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.
. . . .
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
Seems to me that the next wave of publishing is coming from serials. Amazon has leaped in with Vella, capitalizing on their ability to exploit writers by having them write new material for nothing up front, no guarantee of anything, and pressure to promote the app in order to maybe get a little promotion IN the app.
This trend roared out of Asia, especially Korea and Japan and China. New apps spring up almost daily. From my perspective, they mostly exploit authors with outrageous terms (including rights grabs) and sometimes outright piracy. However, there are legitimate apps, too, with fair contracts, including one based in California that I’ve signed part of my backlist with.
Apparently younger readers, accustomed to game apps, enjoying the serialization approach. This of course cuts out the trad pubs and the bookstores entirely.
Probably not.
It has been tried before repeatedly (among them Amazon circa 2012) and failed every time.
Quibi walked in with hundreds of millions and a bunch of quality content and was bankrupt in six months. Roku bought the content at fire sale prices, pennies on the dollar.
So far, short content sellers have found that folks out west won’t directly pay for short form content.
(Magazines and other short content channels have been withering for decades. Only a few remain.)
Indirectly, like Youtube? That works. Good luck competing with them, though. Amazon tried. Got nowhere.
Nonetheless, Amazon keeps trying.
Because that is how dominant companies *stay* dominant, by constantly looking for the *next* thing even if they don’t think it’ll succeed. Maybe this time will be different. Maybe the post millennials will be different. So they try again. All it costs is a bit of money and some creator effort. Unlike Quibi, Amazon isn’t investing *their* money and effort creating the short content (neither does Youtube).
Maybe short form is the next thing after all. If it is, Amazon will be there.
All the while, their enemies (Bookstore.org) are *still*, after 25 years, trying to replicate their online print operation. All the while, still trying to marginalize ebooks and ignoring KU.
Textbook dominant business behavior.
You see it everywhere. Most recently, in electric vehicles: while wannabe competitors are focused on engineering worthy competitors to Tesla, Tesla has been engineering a supply chain: giant factories with advanced assembly lines for both car assembly *and* inhouse battery building. In an age where globalization is showing its flaws, they are alrrady building where they sell. Where even the likes of Ford and VW are struggling to build 50,000 EVs, Tesla is cranking out a million this year. And expanding their product line with a truck to take on Fords best and a small, cheap model, to take on the european city car market. Because they thought things through and didn’t assume they could count on outside suppliers alone to get needed batteries. They’re even buying into lithium “mines” to ensure supplies.
Dominant companies build success atop success by covering all the bases.
They don’t follow, they lead, even into niches.
While Mr Shatzkin and company look for a way to preserve the ancien regime, Amazon and others are forging new ways, looking for new products and channels. Most fail but it is cheaper to fail on a speculative venture than to miss out on something that undercuts your primary.
Thing is, the muktinationals knew this; a generation ago the very first ebook readers were funded by the likes of Bettlesmann, Random House, B&N and were killed after they hit the market. It is unclear if it was because they were too slow at finding success or they were too good at pleasing those that did buy and imperiled print.
There is an oft repeated mantra in the tech world: It is better to obsolete your own product than to wait for comoetitors to do it to you. Because if you wait, you’ll be forever trying to catch up.
Witness the OP and its predecessors.
So, while short form most likely won’t be the next revolution it might. Smart play is to keep and eye on it. Dabble in it. Just in case.
Slightly related… I just came back from a trip to Austin, TX. And drove by the new Tesla Gigafactory there. OMG… I’ve never seen a construction site like this (BIG!). Just down the road is a new Amazon multi-story distribution center, and it’s tiny compared to the Gigafactory. Tesla is going all-in.
You realize they build those thing in months?
And they are now talking about a Terafactory.
The way tbose things work is raw materials go in one side, finished cars go out the far end.
The entire car chasis is two pieces stamped out by a GigaPress.
https://insideevs.com/news/512244/tesla-giga-press-idra-details/
They are buying 12, IIRC.
(BTW, did you go by Boca Chica? Musks other monsted does BIG there, too.)
Several companies might just go bankrupt trying to compete or worse, by nt competing.
No, didn’t go to Boca Chica. Too far (4+ hour drive). BUT… I used to surf there in the mid-’60s. Less than 1/2 mile from Mexican border. Here’s a great article about that tiny dot on the map and the changes Tesla is bringing:
https://www.theatlantic.com/science/archive/2020/02/space-x-texas-village-boca-chica/606382/
The changes are exploding:
The Tesla facility has a name: STARBASE.
