First Madonna and Radiohead; Next, James Patterson PART 1

Recently occasional guest blogger, bestselling thriller writer Barry Eisler, called me with an idea for a series of articles for this blog. Deeper thinking on something I've been commenting on for a while now.  I was thrilled to offer him this platform.

First Madonna and Radiohead; Next, James Patterson by Guest Blogger Barry Eisler

Part 1

On October 10, Madonna abandoned Warner Bros., her record label for the last quarter century, for a new deal with tour promoter Live Nation.  On the same day, Radiohead self-released its new album In Rainbows, available directly through the website www.inrainbows.com for whatever you want to pay for it.  The price, as the website says, is "up to you."

I don't think the abandonment of record labels by two of pop's biggest stars is an aberration.  And I don't think the implications of this development will be confined to the music biz.  Look a little more closely, and you'll see a common element among media companies -- that is, record labels, movie studios, the newspaper business, and book publishers -- and a common dynamic.  Here's the way it works:

1.  Media companies are built on distribution.  Distribution is their most important competitive advantage -- that is, distribution is what most keeps potential new entrants out of the media business.

2.  Digital technology is dramatically lowering the costs and logistical burdens of distribution.  That is, digital technology is lowering the barriers to entry into the media business, and undermining the foundation media companies are built on.

3.  Media companies must find a new competitive advantage to replace distribution.  The ones that do will live.  The others will die. Either way, players who today play some subsidiary part in the various individual media ecosystems will assume dramatically more powerful roles.

It makes sense that the earliest and most dramatic moves are playing out in the music biz.  Of all the media businesses, music is currently the most amenable to digital distribution.  An album takes only a few minutes to download.  Music in MP3 is easier to store, manipulate, transport, and listen to then music on physical media like CDs.  You can also sample a significant percentage of a song by listening to it, and thereby have a high degree of confidence about whether you want the whole song.  The only aspect of a traditional album or CD you might miss when you download instead buying the CD is the jacket cover and maybe a booklet of lyrics -- but both of these are as well-suited to downloads as the music itself.

Translation:  artists don't need labels for distribution the way they did when music was distributed on albums and CDs.  Artists as big as Madonna and Radiohead don't need the labels at all.  As superstars pioneer and then prove the viability of distributing without a label, the labels will lose the next level of talent.  Self-distribution will become even better known and more successful.  More artists will defect as a result.  Etc.

I'm not arguing that labels offer no value other than distribution, just that distribution has always been their *key* value, the one thing that only they could offer.  They've lost that key value; the challenge now will be to find ways to replace it with something else -- for example, some combination of imprimatur, branding, marketing, and other residual values.  But because none of these values offers nearly the barrier to entry that distribution did, other players will move into what today is the labels' exclusive domain.  Not all labels will die, but even the survivors will lose clout and profitability.

What about movies?  I expect Hollywood is next in line for a shakeup.  Today, if you want to release your Major Motion Picture on 1500 screens across the country, you need a studio to ship that many heavy canisters of film to that many locations.  As more and more theaters install digital projectors, movies will be distributed to thousands of locations with a single click of a mouse.  At that point, you might still need a studio for a variety of things, but distributing film won't be one of them.

The newspaper business -- or, more broadly, mainstream media -- is already reeling from its loss of distribution as a competitive advantage. Not so long ago, if you wanted to regularly offer your opinion on current events to the masses, you had to write an op-ed column for a major daily paper.  Now you can just set up a blog.  True, the challenge of acquiring readers remains, but distribution itself, on which the papers used to have a lock, is now available to everyone.  The rest, again, is marketing and otherwise reaching readers, but as numerous bloggers have demonstrated, reaching consumers is something you can certainly do yourself once you have distribution.  And sure, it's hard to develop an income stream as a blogger, but how much revenue do you need, if your cost of distribution is zero?

The last to be affected by the flattening out of distribution will be the book business.  Why?  Thus far, readers are less inclined to read digital books than listeners are inclined to listen to digital music.  The lag, though, is only a question of when, not whether.  Digital readers will continue to offer an ever-improving user experience, and more people will adopt them.  Sure, probably the majority of readers will never make the move to pure digital, but another emerging technology will flatten out distribution even more.  I'm talking about standalone print-on-demand (POD) stations like Jeff Marsh's Espresso Book Machine that can receive a digital download, and then print out and bind a book in a matter of minutes.

