White paper: Where would you place your bet by Schilling A/S

OCTOBER 2014

Where would you place your bet? The bright future of the publishing industry

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SCHILLING WHITE PAPER SURVEY - OCTOBER 2014

SEPTEMBER 2013

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SCHILLING WHITE PAPER SURVEY - OCTOBER 2014

Introduction Schilling’s white paper 2014, “Where Would You Place Your Bet?”, published in cooperation with Publishing Perspectives and CONTEC at Frankfurt Book Fair, focuses on the many opportunities and the vast amount of creativity and enthusiasm that are still prevalent in the publishing industry. This white paper is rooted in a fundamental belief of ours, namely that this industry does have a prosperous future. This year, in our fourth white paper in as many years, our ambition is to stay positive and collect all the optimistic dreams and ideas that are out there and share them with the industry – and with you. Far too often we hear that publishing, as we know it, is doomed and that the industry will soon fade away, wither, and die. If you believe everything you read and hear, it seems the apocalypse of publishing is nigh! However, the long list of new companies and startups in the industry, some of them (still) small and some already well established and with a global reach, clearly indicates that not everyone believes the bleak prophecies. We hope that neither do you. Toronto-based Kobo, a global leader in eReading, recently decided to invest in hardware and distribution, German Dotbooks went for curating and content in 2010, Goodreads has chosen to focus on social media marketing, and codeMantra from Boston started out with a clear focus on digital solutions but now covers the full value chain. The list of new companies is long, and each has its own idea about which area to focus on and how to make it in the industry today. One thing that all the companies and all these people have in common is that they have invested in publishing because they believe it is worth it, literally. Another thing they have in common is that their investment decisions were made while looking ahead, while thinking of tomorrow and of what is possible, not while looking back or thinking of yesterday and of what is impossible. We are all affected by our history, customs, traditions, and obligations, in general and most certainly when we make investment decisions. History and legacy may be assets for a company but they can also be obstacles. We have therefore asked the participants in this white paper to dream a little, to let go of all thoughts of “how we usually do things” and discuss more freely the opportunities in publishing today and in the future – with no obligations on or limitations to their current business – and then tell us where and how they would invest or in which direction they would move. What would their idea of a publishing company built from scratch in 2014 look like? What would their focus points be? Would it be a venture into distribution and sales? Would they go into content and curating? Establish a tech company to automate production? Or something else, brand new and unheard of, and completely different? In short: Where would they place their bet? “MY PUBLISHING COMPANY OF 2014 WOULD BE DRIVEN BY ENTHUSIASM.” Publishing executive

Topical industry white papers “YOU MUST ALWAYS LEARN AND CHANGE” Publishing executive For the fourth year in a row, Schilling is zooming in on the publishing industry. In 2011 we focused on the general challenges in the trade publishing market. In our white paper “European publishing towards 2015” 18 leading executives from European publishing houses offered their views on the battle in the industry in the coming years. They discussed digitisation, new business models, product development, rights, the editorial process, sales and marketing, and the relations between publishers and authors. The last topic in the first white paper, the relations between publishers and authors, was further elaborated in our second white paper in 2012 (published in cooperation with O’Reilly Media) titled “Author and publisher relations – how publishers stay competitive in digital publishing”. A large number of international key persons from the industry, including authors and publishers, discussed the changes in the way they work together in book publishing. They particularly focused on publishers’ traditional business models being under pressure from digitisation, from lower costs involved in book publishing, and from the growing opportunities for self-publishing and distribution via new digital platforms. In 2013 we turned our focus towards education in the white paper “Educational publishers of the future”. A number of qualitative interviews were conducted with leading executives from educational publishers in Denmark, Sweden, Norway, Finland, Holland, the UK, and the US, and with selected heads of private and public schools. Via a questionnaire, specially developed by Schilling, they were asked to give their views on the most important challenges educational publishers face in the coming years.

