Handling Disruption – 3rd in the Occasional Series
Big House Publishers Staring Disruption in the Eye
Recently I wrote about handling disruption and offered some steps to take when faced with disruption. One of the key steps was to ensure that the organization is on the lookout for the mere potential of disruption. From a business perspective disruption ought to be treated at seriously as cancer, and early detection could be the difference between sustaining the life of a product or service. Disruption remains one of the greatest challenges in the life of a product manager or product marketer, not to mention the CEO, so it seems to make sense to continue the conversation by offering up examples of clear-cut disruption in action. Today’s entry, the impact of eReader adoption on traditional publishing.
Amazon continues to build out a strategy that places them centric to a new publishing landscape. Their Kindle, oriented almost completely to the consumption of the written word, is the clear front runner in the eReader market. Their closest competitor, Barnes and Noble’s Nook, seems to not really know what it wants to be, and the iPad appears to be capturing an almost completely different market. Also consider that at the beginning of this month Amazon announced an ad-supported version of the device which sells for $25 less than the low end version in exchange for delivering advertising over the device (sounds suspiciously like print advertising to me, no?). And finally just a week later the announcement that Amazon has finally sorted out eBook lending through public libraries.
The resulting disruption of all this hardware success? Big publishers may very well find themselves completely irrelevant. A middleman that will eventually be squeezed entirely out of the publishing ecosystem. Consider this Wall Street Journal report that 30% of the entries on a recent listing of Amazon’s top 50 best selling digital titles were priced
at $5 or less. In fact 12 of the top 50 were selling for under $1. The disruptive effect is that the access to 
inexpensive content is giving rise to a host of new authors who, prior to this eReading age, would never have had a prayer of gaining national notoriety or publishing success.
Need a more tangible example of the disruption in action? How about taking a look at the search popularity of Mitch Rapp vs. Donovan Creed. Rapp, the literary brainchild of wildly successful author Vince Flynn, is a CIA assassin taking it to terrorists with a vengeance. Flynn’s last Mitch Rapp release, American Assassin, sold digitally for approximately $15. Creed, belonging to author John Locke, is a former CIA assassin with a significantly sharper wit than Rapp. Vegas Moon, the latest Creed offering’s price tag? 99 cents. Turning once again to Google Search Insight take a look at recent search popularity between the two.
It is interesting to consider the economics here. Locke’s 99 cent novels net him , according to the wall street journal article, about 35 cents apiece. But his publishing costs are a mere $1000, and he grossed over $126K in 2010. The price point makes Locke’s work an easy decision for readers, and his growing popularity gives him the flexibility to test the price points to determine where he can comfortably land above the 99 cents .
Another example would be Seth Godin’s recent decision to start The Domino Project (read the post a great breakdown of the change in publishing) and eliminate the publishing house that mediated the distribution of his efforts to his market place. The first offering from the Domino Project, Poke the Box, listed at a digital eReader price of $7.99. A previous effort, Linchpin, went for about $15 in hardback. Godin’s established authority allows him to set the price in that range, but less known would-be-trade authors could easily test the market with a low risk effort priced at the 99 cent point that seems to drive readers to see if the author aligns to their tastes.
What about journalism? Is the same applying here? And does the eReader have as much impact? It will be interesting to watch the performance of the aforementioned ad-supported version of the Kindle. Rapid adoption and access to affordable content might just turn the kindle into the magazines and periodicals of the digital age. There is something more at work here, and that would be the surprising revival of long form journalism, due in part to the Amazon providing a home for non-fiction too short to publish as a book and too long to reside in a magazine. Sarah Lacy formerly of business week and currently writing for TechCrunch recently wrote about a new effort, Byliner that enables journalists to capitalize on the revival.
Success for these efforts will most certainly ebb and flow, and it remains to be seen if the Kindle will indeed entrench itself as the choice device on which to consume the written word. Regardless of the eventual success and outcome of self-publishing or what goes on in the eReader market it is unlikely that we’ll ever return to the days of the big publishing house. In ten years time it is much more likely that the big names in written content distribution will look more like ByLiner, Godin’s Domino, or John Locke’s individual effort then Simon and Schuster or Random House.
Disruption. Big house publishers are staring it straight in the eyes. Makes one wonder what the internal conversations sound like when they read stats like the 30% of the Amazon top 50 are selling for less than $5. Keeping an eye on their decision making and reactions will offer up insight into what they might be and provide excellent examples of how they decide to handle this disruption brought upon them.
Update: Seth Godin interview diving deeper into the disruption currently underway in the publishing industry. Worth the listen.