Don't think POD stations will ever be able to turn out a book fast enough, and of sufficient physical quality, to entice a consumer?  I'll take that bet.  Because every technological precedent (laser printers, for one) indicates that speed and quality will only improve.  And at the same time, the physical quality of published books -- the bindings, the paper, the covers -- is continually declining as publishers seek ways to increase their profit margins (or narrow their losses).  At some point, as POD quality goes up and traditional book quality goes down, the two will meet in the middle.  At that point, the playing field will be level, and book distribution will be open to anyone who can afford a POD machine.

What does the advent of POD technology mean for book publishers specifically, and for the book industry generally?  The implications are huge, and will be the subject of Part 2 of this piece.  See you soon.

Comments

[gregory huffstutter]

Very interesting column. I too agree that it's a "when" not "if" for alternate distribution models to seriously alter the book business beyond the explosion of POD authors.

If you can get the new Barry Eisler release by inserting your credit card into a ubiquitous street-corner vending machine -- and out pops a freshly-bound paperback for your train ride home -- what role will Borders and Barnes & Noble play in the future?

And if book binding becomes as cheap and easy to do at home as printing your own vacation pictures, will Lulu find itself struggling for relevence?

It seems to me that if editing (which could be freelanced) and guaranteeing shelf space at distribution points is no longer the main selling point for traditional publishers, their main function will be business partners in financing a publicity push. Because that's the one area where an author selling a POD novel out of the back of his/her van cannot compete.

Radiohead already has a built-in fan base, so they don't need to build name recognition -- which makes it an easier buisness proposition for them to self-release. But for every indie success story (like "Clap Your Hands Say Yeah"), you've got thousands of bands who tried that model and only sold CDs/downloads to their friends and family.

So too, I believe, will go the book business. A few indie authors will be good enough or get lucky enough to break into the mainstream consciousness. But building the next bestseller will still require the credibility and deeper pockets of the traditional publishing houses.

People Magazine only does so many book reviews per issue. Amazon.com will only sell so many banner ads on their homepage. And Jay Leno only interviews so many authors per year. If a publisher can make those happen for their authors -- through industry contacts and/or paid placements -- that gives them long-term value over mere distribution.

[connie]

It does seem to be in the cards. The only thing I fear with all this new technology is that there will be a glut of music,movies and manuscripts flooding the market. The problem with this is most of that material will be of sub-standard quality. The companies that have been involved in distribution and other aspects of getting these out to the public have also worked as a filter system. Yes, it is true that often that filter system has worked against actual talent- real talent- but with the right determination the talent has managed to get through. Without such a filtering system- the public is forced to wade through alot of nonessential material before they reach real masterpieces!

[Zinnia Hope]

Great post. I've noticed a lot of changes in the movie industry such as the computer graphic films that turn actors and actresses into 4D versions and then they supply the voice. Yuck. Don't like that at all.

[Neal Stapel]

In my opinion, a very accurate fact based prediction. Change is all around us and as usual technology is way ahead of the average person. Most people purchase a computer that is capable of running a business, but end up e-mailing and surfing the web.

Like Mr. Eisler has pointed out, there are those that will use today’s technology and push the envelope making room for their own place in today’s media jungle.

Slowly the moguls that have reined supreme for so long are being nudged aside making room for less traditional thinkers.

As usual, VERY nice piece Barry.

Neal

[Leila]

Thanks for a very informative piece Barry. Just this morning I was reviewing Time Magazine's article on Best inventions of the Year and saw the Espresso Book Machine. I agree with you whole heartedly that it is just a matter of time. The machine will supposedly offer the copies at just $3 a book. It's going to be interesting ;)

Great blog as always!

[C.M. Mayo]

Fascinating, thanks. I myself have bought several self-published books this year, most recently Edward Tufte's books. He self-publishes them and they are both gorgeous and visionary. You can read more about his work at www.tufte.com Interestingly, the price of his one day course includes his four books, delivered at registration as a handsome boxed set. Similarly, I ended up with a free copy of Joshua Leeds's excellent anthology "Sonic Alchemy: Conversations with Leading Sound Practitioners" when I bought some of his CDs off his website, www.sound-remedies.com. But selling books in this indirect way, that's another subject.