ALL WHITE PAPERS CAN BE DOWNLOADED FROM SCHILLING.DK

OCTOBER 2014

Where would you place your bet? The bright future of the publishing industry

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OCTOBER 2013

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Educational publishers of the future – how to meet market demands in times of digitisation, new media, and new learning methods

NOVEMBER 2012

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Author and publisher relations – how publishers stay competitive in digital publishing

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SCHILLING WHITE PAPER SURVEY - OCTOBER 2014

For this white paper we have interviewed around a dozen international publishing executives from companies in the US, the UK, Canada, and the Scandinavian countries and challenged them to think outside the box. Instead of focusing on the many demanding changes that the modern publishing industry abounds with – these are the themes discussed in our previous white papers – we have asked the publishing executives to focus on the opportunities, and to try to reinvent themselves. How would they go about it if they had to start all over? Of course we acknowledge that there are challenges in the publishing industry – no one ever said it would be easy – but the many thought-provoking and engaging answers we got during our interviews confirm what we have always believed deep down: that this industry, the multi-faceted world of publishing, still has great potential for growth. As always we aim to inspire and spur the creation of new ideas and visions to empower publishers to not just meet the challenges brought on by increased digitisation heads on, but to help the industry fulfil its growth potential by meeting customer demands for new products, both print, digital, and in combined solutions. “THE VALUE OF GOOD STORIES IS CONSISTENT, NO MATTER WHAT. IT IS ONLY A QUESTION OF CHANGING FORMATS – HOW WE READ, WHICH DEVICES WE USE, NOT THAT WE READ. SO, OF COURSE PUBLISHERS HAVE A ROLE TO PLAY ALSO IN THE FUTURE.” Publishing executive PARTICIPANTS IN THIS WHITE PAPER: Bloomsbury, Bonnier Books Nordic, Bonnier Books Finland, codeMantra, Goodreads, Klaava Media, Kobo, Lindhardt & Ringhof (Egmont), MacMillan, Octopus Publishing, Profile Books, The Publishers Association, Rosinante&Co (Gyldendal), among others. All interviews were conducted by Schilling with a specially developed questionnaire in the spring of 2014.

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Focus points “THE MARKET IS FLAT IN TERMS OF TURNOVER, BUT READING AS A MARKET IN ITSELF KEEPS GROWING. HOW DO WE CAPITALISE ON THIS? I BELIEVE WE CAN.” Publishing executive The questionnaire that we used for this white paper focused on some general questions you need to ask yourself before launching a publishing industry startup. These are questions which any investor would ask before he or she would finance a new business idea. We focused on four main dimensions: Mission statement, opportunity, people, and context. MISSION STATEMENT What would be the main goal of your company? When asked to rethink their foundation as a company in the publishing industry, the executives who participated in the white paper survey seem to agree on one thing in particular: The need to specialise. The future of publishing lies in specialisation, in being the best at one thing and not the second best at many things. The market demands this of publishers today, and it has taught traditional publishing houses an important lesson, forcing them to be sharper and more focused. Why does your company exist? What is it that you do better than others? What is your focus – is it content? Digital solutions? Is it distribution? Or marketing? The general trend in the publishing industry nowadays is to define publishing in a much broader sense than has previously been the case. Today all links in the value chain are part of the industry, and publishing is no longer limited to what happens in the traditional, well-known publishing houses. Now, more than ever, players in the industry who are solely focused on content and curating really need to believe in the power of storytelling if they want to succeed. They also need to believe in their own business idea and business model. It is not possible to create a success through cuts and rationalisations, or through defensive thinking and a ‘better-safe-than-sorry’ approach. On the contrary, there is a widespread belief among influential publishing executives that you need to invest continuously in the future and be prepared to take risks if you want to make it in the industry today. However, decisions must be rooted in rational thinking, in facts and figures, and not so much in tradition or ‘feelings’, which – it must be said – publishers have had a tendency towards in the past.

