Paulo Faustino "Book publishing management, changes and business models"
National Research University Moscow – December 5 and 6BOOK PUBLISHING MANAGEMENT,CHANGES AND BUSINESS MODELS Paulo Faustino, MSc, PhD, PostDoc email@example.com Presidente of Media XXI/Formalpress Porto University and Lisbon School of Mass Media Centrer of Investigation in Media and Journalism/Nova University of Lisbon Columbia Institute of Tele Information, Coumbia University
Key trends and main characteristics of book publishing business i) tendency to ownership concentration in large groups ii) pressure to increase the rates of return investment iii) increase in the editions of different book formats iv)obsession over bestsellers to save the balance results v)more editions and need for high-rotation books vi) maximization of the potentials of the technologies vii)having trends and authors that are truly global viii) growing interest in specialized niches to small companies ix) book publishing diversification in a multimedia approaches x) Importance of journalist people and celebrities as authors
Strategies and concentration in the book sector• Editors publish more than ever and there is even a super-abundance of new titles;• Concentration removes the importance of the traditional territorial distributors, favoring centralized retail;• The economic gains – synergies - are considered one of the main reasons for the operations of acquisition and business concentration;• The major international publishers have some competitive advantages: - economies of scale, - adoption of technologies, - marketing knowledge, - experience and practices
Example of potential sources of additional revenues to publishersbased on digital book publishing business Subscription Advertising – Sponsorship Users pay a fee to access the content Free access to content supported by for a certain period of time advertising or sponsorships Aggregate Products Mobile Phones Access to online content is included in Content is delivered via wireless the purchase of the printed product devices, with revenue sharing with the mobile operator Electronic Commerce Electronic Commerce Physical product or services are sold Contents are sold piece by piece basis through an online channel for online or offline access
Business Models ConceptNot merely the revenue stream of a firm. Are a tool for understandingand evaluating the business logic of a specific firm, namely:1. Reveal the concepts and foundations upon which businesses and theiractivities are built .2. Provide the architecture of a business in terms of value created,products/services provided, operational requirements, customers served, andhow it finances itself3. Helps identify most important commercial aspects of their activities4. creates understanding of revenue streams5. Clarifies financial dependencies and vulnerabilities6. Provides insight into potential for success7. Helps identify its differences from competitors
Business Models Answer QuestionsHow does it create value for customers?The real value is the satisfaction created to the wants and needs ofcustomers. Business models should answer: - What wants and needs are you serving? - What is the central valuecustomers wish and receive from you? - What is your unique valueproposition?-By serving human needs for diversion, relaxation, and emotional comfort-By providing quality content that creates an enjoyable and satisfyingexperience- By being creative and innovative in approaches to drama and comedy- By providing brand value, choice and ease of accessThese are not enough for success. A firm has to do these in a uniqueor different way
Business Models Answer QuestionsWhat business is a firm in? Business model describes:-The broad basic activity of the firm-The product/service provided product/service provided-The segment of the product/service industry in which the companyparticipates-Rail companies thought they were in the railway business-They didnt feel threatened when trucking and airlines developedProblem: they were in freight and passenger transportationBusinesses.Solution: for publisher the business is sell content; isn´t sell paper.
Business Models Answer QuestionsHow does it provide the product or does it provide service?Business model describes:- Its fundamental characteristics- The frequency of availability- When it is available- Where it is available
Business Models Answer QuestionsWho are its customers?-Are there intermediaries involved?-Are there firms or infrastructures that exist between the provider and thecustomer? Example: Wholesalers, distributors, service providers-What are their incentives to carry or service your product?-Are required infrastructures already in place and readily available to youand your customers?-Who pays to create intermediaries or infrastructure? Your firm, otherfirms, customers, or government-Who pays for services of intermediaries and infrastructure?- Who buys or uses the product and what needs and wants does it serve?