[Klaus Jaritz]

Great Barry.
But: would there be 'THE' Madonna today without Warner Bros in the first place - or would there be 'A' Madonna with her songs among a million others hoping to be noticed and picked up by chance? Yes, it's great to eliminate the distribution hassle. But don't be too casual about the enormous publicity needed to cut through all that noise on the web. How is an unknown artist to manage that? The publisher doesn't just distribute, the publisher is the complete launching pad.
A side thought:
I am an avid reader and travel a lot. On the way I stop at second hand shops. I scan the spine of their books. I don't look for authors or titles - I look for the Penguin icon. It's a guarantee that an author is of interest.
Cheers - Klaus

[AngiS]

I don't know about the book industry. As a REAL reader, that is a person who really LOVES books, I would probably, if I had the money, pay for a first edition hard cover just so I could continue to experience the pleasure of turning the pages of a nicely bound book. What I think will happen is that the consumer will have the choice between the POD or a more "luxury" version from a publisher, complete with real parchment paper and library quality bindings and leather covers...I love animals and I love cows...but I love steak too...so if they are going to kill the cows to eat, then why not use the leather for something nice? Anyway, I digress...that is what I think will happen to the publishing industry...there will no longer be paperbacks...you could download these and read them on your iPod or cell phone...personally, though, I like the clipboard sized readers with the touch corners that turn the page. BUT, there is nothing like curling up with a good book on a rainy day. A real book...no technology...I think it would take away from the experience. Kinda like a big screen with a picture of a roaring fire instead of a real fire, it just wouldn't have the same feeling. For the same reason that I hand-knit and hand-crochet my own throws and sweaters, I would continue to want to feel the slight roughness of the pages, to smell the "book" smell - yes there is one - and to be able to experience things the way they used to be. Technology just can't replace the feelings associated with holding a book in your hand, snuggled up in a nice warm blanket, with a cup of hot tea or good coffee and a carafe right there beside it, and a nice room with overstuffed chairs and thick plush rugs. Its the experience..and I think people will be willing to pay for that. If they can...I think, unfortunately, that public libraries will suffer the most..and that is a shame - for it is my librarian, Mrs. Lee, who "turned me on" to some of my favorite authors.

The music industry needs some change. Right now, talent is determined by producers or talent scouts with over-inflated egos who THINK they know what the public wants. They are the ones who made Britney Spears a star. Granted, I could have seen her as a dancer...but she can't sing. Christina Aguilara, on the other hand, is one of the most talented singers to come about in the modern world of music...a true prodigy...but she was the last of the last of the Mouseketeers to get signed to a label..and she should have been the first, if it was solely based on talent. The world has become shallow. However, there are still a few of us (actually more than a few of us) who actually CARE about the music. Most of today's stars would never have made it in the 60's and 70's - the "Golden Age" of modern music IMHO. Likewise, Janis Joplin, Jimi Hendrix, Bob Dillion, etc. would never have been accepted in today's musical climate where looks are more important than talent. There are a few breakthrough talents, but even the most talented new bands got their start on MySpace or by promoting themselves over the internet. American Idol also had a huge impact on what we listen to now...and it ultimately came down to what America wanted. I think as the proliferation of social networking sites, such as MySpace, expand...then you will see more talent being "discovered" because they took the initiative and self-advertised. Same goes with young filmmakers and You Tube. Without MySpace and You Tube, these people would never have been noticed...with them, they made Good Morning America and the late night talk show circuit before they were even signed to a label. Sure there are "flashes in the pan", but some of my favorite "CD"s right now are from bands and artists (Go Lemon!!) that I discovered myself on MySpace. They will not appeal to the average teenager because, well, they aren't "like, Hot" (to quote the Paris Hilton's of the world - shudder), but they make GREAT music.

