The Summer is over - What's Next?

Today is the first day of school in Newburyport, and, after a great summer, the kids are all excited and anxious about starting up again. Lot's of big smiles - and some bouncing off the walls - this morning. My guess is this will last through next week as the new schedules become more routine.

This whole transition at home has me thinking a bit about the transition in book publishing systems. Last Spring, and right up through July, many of us were skipping from conference to conference trying to understand the term, 'digital strategy'. We were pondering widgets, and Internet marketing techniques, and 're purposing our content'. And, then it seemed as though we all decided that we needed a break and took the month of August off.

So, now it's September - time to get back to work. And for me, the open question seems to be, as an industry, what are we going to do with all of this collective knowledge that we gained earlier in the year?

My guess is that we are going into a quiet period. The industry leaders all had strategies before the Spring, and they are (now) working on executing those strategies. The next tier of publisher is taking all the collected knowledge from the Spring and putting together strategies. And the last group is simply waiting to see what shakes out from all of this.

I think it will be very interesting to see what gets rolled out in January and February next year by the leading publishers. Oh, we might get a few minor announcements before then, but my money is on the big roll outs happening in the beginning of the new year - after the Christmas season is over, and before the 'Trade Show/Publishing Conference' season starts up again.

What I do expect to hear about is Fall is more consolidation. These new technology innovations are expensive, and generally out of reach for small to midsized publishers. Much like the expensive technology barrier for physical distribution, the high cost of developing electronic marketing and distribution systems is going to encourage the small and midsized publishers to 'partner' with the bigger guys.

I expect that we will see alot of fluctuation in business models as the larger 'entities' figure out how best to 'partner'. Competition to gain economies of scale (to make all this investment worthwhile) is going to be fierce among the top organizations, and the race will really be on to woo publishers into their respective folds.

I use the term 'entities' loosely as I think that there will be some shakeup in who we have all traditionally thought of as leaders. Some will rise and grow, and I believe that others will self destruct. It wouldn't surprise me if there was another 'PGW-like' collapse already in the making.

So, like my kids, I'm excited and anxious about the year ahead. I suspect that this time next year, I'll have a completely new perspective!

Slumbering Giants and Publishing Services

Maybe I feel some of the tectonic shifts in our industry more acutely than others, because our very existence as a company is so threatened by them.

Nothing illustrates this point more than the consolidation of the distribution market. From my point of view, this consolidation has been largely driven by the need to have a more efficient supply chain. This essentially means that retailers - large and small - have the tools they need to help their customers find what they are looking for and deliver it to them as quickly as possible. This is true whether it is the local corner bookstore or a behemoth online retailer.

To have a more efficient supply chain means to have the technology and industry standards in place for companies to have their computer systems talking to each other, and to automate as much of the process as possible.

This technology 'barrier to entry' in publishing is now at such a daunting level, that most publishers have realized its better to 'partner' with another company who knows how to manage the technology than to make the money and people investments necessary to do it themselves.

Fortunately, there are companies that have made all the proper investments along the way, and have built a formidable array of systems and technology services that make it easy for publishers to take advantage. Most of these companies are in the distribution business (as well).

For several years, distribution companies have thought of themselves in those terms alone - that they handled distribution. Now, most are awakening to the fact that they are really publishing services companies, and it just so happens that they are also distribution companies. Once awakened to this FACT, they start to realize that they are no longer bound only to those customers they do distribution for. Now they can start offering other services, like content management, content distribution, production management, or royalty accounting to companies they don't have any distribution arrangement with at all.

So why is this such a threat? Well, its two-fold for us. One is direct, and one is indirect. The direct threat is that there are now simply less customers for us, and for all other publishing systems providers. We, at Quality Solutions, are slightly immune to this as our systems help publishers with their core competencies - editorial, and marketing. However, the clock is clearly ticking, and it won't be long before the slumbering giants will be offering those services as well. And, while we're fortunate to have many of the large service providers as customers, our room for growth is very small.

The indirect threat is from other publishing software companies. Especially those who offer order processing and other back office systems. In a market where there were maybe 20 companies to begin with, we've seen several 'consolidations' just in the past six months. The last two being just recently - Vista and Ingenta, and the Cat's Pajama's and Media Services. These companies are swallowing each other to stay alive as their customers bolt to the larger 'publishing services' companies.

This is an indirect threat to us, because now those software companies are thinking that their future lies in what we do. This will only create more competition in an ever shrinking market, and will kill us all more quickly, as our services get commoditized. It sort of feels like the rats on a sinking ship seeking higher ground.

The only answer to this threat is to create new services! We've got several in mind, and in the coming months, we'll be announcing several in rapid fire succession. The creation of new services is often a risky business, and building things that publishers didn't even think they needed has been the hallmark of what Quality Solutions has done for the last 20 years. Stay tuned!