I was never much of an economics student. In truth, I was pretty bad. I did, however, grasp the idea of opportunity cost. The first sentence of Wikipedia’s definition sums it up wonderfully for me:
Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen).
It goes on to state:
The opportunity cost is also the “cost” (as a lost benefit) of the forgone products after making a choice.
When considering opportunity cost, the obvious currency is money. However, time, focus, human resources, morale, and anything else that is scarce may also be considered. When I look at what is happening now in the publishing value chain, I find myself thinking a lot about opportunity cost – particularly the devastating effect I feel it is having on the major trade houses.
A sharp colleague of mine once stated that the only two constants in the publishing value chain are authors and readers. Authors create, readers consume. Everyone else in the middle serves merely to make that exchange as efficient, scaled, and pleasurable as it can be (in theory, anyway).
This month finds the two largest trade publishers turning their attentions to the author pole of the value spectrum. Penguin, via parent company Pearson’s acquisition of Author Solutions, Inc., moved into the “self-publishing” space, developing a direct relationship with authors opting for pay-to-play “sushi menu” style publishing. Meanwhile, Random House recently launched agent- and author-centric email programs and an author portal, designed to increase transparency for the author/agent constituency. In both cases significant cash, focus, and human resources are being deployed to demonstrate a commitment to writers of all stripes. Publishers seem to be putting a stake in the ground — “we own the relationship with the author.”
Ins and outs and nit-pickings aside, both maneuvers strike me as wise when viewed in isolation. Publishers are nicely positioned to serve authors. A great deal of their focus naturally goes in this direction and, given Amazon’s moves toward authors, publishers should be making damned sure the author/agent community is with them.
But a great deal of publisher focus also goes toward the accounts, including Amazon. After all, retailers hold the critical transactional relationship with the end reader. So, publishers can hardly drop those relationships, though they’ve been “re-thinking” them for years now and the “re-thinking” seems to be resulting in shrinkage. However, when B&N speaks, publishers still listen. Period.
So, publishers are tight with authors, agents, and retailers (and the distributors who sometimes service them). So far so good. Scratching head now, I think all I am hearing these days is that publishers must develop direct relationships with consumers or they will be disintermediated in that always nearing future where members of the value chain stop adding value and simply drop out.
So publishers make forays toward the consumer end of the value chain — selling to them, emailing and updating them, collecting them in niches, etc. Meanwhile, Amazon, the most notable value chain hopper, heads toward authors — self published and otherwise. Resource-wise, it’s an unfair race. The capital available to Amazon dwarfs that available to the Big 6 (more often than not to that of their parents, as well). But, I believe that with appropriate focus, publishers can secure their position in the value chain if they…
Take a moment, think about it, and respond to opportunity cost.
When viewed in light of opportunity cost, all of publisher’s recent strategic moves — even the perceived lack of attention to certain areas, and “failures” of several tacks taken — make sense. How does one focus on authors and sell directly to consumers? Well. At the same time. And simultaneously innovating and mastering the discipline of each endeavor. Unless, you de-prioritize something else like, say, physical sell-in to accounts. And I mean really de-prioritize it (eg. all but stop doing it), you can’t.
Simply put, publishers can’t do everything. They must cop to this. Now. The more they try to do it all, the more morale dips and fear rises as they find themselves in mismatches, feeling as if they aren’t putting their best feet forward to anyone. To be fair, publishers try to shift resources but they never truly and explicitly commit. Everything remains “sort of” funded and “sort of ” prioritized. The strategically significant move of the month gets top billing. But only for now. It will be interesting, for instance, to see if Pearson/Penguin’s move with ASI is “real” or a “strategic dabble.”
Call me cynical. I don’t see myself that way. Though I do think the ignoring (or minimizing) of opportunity cost is eating away at publishers. I feel it accounts for much of the general malaise, premature death knelling, languishing initiatives, gallows humor and, truthfully, static profit margins that are pervasive in our industry. This is a) unfortunate and b) can and should be eradicated.
I believe publishers must allocate resources with a greater degree of intentionality and — and this is hard to swallow — often at the full expense of other endeavors. They need to know what they will do — and more importantly, they need to know what they will stop doing until they are able to focus on it. I am quite hopeful that publishers will find this focus as the need to do so increases, thanks to Amazon and others.
As always, I’d love to hear what you think.