What's stopping book publishers from moving beyond their currently nascent adventures in Cyberspace
to aggressively leveraging their content properties? The technology's available; the audience is
sizable. So what's stopping them?
Unlike many companies whose presence on the Internet was first motivated more by hype than by any
defined strategy, publishing companies tend to have very clear goals in mind, and grand ideas about
how to generate significant additional revenues from existing content in either its traditional or
The growth in publisher web sites on the Internet has been dramatic over the last two years,
but typical of the online experience in general. (The Economist recently estimated the number of
people worldwide with Internet access at 20 million.) But while the web sites of US-based publishers
reveal an overall similarity in style and function, the only real difference between these areas is
their ability to offer books directly from the publisher. Most view this medium as a supplement to
their traditional distribution, sales and customer service networks, not as an alternative.
So for now, booksellers who worry that publishers will soon circumvent retailers by selling over the
Internet can rest easy. In fact, one major publisher's effort to stimulate sales by offering
discounts on purchases made at its web site was soundly rebuffed in the press by booksellers, and
the offer was quickly rescinded.
That's not to say that buying direct-from-the-manufacturer on the Internet is not done.
According to Joe Budd, director of online development, HarperCollins Interactive
(www.harpercollins.com), approximately 100 books per week are purchased at the HarperCollins web
site, although this is not the company's prime objective.
"Pricing is not competitive with a bookstore and it is designed that way. We are more interested in
interacting with [consumers] and getting information on their interests." One of the most popular
areas of the HarperCollins web site, says Budd, is the Author/Tour/ Events location, where consumers
can learn which authors will be visiting their neighborhood bookstore over the coming months.
At some web sites, such as Houghton Mifflin (www.hmco.com) and Bantam Doubleday Dell (www.bdd.com),
no sales mechanism exists. Rather, those interested are directed to their closest bookstore.
Bantam Doubleday Dell has made a conscious decision to support the bookseller and has no plans to
change this philosophy.
Houghton Mifflin Interactive President, Conall Ryan, believes that the opportunity to
try-before-you-buy online gives customers a better feeling about their purchases and helps sell more
product. "You have to believe that online is a great preview channel; we believe that our online
presence results in market expansion and will not result in the replacement of any other
distribution method. [It] will not undermine current channels; it will educate customers and it
will expand the market."
Similar opinions are expressed by other publishers, who believe that one of the great strengths of
the Internet is that it allows them to continually inform and educate their target audience. Ryan
said that Houghton Mifflin's presence on the Web facilitates both communication with customers and
the building of a community interested in Houghton Mifflin - products all on a relatively cheap
basis. In an effort to create even greater incentive for customers to return, Ryan has required that
some aspects of Houghton Mifflin's print products - excerpts, previews, reviews, jacket cover
images - are incorporated into its electronic venue. To create a more welcoming and less high-tech
environment, this virtual bookstore is organized by familiar section categories and, to complete
the metaphor, it even has an information desk and a cashier where orders are placed. Informational
and promotional aspects like these, Ryan believes, will drive people to real bookstores looking for
Houghton Mifflin titles.
Due to the nature of its content, The Encyclopedia Britannica's web site, Britannica Online
(www.eb.com) is a notably commercial exception. Up and running since October 1994, Britannica
Online has been experimenting over the past year with different pricing mechanisms in an attempt
to maximize the value of its content. Currently, only subscribers ($14.95 monthly; $150 annual,
plus a $25 one-time registration fee) have access, although you can "preview" the offering.
According to Robert McHenry, Britannica Online's editor-in-chief, the site has been very
successful. Compared with the traditional product, the electronic version has additional articles
and other features designed as a value-added service for online subscribers.
"There were two principal reasons for our development of this service," said McHenry. "Firstly,
when this process started about three years ago, our intuition was that distribution of fact-based
reference material would migrate to online media. Secondly, we believed our traditional print
product was not meeting its full potential market. For example, we had low usage from university
students and this distribution method could address this and other issues."
And despite the restrictions inherent in print publishing (production costs, page size, etc.) the
often irritating and seemingly arbitrary need to cut and fit was, says McHenry, a useful discipline
online. While electronic publishing allows for greater adaptation and flexibility, it nonetheless
requires close supervision in order to remain organized, controlled and rational. Its management
also demands constant communication with customers, primarily by e-mail, to enable the editorial
staff to modify the product according to actual feedback.
Maintaining regular contact with consumers, and the database that grows as a result, are compelling
enough reasons for publishers to continue their web efforts. Direct e-mail relationships with
target audiences is an advantage publishers never had before. Response rates to traditional direct
mail are often frustratingly low, but because online responses often require little more than a
mouse click, it is reasonable to forecast that the number generated by web-developed databases will
be considerably higher. And as a result, new products may begin appearing on the market faster.