“TRADITIONALLY, PUBLISHERS HAVE BEEN SERVING THE FULL VALUE CHAIN, BUT THEY HAVE TO FOCUS MORE ON WHERE THEY ARE REALLY ADDING VALUE. WHEN THEY FOCUS ON CONTENT CREATION, FOR EXAMPLE, THEY HAVE TO FREE UP RESOURCES ELSEWHERE.” Publishing executive “WE NEED TO ONLY DO WHAT WE DO BEST.” Publishing executive

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OPPORTUNITY How would your company work the market and its opportunities? Who would be the customers? Why would they buy from your company? How would you reach them? How would your products and services be priced? What about sustainability and competition? The answers to these questions obviously vary and depend on the service provided, but some common themes can be detected: All the publishing executives emphasise the need for a sharp focus on the core competence of the company, whether it be content, delivery, software, digital solutions, social marketing, or something else. On top of that they point out how new companies and startups tend to be much more open-minded, willing to take risks, enthusiastic – and not weighed down by tradition, legacy, a heavy organisational structure, and habits. They possess a freshness and enthusiasm in their approach that established companies would do well to remember – even when they grow big.

“A BIG ORGANISATION TENDS TO TIE YOU DOWN. WE HAVE TONS OF OPPORTUNITIES, BUT WE NEED TO BE SWIFTER AT DECISION MAKING.” Publishing executive Equally important, the fact that companies focus more and more on specialisation – on what they do best – seems to be creating a new openness and making way for new, exciting, and mutually beneficial partnerships. There was a tendency in the industry before – as indeed in most industries – to protect one’s own, and a fear that cooperation and outsourcing, letting other companies in the door, and sharing valuable information would somehow damage business and hurt the core of the company. But now there seems to be a new and growing consciousness in the industry, a new-found courage when it comes to cooperation. Acknowledging that each and every company needs to identify and focus on its core competences makes it easier to be flexible and work closely with others, and to understand what part of the value chain your company belongs to, and have other companies provide the services that your company is not a specialist in. In the end, all this is for the benefit of the consumer. This is also true for self-publishing. This could and should be seen as an opportunity, not a threat, by the established publishing industry. Self-publishers are in fact a major talent pool, and mainstream publishing houses would benefit from cooperating with self-publishers, for example by providing professional distribution channels and professional marketing tools. At the end of the day, nearly all self-publishers who have made it have done so in collaboration with a publisher. Last but not least, the trend of specialisation is not only apparent in the way companies change their company profiles and in terms of finding their place in the value chain; you can also see it in the production of traditional, printed books for which there is still a market full of opportunities: • Coffee table books. Well designed, high-quality paper, hardback books, made to impress and to be a symbol, a design object, something that tells a story about its owner. These books are not as fragile or as influenced by the pressure from pricing and production costs, changes in the market, or from the power of digitisation, as other kinds of content and printed books are, mainly because there is no real alternative. The coffee table book, simply put, is here to stay. • Children’s books. These are not so much about the platform on which the content is presented, they are more about circumstances, about the situation in which they are used and consumed: they are about parents and children spending time together, interacting, sharing an experience. This gives them a competitive edge.

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“SIZE IS NO GOAL IN ITSELF. BEING ADAPTIVE IS THE KEY.” Publishing executive PEOPLE What kind of people and what kind of expertise would be needed? To what extent would the production be in-house and to what extent would tasks be outsourced? What kind of organisation would be established and built upon? There is a strong focus on enthusiasm and creativity when it comes to hiring and building an organisation, this to an extent where these qualities for a majority of players in the industry outweigh having the ‘right’ degree or a particular CV. A modern company in the publishing industry also looks for employees in non-traditional areas, people with a variety of backgrounds – the search for the right employee may take place in the gaming industry or among digital natives, combined with more traditional recruiting in the mainstream publishing industry. Again there is a strong focus on the value of outsourcing and of collaboration among publishing houses and between publishing houses and the providers of the required services, from sales to digital work. In other words: The traditional hierarchy where the publishing executive was placed at the top of the pyramid and all major decisions were made by him or her is no longer the way forward. Today, successful players in the industry understand that a publisher, regardless of his or her success, is not – by position alone – necessarily the best equipped to make all decisions. When you specialise – which happens more and more, also with regard to organisational structure and employee profiles – managers and executives need to delegate and let different experts take care of things and make the important decisions in their part of the value chain. Leave marketing to the marketing people, leave the matter of rights to the legal departments, and leave decisions about print runs and sales channels to logistics experts, etc. In the future, the key is trust. These changes are challenging for many links in the value chain – for the management as well as the employees – but changes in culture and attitude are necessary, just as you need to come to terms with the fact that when you need people with new skills it may mean that people with older skills become redundant. Although referring to Amazon has almost become cliché, the company is nevertheless a very good example of how you can challenge traditions and rules in the industry. They are not afraid of hiring employees with little or no direct connection to the traditional publishing industry – people who have no particular fondness for books and might just as easily sell something else, people who do not have any cultural agenda and who are primarily focused on business and sales figures. This is the key to understand Amazon’s success: the fact that they prefer to hire talents with a distinct flair for sales rather than for literature. It explains the growth and success of Amazon and also explains why the traditional players in the industry has treated Amazon as an outsider, as a company that is not quite comme-il-faut. But this is a mistake – rather, traditional publishing houses ought to look at how and where they could get inspiration from the way a company like Amazon does business and organises itself.

