New business models in publishing: start-ups and their strategies
Article By Nina Klein
What publishing can learn from start-ups
With mass-market e-readers available on a large scale, digitization has long reached mass market book publishing, as well, having already conquered other creative industries like music and press publishing. Traditional definitions of books no longer apply, nor do traditional ways of value creation and capture seem to work. “[Publishing is] not a job anymore. That’s a button. There’s a button that says ‘publish,’ and when you press it, it’s done,”  says publishing expert Clay Shirky. One year ago, I set out to explore the role of book publishing in the new digital publishing world in the framework of an MBA thesis. The central questions were: if everyone is a publisher, what is the added value that book publishers bring to the customer – and to society? What are the emerging new business models? To answer these questions, the business models and strategies of start-ups in the field of publishing were analyzed. This approach was chosen because start-ups can be defined as “organization[s] built to search for a repeatable and scalable business model” . They can show ways of inventing the future, rather than predicting it.
An extensive research on evolving business strategies
The paper analyzes the challenges facing book publishing in a digitized world from three perspectives: the macro, meso and micro levels. The macro perspective looks at technology as the primary driver of change, at changes in society and consumer behaviour, and at policy frameworks as well as the special interest the state takes in media. The assumption is that changes in business models at the micro level, but also at the meso level of the industry, are triggered by a combination of technological and societal trends. The meso perspective takes in the larger-scale changes occurring in the ecosystem of book publishing, with technology as the primary driver. Boundaries between the creative industries are in flux, and traditional roles are shifting; the nature of the internet economy is having a powerful effect on traditional structures of value creation. The micro perspective looks at business models and the strategies of selected start-up companies in the field. The paper proposes a categorization of business models and start-up strategies. To do so, specific features of the business models are distilled and categorized, drawing on an analysis of over 160 start-ups. These features are then grouped into categories and are applied to structured interviews with the CEOs of five selected start-ups. Building on this, case studies are presented that illustrate general trends.
The methodology consists of extensive primary and secondary research, analyzing online sources like trade magazines, websites and blogs, as well as qualitative empirical interviews with CEOs of selected start-ups. It is assumed that the fast transformations in book publishing are best analyzed by examining the ongoing debate amongst publishing experts. The analysis of the start-ups builds on a catalogue of questions that follows business model definitions by Amit, Zott, and Massa (2010), as well as Osterwalder and Pigneur (2009). This research is complemented with theoretical approaches drawing mainly on the literature of media and internet economics, and on the theories of value chains, value networks and the transaction costs.
The start-ups lesson in a nutshell
The results are presented as seven propositions that are put forward in order to delineate the emerging new business models in book publishing. The main results show that start-ups change their value proposition from offering a product to offering services, and their role is often defined by offering a platform for multi-sided markets. Societal and consumer trends that stress participation (self-publishing, crowdfunding and crowdsourcing) and individualization, are explored as important drivers of innovation in business models. Consequently, new emerging business models mostly aim to provide publishing services to self-publishers, and/ or platforms for direct interactions between user groups; they support the use of crowdfunding and crowdsourcing to complement the core functions of publishing, they deliver high quality multimedia books (so-called enhanced books) and/ or draw on new sources of income from marketing. The sources of income and the customer value propositions are considerably more diverse in digital publishing than in traditional publishing structures. Core functions of publishing, such as selection, aggregation, curation and marketing, emerge as functions that are being explored by a plethora of start-ups. Reproduction and distribution, as well as transformation, are functions that will probably be disintermediated in the future. The societal value of publishing will rise, with a larger number of players (NGOs, institutions, citizens) partaking in the publishing process, and social values providing important motivation for start-ups.
Now, several months after the publication of the paper, the situation has already changed at high speed – some of the start-ups mentioned do no longer exist, some have moved on and cannot be called start-ups any longer. Yet I think that some of the fundamental insights of the paper hold true, still, and I encourage you to take a closer look at my complete findings and let me know if you agree or disagree!
The full paper is available for download here