As an author and a publisher, I think a lot about the future of publishing--(but not as much as I should!)...I find a lot to like and learn from Tim O'Reilly. Unlike most publishers, Tim has a strong unequivocal brand experience tied to his publishing/information empire.
I particularly enjoyed Tim's The Long Snout post in which he describes lots of elements of his current thinking about his business model.
At O'Reilly, we've always said that a key part of our business is watching the alpha geeks, and then building products to bring their knowledge and insights to a wider audience. We have a product pipeline that begins with O'Reilly Network articles, which can be produced relatively quickly, and can test demand for products like books and conferences that take more time and resources to produce, and we end with Safari, as a searchable, remixable database of technical content.
...because we've built a whole suite of XML-based publishing tools, a rich e-commerce engine, and a huge customer base with Safari, we realized that if we integrated Aardvark into the Safari production pipeline, we could offer Safari subscribers paid early access to the books under development -- not just giving them periodic PDF builds but even daily builds, if the progress of the book merits that frequency....
This morning, we announced one of the first fruits of this development effort: a new program for early access to books under development, called Rough Cuts. The first titles to be available include Flickr Hacks, Ajax Hacks, The Ruby Cookbook, and Ruby on Rails: Up and Running....
As to the business model, we were inspired by the success of the Pragmatic Programmers' recent beta books program, which sells early access at a discount from the print book price, and a combination of early access and the print book at a higher price than the print book alone.
One of my clients told me about a very popular open source book that was delivered in chapters online--all of his developers downloaded it, read it and talked about it.. Then, when the book came out in print they all bought copies, told their friends, and it was a blockbuster success. I suspect it came from this series...
Tim goes on to say:
In short, you can buy online-only access to the Rough Cuts directly from us for about 50% off the expected list price of the final book; you can pre-order the print book for about 35% off the list price; and you can buy both together for only about 10% more than the list price.
I was with him up to there... but then Tim describes the costs and complexities of distributing print books.. in the current business model, and explains why it therefore becomes difficult to off print on demand at retail:
What's more, print-on-demand removes the financing provided to publishers by retailers. While manufacturing thousands of copies is expensive, if those copies are ordered up front by retailers who may hold them in the channel for years, the cash flow may actually be in the publisher's favor, with the quick cash returned by filling the channel subsidizing not only the cost of manufacturing and warehousing but also a substantial portion of the development cost. This goes away in the pay-as-you go world of print-on-demand and just-in-time inventory systems. In short, publishers are solving a complex equation that includes development cost, manufacturing cost, distribution cost, demand volume, price, and the cash flows resulting from all of those factors.
By the way, one large book retailer, Steve Riggio, Chairman of Barnes and Noble, disagrees with two parts of the current publisher-to-retailer business model. He would much prefer to buy the books outright without the returns clauses that most retailers insist on, and remainder the books himself, instead of the ridiculous current practive of sending them back to the publisher, receiving a refund and then buying the remaindered books back from a distributor in order to have mark-downs in the store... Steve is also a big fan of in-store on demand printing--see my earlier post, Predictions for Print Licensing Models.
I enjoyed the recent repartee between Tim's The Long Snout post and Matt Mankins post linking to his blog. In this post, Please Keep Retail in the Picture , Matt suggests that O'Reilly's customer-led business model keep retail book stores in the picture--especially the small independent ones that we all love to hang out in, by including an on demand print capability in O'Reilly's Rough Cut Series. I discovered that Matt Mankins' Lore Ipsum software company and bookstore is right nearby in Cambridge (Inman Square). So I plan to visit.
Lore Ipsum is an idea whose time has come--it's software that lets a used book store (why not new books, Matt?) simultaneously list titles for sale in his physical store and on a variety of online sites as well. Although many booksellers do this, it's been something they had to do on their own. This Web Service (software as a service) provides everything you'll need--presumably--to manage your own bookstore's inventory, catalog and sell your books AND post them and sell them online... Good idea.. Matt is reacting to Tim's contention that on demand printing in retail stores is uneconomic for publishers, since it removes one major source of publisher revenues--pre-selling books to bookstores, who then get their money back when they return the books.
I think that Matt is onto someting.. The "solution" for the very broken authoring-publishing-multi-channel retailing paradigm we have today is to redesign the entire value chain from the customer back... And, since many customers include the in-bookstore experience as a big part of their lifestyles, as consumers, we want the whole range of possibilities. We'd like to be able to see and feel and sample books on the shelves, find other books that "readers who liked this book also liked" IN THE STORE (even if we order them online from the store) AND be able to print on demand any book in any stage of progress..