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This trend of cooperation and specialisation is not limited to the publishing industry. Indeed, you see the same trend in other industries, and globally the publishing industry stands to benefit greatly from this trend and will be better able to function in a global market place. This is of course only the case for publishing companies that truly understand the need to evolve and adapt, and are able to keep a sharp focus on creating a flexible and agile organisational structure. If they can do this, they will be able to employ more project-oriented task forces that vary from project to project and can undertake specific tasks depending on for example content, sales channels, or target groups. In this way, publishers gain competitive advantages and build up their ability and potential to explore and use content on more platforms and explore a variety of business models.

“EDITORIAL, DESIGN AND MARKETING ARE CORE COMPETENCES FOR A PUBLISHING COMPANY AND SHOULD STAY IN-HOUSE. OTHER PARTS OF THE PRODUCTION COULD MORE EASILY BE OUTSOURCED – SALES, FOR INSTANCE, BUT MOST IMPORTANTLY DIGITAL SOLUTIONS AND PLATFORMS. CONTENT IS KING AND SHOULD NOT BE JEOPARDISED BY LACK OF DIGITAL EXPERTISE WITHIN THE ORGANISATION.” Publishing executive CONTEXT Which external factors impact the success of the company? Obviously a number of external factors influence whether a startup is successful or not, just as they have an impact on the success rate of more established businesses. In particular, the progress in technological development – that changes everything and creates a global market – and the level of state regulation seem to be influential. • VAT is a factor. Many countries around the world have reduced or completely removed VAT on printed books but kept taxation on the sale of digital products such as e-books. Some publishing executives stress the significance of VAT/taxation and government regulations and deregulations – positive as well as negative, obviously depending on the content of the particular regulation – on both production costs and sales in the industry. • Technological development creates endless opportunities. Needless to say, it has become much easier and cheaper to produce e-books, apps, websites, etc., but new technology such as broadband connections and new, cheaper and portable digital devices also makes new and less traditional markets – and countries – accessible.

“IF YOU LOOK AT THE INDUSTRY FROM ABOVE YOU WILL FIND THAT THINGS ARE IN FACT NOT AS BAD AS WE TEND TO MAKE THEM. WE ARE EXPERIENCING SOME MINOR SPLASHES, NOT HUGE WAVES.” Publishing executive

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Globalisation and digitisation The majority of the participants in this year’s white paper survey have a strong focus on globalisation and digitisation. The key to growth and success in the publishing industry today and not least tomorrow is to understand the importance of these two game changers. A GLOBAL PERSPECTIVE In the broadest of perspectives, globalisation and the increase of international trade create growth. This is also true for the publishing industry. New markets can be reached and the number of potential customers is multiplying. But the industry needs to embrace the new opportunities. When publishers get together for the major annual fairs in London and Frankfurt, a large number of agents and publishers are of course present, each and everyone is there to sell their product, and they present their newest titles and publications for potential international buyers. They do this by presenting promotional samples and elaborate on potential sales figures. If the author is well known, references to previous published works will be given and perhaps in the end a sample of the script will be sent to interested buyers. This is a manual and, so to speak, analogue process, limited by time and the priorities of the individual sales person. Imagine now, a global database with powerful and serious presentations of each and every new book for sale, all the rights on the market, a database that all potential buyers could access and go through in their own time and at their own pace …

