Throughout my career as a publisher and platform manager licensing and distributing eBooks and streaming video, I have encountered no shortage of publishers and distributors who too easily succumb to the fallacy of zero sum thinking. The basic belief is publisher-direct sales will suffer if the same content is licensed for distribution. The advent of multi-channel, digital distribution created a context of risk assessment, trade-off thinking and option selection that publishers were more likely to view – in the early days especially – as fraught with risk rather than opportunity rich.
For example, place yourself in the chair of the editorial director at a major college textbook publisher in the early 2000s. The overwhelming majority of sales were flowing through college bookstores in the form of print titles. The only competitor to your product was the product itself resold as a used copy. Then, in 2007, in conjunction with other major industry players, you launch a platform to sell the eBook copy of your textbooks: CourseSmart. Now you and your leadership team are considering the potential impact of eBook sales on print sales (lower per unit price but higher margin than print). The used book resale market is becoming more efficient with new entrants like Chegg, and new platforms for library and consumer distribution are emerging with increasing regularity. Across these platforms new buying models are also emerging: demand-driven access, evidence-based access, subscription-aggregation, etc. By 2010 our hypothetical editorial director had to make a decision between retrenching around core content distribution strategies or experimenting broadly with packaging, pricing and distribution. The overwhelming majority of industry players erred on the side of not experimenting on the assumption new business models would disrupt known business models and have a negative impact on revenue and margin: zero sum thinking.
Experimenting with Packaging, Pricing and Distribution
I launched Business Expert Press in 2008 with a default assumption that experimentation in distribution was essential to our future. At launch we established a library collection that was sold publisher direct. We offered our eBooks on every consumer platform. We included our titles in popular aggregation platforms like Ebrary (now ProQuest Ebook Central), Vital Source and Ebsco eBooks. We included select chapters in distribution alongside Harvard Business Publishing Cases. We licensed select titles to emerging open platforms like Flat World Knowledge. And we offered simultaneous consumer and institutional single title pricing. Of course, as a start-up with no revenue base to protect we could be very adventurous, but many start-up publishing houses have launched with no such bias to content packaging innovation. As our business grew and evolved, we remained committed to what we referred to as our multi-channel distribution strategy. We described four unique channels: consumer, library, professional and course pack/cases and established as many relationships as possible within each of these channels. For example, in the course pack/cases channel we partnered with Xanedu and Harvard Business Publishing at inception and then sought to add more partners over time. And it worked …
The Myth of a Rational Consumer
In early 2011, I visited Syracuse University on an author scouting trip. The Syracuse library had recently purchased our 2010 Ebook collection for perpetual DRM-free access and thus all our titles were broadly available to all faculty and students. During this visit I passed through the college bookstore and found, to my surprise, print Business Expert Press titles for sale as course adopted. I did some subsequent checking on our channel sales and discovered that eBook sales of these same titles had processed through Apple and Amazon into the Syracuse area. In short, Business Expert Press titles, the same titles, had sold into the Syracuse University ecosystem in multiple packaging and pricing formats. This experience had a lasting impact on my content distribution thinking and led to three key observations that inform my view today that is decidedly non-zero sum: 1. The assumption of a rational consumer making informed trade-offs in a context of perfect information is a false premise but holds much currency in the halls of publisher strategy meetings. 2. Faculty, students and librarians are unique consumers with unique objectives that often overlap. 3. Channel partners amplify the publishers’ business and reach into segments and customer categories that the publisher cannot always envision.
The assumption of a rational consumer making informed trade-offs in a context of perfect information is a false premise, but holds much currency in the halls of publisher strategy meetings:
Put simply, and I am as guilty of this as my industry colleagues, when we do not move forward with an innovative access model at a given price point because we believe it will erode our sales in an existing access model, we are playing too conservative. Markets are not this clean and clear and this thinking does not account for a growing market perspective. If, for example, a publisher makes a title available only in the single user model and avoids a multi-user institutional price for access, sales will be lost at institutions and with faculty that favor and prioritize unlimited access. The publisher has latitude in price setting, digital rights management limits and can remove content from distribution if the revenue impact is unexpectedly negative, so why cut off the multi-user access model from experimentation? The examples are many. By avoiding product models and purchasing/business models in favor of protecting known single title sales revenue, an expanding pie of opportunity is closed off as well as an opportunity to learn and evolve the business.
Faculty, students and librarians are unique consumers with unique objectives that often overlap:
In the realm of content used for curriculum development, faculty, students and librarians often pursue access through mutually exclusive models that frequently overlap, as in the example I described of Business Expert Press content at Syracuse. The library may be pursuing a perpetual access collection development policy or a subscription-aggregation development policy and purchase irrespective of faculty and student selection. A faculty member may desire the title embedded in courseware, or a print copy, and thus make the content available through the college bookstore. And a student may prefer to purchase and access the content on her Kindle and buy direct from Amazon.
Channel partners amplify the publishers’ business and reach into segments and customer categories that the publisher cannot always envision:
There are endless opportunities to participate in innovative business models and access models and these efforts will reach users that were previously unimpressed, unaware or biased against existing business and access models. When ebook platforms began disaggregating chapters from books and selling individual chapter access whole avenues of usage and revenue opened; JSTOR began offering ebook chapters in discovery and access around 2015 and saw massively increased usage. Business Expert Press experienced a significant increase in sales when chapters were aligned with specific Harvard Business School cases. As new models emerged in corporate library sales that remunerated the publisher based on pages viewed, minutes viewed, etc. new revenue streams from new customers were added for Business Expert Press content.
Balance Experimentation with Smart Management Practice
Publishers must make wise decisions when considering new markets, new product configurations, new distribution partnerships and new business/access models. And the known revenue stream, margins and customer base are the foundation for considering and making these reasoned moves into experimentation. But zero sum thinking, being predisposed to believe new access/sales model will erode revenue one-to-one, is to engage in unhealthy risk averse management that will, long term, only hurt the business.
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