SpaceX is resurfacing and expanding Route 4 to better accomodate the movement of the 230 ft tall boosters from the open air factory to the test launch facility.
Musk is planning to incorporate the area under that name to accomodate the workforce. Thousands of workers, from skilled welders, construction workers, technicians, to support staff. All high paying jobs.
—-
“Most of the kids that are fortunate enough to get a college education usually leave the area and they don’t come back,” Eddie Treviño, the county judge for Cameron County, told me. Treviño grew up in Brownsville, left for college, and then returned for good. “SpaceX may draw kids to either come back or maybe to stay,” he said.
—–
That same judge is fighting the idea of Incorporating the village.
Odd. SpaceX success is scaring many in government.
The folks refusing double to triple market value may change their minds by fall: the full 400 foot rocket with twice the power of the Saturn V is launching sometime after July. It won’t be just windows that rattle.
So far it’s just prototypes. The production version will be more powerful and launch at sea. But by then STARBASE will be a town on the way to a city. Eventually instead of STARBASE being a suburb of Brownsville, Brownsville will be the suburb.
Something to factor into world building.
For those that haven’t seen a GigaFactory:
https://www.youtube.com/watch?v=XW6mYGggmfw
The Shanghai Giga was producing cars within six months.
Austin is bigger but it’ll be operational with the year.
The next ones are apparently headed for the UK, Brazil, and Kentucky.
News to me: it takes 1500 trucks to feed one of these machines. Daily.
The output, about 450,000 cars a year from the “small” ones.
Oh, my…
Permitting becomes one of the biggest obstacles. Want the factory? Cut back the permitting delays.
Yup.
Cut the permits, lose the jobs.
Musk had trouble in Germany. He scaled back the factory and cut back its battery production. It will still be the biggest in Europe just no longer the biggest in the world. (As a corollary, auto output will also shrink.) Suddenly the local government in Brandenburg is actively supporting the Gigafactory against the lobbyists. (Sorry VW.)
It might have something to do with Tesla working to secure a site in the UK.
The golden rule rules: “Thems that have the gold…”
In Texas the pushback has more to do with UNITED LAUNCH ALLIANCE looking at the end of their goldplated contracts than the holdouts (who have been monetizing their access to STARBASE via Youtube) who are looking for more cash. That SpaceX hasn’t moved to emminent domain speaks of their concern. Or lack thereof.
Musk has the upper hand there too because most of tbe work in Boca Chica is in adhoc facilities. He isn’t just prototyping the rocket but also the process tbat will be used in the factory to come.
He’s been totally transparent there. His best defense against under the table political dealings is his open backdoor lobbying. For example, when he expanded the operation to 24×7 he didn’t go to headhunters: he told the workers to recommend friends and family, with the proviso they woukd be responsible for the quality of their work. Net result was good workers committed to the mission.
Musk isn’t just rewriting the rules for hightech manufacturing but also for lobbying. He’s creating a new future in many ways.
I’m curious, is this really any different from what the big railway companies in the UK (and I have always assumed in the USA) were doing 150 years ago? Iron ore in one end and railway equipment, especially locomotives, out the other. Of course, they carried it a bit further as it was their trains on their lines bring in the ore from their mines or sometimes their ports.
The fashion for all out vertical integration came to an end for a host of reasons but maybe the wheel of revolution has turned again?
Well, you could say everything old is new but the *way* the new verticals work is a bit different. than the steam age ones. Verticality is becoming a competitive advantage in many businesses because of scale and complexity. The pendulum is swinging back.
Vertical integration was withering under globalization of supply chains. It was cheaper to outsource to specialists. Until the pandemic revealed how bizantine the supply chains have become. It started in tbe 80’s with the broad adoption of JITS and only grew from there. It got to where some products depended on suppliers in 100 countries and managing the chain was the biggest bottleneck.
Then the pandemic.
Suddenly supply chains came to halt and when thdy camd the delicate ballet was out of sync and product allocation came under political pressure. (Think vaccines, face masks, respirators…)
And to top if all the backlog of demand created enduring shortages of everything (like the semiconductor shortage) and the bottlenecks came to the fore. Everybody at tbe mercy of everybody else. And the verticals were least impacted.
Suddenly “build where you sell” is making sense. So is “source where you build”.
Which is where Tesla’s inhouse model shines. Everything they do is a clean sheet design, new tech almost everywhere, very little is COTS, and the product is a “wee bit” more complicated than a locomotive. Software, semiconductors, batteries, everything is inhouse. And locally sourced. Lots of little proprietary advantages add up to a big competitive advantage.
