Has push come to shove yet? How publishers are reacting to disruptive forces from the social web

Report from the Semantico Digital Publishing Symposium on Publishing and the Social Web – Part Two

Disruption is happening unevenly across publishing. Where the commercial threat is most intense is also where we see the greatest ferment of evolutionary change in online business models. Winners and losers are not always easy to spot yet among the general fallout, but a clear message emerges: innovate or die.

This was one of the key findings of the second Semantico Symposium, held recently in London to discuss the impact of social media on publishers and information providers. An invited audience of publishing industry leaders debated the issues under Chatham House rules, covering the following three themes:

  • Trends and drivers
  • Disruptive effects
  • Strategy options

It was a stimulating event with a high calibre guest list, delegates attending from organisations including Bloomsbury, CABI, CourseSmart, Harper Collins, Informa, ITHAKA and the Royal Society of Chemistry. To do justice to the discussion, we’re reporting it over three blog posts. This post is on the theme of disruptive effects.

What do we mean by disruption?

Disruption is one of those words, common enough in everyday parlance, that take on new freights of meaning within a specialized vocabulary – in this case, a far more drastic one. A bit of disruption might be a good thing in our lives – if it’s caused by, say, an unexpected (and welcome) visitor, or a change of routine. But in business, especially technology-driven business, it is a word that causes shudders. Because more often than not we’re talking about the wholesale annihilation of enterprises; the destruction of entire business sectors.

This is certainly the somewhat apocalyptic connotation that disruption carries in Michael Nielsen’s 2009 article, ‘Is scientific publishing about to be disrupted?’ as he describes the collapse of print newspaper sales in recent years, and the newspaper industry’s apparent inability to offer any significant resistance to its online competitors, blogs such as TechCrunch and Huffington Post.

Neilsen criticises the callow assumption, too easily made, that large businesses like these somehow passively allow themselves to be disrupted – as the result of institutional inertia or blind stupidity. No, he says, the reasons are structural, systemic.

‘The problem is that your newspaper has an organizational architecture which is, to use the physicists’ phrase, a local optimum. Relatively small changes to that architecture – like firing your photographers – don’t make your situation better, they make it worse.’ Big newspapers need things like photographers, journalists on the payroll and big shiny offices to qualify as big newspapers. When a competitor comes along who has none of these things – and worse, doesn’t seem to need them in order to steal their readers – they have no way to compete in terms of costs.

One delegate to our symposium described a similarly structural effect due to what he called ‘VC economics’. This is where your competitor has a seemingly bottomless fund of VC cash that they are burning through and no ostensible business model. Neither of you is making money but they don’t care. It’s not a level playing field in competitive terms because you need to turn a profit to survive – and they don’t. The market is hopelessly skewed, to no-one’s benefit (except perhaps the end-user).

As Neilsen rightly says, an inability to counter structural disruptive forces like these is ‘a much scarier story’ than mere institutional inertia. Even blind stupidity can be corrected by effective leadership; but you can’t fight economics. And what that means, he says, is that, ‘disruption can destroy even the smart and the good’.

So who, among the smart and the good around our table, was feeling the fear?

Who is being disrupted?

As was noted in the previous report from this symposium, disruption does not present consistently across the publishing landscape. News is being disrupted by blogs, by Twitter, by Google; trade publishers are chiefly worried by tech’s ‘Gang of Four’, Google, Apple, Amazon and Facebook, while scholarly publishing, to the extent that it is being disrupted at all, is being disrupted by the Open Access movement and a generation of innovative new social sites such as Mendeley, Chemspider, etc.

Though the threat seems to come from different quarters in different sectors, in all these cases the underlying driver is social – a change in the way we all get and use information for leisure and work.

This change can seem rapid, as in news, or unexpectedly slow, as in Journals: it’s an irony that the web was created for the purposes of scholarly communication, and yet the current state of that market seems, to one tech-head around the table at least, like ‘an incredibly slowed down social media conversation’.

Change is also confusing, creating lots of contradictions and uncertainties; new value networks, new criteria of value. It’s a bit of topsy turvy world publishers find themselves in, where sharing (for which some read ‘IP theft’) is a way of gaining credibility for the young, where the best selling sci-fi author can’t be guaranteed to make the front page of Google, and where the most powerful consumers on the planet are teenage Japanese girls.

But are we really justified in talking about disruption? Are the prospects really so dire for traditional publishers as they are sometimes painted, so long as they can adapt to this new world? Is it not more a matter of evolutionary change than annihilation? Dinosaurs after all, didn’t actually die out: they just evolved into birds. Publishing itself is certainly in the throes of evolutionary change, but can individual publishers evolve?

