Figure 1 – The traditional value chain in the publishing sector12
Marta Magadán-Díaz and Jesús I. Rivas-García
The Spanish publishing industry is one of the most powerful – and internationally projected – in Europe1. Publishers – within the book industry – establish relationships with different companies, agents, and subjects, showing both the complexity and dependencies of publishing processes2. It is in this context where the Spanish publishing industry experiences the effects of a change in settings (technologies), scripts (operational processes), and characters (agents) caused by the digital transition3.
Whether in past times the critical competitive advantage of a publisher was a powerful physical distribution, which meant placing its titles in as many selling points (bookstores) as possible, currently, the critical competitive advantage lies in two dimensions: business model and digital transition. Nonetheless, the Spanish publishing industry has traditionally been averse to innovative risk: although the new business models were already there waiting to fit into the world of books, the Spanish publishers lost sight not only of changes in the environment but also the need to adapt, maintaining – one way or another – a model in progressive decline4. This aversion to innovative risk was so evident that the adoption of the e-book used a ‘crib’ like that of the paper book, replicating its value chain5. Finally, this situation contributed to a late appearance of change in publishing businesses6 and almost unconditional submission to the technology sector7.
Gradually, a part of the book industry has become aware of the paradigm transformation and is gaining speed in the process of change, taking advantage of the impulse of unexpected confinement that made reading and books a refuge where society found itself again, once again, with the therapeutic value of words. Thus, the transformative possibilities of technology open a window in the old hearts of publishing businesses that are beginning to consider the possibility of redefining their ways of making and commercializing the culture of words with approaches as diverse as desktop publishing, direct selling, crowdfunding, affiliation, the subscription model, payment for consumption, fragmented content, or the audiobook: new formulas that, today, Spanish publishers are testing.
This paradigm shift and the possibilities of new ways of doing business in the publishing industry are the reason for this study, which is structured as follows: section two provides a vision of the digital transition; section three presents the analysis of business models; the fourth section refers to future scenarios; and finally, the last section condenses the conclusions of the study carried out.
The digital transition is transforming the book industry, affecting every one of the links in its value chain – products, processes, promotion, and distribution – as well as its business model8, promoting, due to the Covid-19 pandemic, new social behaviors, and consumption patterns9 to which the book industry must adapt10.
This adaptation has led publishing businesses to reflect on themselves – their business models and their target markets. Indeed, as said above, neither the raw material (content) nor the core function of publishing houses has changed: only the settings, the scripts, and the characters. The plot of the work, in its essence, is the same.
The traditional value chain in the publishing sector consists of authors, literary agents, publishers, distributors, booksellers, and readers (see Figure 1). The author writes an original that is forwarded –directly or through the literary agent – to the publisher. Subsequently, the publisher transforms the manuscript into a paper book and delivers it to the distributor who promotes and places it in bookstores. Finally, booksellers display, prescribe and sell the publishing product to the reader11.
Figure 1 – The traditional value chain in the publishing sector12
Publishers have the possibility of distributing books from their web pages or social networks thanks to the advent of the internet13. The direct sale of books to readers allows publishers to obtain a higher margin per copy sold by disappearing from the marketing equation the role of the distributor and the bookstore, enriching thus the value chain with this process of disintermediation, such and as shown in Figure 2.
Figure 2 – The traditional value chain with the emergence of the internet14
The disruptive arrival of the electronic book has modified the traditional distribution channel, which has a direct impact on distributors and bookstores, which will not be able to compete with the new operators who, far from being limited to the traditional publishing offer, provide newborn intermediation, altering the patterns existing distribution systems as shown in Figure 3.
Figure 3 – Extended value chain of the publishing sector15
Regarding primary activities, the arrival of the e-book had a higher impact on the production of publishing companies than on their inputs16. The output (product) takes two forms: printed books and e-books, while the key input (original texts with market potential) remained the same.
E-books drove a new market, so the publishing value chain adapted to respond to the demand for both formats: paper and digital.
