyota, Nissan, Honda, and the rest to come in without challenge when the gas crisis hit.

      The parallel in publishing is SOPA and related law, not the ’74 Galaxie.


      • Thanks, Ric.

        I actually owned two very-used Corvairs back in the day. After the negative publicity, you could buy one really cheap and I needed that.

        I had zero handling problems, but did drive a Corvair through a couple of Chicago winters until it rusted through. If you stepped in the wrong place getting into the back seat, your foot would go all the way through to the pavement.

  11. What I found particularly strange was the analyst’s unanswered question towards the end of the clip. Roughly, he said, “Publishers are wondering where they’re going to get the money they need to adapt to the changing needs of the digital world of publishing?” If you’ve been reading publishing agreements for the past dozen years and watching the erosion of the old 50/50 partnership between the talent and the publishers, its clear where the publishers decided to get that money. They’re getting it from their old partners – the talent – by squeezing them at every opportunity. Why has self-publishing flourished during the past couple of years? Because entrepreneurial talent said, “That’s enough!” and walked away from bad deals. Good for them.

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