Business Models Answer QuestionsHow does it receive revenue?FACT: AN ABSOLUTE: Someone has to pay!The business model describes where the money comes from and howit is generated. We mean, sources of funding:-The Company - Investors - Advertising Sponsorship - Readers- Government Subsidies - Foundation GrantsPossible Revenue models:-Consumer payment - pay for use: single use, subscription low cost for basic use;higher price for extended use (upselling)- Advertising Payment pay for space/time pay for action: leads generated, clickthrough- Sponsorship: pay for association with product/service B2B payment- Licensing for use by other firms/publishers- Some firms rely on only one source of revenue; some combine diffenrent sources
Business Models ChangeWHY- When they are not working as expected or not working as well as in thepast- When the product or service is changed or the product extensiontakes place- When disruptive competitors appear: for example, Amazon-Dynamic business models dont change everything all at once small, incremental changes through improvements and innovation
Business Models Change1. Require regular attention and review; should not be conceived as permanent and stable change;2. On their own can be deliberately changed to include newproducts and revenue streams;3. Firms in mature industries must revisit entire business model toachieve growth and sustainability;
Pursuing Opportunities Requires Business Model Changes- Changing the existing model. The business the company is in, how itprovides products/services, its customer base, it revenue model- Expanding the existing business with similar new products/servicesthat have a similar business model- Adding a new products with different models
Pursuing Opportunities Requires taking Risks- Potential for new product failure or outcome different thananticipated- Potential for financial losses- PROBLEM: Publishing industries have not be risky for manydecades- Lost opportunities- Lost abilities to grow and develop in new ways.- Forced to live on existing (declining) activities
It also allows to:- Help identify the most important aspects of their activities- Create an understanding of the revenue stream- Clarify financial dependencies and vulnerabilities- Provide insight towards potential success- Help identify their differences when faced with thecompetition
Business Models Strategies• The innovative business models shoes the customer area which could be any of a number of industry segments where technology information and innovation is at a premium;• Within this customer area, key attention is directed by the new publishing organization to teams involved in innovation projects such as staff working on new product development• This focus establishes the purpose and context for the communication system or virtual community to be established.• Develop an innovation culture with clear methods to promulgate more and better innovation.• Embark on experimentation with new organizational forms: Knowledge Based Networking Organizations to develop network organizations and learning networks out of control- organizations• Support for new forms of organization may be engaged via development of an explicit knowledge management strategy.
The added value of the new service-based firm comes from:• Firstly, for the customer, the opportunity to interact with others to create new knowledge to allow new products and services to be developed and to improve existing business;• Secondly, for the large publishing organization, the opportunity to test out the networking model as a successor to the information provider model but with the option of developing this business as a spin-out rather than risking a total transformation of the current business model across the firm as a whole;• Thirdly, for the small organization, the opportunity to reinvent and center the firm along the lines of the emerging networking business model taking full advantage of the interactivity of the Internet.
Ansoff Matrix/Intensive Growth Strategies Products Present New Present Market Penetration Product development -Attract competitor’s customers -Add functions and features -Increase the global demand (usage -Increase product range frequency, used quantities, new -New generation of products uses)Markets New Market developement Diversification -Geographical expansion -Horizonta -New distribution channels -Vertical -New segments - Lateral
Description of Ansoff StrategiesMarket Penetration▪ The point of market approach consists of achieving a stronger penetration using currenteproducts in existing markets▪ This can be achieved through an increase of unit sales per consumer or through an expansion ofthe numbers of consumers by adopting aggressive price and communication policies▪ In a stagnating market, the strategy leads to an expansion of market share at the competitorsexpense.Market Develop Strategy▪ A second strategy option is to advance into new markets with existing products and services.▪ Market penetration and market development strategies can entail offering new applications for existingproducts or opening up new market segments.▪ In market development, the role of market segment plays is great importance. It permits a specific separationof markets and become.The are formed in accordance with specific criteria
Conclusions and Workshop IIProduct Development▪ This strategie focus on developing products or solutions for existing markets.▪ It must be taken into consideration that degress of innovation can vary considerably and arefrequentelly influenced by costumers perception.Diversification▪ Diversification introduces new products and services to new markets. There are threerelevant diversification strategies.▪ Horizontal diversification. The new products are similar to the previous products. The actual connectioncan be based on existing production technology, the imput factors used or the distribution channels.▪ Vertical diversification. This strategy expands your own action radius in earlier steps invalue creation chain. For example: production and distribution▪ Lateral diversification. In such a strategy, there is no longer a direct connection to theprevious products or market aspects. Example: education and training courses.