Responses to disruption

Neilsen describes something he calls an ‘immune response’ as the first reaction of a traditional business challenged by disruptive incomers. This response is typified by New York Times editor Andrew Rosenthal’s remark: ‘Frankly, I think it is the task of bloggers to catch up to us, not the other way around’, (though this is not the last word on NYT’s response to disruption, as we shall see). Such businesses will tend to rally round their core values and the quality resources that have made them global brands. There’s another word for this stance: denial.

Publishers are not in denial: they are struggling to understand and to adapt to the change – which is why it is perhaps not wholly satisfactory to talk about disruption. As one of our delegates said, ‘it’s not about disruption, it’s about where the value’s moving’.

Once it becomes clear that rhetoric will not suffice, and that something clearly needs to be done to save the business, more proactive measures get taken. Inevitably, the earliest of these will tend to be defensive in character.

In publishing, transfixed by the example of how the music industry failed to defend its content assets in the face of widespread illegal downloading, the tendency has been to focus on IP protection. This has given us DRM and paywalls.

DRM, to take the first of these, is seen to be widely flawed. Though it can work well for rentals, it has yet to provide a satisfactory solution in the cases of purchase, without providing customer annoyance and over-stepping the boundaries in over-policing what would be considered legitimate behaviour in a physical world environment (lending a book to a friend, for instance). Once I have bought something, surely it is mine to do with as I wish? With the virtualisation of content, this becomes a less than safe assumption. What you are being sold, more often than not, turns out to be a highly limited and prescribed right to access a particular instantiation of a piece of content, in a particular format and on a particular device.

Paywalls have their problems too, chief among which is their tendency to trash the discoverability of content. Obscurity, as Tim O’Reilly pointed out, is a far greater threat on the web than piracy.

However it is too easy to see both DRM and paywalls as reflexive, even knee-jerk reactions to change. In the case of paywalls, particularly, the picture is far from black and white. It would be almost impossible to conceive of a publishing industry that did not have some form of paywall, and the decision about where exactly you position the paywall on a site; how much content is given away for free, and how much you protect, varies widely from site to site.

The Times paywall experiment, when first unveiled, seemed to open up a fork in the road: either you went the Guardian route and gave it all away, hoping for maximum visibility, or you took the path of Murdoch and protected everything to the hilt. A year and a half later, it’s still not clear which of these models is winning. The Times has paid subscribers in the tens of thousands, and advertisers who value the chance to hit a more select and selective target audience (reportedly) while the Guardian has boosted its worldwide audience massively, and seen healthy growth in syndication rights. But both concerns are still losing money.

Meanwhile the FT, after early adoption and a lot of early experimentation, is judged to have made a success out of monetizing its highly specialized, premium content online, while the New York Times has shown encouraging results more recently through instituting a ‘soft’ paywall. Rather than a sharply forking path what you actually see is a ferment of evolutionary change and experiment in the newspaper world, as the threat of disruption causes publishers to investigate new business models.

The growth of smartphones, tablets and readers adds further change – and leads to further experimentation. Subscription access rules on the iPad for newspapers and magazines, and the Guardian now has a paid app for iPhone as well as a free one. Fremium is becoming a dominant model in mobile for many different sorts of content.

The tide of experimentation flows fullest in newspapers because they have been the biggest sufferers, in revenue terms. Many publishers in other parts of the forest feel that they face a dilemma in deciding whether they should wait and see or plunge in – but it only looks that way because they have a choice: if your business is disappearing before your eyes – as newspapers have seen theirs doing – your arm is forced. Innovate or die.

It isn’t difficult to forsee trade publishing undergoing similar contortions as their Gang of Four disrupters continue to move in on both their readers and authors: it may be that newspapers are at the front of a curve.

When it comes to scientific publishing it might be that real disruption, the soon-come event of the decade, is just around the corner. In the UK, the government is changing the way it allocates research funding, moving away from impact factors and towards demonstrable effect in the community, both economic and social (that word again). And HE has a whole new stakeholder map now that it is no longer taxpayers stumping up the fees but students, through their loans. And when the generation raised on Facebook and Scribd and ‘free’ music downloads wakes up to that fact …

The debate continues

While disruption is certainly a force in publishing, it hardly seems that the whole category of traditional publishers are going to go the way of General Motors, MCI Worldcom, Digital Equipment Corporation and the other victims of disruption Neilsen cites. What we are seeing is a ferment of competing business models, innovation driven by necessity, and companies that have the ability to make large changes, when needed to stop themselves going out of business.

Innovation seems to be the key to survival, and the main source of competitive advantage – but what is the best way to achieve that?

Find out next time as our discussion turns to future strategy, in the third and concluding part of this report from the Semantico Symposium.

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