New Models for Book Publishing

February 17, 2011

By Kwanghui Lim

Traditional book publishers have been increasingly challenged by e-books and other digital technologies. We decided to organize a public seminar with industry participants to learn about new opportunities in this area.

A common theme among our speakers was of the growing fault lines between those who create content and those who distribute it. From the point of view of content creators, digital technology is not a bad thing. It presents new ways to reach customers. To a firm like Lonely Planet, printed books, e-books and apps are alternative and useful delivery mechanisms. The heterogeneity is a good thing since each delivery mechanism has its strengths and weaknesses. For example a map-based application on your mobile phone may be useful for navigating the streets of Melbourne, while a printed travel book might be preferred if you are travelling the Australian outback (books are more durable than electronic devices; they also require no electrical power).

Authors are beginning to explore new pricing schemes. For example several authors are trying to sell a larger volume of e-books at lower prices (around $2.99 – $3.99) instead of a small number of regular books at higher prices (say, $10). Other authors are trying “pay what you want” schemes. Our guest speaker Max Barry will be selling his next book as a real time electronic serial, distributing it directly from his website in small chunks and for an attractive price ($6.95). It is too early to know which of these will work well and for whom because the book industry has many different segments of customers with different needs. Furthermore, there are concerns with e-books around the issue of digital piracy. However, we were reminded by one of the speakers that for many authors, obscurity is worse than piracy.

Besides, piracy has long been a threat even with printed books: you will of course remember the photocopy machine which has existed for quite awhile, as well as those suspiciously inexpensive textbooks printed on poor quality paper brought in from various developing countries. It seems to me at least that in the digital world, selling a large volume of e-books at a low price makes a lot of sense. In this context, the serialized e-book has an added advantage because it builds a repeated interaction between the reader the author. Over time this may help create loyalty towards the author.

I see three areas of opportunity and these arise along the fault lines described above.

The first opportunity is with “apps”. It crossed my mind earlier this month that simply repackaging a book as an app gives the author tremendous freedom. With books, the author is stuck with publishing delays, parallel import laws and other legal impediments, not just the need to physically deliver products. With apps, all that is gone. Re-purpose a book as an app and it morphs into a software program, so different rules apply. If you go one step further and make the app exciting to use, you can counteract the myth that printed books are superior. Those who have tried The Elements on an iPad will find it hard to go back to a printed Periodic Table. Similarly, having compared both this app and the book version, I much prefer learning about photography using the app version which is more interactive and has built-in videos.

A second opportunity lies in offering new skills combinations. In order to serialize his next novel, Max Barry combined his computer programming expertise with a passion for writing: he is essentially selling each subscriber a private RSS feed as a separate product. Most people do not have this combination of skills, especially the generation of authors that went to journalism school and did not acquire a technical background. An opportunity exists for people who can bridge this divide and provide new tools and services to help content authors to craft their products and reach customers easily. For example, Graeme Connelly spoke to us about the new “expresso printer” at Melbourne University Bookstore which produces small print runs that were uneconomical in the past. I believe this is only a starting point, e.g., we don’t yet have the equivalent of WordPress for creating books with existing tools being either too complex or too amateurish.

The third opportunity lies in further disaggregating the value chain. I learned from the session that one of the benefits to authors of going with traditional book publishers is their expertise in editing. Publishers convert the messy raw material that is a manuscript into a curated experience that is proof-read, edited and checked. I suspect that the editing activity will split apart into a distinct industry segment, just as has happened in other industries such as semiconductors, which used to be vertically integrated but which now has some firms focusing exclusively on system development and others on chip design or manufacturing. This is pure speculation on my part, but I don’t see why the editing process, while valuable, needs to be tied much longer to the manufacture and distribution of physical products.

It is hard to predict how things will work out and I don’t think the traditional book will completely disappear. This industry is definitely going to be interesting to watch over the next few years.

Kwanghui Lim is an Associate Professor at the Melbourne Business School

This article was cross posted here at Core Economics http://economics.com.au/?p=6702

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Who Owns the News?

August 12, 2010

By Rebecca Mouy and Jake Goldenfein

News Corporation recently announced that it was about to start charging for online access to its news. It says the future of old media in the digital age is that consumers will pay for online news content in a similar way as for hard copy ‘newspapers’ – and it seems to be far from alone in its plans. But is this a sound approach in legal and business terms?

On 8 July, IPRIA in association with the CMCL and Melbourne Business School (MBS) presented a seminar entitled ‘Who Owns the News’ chaired by Sam Ricketson. Mark Davison and Stephen King (respectively of the Monash Law Faculty and Faculty of Business and Economics) presented on legal and economic perspectives of the future of ‘the news’, and discussant Kwanghui Lim (from the MBS) offered a brief recap of each of the presentations along with some suggested business solutions available to news publishers. Speakers’ slides as well as the podcast for the seminar is now available here so the details will not be canvassed in depth here.

Ownership rights over news

Mark Davison outlined the legal framework for news ‘ownership’ in Australia, concluding there is little copyright protection available for news, especially in the wake of the High Court decision in IceTV Pty Limited v Nine Network Australia Pty Limited [2009] HCA 14 and its application of the Federal Court’s decision in Telstra Corporation Limited v Phone Directories Company Pty Ltd [2010] FCA 44 (see Michael Crawford’s article in an earlier edition of Fortnightly Review for analysis of this case). However, he argued that in the current climate Australia should not follow the US approach of ‘hot-news’ laws or the European database protection in an effort to protect ‘news’.

