Beware of Being a Battersea
I was not surprised by the Bookseller’s leading story this morning reporting 8 of the top 10 publishers are experiencing a dramatic downturn in sales in in the first 24 weeks of 2010. Key takeaways were:
- don’t attribute the downturn to the recession
- the economic situation is only accelerating the problem not causing it
- book sales will never likely recover again
- most publishers over-publish for today’s market
- competition for reader’s time is intensifying
- publishing’s business practices are outmoded
- coping is about lowering the cost of doing business
- publishers need to get better at understanding consumer behaviour
What surprised me was the lack of advice – few things were said about initiatives that can be taken to lower the cost of doing business – my experience of change leadership dictates that a blend of the following is necessary:
- The downturn is a catalyst for change – use it to drive change at every level of the business
- Business needs new vision – if the current vision is no longer relevant – what vision is there? – who is on / off the bus – is it being communicated effectively?
- Improve your vision of profit drivers – ensure everyone understands the drivers and how they can contribute
- Restructure the business so that it has a newly articulated mission – the business needs to look “out” not in
- Put your best people on your biggest opportunities – move bums on seats to get new momentum and fresh initiatives in the business
- Create a culture of “initiative” not “fear” – recompense the bold
- Budget for failure – things are going to get a lot worse – don’t be meek – bring sales down then bring your costs down in line to preserve your margin and some headroom
- A clear business focus works best when you divest all non-core activity – you can always come back to it in more prosperous times
- Put technology at the heart of the company
- Promote (or recruit if you need to) a digital marketing expert to your board – they know how to lower the cost of reaching customers more cost – effectively using digital marketing
- Put time aside for redefining your business purpose and structure – no matter what you think the future is DIGITAL — how will your digital plans compensate for the downturn in print sales? match numbers to the vision
- Work fast and don’t waste time trying to preserve the existing – get advice from others
I’m not surprised at the Bookseller’s report, but am surprised if anyone thinks this is anything new. (I’d also be interested in knowing whether those breakdowns hold true for the US as well. I suspect they do over all, but differ in detail.)
I’ve been following publishing for a while, and the issues reported were present well before ebooks were even a gleam in a vendor’s eye. Unit sales were flat or down, revenue was up (if it was) due to price increases, and there were simply too many books chasing too few readers. Everybody knew there were too many books being published, but no one wanted to be the first to trim their lines. The fear was that they would lose the retail shelf space and not get it back.
And add publishing’s traditional 100% returns policy. If the book didn’t sell, it could be returned for credit, so the retailer bore little risk. And given the nature of the distribution network, it could be a year before you knew if the book sold. Everyone knew that was a recipe for disaster, too, but no one wanted to be the first to try to change it, for fear of losing out to competitors who retained the existing practices. We are only now starting to see experiments with offering retailers higher discounts in exchange for limiting returns.
Personally, I consider market share the wrong number to look at. There’s no value to having the biggest market share if all it means is that you are losing even more money than your competitors. It’s like the old joke about “We’ll lose money on every sale but we’ll make it up in volume!”
But in terms of meaningful suggestions, it’s not very simple. “Take costs out.” Everyone is trying to, through a wave of mergers, consolidations, and layoffs. “Put technology at the heart of the company”. Well, they’re trying to do that too, though some of the tools aren’t really there yet. “The future is digital”. Yes, it is, but no one really knows what that means.
I suspect publishing may through the sort of evolution that affected the computer industry as hardware became cheap enough and powerful enough that desktop machines could do what had previously taken expensive multi-user systems to do. Various companies like Digital Equipment Corporation brought out “super-micro” systems of their own, but sales couldn’t ramp up fast enough to cover the losses as customers migrated away from the flagship mini-computer systems. DEC no longer exists, with what remains of it now owned by HP, and DEC is far from the only casualty.
We may see something similar in publishing. There’s a large and growing market for ebooks, but there’s also a perception on the part of the buyer that ebooks should be much cheaper than a paper book. Since the big competition is for the reader’s discretionary time, I don’t see huge increases in units sold simply because it’s a cheaper ebook. Can a traditional publisher actually shift to ebooks and make money?
And the biggest barrier to innovation may be the fact that publishing doesn’t operate in a vacuum. A lot of the majors are units of media conglomerates that saw supposed synergies in having all forms of content under one roof, and the publishing divisions are under pressure to produce returns comparable to film and TV operations. I don’t think a book publisher can produce numbers like that, and we’re starting to see those combinations come apart, such as Time Warner selling off the Warner Books division to Hachette.
I don’t see the head of a publishing division getting a good reception if he tells his boss he has to downsize and bring sales and costs down to match reality. The response will likely be a flavor of “I hired you to grow the business. I want your resignation on my desk in an hour!”