What If They Said No?

December 12th, 2005 · No Comments
by Booksquare

We realize (truly!) that there is a fundamental difference between the music industry and the publishing industry. The two industries also have much in common, and given that music moves faster than publishing, the technological growing pains faced by one industry provide lessons for the next.

The challenge from satellite radio is the latest example of how technology and changing consumer behavior are undermining the longstanding business models for record companies, Hollywood studios and other creators of entertainment content.

Legacy systems — acquisition of product, distribution of product, associated accounting, artist development — are being challenged by the most powerful consumer tool ever invented: choice. Don’t get us wrong. Entertainment companies want you to have lots and lots of choice; they also want to print the menu you choose from. They showed up late to the party, but want to make sure they hors d’oeuvres they brought are served to everyone…during dessert.

Forget home taping, now satellite radio is killing the radio star. It is somewhat of a relief to know that, like a good anime series, a new uber-villain will come out of nowhere. Keeps our interest up. We’re not going to analyze the underlying arguments being made by either industry today, but want to ask a simple question: what if, in the next round of rate negotiations, the satellite industry says “no” to higher rates? Can the music industry afford to take their records and go home? Well, one supposes that depends on where the consumers are turning for entertainment.

Over in the world o’ iTunes, labels are looking for more money as well. One must remember that running a business is expensive. Oh sure, you can (and should) argue that the current system has exceptional quantities of waste baked into the process. There is still a cost associated with the work. Also bonuses.

And the music industry wants price increases at the iTunes bar. It is clear that consumers are satisfied with the current price of 99 cents. Sure some might be willing to pay more, but will they be willing to purchase in volume? If one pays for a song, will that reduce the number of songs purchased? More importantly, will the artist get a larger piece of that song? If in the past, three artists benefited from the fact that went to three different musicians, what happens now?

Labels are going to continue to push on this issue — and again we ask the same question. There is no evidence that consumers have embraced the industry-sanctioned models. At present, there isn’t a lot of incentive for iTunes to increase costs; such is the beauty of not putting all of ones business eggs in one basket. What if Apple says no to the music industry? Can the labels afford to walk away? What can they offer as a replacement? They’ve spent too much time and money fighting the inevitable. Institutional memory will reflexively reject any innovation.

What does this matter for publishing? Well, business guru Jim Collins has released his latest book as an “unofficial*” title while his next blockbuster is presumably being groomed for world domination. He chose to self-publish, partially to fill a market void.

Indeed, while some gurus put out a book every year, Collins’s research methods limit him to writing a book once every six or seven years, a time lapse that creates a sense of anticipation similar to that felt by devotees of “The Sopranos” or U2. He self-published the new booklet partly so no one would confuse it with his next real book, he says. But his decision to sidestep his regular publisher is part of a small trend; management gurus like Tom Peters and Seth Godin have also self-published titles. Thanks to the popularity of online bookstores and the way in which the Internet allows authors to communicate directly with their followers, “publishing is becoming increasingly irrelevant—you can get your book printed by yourself,” says Godin, author of “Purple Cow.” “The publisher doesn’t have as much influence anymore.” Collins says he’ll still use HarperCollins to publish his next full-fledged book.

The truth of the matter is that authors like Collins can self-publish and make boatloads of money by skipping the middlemen. Stephen King experimented with the electronic publishing process, and while the idea didn’t work out, we think that’s more a function of the model used rather than the idea being flawed. As the business changes, trial and error will become the favored tool for finding what works for consumers. Authors may discover that single-digit royalties and delayed payments (six month statement in the oughts? That’s just wrong.) aren’t worth what they used to be.

If major authors discover they can sustain good numbers following non-traditional models, publishers will have to fight for what they’ve gotten from these authors in the past. Right now, the publishing industry is in a comfortable position when it comes to working with authors. But as the motion picture and music industries have learned, technology and consumer behavior are changing rapidly — to win, you must anticipate the future. That means starting last year.

* – We presume this is like all the unofficial Beck albums.

File Under: The Future of Publishing