Former publishing-industry executive and subsequent business-sales-focused lawyer Martin Levin has a very interesting post on Publishing Perspectives looking at the economic theory of “creative destruction” and what it might mean for the publishing industry. In a nutshell, “creative destruction” means that as new business models are created, they effectively destroy the older models.
Levin brings up a number of examples of publishing businesses and assets that have lost considerable value over the last few years. HarperCollins bought religious publisher Thomas Nelson for $200 million in 2011, but its prior owner, Intermedia, had paid $473 million for it only five years before. Some publishing assets, such as Barnes & Noble’s Sterling Publishing Company (bought for $115 million in 2003), didn’t sell at all.
He also writes about Encyclopedia Britannica’s recent decision to drop print and go all-digital, recent media purchases by non-traditional companies such as Bloomberg buying BNA and Google buying Zagat, and Apple, Amazon, and Microsoft’s huge cash reserves and disruptive moves toward the publishing industry. Sooner or later, Levin suggests, companies like Amazon or Apple might see a benefit to buying up devalued (or even not devalued) publishing assets to extend their own reach.
Levin has warnings for the owners of publishing assets now, calling back to examples he quoted in the article:
- Do not delay in taking action when there are clear signals of a decline in market value (Nelson and Sterling).
- Trade your low-profit print assets (even though some may have limited digital value) for core product that has a higher likelihood of success and can be exploited digitally (Wiley).
- Look for an orderly transition from print to digital product which enables a company to reinvent itself (Encyclopedia Britannica).
- If you are seeking to sell your business, one try may not be enough. Think outside the box for the right buyer (Bloomberg and Zagat).
- Open up your horizons as to who are (sic) possible buyers may be. (Apple, Amazon, Microsoft, Facebook, Yahoo?).
It isn’t clear to me whether those warnings will do any good. It seems like publishers have historically been a bit slow to adjust to the new realities of the e-book world, which has led to Amazon locking in a majority share of the e-book market with its DRM, and publishers getting sued for anti-trust collusion. I expect plenty more disruptive developments lie in wait to take them by surprise.