Publishers: Increase Value, Not Prices

The record labels showed the world how to let a billion dollar industry slip away. The publishing industry paid attention, but it is not clear whether it will avoid the same fate or repeat it.



As much as we love internet-connected devices, content is still king. The nerdiest among us may be in denial, as we crave more powerful computational devices, but we are passing dawn in the era of casual computing. Most people use tablets, smartphones, even laptops for browsing the internet and listening/ reading/ watching old media.

From geeks to grandparents, the gadgets that people go for are the ones that serve up the content they want when they want it. Don't believe me? Go remove all the music, movie, and book content and apps from your tablet or superphone. I'll wait. Now that you are free of all those silly movies, books, and music, does your device feel more useful?

The truth is, if tomorrow, web-connected gadgets could no longer access online music, movies, and books, don't look for me: I’ll be holed up in a basement hoarding water and cans of beans because Internet Armageddon is upon us.



Old media still matters. Screen resolution and display technology, audio driver and speaker performance, onboard and expandable storage, cloud services, airplay and DLNA, wifi and Bluetooth, even battery life are all a lot less sexy without content.

I am a consumer and I care about content. I care about music, I care about movies, and I care about books. I judge my devices on how well they deliver the content I want. I obsess about the best streaming applications. I research and compare cloud storage solutions and am so heavily invested in the marketplaces where the content I want is available, it affects the devices I buy. Content matters and so do the content creators without whom my favorite song, movie, and book would not exist.

Frankly, I’m tired of hearing content publishers tell me consumers don't care about content because I don't believe them. Consumers care about content and content creators. What consumers don't care for are content publishers who make it harder than it should be to engage unique and captivating content.



The music industry is not dying a slow death because consumers are indifferent to content. The industry is falling apart because it got blind-sided by technological innovation, sat idly by while the value of its physical product depreciated, and let third party retailers completely dictate pricing. Then, long after everything was broken, it tried to litigate and legislate its way back to the good old days.

Record labels have spent the last decade taking everyone and their mom to court. And in courts of law and public opinion, they have argued against technological innovation and for their own inherent right to make money off consumers, all while standing in the way of seemingly everyone who tries to make legal, high-quality digital music accessible. Today there are over 800,000 Android phones activated daily and you still cannot buy Warner Music on Google Play Music.



What has the book publishing industry learned from the music industry? I wish publishing would learn there is less money to be made fearing digital media than there is embracing it. Instead, it appears publishers have learned "do not let third party retailers set your prices." It is not that lessons about pricing structures are not important, it's just those are not the most important lessons to learn from the demise of the music industry.

The primary purpose of a publisher should be to add value to content and to make money as a function of that added value. For years, book publishers – like movie studios and record companies – added value to their respective media (pairing content creators with editors, producers, and distribution channels) and made unfathomable sums of money. But when publishers began to value their respective bottom lines over publishing and adding value to quality content, they wrongly focused less on the product, which consumers care about, and more on making money, which consumers could care less about. Said differently, instead of trying to bring unique products and innovative ideas to the marketplace, publishers expected to continue cashing in because of their reputations and market position.



The Department of Justice filed an antitrust suit against Apple and five of the six biggest book publishers in the US for colluding to fix prices on electronic books April 11, 2012. The allegation is that the publishing houses along with Apple held secret meetings and together hatched a plan to force Amazon to sell ebooks at a higher price. The defendants claim their actions were pro-consumer because they represented an attempt to break Amazon’s stranglehold on the ebook market. Predictably, none of them was too concerned with the side-effect of charging and earning more for the exact same products across the board.

Three publishing houses, Simon & Schuster, Hachette, and HarperCollins, quickly settled while two, Penguin and Macmillan, along with Apple, defiantly proclaimed their innocence and made it known that they are seeking vindication through litigation.

Right now, two of the six biggest publishers in America and the biggest tech company in the world are preparing to argue in US Federal Court that they all independently reached a decision to raise the prices of ebooks – and ultimately increase their profit-margins – because it was in the best interest of consumers. Is it any wonder that consumers are not in love with publishers?



The world may never know if these publishing houses are guilty of colluding to fix prices. But consumers already know they are guilty of focusing more on their respective bottom lines than producing ever more engaging content, innovating technologically, and restructuring their partnerships with content creators in ways that incentivize creators to work with them to forge business models built around new opportunities to reach consumers.

Instead of using the "transitive property of enemies" (my enemy’s enemy is my friend) to partner with Apple, why didn’t these publishing houses have the gumption to band together and challenge Amazon directly? If what they wanted was an environment that benefited consumers, they could have created another online platform and device agnostic bookstore together, similar to how the television networks joined together to create Hulu. Every publisher could set their own prices - while avoiding Apple’s (ludicrous) thirty percent surcharge - and consumers would have had a platform that was potentially more accessible than the iBookstore. Instead, these publishing houses fell victim to the lure of what was essentially a guaranteed payday and exchanged one paymaster (Amazon) for another (Apple).

Of course there are more meaningful ways to increase the value of books than putting books on more devices. Publishers should be focusing on innovating books and helping authors and readers get closer together. It boggles the mind that physical books are basically the same artifacts they have been for centuries. Though there are innumerable improvements in production practices, a book today still looks and feels like a book from 100 years ago.



Ebooks represent an important leap forward, but most of the innovation that exists in ebooks can be credited to hardware engineers, software designers, and coders - not the big publishing houses. Why does HarperCollins need Apple’s help to produce an e-textbook? Where are the online book readings hosted by authors? How come there isn’t a social media solution for book clubs? The fact is, in the eyes of most consumers, Oprah has done more to sell books over the last decade than publishing houses.

Piracy isn’t the only reason publishers are afraid of digital media. They fear digital objects will obfuscate the value of a physical books in the eyes of consumers. Publishers should see digital media as an opportunity to add more value to more readers in more places. In the digital world, books should be easily accessible, interactive, multi-media and engaging. And, if an digital version is simply a reprint of a physical artifact, it should cost less.

Publishers should be dropping big cash on R&D, finding ways to innovate physical and digital books. Their investments would help consumers understand, and be more comfortable with their pricing. They could enhance the value to published and unpublished works and invent a powerful new way to recruit authors, editors and production talent. Publishers could add demonstrable value to the equation and give consumers reasons to buy their books. Instead, they have all simply raised their prices.

Content is critical, so why are the content industries struggling? The simple answer is selling stuff – even stuff that seemingly everyone wants and is willing to pay for – is not easy. The more complicated answer is when you are selling a ubiquitous product – an album, a book, even a smartphone – there comes a point when the market is saturated. The economics of selling change. Customers begin to think differently about the value of objects. Consumers want content from creators and they want publishers to increase value, not prices. Record companies and publishing houses must restructure their business models around adding value through innovation and incorporating emerging technologies or face extinction.