“PUBLISH IN ENGLISH EVEN IF YOU ARE FROM SWEDEN – EXPORT IS EASY.” Publishing executive Obviously some forms of content are limited to certain geographical areas, but the fact that we now live and work in one another’s countries also provides new great opportunities for the publishing industry. The market is expanding. The publishing industry needs a global mindset. One publishing executive points out that exporting fiction from small markets to big markets is an area that provides new earning potential and needs to be explored. This is especially true for smaller publishing houses from smaller countries and thus smaller markets. The possibility of exporting content to new markets without actually having to share the profits with a local publishing company is worth looking into for many smaller businesses. Traditionally, the export of books was done in cooperation between the original publishing house and a publishing company in the country of interest that helped with distribution etc. and took its share of the earnings for services provided. This is no longer a necessity, since everything today can be handled by any company in a digital world. New business models that are focused on digital distribution therefore leave both authors and their publishing houses with a larger financial share than used to be the case. Needless to say, this does not happen without technical and practical obstacles, but on the other hand there seems to be no structural barriers that hinder an exploration of these ideas and markets.

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“GLOBALISATION IS AN OPPORTUNITY FOR SMALL PUBLISHERS. WE CAN SELL OUR PRODUCT DIRECTLY TO THE US, THE UK, ETC. THIS IS PARTICULARLY TRUE FOR E-BOOKS. MAYBE PRINTED BOOKS CAN ALSO BE TRADED THAT WAY AS WE GET MORE AND MORE USED TO A GLOBAL MARKET. AFTER ALL: MOST OF OUR LIMITATIONS ARE IN OUR MINDS.” Publishing executive In a sense, globalisation is closely linked to digitisation. This has to do with how we navigate when we educate and entertain ourselves. To a larger degree than ever, we seek and get information from the same international sources. The ability to reach readers all over the world through digital platforms and devices is therefore a great future asset.

“GLOBALISATION IS AN OPPORTUNITY – NOT A THREAT.” Publishing executive

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A digital perspective Among the answers to the 2014 white paper questionnaire, one thing stands out: There seems to be an interesting shift in perspective when it comes to how the publishing industry looks at digitisation. There used to be a tendency, particularly among the more traditional players in the industry, to view digitisation as a threat or an obstacle, something that had to be dealt with out of necessity. Today, increasingly, digitisation is seen and discussed among publishing executives as an opportunity for growth and development. This important change in attitude is in all likelihood fuelled by the fact that sales have gone up all around for digital content and because e-books have manifested themselves as a substantial source of revenue in the publishing industry. These new insights – and the fact that digitisation has gone from being a somewhat abstract concept to something concrete and profitable – have shifted the balance. How to deal with digitisation on a day-to-day basis is, however, still a complicated matter. There is today a genuine understanding and acceptance of the fact that books, as we know them, are being redefined by digitisation. This goes for the way we buy books and read books. The companies that produce and distribute books are also undergoing changes. They have to. But while this is true, it is also important to understand that digitisation is neither a monster nor the solution to everything. For example, digitisation in the form of e-books and online distribution of content has put pressure on publishing houses and forced them to lower their prices. But this pressure is not caused by digitisation alone – you also have to take into consideration the liberalisation of (book) markets and more competition from other media. In conclusion: Digitisation is not a golden opportunity in itself, but it is one of many aspects to think about when contemplating the future.

