A new book industry business model

I stumbled on this proposed new book publishing business model via Om Malik, which would extend the self-publishing models in vogue today to the limit.

The model has been put forward by Peter Redford who has set up a blog to develop his ideas and business model out in the open. His new publishing business model is built around a web portal to publish books. He's named his company Browse Books Inc. and his web portal is at http://www.browse.net/, which currently points to his blog.

Here's what he says on his blog (excerpted from a series of posts).

I am a serial entrepreneur.

I try to guess the next big thing and then build a company to bring it to market. I always need a monster market, an unfair competitive advantage and a business model leveraging this unfair advantage.

It's time again to hunt for the next big thing and I have an idea. The idea is to build a new book publishing empire. Like Random House or McGraw-Hill, but better... This is going to be my monster market.

"Puny little $100 million markets don't interest me; I like the ones that are monster in size", as Don Valentine of Sequuoia Ventures would say. That is also what I am looking for.

Consumers spent $63 billion on books in 2002, according to Euromonitor International. $35 billion of this was sold in the US and $11 billion in Japan. Table below shows the retail sales of the top 5 World markets for books.

Retail Sales of Top Five World Book Markets in 2002
($ in millions - Sourc: Euromonitor International)

$34,920.10    United States
$10,945.60    Japan
$  7,914.60    Germany
$  5,565.60    China
$  3,729.40    United Kingdom

Structurally, a business is based on ideas: a monster market, an unfair advantage and a business model that leverages that advantage. Operationally however, traditional companies run on people: suppliers (input), employees (processing), and customers (output).

My holy grail is to build a multi-billion dollar company that operates without people. This implies complete automation of input, processing and output functions.

One company that comes close to this ideal is Ebay. Billions of dollars are made by Ebay through an automated auction Web portal. Sellers register their products on Ebay by using an automated on-line form (input). The web portal displays the auction for a specified period of time and facilitates the payment transaction through a serive provider, PayPal, (processing) when the highest bidder (output) wins the auction.

Can a publishing company be automated like Ebay?

A publishing company’s input is in the form of book manuscripts from authors. The publishing company processes these manuscripts into finished books. It then outputs finished books to book sellers. My business plan is to create a Web portal called Browse that completely automates book publishing.

I now have all three essentials of Browse crystallized:

• Monster market: book publishing;
  
• Unfair advantage: new “merged-media” book format, every book will include a DVD with related electronic media -- merged through DVD menus;
  
• Business model that leverages that unfair advantage: books produce themselves via the publishing portal and Browse gets a cut of each transaction in the process.

But is it profitable? Profitability will depend on:

• Head-count
  
• Book pricing
  
• Pricing of services
  
• Percentage that Browse keeps from each transaction
  
• How fast we grow in terms of book titles.

This is as far as Peter Redford has gotten on his blog now. He's created a trial press release for browse.net which explains how the model would work.

Sramana Mitra calls Redford's model the Open Source of Book Publishing, Om Malik asks what is Open Source about this, and Peter Redford responds by saying the "the portal is the company in his model and asks what could be the Open Source rules when the software IS the company?"

What would be the impact of this model, if it catches on?

• It could gradually disintermediate the mainstream publishing houses over time, with the editorial and publishing talent preferring to set up shop on their own rather than work for a big name publishing house, now that they can find work themselves by bidding for it on the Browse.net portal.
• It would shift the risks of publishing from the publishing houses to the authors who would now be in a position to finance the publishing of a book from manuscript to delivery to the readers by finding a set of people (editors, distributors, marketing agents etc.) willing to work for them on terms acceptable to them. This could be the start of the long tail of talent.
• It could provide a huge boost to the (long tail of) content  on the supply side (the creation of more content) with a wide and extremely dense spectrum in the range of subjects and genres as well as the quality of content. Lots of moderate/poor quality books can and will  begin to see the light of day and this is no bad thing. A few poor/moderate quality books are better than no books at all in many  areas where there are few or no books available today. This is especially so in the context of publishing in various Indian languages (Tamil, Telugu, Malayalam, Kannada, Bengali, Gujarati, Punjabi, Marathi, Hindi etc..) that command far smaller markets than English. The size of the entire Indian book publishing industry is estimated to be around US$ 1.3 billion per year, of which about half a billion dollars comprises English publishing in India with the rest being Indian language publishing. There could be a huge surge in publishing output in such languages with smaller markets.
• It could provide a huge boost to the (long tail of) content on the demand side (the consumption of content) with a dense and dynamic spectrum of price points (changing in time)  and types of content consumed, in terms of level of depth as well as the quality of the output.
• It could be extended all the way to the retail consumer, with retail users participating in open auctions to arrive at the optimal pricing of books.

This is one model I'm going to be keenly following as it develops.

Comments

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