Earlier this week I heard John Makinson, the Chief Executive of Penguin, speak on the future of publishing at a Financial Times conference on digital media. He was an optimist, a pleasant change at any conference for people in businesses being turned upside down by the internet and mobile technologies. There is an opportunity for publishers to sell more content of different kinds in different ways, he said, insisting that physical book would continue to be an important and profitable line of business.
His argument was that there are three big challenges facing publishers: the threat of copyright violation, disintermediation and the challenge of finding a pricing and business model which can be sustained. On the first, he noted that piracy has long existed in publishing and while constant vigilance is needed now, it can be managed. On the second, his view is that retailers are indeed being disintermediated but publishers of appealing content are not even though they are no longer the exclusive filter between authors and audiences.
On pricing and business models, Makinson argued that publishers must go through a period of trial and error. The two challenges to be navigated are how to respond to business models which offer free content as a pathway to charging for something else, and how to respond to those who offer cheap content as a loss leader – the latter perhaps the most difficult as the cost of physical production accounts for under 10% of the cost of producing a book.
On the other hand, he said, the iPhone and iPad have made charging for e-books easier because of the psychology of paid-for apps they're creating. Asked specifically about Apple's so-called agency policy whereby publishers set the price and Apple takes a commission (in contrast to Amazon's loss-leading flat price for e-books), Makinson said wryly that Apple needed the content and should be paying publishers, but added: “We tried to argue this with Apple but not with great success.”
In sum, I took his comments to point to good news for readers, authors and Apple, bad news for retailers, and some experimentation before publishers find their own margin in the middle. We'll soon see – the iPad's launch will speed up the process.