“WE NEED TO FOCUS ON CONTENT AND DELIVERY, BUT WITH BETTER UTILISATION OF MOBILE POSSIBILITIES. MOBILE DEVICES ARE PERFECT MARKETING TOOLS AND IT IS MUCH EASIER TO CREATE CONTENT FOR THESE DEVICES.” Publishing executive “THE ELIMINATION OF INTERMEDIARIES BETWEEN AUTHOR AND READER, THE FACT THAT WE ARE ALL PUBLISHERS – I READ WHAT MY FRIENDS PUBLISH ON FACEBOOK ETC. – IS THE KEY ISSUE HERE. THIS IS THE TRUE CHANGE. NOT DIGITISATION IN ITSELF.” Publishing executive There is one area in which traditional publishing houses with relatively small effort could benefit from embracing digitisation, as Wired editor, entrepreneur, and author of the book “The Long Tail” Chris Anderson has often been quoted of saying. They could revitalise their backlist by making it available to customers digitally. This is an obvious, low-cost opportunity which has been discussed for years in the industry, but not many publishing houses seem to fully consider it. It is an idea that seems to stay in the back of the collective mind, perhaps because many publishing house employees tend to stay highly focused on the near future and on chasing the next bestseller, and they do not see any immediate revenue gain to be had in publishing a backlist digitally. Also, they might be put off by the potentially complicated negotiations with authors that such a manoeuvre would require. It is often argued that a simplification of the rights area would be an important first step towards reusing old content in new digital markets. This is just one example of how publishers see digitisation as an opportunity.

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The question of rights Another publishing executive points out how complexity in general is an issue in today’s publishing industry – complexity in contractual terms and royalties as well as in the supply chain. To prosper and grow, the industry needs simpler and more efficient solutions. This, the simplification and administration of rights, should not be seen as an obstacle or a challenge but as an opportunity. This is a concrete area in which there is a lot to gain for everyone, if all players in the industry – i.e. all links in the value chain – work together.

“IT IS ALL ABOUT THE ‘MINIMAL, VIABLE PRODUCT’. HOW DO WE MAKE PUBLISHING MORE LEAN, ADAPTIVE, AND CHANGEABLE?” Publishing executive So, especially rights and the administration of rights could benefit from a thorough clean-up. Basically, the complex area of rights and regulations is still based on a world which no longer exists in its own right, i.e. the world of print publishing. This means that many new opportunities to use and distribute content are overlooked or not being used because of the heavy administrative burden involved in reusing content digitally or in new markets. It may also require cumbersome negotiations between the author and the publishing house. Very often, if companies in other industries request content from a publishing house for marketing, branding, or promotions, the publishing house and the author find themselves in cumbersome and unnecessary negotiations about terms that do not match up to the potential outcome. There is a common cry for simplicity and flexibility for the managing of rights. And there is a common belief that such a manoeuvre – creating a simpler and more flexible rights administration – would benefit everyone and create many new opportunities for better commercial use and reuse of content compared with today.

“WE HAVE TOO MANY FORMATS. IT IS TOO COMPLICATED TO FEED THE PIPELINE. WE NEED BETTER SYSTEMS. ALSO, THE WAY WE CREATE CONTRACTS AND ADMINISTER RIGHTS HAS TO IMPROVE. THERE IS CONSIDERABLE OPPORTUNITY FOR IMPROVEMENT HERE.” Publishing executive

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Discovery

We live in a world where there are more books to choose from than ever before. Self-published books and traditionally published books. At the same time, there has been a dramatic shift to online purchasing of books – around half of all books (printed books and e-books) in the US are purchased online. The numbers for Denmark and the other Scandinavian countries are not as high – yet! But change is here to stay. And, if you want to read a book, you can pretty much start reading it instantaneously thanks to e-books and tablets. The problem is not content or access any more. That has been solved. But it has created a new problem for readers: How do I decide what to read next? For authors and publishers it has created a different challenge: Discoverability. It is getting harder to be noticed. The ability to be seen, to get the product noticed, is crucial in a time where the competition for people’s attention – television, the internet, movies, games, and access to it all online and on mobile devices – is fiercer than ever. Getting the printed book to the bookshop or making the e-book available online is no longer sufficient. You also need to focus on social media and marketing; there are opportunities in that field that have not been utilised properly. This ties closely together with the field of consumer insights. Today it is possible for a publishing company – through social media, market research, and analysing internet behaviour – to learn a lot about its readers. This is, however, a new discipline that needs to be explored. And the focus must be on branding and making your company stand out and be remembered. This has to do with niche production, why does your company exist? What is your product and why should the reader choose you? One publishing executive discusses the possibility of concentrating on the production of luxury books and inspirational books heavily focused on design and photography, another talks about the need to focus on apps and getting the attention of mobile device users. Rethinking marketing is another important issue. One publishing executive suggests promoting a book about a soccer player by advertising it on the tickets for a soccer match. Remember: The greatest limitations are in our minds.

