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Thursday, December 06, 2007

Print is dead and most content tends to be free

Print is dead and all content wants to be free — two bogeymen of the digital age, with some edge of truth, but based on current visibility, still unlikely at those extremes. But it’s undeniable that the economics of print publishing are very different today than what they were before the web, and more content is available for free on the web than any media company could ever have imagined.

Most of the discussion about the future of print publishing and paid content centers on the content, which makes sense, but the content hasn’t really changed that much (despite the emergence of some new forms) — nor do I think the value of content has changed in the minds of content consumers, e.g. people who value journalism still value it — their numbers haven’t diminished as so many fear.

What’s changed radically is the value of DISTRIBUTION.

For many people who paid for print publications, including newspapers, magazines, and books, a significant part of the value was in the distribution. That DOESN’T mean people don’t value the content anymore. It means that the value of having it delivered to their doorstep every morning, or having it show up in their mailbox, or carrying it with them on a plane — in print — has CHANGED because of the availability of digital distribution as an alternative.

The problem for people who sell printed content is that the value of the distribution and the value of the content itself was always deeply intertwined — now it’s separable.

People ARE willing to pay for certain digital content, but they AREN’T willing to pay for the distribution — specifically, not the analogue distribution premium. Tim O’Reilly has a fantastic piece on the economics of eBooks, in which he makes this fascinating observation:

And as for the kind of books that you don’t read from beginning to end, but just use to do a job like looking up information, or learning something new, the “all you can eat” subscription model may be more appropriate. With Safari, we’ve increasingly moved from a “bookshelf” model (in which you put books on a bookshelf and can only swap at month end) to an all you can eat model, because we’ve discovered that people consume about the same amount of content regardless of how much you make available. All you can eat pricing lets people take what they need from more books, but it doesn’t increase the total amount of content they consume. It merely changes the distribution, and in particular, favors the long tail over the head.

Instant full access to a searchable digital library is a radically different form of distribution from buying reference books one at a time and putting them on your bookshelf. But here’s the fascinating part — “it doesn’t increase the total amount of content they consume.” People still value and use the content in much the same way, despite the radically different distribution model. By unbundling these books into a digital library, consumers essentially repackage them by searching for and selecting specific content items.

So even when consumers value content enough to pay for it, they intuitively understand that it doesn’t cost the publisher nearly as much to make the content available digitally as it did to put all of those books physically on a shelf. That’s why consumers aren’t willing to pay for the equivalent of buying ALL the books in print. You can’t price a bus ticket the same as a plane ticket simply because they both get you from point A to point B — it costs a lot less to drive a bus than fly a plane.

This is why I disagree with Tim here (as he debates the findings of a consumer survey):

But Marie’s poll goes on to conclude that “over half of people surveyed expected e-book prices to be $5 or less and 1 out of every 5 expected the price to be $2.50 or less.” She says:

We believe that the Publishing Industry will very quickly discover that they’re blessed with ELASTICITY. That is, the lower the prices of e-books up to a point, the more net revenue they drive (thus the cannibalization effect on traditional book sales will be overcome). E-books may start around $10.00 each, but come down in the 2008-09 timeframe and approach $5.00.

It’s true that new price points can sometimes attract new readers — that’s what happened with the rise of the paperback. But note that as paperbacks became the dominant format, outselling hardbacks, prices rose substantially for both paperbacks AND hardbacks. They didn’t keep falling. So if prices fall to $5 or less, as predicted, you can equally bet that they will rise if and when the electronic format becomes dominant.

The problem with the comparison between paperbacks and ebooks, is that while the average person could tell you that printing and distribution for a paperback is cheaper than for a hardcover, they could also tell you that “printing” and distribution for an ebook is A LOT cheaper than for either a paperback or a hardcover. When paperback and hardcover prices rebounded, it was because consumers were still willing to pay a premium for both forms of distribution.

To find the right price for ebooks, publishers need to FORGET the value of distribution in the traditional print model. There’s only one question — what is the CONTENT worth? (Even the ability to search an entire library can’t be valued — Google has commoditized it.)

I’m of course making an assumption that widespread digital distribution will do the same thing to books as it has to newspapers and music — but no type of content, despite the differences, has proven immune to the effects of digitization. The easy and frictionless microchunking of digital content — an article, a song, a book chapter, a clip — will continue to redefine production and distribution of content. Books are not immune. (Neither are movies, but that’s another topic.)

So does that mean there’s no value left in print distribution, be it a book, a newspaper, or a magzine? NO.

Print publishing won’t be dead until the people who value print distribution are dead — and that’s going to take at least a generation. People will still pay for print publications when they DO value the print distribution, e.g. the newspaper on the doorstep, the book or magazine in your bag on the plane or at the beach.

But the reality that print publishers need to face is that the number of people who value print publishing will continue its long, slow decline, as the digital generation grows up. That means print publishers need to completely re-evaluate the economics of their print publishing operations according to a 50% rule.

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