This could also lead to more effective market-testing of such things as jacket designs, and online
focus groups can aid publishers in their product development. Indeed, there have already been a
number of instances in which publishers have initiated development of new products based on
suggestions from visitors to their web sites. Robert McHenry is encouraged by the number of e-mail
responses he receives, and feels they will ultimately Britannica to re-examine its assumptions
about what an encyclopedia is supposed to be.
Clearly, the ability to communicate directly with highly interested consumers is a very powerful
marketing tool. One executive described the gathering of marketing data as "capturing the exhaust"
off their web site, an extension of the information superhighway analogy. Joe Budd of HarperCollins
noted that his department receives about 100 completed user surveys each month, providing
information with which to build a deep and compelling database. "When a new mystery book comes out,
we are able to send e-mail to all those who have indicated an interest and draw them to the store,"
Direct and regular contact with consumers will also enable publishers to monitor and hopefully
anticipate changes in consumer behavior. In time, these sites will likely metamorphose into more
full-service areas for consumers. For example, there exists the potential for offering technical
support for the growing number of multimedia titles offered by the publishers.
Conall Ryan and his team have developed programs which invite, or even require, consumer responses.
These programs have helped solidify Houghton Mifflin's relationship with its audience. And this new
data, Ryan predicts, will prompt the coordinated promotional and marketing efforts among
departments as they look to take advantage of these databases.
But at the end of the day, publishers provide content, and all have vast content libraries to make
available to Internet users for a fee. The goal of many of these companies is to eventually enable
users to search through a wide body of material, download what they want, and pay for it either by
credit card or some type of electronic debit card. So for example, a student's search for
information about Alexander the Great on the Simon & Schuster web page might, in its most limited
form, return book bibliographies, article citations and summaries, and possibly a list of available
graphical images. It is unlikely that the student will want to download an entire book on the
subject (considering the time and cost factors such a download would involve today), but they
might want a given article that they could access by paying a fee. If that student then wanted to
share this article with a friend via e-mail, however, encryption technology embedded in the
original transmission would enforce the payment of further compensation for that article before it
could be reused. Eventually, pass-along tolls will increase the revenue stream as each incremental
user pays for access.
Revenue collection and royalty payments are major areas of concern for publishers. Royalty
accounting functions within many publishing houses today are fairly basic. The current revenue and
royalty accounting systems of most, if not all, publishing companies simply could not handle the
degree of micro-transactions that Internet commerce might bring, e.g. the limited-use purchase of
a chapter from a text book written by five authors. As these micro-transactions become more
commonplace it is conceivable that additional costs associated with royalty accounting will eat
into all incremental profits unless fundamental improvements are made.
Systems solutions will need to be far more sophisticated to manage the large increase in
micro-transactions and will also need to interface seamlessly with royalty management systems.
Consistent terminology and data structures are necessary to maintain effective rights management
systems. Technology is advancing in this area rapidly and encryption capabilities offer protection
against most forms of infringement and unauthorized use. Encryption codes can track and regulate
how many times a user can print, e-mail, even alter published material.
As publishers construct their business models, they will need to first determine what unit levels
to offer the public; indeed, what unit levels will prove the most marketable. This analysis must
support a clear business case.
Traditionally, the standard unit has been the book. In digital form this unit may become the
chapter, page, paragraph or, to a much more limited extent, the sentence; it is unlikely that a
single word, or clause, will ever generate overwhelming consumer demand. Therefore, publishers
should avoid committing themselves to supporting even sentence-level access if that turns out
to evoke little or no interest. Further, production costs will necessarily escalate as the unit
gets smaller, and significant pricing issues will emerge as purchase options increase. Sufficient
experimentation and testing need to take place to determine what unit level will satisfy the
largest proportion of customers, and to what extent this will vary on a product-type basis.
In journal and directory publishing, for example, many users are interested only in specific
listings. As the electronic distribution of these products becomes more commonplace, their
space-consuming print versions may become superfluous.
Even as so many publishers are well underway organizing their complete content libraries,
corporate-wide buy-in to the concept of centralizing all of these assets may be the biggest
hurdle they will face. Today, many of the larger publishers don't have a single compendium of
every title it publishes. But in order for a publisher to fully leverage the value of its content,
its online consumers must have easy access to its entire catalogue at one location. The content of
one publisher's education, children's, sci-fi, biography, and current fiction divisions, must all
be accessible from the same database, archived with the same software, and formatted to look the
same from screen to screen.
Many people connected with the Internet believe that its current stage of development is comparable
to where television was in the late 1940s and early '50s. Yet the speed at which technology is
advancing ensures that it will not take 40 years to reach the online equivalent of high-definition
TV. Most Internet providers, at least, are positioning themselves to keep pace with these changes.
For publishers, the long-term benefits will result in a substantially changed marketing and product
development environment. Access to and responses from customers will be virtually immediate.
Product assumptions about pricing and packaging will also be dramatically different as will the
back office capability for managing this new publishing environment. Each publisher's current
web site is merely a precursor to a much more interactive relationship with its customers, a
relationship which will yield significant returns if the hard strategic decisions made today are