“ONE OF MY FAVOURITE THINGS I HAVE LEARNED FROM JEFF BEZOS (CEO AND FOUNDER OF AMAZON.COM) IS THAT THE BEST WAY TO INVENT THE FUTURE IS NOT TO THINK ABOUT WHAT WILL CHANGE BUT RATHER WHAT WON’T. WHAT DO I MEAN BY THAT? IN TEN YEARS’ TIME, I CANNOT IMAGINE READERS WILL BE SAYING ‘I DO NOT WANT TO FIND A GOOD BOOK TO READ’ OR ‘I DO NOT WANT TO TALK ABOUT THE BOOKS I READ WITH OTHER READERS.’ AND I’M PRETTY SURE I WON’T BE MEETING ANY FANS OF JAMES PATTERSON WHO WOULD NOT BE EXCITED ABOUT BEING ABLE TO TALK DIRECTLY WITH HIM … I THINK THE BIGGEST THREAT TO PUBLISHING IS THE COMPETITION FOR PEOPLE’S TIME. HOW DO WE CREATE A SITUATION SO THAT WHEN PEOPLE ARE FACED WITH THE CHOICE OF PLAYING A VIDEO GAME, WATCHING A FILM, OR READING A BOOK, THEY WILL CHOOSE TO READ A BOOK?” Publishing executive

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Branding and direct sales Branding means discovery. Most companies in the trade publishing industry agree on this: their most popular writers are bigger brands than the publishing house itself. No one buys a book by Stephen King because of the company that publishes it. They buy the book because of … Stephen King. While this is true, it has also become a non-constructive and non-productive fallback position for many trade publishers. This is a shame, because there is a lot of undiscovered and unused potential for branding in non-fiction. This is an area where a publishing house can decide to stick out, to be different, to brand itself as being particularly good in certain areas. A publishing house like Phaidon is a great example of this potential and tendency. In the music industry they seem to be better at capitalising on this trend, companies such as Sub Pop, Rough Trade, and XL Recordings are all examples of smaller companies with strong brands within their community and customer segments. And if a company such as Nike can maintain a strong brand cooperating with a star such as Michael Jordan – with an extremely strong personal brand – why shouldn’t publishing companies be able to do the same?

“SELLING DIRECTLY TO CONSUMERS WILL BE CRUCIAL. PUBLISHERS MUST FIND A WAY TO GET IN DIRECT CONTACT WITH READERS.” Publishing executive Traditional thinking when it comes to distribution and sales, to getting the product out to the consumer, to delivering content to the reader, needs to be challenged and reconsidered. There is an urgent need for a more direct link between publisher and reader. The consolidation we have seen in traditional retail (brick and mortar) which gave retail the advantage of having direct contact with the consumer, has shifted to – and at the same time grown stronger in – e-trade. The most obvious example of this is of course Amazon who have basically taken over the whole market of e-books and print. Traditional businesses are left behind with no direct contact to buyers and readers despite the fact that in a digital market this contact, this feel for what the buyers want and for who they are, is becoming increasingly important. Nevertheless, and even though Amazon seems to be dominating, the battle is not lost. Publishing houses do still have the opportunity to create sales channels themselves, which will also give them access to valuable market research and information about their core customers. But this, once again, demands a change in thinking and organisation. Publishing houses must team up with new players with agendas different from their own – and this is not Amazon, since Amazon also wants to publish books themselves. To be a success, future collaborations in the publishing industry must be based on the old saying: “opposites attract”. Partners with different agendas, different strengths and specialities, who support each other in reaching a common goal, bringing various forms of expertise to the table, will make powerful and winning teams. In conclusion, no one is out of options, not now, not in the future, but publishing houses need to create partnerships with companies outside their natural comfort zone, both when it comes to direct sales, as discussed in this chapter, and to the industry in general. The future looks a lot brighter if we face it together.

