Publishers, you have to change your business model

Bob Lefsetz on what the book industry can learn from the music industry.

This post is part of the TOC podcast series, which we’ll be featuring here on Radar in the coming months.

In this podcast, Bob Lefsetz (@Lefsetz), author of “The Lefsetz Letter” and an advocate for change in the music industry, talks about the similarities and differences between the book publishing and music industries, and offers observations and some words of advice. Highlights include:

  • Issues of distribution: “Book publishers are losing control of distribution. You can go on Amazon and sell your own book today … They have a deal, certainly if you’re willing to charge $3, you get 70% of the revenue. That’s very different from a traditional publisher’s deal. It’s very difficult to get a deal with a publisher, and they give you a rotten deal because they give all the money to the superstars. And they really don’t do much promotion, which is driving people to the independent sphere, which happened in the music industry. To quote Jackson Brown, they’re just a couple of years and a couple of changes behind the music business.” [Discussed at 9:50.]
  • Issues of quality: “We all know that most [people who publish themselves] are truly ‘wannabes.’ This is one of the problems we have in the music business. It used to be that the major labels were the filter. They’d put out 5,000 records a year, and they all had a certain level of quality — maybe the songs were not good, but you could see why somebody signed it … Now there’s in excess of 100,000 albums a year, and it’s chaos. A lot of these albums are pure crap … Same thing in publishing: most of the self-published stuff is crap, which makes it difficult on both ends. First of all as a consumer you say, ‘How do I find the good stuff?’ And although there is a long tail, it tends to drive people to the established brands, but it allows for the independent to spike … The way that you could cope with this change — what the music business didn’t realize — is (A) you can own all distribution … That’s an economic model — how do we make it appealing enough to get everybody … and (2), you have to change your business model … we have to have transparency; we have to give up more income.” Lefsetz continues and discusses “The Innovator’s Dilemma.” [Discussed at 10:49.]
  • Issues of discoverability: “In the music business, whoever tells us what to listen to is going to make all the money. We saw this with MTV … somebody who tells people what to listen to is going to make a fortune in the music business. But what they don’t realize is it can not be done by computer … it’s really something more akin to a DJ — somebody whose taste you trust and you follow.” He talks about the Pandora recommendations and how “someone can listen to something like the Mahavishnu Orchestra … and you can connect that to Frank Zappa … and you can see the mental connection, but a computer can’t see it. The future is not algorithms figuring out what people should listen to.” He also says that the ratings systems aren’t the recommendation answer either, and that it’s a huge problem with no imminent solution. [Discussed at 14:29.]

For more of Lefsetz’s views on customer relationships, Apple’s place in the market and how reducing the price of tablets will bring tablet purchases into the realm of impulse buying, you can view the full discussion in the following video.

TOC Frankfurt 2011 — Being held on Tuesday, Oct. 11, 2011, TOC Frankfurt will feature a full day of cutting-edge keynotes and panel discussions by key figures in the worlds of publishing and technology.

Save 100€ off the regular admission price with code TOC2011OR