For many years now I’ve been putting my thoughts about the future of the media and publishing in writing. Here are my thoughts on the coming year.
Education publishing may well see a lot of turmoil during 2016. At Houghton Mifflin, CEO Linda Zecher has continued to make changes to her organizational and executive team, while at Cengage Michael Hansen‘s team is now well bedded in. In both cases, the companies are focused in investing in digital products and distribution, which they couldn’t do doing while their businesses were under considerable financial constraints prior to refinancing. Where change will really be evident is at Pearson, Wiley, Scholastic and Macmillan. Given the share slides of both Wiley and Pearson, I expect some restructuring is inevitable at both companies. Pearson has already announced significant headcount reductions and has sold off most of its ‘non-core’ operations. Pearson’s share price is at a ten-year low and any long-term shareholder must be wondering what happened to the ROI from the asset sales and education company purchases made during the past 10 years. At the current price, the company must be a target for private equity. Perhaps even Bertelsmann will take a close look at the company in collaboration with a PE company.
Similarly, at Wiley there is an argument that their educational division is not big enough to be a “real” player against the bigger companies. That may have been fine when the business as a whole was running well; however, the business is fighting a general market slow-down and internal operational issues, all of which are reflected in their operational results. Look for some announcement in 2016 that Wiley is looking at ‘strategic options’ for parts of its business. It is also possible that Scholastic may consider similar options for its education business and perhaps Macmillan could look to pick up more assets to grow the scale of their education textbook business.
The expansion of China. In years past I’ve predicted that a Chinese publisher would make a significant purchase in the US/Europe of an academic/professional publisher, but that has yet to happen. Still, there have been small, modest investments by Chinese publishers over the past few years and the Chinese publishing industry has begun to expose itself internationally at BookExpo, LBF, etc. I think this shows increasing confidence (which may have been lacking five years ago) and that makes expansion into western markets a probability. In addition, there is a recognition that the domestic Chinese publishing market is significant, both in size and reputation, and this presents international expansion opportunities for Chinese publishers which were not appreciated five years ago. This developing strength will also help propel Chinese publishers towards global expansion.
And, just this week, a Chinese consortium announced it was bidding for Opera, a web browser design company based in Norway. While this deal is not directly in our market, it is indicative of the intention of Chinese investors to expand into the media market in a big way. (Opera actually has a larger role in content distribution than may be obviously apparent).
Platforms purposely open will become a strategic imperative for all CTOs looking for new content management options in the coming years. The launch of Facebook, Apple News and other large distribution networks will actually convince more content owners that their content repositories and distribution networks need to be built with open-source, non-proprietary tools, and retain open APIs so that linking and third-party application development can be encouraged and fostered. While the entry of the larger players is important, it will not diminish the need for individual publishers (and/or aggregators) to maintain their own market presence. What becomes more important is that the platforms on which these are built are true platforms which can be upgraded frequently, without disruption or added cost by the developer. In addition, development and third-party app “tiers” sit on top of this base platform to enable extensions and ‘bespoke’ applications. These latter elements can be built by the software provider, the client publisher or third-party developers. The third-party development capability will become a marketplace for applications similar to the manner in which salesforce.com has established their developer community. These product criteria will become critical entry points for any technology provider presenting their solution to education, academic and scholarly publishers from this point forward (if it isn’t already).
The growth of corporate communication platforms is another prediction I’ve made in years past. It hasn’t yet become prevalent; however, I believe virtually all corporations and businesses are becoming publishers to some degree. Accelerating this is the availability of the tools needed as well as the business imperative for companies to manage their own internal and external content in more effective ways. I recently met an ex-colleague who has developed a content tool that enables a company to host its HR and policies and procedures manuals in a central service. This content platform offers edit features so, not only is the content updated daily, but employees are empowered to offer input to improve procedures and safety practices, which can then be immediately rolled out to other offices. A global retailer is now testing this tool across its business. Similarly, communication with external constituencies can be improved significantly for many businesses by adopting many of the same practices which publishers have employed with their subscribers, like content platforms and access and control features.
Growth of licensing revenues: CCC has been on an accelerated expansion of overseas activities which underscores the opportunities for publishers outside the US marketplace. Most publishers are still focused on the form of their content but, increasingly form will be less and less important (the aforementioned Facebook and AppleNews sites are instructive on this point). This will mean publishers providing flexible content and making it available to as many sources as possible will increasingly drive their revenues. Licensing fees are becoming a very important source of revenue for publishers and if your revenues in this area haven’t increased more than 20% over the past three years you may want to re-think your policies. Undoubtedly, licensed content will become one of a publisher’s main sources of revenue in the coming years. This will have implications across businesses, especially for systems and accounting processes.
Application of Blockchain: And, speaking of copyright, expect to see the application of Blockchain to intellectual property rights. As you know, Blockchain is the underlying foundation for BitCoin and, as such, its application to the protection and distribution of intellectual property will be another very interesting use. Each step in a Blockchain transaction is protected by a tamper-proof encryption technology which supports BitCoin as a legitimate financial transaction service. The use of Blockchain is being considered in several other applications, and media is one of them.
Blockchain can be used to facilitate the transfer of intellectual property from one owner to another. Bitcoins are ‘tokens’ that represent money and are exchanged on the Blockchain network. But there is no reason why a ‘token’ couldn’t represent some other specific item of value, such as a book or an article or a business case. Once a transaction occurs, the user is supplied with a unique key for accessing the content. If the user subsequently wants to sell or lend the item, they pass their unique key to the next person for their use. This process eliminates the ‘residual’ copy issue which arises when someone tries to sell a second-hand e-file.
Ultimately, a network of “bitRights” ™ could represent a universal content repository or bazaar/market where rights and content could be exchanged or bought, traded and sold. In addition, this aggregation would also generate significant user data and analytics to inform future pricing, content/topic areas, distribution models and a host of other benefits which currently get lost in the very inefficient rights and copyright clearance process we have today. Recently, Ascribe received $2mm in seed capital to establish a Blockchain product for artwork.
Open Access for federal funded research will clear Congress in 2016. In recent years, the Fair Access to Science & Technology Research Act (FASTR) bill has failed to pass Congress due to opposition from publishers and others. FASTR will require any federal agency which provides more than $100million in grants (which, let’s face it, is a huge hurdle) to adopt an open-access policy. Coupled with this will be more excitement and activity around the Obama Administration’s open data initiative. Either way, there will be much more to happening in 2016 with open access to government information. App developers and non-profit foundations are working together to drive better access to this type of information, and I recently saw a demo from CivicHall, which is doing just that for several cities already.
As always, I expect the coming year will be another exciting year with, I hope, the above trends occurring but almost certainly many other new and interesting things as well.
Michael Cairns has served as CEO and President of several technology and content-centric business supporting global media publishers, retailers and service provider. He can be reached at email@example.com and is interested in discussing new business opportunities for executive management and/or board and advisory positions.