For EVs the biggest bottleneck is batteries. And tbe bottleneck for batteries is Lithium. Tesla was planning big so they built their own battery factories and they own their own mine, in Nevada. And it uses a proprietary process that is cheaper than anybody else’s. Less polluting, too.
https://electrek.co/2020/09/23/tesla-mining-business-buys-lithium-claim-acres-nevada/#:~:text=Tesla%20is%20now%20officially%20getting%20into%20the%20mining,Drew%20Baglino%2C%20SVP%20of%20engineering%20at%20Tesla%2C%20said%3A
An interesting example is Musk’s other company: SPACEX.
They are building their prototype spaceships out of (a proprietary) stainless steel alloy which comes in massive rolls tbat they cut, wrap and weld on-site to create enormous rings that are then welded into cylinders.
Where things get interesting is that one of the requirements for their spaceport is massive liquid oxigen, liquid methane, and water tanks. The could have ordered them from specialist companies. Instead, they used the same techniques and supplies from the rockets to build their own. Turned out to be faster and way cheaper to do them inhouse.
Other supplies?
They have a massive solar farm for electricity. A desalination plant for water. An air separation plant to source the liquid oxygen and liquid nitrogen. Water and CO2 from the air gives them methane. They hope to launch three monsters a day when tbey hit peak, circa 2030. And every critical component is fully controlled.
(Another company that is leveraging verticality is MS in game streaming. They own the data centers, the game developers, the IP and back catalog, the online store and, most importantly, the streaming tech. Nobody else does. And they’re running away with the nascent game streaming business.)
Lots of companies are vertically integrating, especially where cheap labor isn’t a main driver. The idea may be old but the execution and scale is 21st Century.
Thanks for the explanation.
Of course, everything these days is a “wee bit” more complicated than old tech – even the old internal combustion engine is so many stages of incremental improvement from that in a model T that it might be from another world – but in comparative terms the steam locomotive was vet high tech for its time.
Does Tesla but in its specialised stainless steel? The old railway works typically incorporated their own blast furnaces. There must be a considerable tension between doing things in house and outsourcing where there are large economies of scale and your demand is not that “large scale”.
I don’t think they own (yet) the foundry for the steel but it is a custom formulation. At Tesla, their batteries (and Lithium process most likely) are based on work by sponsored University researchers, with Tesla owning the patents. A common approach.
Both Tesla and SpaceX are verticals but they’re not 100% vertical. The products are too complex to do that. What they do is they are very cost driven and open minded to using consumer level products and components. And willing to go inhouse on mission critical parts. There’s a whole thread on it here:
https://forum.nasaspaceflight.com/index.php?topic=39221.0
One example is their industry leading Falcon 9 rocket. Using industry standard methods, NASA calculated a development cost of $1.7B to 4B versus a verified $390M cost for SpaceX. Their new Raptor reusable rocket engines cost $250,000 each vs millions for competitors and take 52 hours to build one vs months for competitors.
And they’re not unique in the “New Space” sector, they were just first and showed the way. There’s a dozen followers, most aiming at small launchers. Players like ASTRA and ROCKET LAB. One particularly interesting one is RELATIVITY SPACE whose calling card is that both the rocket and engine are built using advanced 3D printing tech. There’s several online videos showing their proprietary laser sintering tech at work. Awe inspiring.
The UK ARRIVAL electric vehicle company is a part of the new wave of advanced manufacturing coming to the fore in the post globalization era. Their approach is 180 degrees from Tesla, by working on purely automated microfactories.
What both approaches share is clean sheet open mind operations, rethinking everything in service of efficiency and minimizing labor.
Mind over muscle.
The 21st is taking on its own identity.
This is my observation as well. Serialization keeps not taking off and I don’t think Vella is going to be the magic bullet.
Younger ‘readers’ aren’t reading text.
True about the GenZ-Millenials, but there are plenty of Boomers only midway to retiring, and they have time on their hands and a hankering to read. I think.
Except bookworms.
But bookworms, of every generations, have always been a small niche.
That is where Amazon is really killing it with KU. They’re taking a good chunk of the most avid readers out of the bookstores and that is killing the bandwagon effect for most frontlist titles. And to compound the impact those readers are spreading their reads among a horde of indies instead of a handful of front table titles.
Has this guy ever been right? I can’t recall a single take TPG has put up here of his that had any validity whatsoever. And if I recall correctly, he’s some kind of big shot in Trad Pub world.