The ‘hot-news’ doctrine in the US provides a quasi property right in “breaking news” and posits that such news can be misappropriated, eg by other news services. Davison argued that the hot news tort followed in various US States (including New York) relies on vague criteria leading to substantial uncertainty. The European Union database protection laws, on the other hand, have provoked a great deal of discussion on the distinction between ‘collecting’ and ‘creating’ a database. After grappling with this issue for sometime, in 2005 an EC Commission report on database protection stated the net benefit of the law was unproven.

Given the unsuccessful legislative attempts to protect news abroad and the current state of flux in Australia, Davison suggests that the best course of action is not to rush hastily into legislative reform and in the meantime consider whether exclusive rights over information are desirable.

Can the iPad do for news what the iPod did for music?

A vital question facing current news services is how to survive in the age of digital publication and distribution. Economist Stephen King examined the drastic changes the Internet has effected upon the business model for news media organisations.

King discussed the changes digital distribution has brought to news production, mostly in relation to ‘convergence’. He raised the topic of news aggregators such as Google News, which allow users to search by topic and access articles from multiple sources. This gives users an effective tool for sidestepping on-line news providers who limit access to subscribers, and raised the ire of incumbent media outlets such as News Corporation. These aggregators demonstrate the quantity of professional and amateur content produced on-line, and liberate users from relying on established sources of information.

The potential pitfalls of such services are that consumers become more capable of choosing the news sources that support or reinforce individual prejudices. However, once the pretence that official news services provide more ‘objective’ information is jettisoned, it is difficult to maintain that access to more information is not beneficial to consumers. The more raw the source, arguably the less adulterated the information. Personal biases may be more prevalent, but articles can eschew the political or editorial line of an established media outlet. Arguably, numerous amateur sources provide a clearer picture than a single incumbent news service.

The net effect of the Internet upon news production, in King’s view, is thus a benefit to the consumer through increased access. Competition ultimately drives the cost consumers pay for news to nothing. King proposed that in future, consumers might only pay for ancillary services or specialist commentary (perhaps something along the lines of The Economist) rather than factual news.

In this context, he referenced the position of Rupert Murdoch that the ipad will save the newspaper. However he pointed out that this raises the question of whether a specific interaction between a device and content can provide an experience a user is willing to pay for. Arguably, the comparison between the ipad and news with the ipod and music is flawed.

Prior to the ipod and itunes, obtaining music digitally was predominantly illegal, and users knew it. Itunes subsequently provided a service that adequately competed with piracy so that the financial detriment of sating one’s conscience was in-step with user expectations. While the ipad will offer attractive paid news services through specific subscription ‘apps’, there is no moral problem in obtaining free news from other services (also accessible form the ipad). Further, findings demonstrate that paid subscriptions or walls on online news are generally unsuccessful in raising revenue unless very niche. This leaves the difficult conundrum of what kind of business model may succeed for news publishers, and a discussion of the role of public broadcasters.

In discussion, it was suggested that public broadcasters (such as the BBC and ABC) are capable of providing quality journalism with the advantage of government endowment rather than relying on traditional revenue streams such as advertising. However, in response King argued there is little justification for investing taxpayer dollars in a service that is essentially equivalent to services provided by commercial broadcasters. He suggested it also raises questions of editorial independence, especially in reference to investigative journalism. However it was noted the independence of certain commercial publishers is equally questionable, and government endowments continue to produce quality investigative journalism.

Where to from here?

Kwanghui Lim suggested the following business options for news producers.

Close down: Lim suggested that the market is saturated and the only way forward for some newspapers will be to close down. He cited statistics from the Unites States that 42% of people say that they would not miss their newspaper much, and would find it easy to access their news in other ways.

Build complimentary services: This approach requires news producers to further develop current sources of revenue, namely advertising. Lim emphasised that in the current atmosphere, the majority of revenue is made through advertising and not subscriptions.

Fight back: Here news producers would fight against the challenge of the Internet by erecting pay walls or calling for subscriptions. Only a small number of publications have managed to do this successfully, including The Wall Street Journal, The Financial Times and The Economist.

Diversify: News producers could expand to become ‘media supergiants’ following the example of News Corporation. This would allow the substantial benefit of cross-marketing.

Reconfigure: follow example of the radio to create a new market for itself, for example recasting as a local newspaper.

For more from Kwang have a look at his post on the Core Economics website. There is also a good discussion of the issues on ipwars.com.

Concluding thoughts

The seminar provided excellent food for thought. As shifts occur in the market for news production, there is no doubt that legal and economic questions will be raised. What the seminar did not provide is answers – for the simple reason that there are no clear answers yet. Nobody knows which business model might be the most successful or which new technologies will shape the changes to come. If no business model emerges as the prominent or successful way to provide news online we will eventually face the question of whether copyright law is flexible enough to deal with the continuously changing conditions of online media.

Historically the price of news has always shaped the tone of content. When the first cheap newspapers emerged in the early 19th century, the consumer’s predisposition for ideological discussions, commentary on principles, and articles with political flavour were replaced by a developing interest in information and current events. With competition driving the cost to zero, this may equally drive professionally produced content away from in-depth investigation and commentary. As such, business models have been postulated where current events and information are free services, while niche commentary attracts subscription fees. However it is difficult to avoid the trend of competition pushing prices to nil.

Several audience members referenced the maxim that ‘good journalism has to be paid for’. While clearly there is a case for professional journalism, arguably the Internet has also provided a habitat for digital communities dedicated to exposing truths and bringing incumbent powers to account. While the form of content may be changing and the influence of established media dwindling, writers will always write and the modern obsession with sharing information will only grow.

Rebecca Mouy is an LLB candidate at the University of Melbourne.

Jake Goldenfein is an LLB graduate from the University of Melbourne.

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