From Mike Shatzkin at The Idea Logical Company:
The book business is in the early stages of its third great disruption in the past quarter century. The first two both changed the shape of the industry and created winners and losers across the entire value chain: touching every step from how authors got money to how readers got books. Significant institutional players were lost in both prior disruptions, and all the ones who remained had to change their models and practices significantly.
The cause of the disruption on both prior occasions and now was the introduction of asymmetric competition. Before 1995, publishing and retailing were the province of entities that did it in a businesslike way, usually for profit but always within an organizational structure dedicated to their publishing or retailing activity.
Amazon changed that in the 1990s when they were able to sustain virtually profit-free retailing, employing two points of leverage which they uniquely discovered. One is that they used book retailing as a customer acquisition tool: they always had the intention to make profits in other ways on the customers they sold books to. The other is that they persuaded Wall Street that their profit-less growth was valuable and that it was worth increasing their share price based on sales growth that didn’t (yet) produce profits. (Wall Street might also have been seduced by another unique feature of their model: positive cash flow on sales. Amazon would sell you a book today and take your money and they didn’t have to pay Ingram for the book they’d get and ship you tomorrow or the next day for another month or more!)
The second great disruption was spawned by Amazon’s Kindle, which was the big driver needed to galvanize what is a robust capability for authors to publish themselves. In this case, the asymmetry didn’t come from Amazon, but from the massive horde of independent self-publishing authors they have spawned. They have collectively crowd-sourced millions of titles into a market which was previously supplied pretty much exclusively by publishers. And authors often, if not usually, deliver their competitive titles with pricing strategies that a publisher paying royalties and rents and salaries couldn’t begin to match.
And now we are at the dawn of a third reordering of publishing’s structural and commercial landscape. The infrastructure capabilities spawned by the past dozen years of author self-publishing are now industrial strength. Ingram is the heart of this. It is literally the case today that all you need to be a publisher is a manuscript and a checkbook to pay freelancers; all you need to be a book retailer (print and digital) is customers. Ingram can provide all the rest, mostly with transaction-based pricing, so there are no large up-front investments required. Service organizations that handle details from copy-editing to cover design to press release copy for books, one of which I am helping to build now, are ubiquitous.
What I believe we are on the verge of seeing is that waves of entities will discover that they can clearly benefit from publishing books. Think of this as enterprise self-publishing. Every law firm, accounting firm, consulting firm, retailer, political campaign, cause organization, charity, and church, synagogue, or mosque is only a bit of imagination and effort away from books that can promote any variety of missions. These will be books delivered by a vast unaffiliated network of entities doing publishing as a “function”, not publishing as a “business”.
Across what will be many times the number of titles as are now being published, making money will sometimes happen. But in most cases the payoff from the publishing “investment” will be expected to be realized in other ways. The new players who are doing “publishing as a function” will also band together in countless opportunistic ways. But, once again, that asymmetry of economic purpose will be poison to people trying to publish books as a rational, stand-alone economic enterprise.
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The first big disruption — Amazon as a retailer — completely remade the retail network in less than two decades. The second — easily-enabled self-publishing — unleashed a tsunami of titles in competition with the ones delivered by the commercially-minded players. The combination has spawned two trends, neither of which has any end in sight.
The first trend is that the sale of books is increasingly online. If you add ebooks and books sold via customer-generated web ordering of print, it is well over half the business. Bookstores are less and less important to the overall sales profile, only three decades after they were the only player in many sales profiles. Mass merchants are paying somewhat more attention to books, but the biggest remaining chain dedicated to selling books, Barnes & Noble, is still shrinking.
The second trend is that the share of all book sales that is delivered by “real” publishers is also shrinking. That has been true for the many years since authors were empowered by Amazon, and then by IngramSpark, to put their books into the marketplace effectively without working through a publisher. But if I’m right that every business with a marketing or business development or client relations budget will explore how books can help their business, what the authors have spawned will be dwarfed by what enterprise self-publishing will do in the coming decade.
Link to the rest at The Idea Logical Company