How has he managed to stay in business is just beyond me. Just what industry today would be intrigued by the access to ‘Publishing’ that exists for small potatoes types like me that they couldn’t already take advantage of? Tech industry? Ummm I think they’d put the effort into their web presence. I have a hard time seeing a manufacturer getting into this (visions of a GM imprint boggle the mind). Finance? Oh… gosh… GetYerMoney: the publishing imprint of Wells Fargo.
And, oh…I dunno… I heard somewhere that biznezzez that are successful are kind of interested in Return On Investment or something like that. And the current ‘Publishing’ (in a corporate manner) environment is kinda tough as it is, isn’t it? We’re down to four big companies? There are more companies manufacturing cars now.
It’s not just the concept that baffles me. What really baffles me is the author of this excerpt. He’s a magician in being able to still be out there in some sort of position of influence if this is his kind of strategic forecasting.
You are 100% correct.
Bear in mind he is a (publishing) consultant and consultants make their money not by being right but by feeding comforting notions to their clients. “No, you won’t have to reinvent your business. With a few minor tweaks you’ll still be relevant.” “Yes, there’s a hurricane coming but afterwards people will need you more than before.”
More recently, he has taken to promoting Ingram.
Look at the bulk of his columns over the last couple of years and you’ll find he has taken the tack of conflating Ingram’s indiepub services (focused on print and making books *available* to book stores) with Amazon’s indiepub retail services, focused on *selling* ebooks. Peaches and oranges. (No apples involved meaningfully.) 😀
He glosses over that making stuff available to retailers isn’t quite the same as actually featuring it in the two biggest retail outlets in the west. Ingram Spark is useful…for some. Mileage *will* vary but buried behind his smoke screens and handwaving is the same old decades old outlook of print and traditional channels still being relevant. Which, duh, they are, as a *legacy* operation, not a growth channel. Looked at casually by an establishment/legacy type, his balloons look plausible, if you ignore the outside world.
In this case, as you pointed out, there is the matter of websites.
Which most business have been doing for over 25 years. And, except for tradpub and clueless booksellers, doing well. In fact, doing better via the web than cranking out promotional books to try to scare up business in a stagnant pond could ever be. Some businesses *can* scare up extra cash flow by branching out into very different products but books isn’t a particularly useful one; small market, low margin, flooded with competitors. They’re better off flogging logo’ed tshirts and caps.
This is in line with his typical schemes.
A while back he was promoting the BPHs “gold mine” of IP that Hollywood would beat a path to their doors to pay tens of millions to license so his followers proceded to demand all rights in their contracts. Gold mine!
Uh, no.
Here we are in a golden age of video production with more new, scripted content coming out daily, both movies, miniseries, and longer series for broadcast, cable, and especially streaming. Precious little is licensed from tradpub. In fact, a majority of licensed content is coming from Indies.
This is particularly noticeable in the high profile superhero fantasies and other comics-based productions. They’re all over. Disney and WB have their own “IP farms” in Marvel and DC but Netflix and Prime have no shortage of products, all licensed from independents like Mark Millar (Netflix went and bought his full catalog and “him” with it) and Robert Kirkman and Garth Ennis and Neil Gaiman. Not a single producer is rushing to pay big bucks to the BPHs for the IP they control; instead, they go straight to the creators and ignore content they secured. The rights grabs are doing them no good.
The multinationals have each secured a hoard of IP that is valuable for publishing but not much else. Mostly because the bulk of it is legacy content from before they even thought to secure video rights and because once they did think of it most creators know better than to give them up.
It’s the same with the rest of his schemes and proposals.
He knows old school publishing.
He has vague notions that there is gold somewhere out there and he keeps on floating (half baked, usually) ideas on how the establishment players might leverage their empires for some of it. But like most of the ADSers out there, he rarely thinks things through. He only looks at things from the point of view of his clients (his cash cows) and doesn’t bother to look at (or present) things from the point of view of his targets in the outside world.
He is a creature of the NYC tradpub establishment bubble.
Good for an amusing read or two but business insights? Not so much.
My impression as well. “Enterprise promotional books”??? Yawn, yawn, yawn. Has he not heard of YouTube, TikTok, Facebook? I used to create “enterprise books” back in the ’80s for clients (along with T-shirts and caps). This is no “third great publishing disruption.”
Seems a lot like the stuff we read ten years ago about truly sincere micro publishers who would do the icky things real artists avoid. The real artists did avoid the ick, and left the field for the authors who weren’t so sensitive.