The film industry I think will, unfortunately, always be ruled by the studios...for one reason...it can be distributed via digital media...but good film making - even the animated kind - takes a hell of a lot of money...the kind of money that studios provide. Fortunately, there is still the occasional great film. They haven't completely lost their art to the mindless comedies and horror films. (Although, sometimes I like these...especially stupid comedies.) And, the first Friday the 13th (you have to be old to remember that one) actually had a "killer" plot (okay, that was a BAD pun). But I think you understand what I'm saying. It doesn't take a lot of money to produce a book. It doesn't take a lot of money to cut an album (maybe to make a good video - but not to cut the music). It does; however, take TONS of money to make a GOOD film. Even the small "Indie" films take a million or so and, let's be honest, most of the artist's out there trying to make it, just don't have access to that kind of money. So, they have to have the backing of a studio.

And, that's just my two cents' worth...

[Personanondata]

Interesting and I mostly agree also. With respect to the movie industry you haven't taken the example far enough. About ten years ago all movie distribution companies were gung ho about satellite distribution to movie houses. It would avoid shipping film reels, errors and delays and importantly enabled better accounting so houses could no longer cheat on showings. It failed because the houses saw nothing in it for them against the significant capital improvements they would have to make. Move ahead 10 years and we are again talking about digital distribution but the landscape is significantly different. As consumers we can all get new 50in flat screen TVs in our homes and we don't need a movie house any longer. (And there aren't enough of them any way). It is only a matter of time before first run movies are distributed direct to consumers together with consumer (behavoral) ad placement. Ergo: very flat distribution.

With respect to books/publishing, in my view we won't even remember the Expresso machine in three years. Led by the iPhone, consumers will consume more and more books on these handheld platforms and 'vending' locations will be ubiquitous (including B&N etc.) E-books will not replace hardcopy books in total. They may replace trade paper in dramatic fashion over the next five years. (I will make another point on your next post about retail). The Expresso machine is impressive technology and will retain a place in libraries and academia but I see us the typical high street consumer skipping over the on-demand opporuntunity of printed works to simply e-content on a handheld.

And all this from someone who only buys hardcover titles and collects first editions!

[Chuck]

The reason, I think, folks don't want to download books is the portability factor. I want to be able to carry a book with me on the plane, train or to the beach. I don't want to worry about getting sand in a device for my $9.99 paperback version of a best seller; I want to be able to flip it into the car with the flip flops and towels. Now a digital book...a small, virtually indestructable device that is hand held, portable, water proof, about the size of a small paperback book used to download books...that I would use...Hmmm.

[Jenny]

There are 100,000 people out there who think they can write a readable book who can't. When a publisher publishes a book, it tells the reader that book probably isn't crap.

With music, you can listen online and decide if it's crap on your own. With a video clip on YouTube, you can judge a movie. With a book, it really isn't possible to know if something is crap without reading a lot of it, a time consuming task, since the first chapter can be fine but the author have no idea how to make a novel work.

So we rely on publishers to tell us that a book will meet some standard of competence.

POD solved the download to print problem a few years ago. The problem no one has really solved is how can you let people know your book isn't dreadful if you don't have a publisher vouching for its quality?

I have sold a lot of self-published books via the Web, but I only could do that after I published several books with big publishers so people knew they could trust that I could write.

[Arnold]

Although I'd like to be idealistic and believe that Radiohead and Madonna are personally looking out for us as fans, and are therefore excited to offer-up their albums for free online to whomever feels ethical in taking it... I can also see a big 'PROMOTION' hook attached to the zero-dollar price tag that accompanies the release of such online tracks by these majors... Not at all coincidentally, Radiohead also has a BOX SET for sale... (nudge nudge wink wink)... The REAL PRODUCT on the market that DOES NOT HAVE A CHOSE YOUR OWN PRICE, OR A FREE OPTION! C'mon, it doesn't take a genius to read past the little flacid worm and see the big flashy hook that it is attached to. Sure the majors are now being generous, they are also being sly and competetive with the independent producers who are out there offering it up for free as a way to gain EXPOSURE for their artistic work. This is a way of infiltrating a larger market base by gaining a more in-depth exposure for the real product... sorry to burst the bubble, I know it feels better to just grin at the worm.... The one positive that I can grin about in this process is the elimination of the music industry's long over-conflated empires of middle men called... "Major Record Labels"... however, given a personnage like Madonna's ongoing dependency on the Hollywood Empire, I kinda wonder if there are a few sneaky tyrants with their fingers in the pie somewhere behind the curtain....