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Thank you We would like to give our warmest thanks to all the people who have participated in our white paper survey and shared their thoughts and visions about the exciting opportunities in the publishing industry with us – and with our readers.

Michael Bhaskar, Digital Publishing Director, Profile Books David Bass, President of Sales, codeMantra Otis Chandler, CEO and Founder, Goodreads Richard Charkin, Executive Director, Bloomsbury Jacob Dahlborg, CEO, Bonnier Books Nordic Ari Hakkarainen, Founder, Klaava Media Stephanie Jackson, Publishing Director, Octopus Publishing Pieter Swinkels, VP Content Acquisition, Kobo Timo Julkunen, MD, Bonnier Books Finland Jakob Malling Lambert, CEO, Rosinante&Co (Gyldendal) Seonaid McLeod, Publisher Relation Executive, The Publishers Association Belinda Rasmussen, Publisher, MacMillan Children’s Books Trine Ravn, Editor-in-Chief, Lindhardt & Ringhof (Egmont)

SCHILLING WHITE PAPER SURVEY - OCTOBER 2014

WE GROW PUBLISHING Schilling develops and provides the publishing industry with innovative turn-key solutions. Our trademark is our know-how, employees, and the added value we create for our customers in partnership with them. Our know-how is all about innovation grounded in knowledge, personal integrity, and strong process management focused on enhancing the customer’s business. Schilling employees are second to none in the industry – that is why we hired them. Our customers are high-profiled and leading publishing companies in the Scandinavian and European markets. Most of them have been with us for the past 10 to 20 years. We represent more than 40 years’ experience in the industry. We are situated south of Copenhagen, 15 minutes by car from the city centre and Copenhagen Airport. In the past four decades we have managed to build a company known for its attractive work environment and its ambitious systems developers with a vast knowledge of the publishing industry and a burning desire to make a difference. Our core competence that builds on close relations with each and every one of our customers and based on the unique Schilling model helps publishing companies improve their bottom line. ”Successful delivery” is not good enough. Our aim is to “supply success” – to grow publishing. The success of our customers is our success. One example is our service and update agreement which is part of the Schilling model. Another example is our round tables at which we share knowledge with key opinion leaders in the industry. Without knowledge we are unable to fulfil our promises. Our work revolves around our core, the Schilling staff.

Schilling is to a great extent grounded in knowledge – that is why most of our employees hold a master’s degree from leading universities or have earned their position through experience from the publishing industry. A Schilling virtue is to hire only the best – and make them even better. But our first, last and everything are our customers. We grow publishing – in partnership with them. It is of the highest importance that we succeed in enhancing our customers’ business through consultancy and our innovative turn-key solutions, such as:

• • • •

Contract, rights and royalty management Publishing Lifecycle Management Author relation management Subscription management

Our relationship with our customers goes beyond the traditional business relationship – it is a partnership. Together, we grow solutions and our customers’ business. We are proud to say that our customers are among the largest and healthiest publishing houses in Europe. Publishing companies have been made more profitable from our solutions that make the handling of logistics, royalty, rights, production, and their overall business more efficient. We make sure that our educational business arm serves to update employee skills in the publishing industry through our tailor-made courses. And we are proud to say that through conferences, especially the Scandinavian Executive Publishing Meeting, we are generously sharing industry trends with the whole industry. Contact For further information about this white paper, please contact Kent Valentin Fallesen at kvf@schilling.dk or see www.schilling.dk.

SCHILLING WHITE PAPER SURVEY - OCTOBER 2014

For more information please contact JAKOB LARSEN Head of Consulting jal@schilling.dk Tel: +45 20 21 24 03

Schilling A/S Baldersbaekvej 24-26 DK-2635 Ishoej Denmark Tel: +45 70 27 99 00 schilling@schilling.dk www.schilling.dk

ANJA BELTOFT Marketing Manager ab@schilling.dk Tel: +45 21 47 46 20

KENT VALENTIN FALLESEN VP Sales kvf@schilling.dk +45 29 72 70 02