Ansoff Matrix applied to the book business 2.Current products for new 4.New products for new market Market development markets; Product diversification (E.g.: Internalization and (E.g.: Books and other New exploitation of new locations; functions associated to the books sold with newspapers and digital book, film adaptation, magazines) courses)MARKETS 1.Current products for current 3.New products for current markets; Market penetration markets; Product development (E.g.: Paperback books and (E.g.: Sale of book chapters,Current deluxe editions; orders and audiobooks, or CDs attached to services on demand - PoD) the book with additional contents, Courses) Current PRODUCTS New
Some market changes that impact the business model of the book◦ Tendency to economies of global scale and micro scale. Less median scale◦ Tendency to combine big hits and wait for their long-term sales. Longsellers◦ Tendency to the decrease in the importance of traditional bookstores. Online◦ Tendency to reinvent the life cycle of book and explore new markets. Supports Over the years, the traditional book business has undergone various competitive pressures, namely:◦ first came the bookstore chains◦ big retails – represent circa 50%◦ then the number of readers begun decreasing◦ more recently, Amazon introduced the process of disintermediation of sales◦ finally, we have the possibility of digital downloads in various device applications
Transversally trends in the book industry To summarize, we can mention some trends and changes thatcharacterize transversally the book industry:– the transformation in the nature of the book market and business– the increased concentration of resources from major publishers– the growth of internationalization strategies in different markets– the greater importance and impact of technologies and digital– diversification of revenues sources based on different ways to sell
General Conclusions and WorkshopsSo, the Book Publishing Organizations need to:• Develop an e-business strategy and vision that takes account of the likely emergence of a new style “network economy”;• Monitor the extent to which the potential for interactivity with the Internet is actually being exploited and involving author and readers;• Take on the battery of methods required for digital publishing innovation to occur, such as: virtual communities; online moderators; providing services not just content-based products, etc.;• Ensure the digital publishing strategy moves offensively into industry markets rather than defensively or by diffusion from current offerings for scientists/researchers.
General Conclusions and WorkshopsKey factors to create a Strategy and Business Models in Book Industry:• Conciliate the global with local. Someone in the world want yours books.• Today the publishers are a knowledges producers; the book is one part.• Create and sell contents; the business isn t sell paper• Use all print and digital supports to produce and sell contents• Use your competences/know how to diversity the business – ex: courses• Try to find a segments or niches that aren t important to big publishers• Create and invest in your company brand to be perceived with positively
Conclusions and Workshops IBusiness models contributes to▪ What does the company do and to whom are its products or services destined?▪ What are its products and services and how do they differentiate themselves?▪ How are revenues generated and from whom do they come?▪ Where do managers need to focus their attention?And- Help managers identify the most important aspects of their activities- Help managers understand dependencies and vulnerabilities- Help other professionals to analyze these elements
Conclusions and Workshop ISome key issues that should be formulated:1. Is the Business Model specific to a particular market or can it be applied inother markets?2. Is the Business Model specific to a given product or service, or might it beable to work for brand extensions and diversification?3. Can the Business Model be expanded nationwide, internationally orglobally?4. Are there other possible Business Models to de explored? What will haveto change in the company?
Conclusions and Workshops IPilar Building block Description Value proposition Explains what the product does and how it servesProduct the needs of the consumerand consumer Consumer segment it serves Target-audience Distribution channel The way in which the product is taken to the consumerInterface with the Relationships Connections established with the consumerconsumer Value setting Activities and resources needed to create value Skills Skills necessary to execute the planInfrastructure Partners network Necessary measures to cooperate with other companies to offer and market value Cost structure Economical consequences of the means usedFinantial aspects Revenue model The way in which a company makes money through the revenue flow
WORKSHOP 1 - APPLY THE CANVAS MODELAssociated Key Key Value Relationship Distribuition CustomerNetworks Activities Resources Proposition with the Channels Segments customer-Tecnological -Content -Web platform -Electronic - Communication -Physical - Readerspartners generation -Content books - Interaction bookshops -Teachers -Development writers - Physical - Digital - Professors of a web books bookshops - platform - Training - Print on Entrepeurneuria demand ls - Sponsors COST STRUCTURE SOURCES OF REVENUE - Costs of content creation - Sales in physical and digital formats - Costs of production and design - Sponsorships and other types of support - Costs of marketing and sales - Virtual and physical training activities
Conclusions and WorkshopMarket Penetration▪ Increase purchase use by existing customers▪ Win customers from competition▪ Convert non-usersMarket Develop Strategy▪ New Market Segments▪ New Distribution Channels▪ New Geographic Markets
Conclusions and WorkshopProduct Development Strategy▪ New Features▪ Different Quality Levels▪ New ProductsDiversification Strategy▪Through Organic Growth▪ Trough Acquisition▪ Trough Joint Venture
WORKSHOP 2 - APPLY THE ANSOFF MATRIX Markets Present NewProducts Market penetration Market developmentPresent Product development DiversificationNew