The annual Digital Book World conference opened yesterday with a host of industry executives trying to make sense of a new and complex publishing reality. Highlighted by media analyst James McQuivey, a CEO panel, former Macmillan president, now venture capitalist, Brian Napack, and an impressive appearance by President Barack Obama’s digital director Ted Goff—son of publishing executive Neal Goff--this year’s conference offered perspectives on the future of the industry, market conditions and corporate consolidation, the decline of the physical bookstore and the continuing power of technology to transform how publishers do business.
Once again McQuivey, who is also publishing a new book, Digital Disruption, in February with Amazon Publishing, offered the results of a Forrester Research survey on the “digital readiness” of publishing companies, noting very quickly that Apple has sold more than 120 million (including iPad Minis) tablets worldwide, calling the figure, “a big deal.” The survey of 53 executives found 85% of respondents are “optimistic” about the digital transition and that 64% believe that publishers are “capable of competing” in the new digital marketplace and that 55% are confident that their own companies can compete (both figures are down about 10% from last year, he said.).
Respondents to the survey said that tablets (60%) were the ideal reading devices over dedidcated e-readers (23%) and that 45% of the respondents thought dedicated e-readers were “irrelevant,” though McQuivey was quick to note that “this is not necessarily the death knell of e-readers which are still very popular with voracious digital readers.” He noted however that, “I read on a 7” tablet myself.” 85% of the respondents produce apps, 45% of them say they cost to much to produce and 21% see revenue potential in producing apps. 32% of survey respondent also believe that print sales will continue to decrease and 21% believe e-book sales will continue to increase. Previous surveys have also suggested that half of all book sales will be digital by 2014 but 23% of the respondents said that has already happened at their company. McQuivey was doubtful on that last point. but acknowledged that “we’re approaching digital disruption rapidly."
McQuivey’s survey offered a useful seque to the next panel, the CEO’s View of the Future, featuring Marcus Leaver of the Quarto Group, Karen Lotz of Candlewick Press, Gary Gentel of Houghton Mifflin Harcourt, and moderator David Nussbaum of F+W Media. The executives offered perspectives that ranged from an enthusiastic embrace of the new technology: “tablets force us to be better,” Gentel said, “the reader is one click away from other things so we have to provide a great experience,” to being a little bewildered over selling direct: “we sell directly to consumers,” Leaver said, “but I’m not sure we’re good at it or ever will be good at it.”
All the CEOs said that they were working to integrate the digital and print workflow into the overall business structure, often seeking out more experienced digital firms as partners to provide expertise. Leaver and others on the panel noted that he didn’t have a lot of digital-only staffers at the Quarto Group. “Not all of the digital staff are permanent staffers,” he said, “because we’re trying to see what really works. Digital experts can lead you down a blind alley, so we buy services and see how it works as we need them.” Responding to a question on price erosion in the digital marketplace, Lotz noted that the kids’ publisher had detected “some erosion in the U.S. hardcover market, but not that bad. We have to be smarter and plan for the long life of a title. If an e-book has a big price point it must be worth it, prices must be attractive. It’s a balancing act and prognosticating is difficult.” Gentel said, “We’re learning about price flexibility and I’m continually surprised. You can’t just lower or raise prices just to do it. You need a strategy and you need to experiment.”
Ted Goff certainly offered the feel-good presentation of the day. Goff, son of well-known publishing executive Neal Goff, as well the director of President Obama’s much-praised digital and social media compaign, opened his presentation with a shout-out to his dad in the audience before offering an entertaining and informative look at how social media was used in the campaign. Goff noted that President Obama has about 34 million friends on Facebook, giving the campaign the potential to reach about 95% of the electorate when people share content. “We were able to reach almost the entire country when they share,” he said. He said they used social media for fundraising, organizing and communications, and said their guiding principle in creating digital content to share on social media was, “don’t be lame.”
Goff also showed how the campaign had to be nimble and creative in creating content that was both informative and entertaining and how to use it to make strategic jabs at their political adversary. He brought up President Obama’s appearance on Reddit, the social news site, which drew more than 5.2 million readers and, thanks to a link he provided at the appearance, attracted 30,000 people to register to vote. “The mere fact that he would answer crowdsourced questions was very impressive,” Goff said. “Technology is giving people more power, tools and influence. That will not change,” he said, “figuring out how to give them the best experience and develop relationships with them is the best thing anyone can do. People expect more information and more access. It’s a challenge and an opportunity.”
But certainly the appearance of former Macmillan president Brian Napack, now a senior advisor at Providence Equity Partners, a private equity firm with $27 billion in assets that specializes in investing in media and education properties, offered a high altitude perspective on a publishing industry in the midst of “structural change.” Interviewed onstage by Publishers Marketplace founder Michael Cader, Napack responded to Cader's description of a publishing landscape dominated by the Random House/Penguin merger, McGraw-Hill’s withdrawal from educational publishing, the closing of Borders and the rise of technology companies as disruptors in the publishing business, emphasizing that “there’s been very little capital in-flow into publishing, the Random House, Penguin deal is all about scale but there’s no cash involved.”
Napack said that the McGraw-Hill deal was about, “unlocking value. It feels like a lot of change is going on but it’s the beginning of the end of change. We’re about to see what publishing looks like in the future.” Napack addressed the issue of “scale” in the Random House/Penguin issue: “Publishers are in a battle with other other publishers, but there’s a bigger battle, the battle for attention of people watching a TV show on their iPad rather than reading a book.” Napack says scale—buying big books, having warehouses, etc.--doesn’t matter that much within the old print publishing industry, “you need scale but not enormous scale,” but it “matters more than ever,” in the new digital landscape. “Scale,” he said, “means having enough resources to invest in marketing, in identifying audience, being able to research and win consumers to books over TV Shows.” He said the clock is “ticking” for Hachette, “which likely is worried. There are only so many large publishing assets available to acquire,” and said more mergers were likely rather than acquisitions from players “outside” of publishing.
But Napack also emphasized that while the big six may end up as “the big three,” the power of innovation often flourishes in markets during periods of consolidation and new companies can “come from underneath,” and he cited the precarious but interesting market position of Barnes & Noble. Though he seemed to offer a contradictory take on B&N, calling it an “attractive property,” and saying that “I’m optimistic about the [physical] bookstore business, it will be vibrant.” But he was also quick to say that Providence would never invest in the physical bookstore business because it’s “not a growth business.” Nevertheless he also praised B&N, “for the great job it did launching the Nook,” and said “the battle for the media consumer is different, it’s a separate pursuit but there are opportunities on both [sides of the company].”