Wednesday, 15 October 2014

Am I An Oracle?

To use Business-Speak, my last few posts have been a situation analysis: a review of current state of play of an industry and a prediction of what is to come.

I do this all the time for work, and I love it! And as I have said so many times in this blog, wow it is so scary when you are proved right! Makes me feel like I'm some sort of oracle or something.

Of course it's nothing like that, it's just understanding basic business models and economic theory. Most industries are fairly predictable.  It's just that people get swayed by emotion (also predictable) and hope that they can get onto the next best thing before everyone else can.

Want to hear a definition of an economist? Someone who won't bend to pick up a dollar on the sidewalk. Why not? Because he knows that someone else will get there first.

I think this is really funny, but then I know a lot of entrepreneurs, all busy bending for the dollars.

economist cartoon humor: Careers advice centre
From Jantoo

Okay, so here's my final industry overview, and my predictions for the future.

Predictions for the Future of Publishing

1. The shake-up for traditional publishers will continue

I do not see, both as an outsider and a supplier to the industry, the changes required by trad publishers  to survive. And yet their pricing remains high (one of the arguments by Amazon in their ongoing dispute with Hachette), they are not developing new talent and there is a definite trend to outsourcing their supply chain. Access to available substitutes (e-books or POD) is increasing. Trad publishers of mass-market fiction have limited Unique Selling Points (USPs).

Personally, I think this is sad. Publishers do bring a lot of benefits - for one, they ensure the reading public receive a quality experience. They are arbiters of literature, and literature both defines and shapes a society.

2. The business model for publishing will change

Traditional publishing houses do have some competitive advantages and these will continue in the longer term.
  • Access to high performing authors
  • Rights 
  • Competitive printing costs
  • Distribution channels
However, the relationship between author/publisher will change. It is likely that there will be a shift to partnership models. Author-as-venture-capitalist. The author may part fund the publisher. This would be a massive shift for the industry, taking the writer from supplier to partner. There are signs this is emerging already: Ingram has announced a joint model with Barbara Freethy

Other organisations may also enter the market. Printed books are still the widest form of reading and are still where the margins are, so companies with strengths in print and distribution when combined with a high-performing author's stable could do well.

I think it will be an interesting time.

Similarly (as discussed earlier), there will also be a rise in indie publishing houses. The innovative will survive. Note to self: Keep an eye on IPOs for these ones - there are likely to be some very smart operators emerging in this space.

3. The demise (or plateauing) of Amazon as a digital publishing platform

I'm nervous about this prediction, as I'm also aware that Amazon is one of the smartest companies around. But Google is nothing to be sneezed at and increasingly, authors are looking at Google books.  Similarly, the new iOS from Apple included ibooks as a standard app. And with the rise of tablets and smart phones as reading devices, kindle is loosing its edge. The irritation by authors with Amazon should not be understated; the perception in the industry that Amazon is 'arrogant' and 'in it for the money' (Duh!) has been stated by a number of very influential opinion-leaders. At best, this is massively bad publicity. At worse, this could lead to anti-trust suits.

From A Snapshot of Reading in America, 2013
4. The smartening of authors

Twenty years ago, only the desperate or the marginal thought of self-publishing. Now, it's accepted practise, but you need to know how to navigate the process. Authors will have to become business-savvy to survive. There will be more people entering the market, and competition will increase. Already, most of the best sellers (including the traditionally published) are extremely smart business people. So, in addition to the smartening-up, I predict an increase in self-help tools for authors, including quasi full-service publishing houses.

5. Mainstreaming of Indie

Books are sold through personal experience and through word of mouth. And if good writers are self-publishing, good readers want to find them. Mainstream arbiters of taste, such as Publishers Weekly, are now offering reviews to self-pubbed authors. Goodreads, purchased last year by Amazon, offers the social media experience, directly connecting readers with writers.  My prediction is there will be more 'established' platforms reviewing indie works and that the quality of indie works will rise. The term 'indie' will truly mean 'independent'.

This isn't a comprehensive list. I haven't talked here about pricing models or changing platforms (audio, streaming) or non-English speaking markets, although these are also trends worth watching.

Up Close and Personal

So where does this leave me, in my quest for financial security?

This is the last situation analysis post. From now on, it will all be personal. Because analysis only takes you so far. I have a feeling for where the opportunities are now, and I need to try it for myself. Stay tuned!

PS - if you're interested in reading more about strategy and industry predictions, have a look at Porter's Five Forces, a business model developed by Michael E Porter in a seminal paper in the Harvard Business Review.

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