The physical production and distribution disappear within the set of operations associated with the e-book in favor of the technological platforms of commercialization and digital marketing related with publishing promotion, critically questioning it: the e-book seems to empty of meaning the idea of presentation and signature of copies to which the publishing sector is accustomed, in the case of paper format17.
Nowadays, thanks to technologies and the possibility of outsourcing services and industrial processes, both the option of editing and publishing a book is becoming more and more feasible18. Interpreted in economic terms, entry barriers to the sector are lower, which encourages greater diversification of the offer with the establishment of new publishing companies.
To sum up, the transition from analog to digital poses potentially critical challenges and changes for the publishing industry: on the one hand, the internet makes it easier for any internet user to generate content, favoring its dissemination; on the other, with the development of new technologies, authors and readers can contact directly without the need for the intermediation of the publishing company. This new context means that publishers must rethink their business models and value propositions for their clients due to the loss of control due to the abovementioned elimination of barriers to access to the publishing market.
The new digital context opens the door to different business models that publishing companies can take advantage of by expanding their portfolio of products and services19. Nowadays, new business models like desktop publishing, direct selling, crowdfunding, affiliation, subscription model, payment for consumption, fragmented content, or audiobook are testing by Spanish publishers.
Figure 4 – Publishing business model (own elaboration)
Print-on-demand (POD) led to a new production process driving a good part of the publishing sector, mainly small and medium-sized companies, to modify their business model to reduce the total production costs associated with minimum printing runs and limit storage costs, and control the problems related with reverse logistics (returns management)20.
One of the consequences of this business model built on POD is its good pairing with other models related to direct sales, so a commitment to this mode of production, in a way, significantly limits traditional distribution processes where it was about reaching the highest number of points of sale (bookstores) with the best-located distributors in the market. Although POD reduces total costs, this production model raises unit costs, so publishers that adopt it must reduce their unit margins, which discourages the use of channels with intermediate agents, promoting direct sales21.
Among the advantages of POD, the following can be pointed out: a) it reduces the initial investment in printing costs; b) it makes it easier to publish texts and satisfy highly specialized market niches or in minority languages that would not be profitable if they were produced in offset, which allows increasing the publishing offer, with a higher number of titles; c) the low risk assumed with POD enables effectual support for novice writers; d) the lower runs made with POD allow a lower consumption of paper and ink, with a reduced environmental impact; e) technological advances in POD make it possible to achieve the same quality in printing as that obtained with offset technology; f) production and delivery times are reduced with respect to traditional offset printing, which leads to the publication of a title of a current, novel or original issue, in a very short time, without losing validity or interest from the publisher, as well as quickly pleasing the customer; g) storage costs are reduced by fitting production to demand; h) it allows guaranteeing a permanent commercialization of the works, avoiding their discontinuation22.
Currently, in Spain, two technology-based companies such as Podiprint and Quares stand out, developing global solutions for managing on-demand paper book production, connecting publishers with local and international bookstores.
Today, the publishing business models incorporate the e-book, replicating, in most cases, the value chain of the paper book. Both products evolve in parallel in publishers who modify their traditional business model to embrace the latter and access a new market since the e-book is not seen as a cannibalistic product of the paper book but as a differentiated entity that complements the paper and enables an expansion of the offer in terms of the mode of content consumption that the reader prefers.
Although printing and physical distribution disappear with the emergence of the e-book, other operational processes typical of the new technologies associated with the e-book are incorporated, such as XML files or the structuring of formats by integrating metadata.
The development and implementation of information technologies by publishing companies modify the book value chain. The creation of virtual stores on the publishing websites themselves or their social networks (such as Facebook and Instagram) eliminates: first, in the case of the paper book, the distributor and the bookseller and, second, in the case of the e-book, the digital distributor and to the bookseller or the digital platform.
The audiobook, as a format, represents a more profound change in the business model given that new productive elements are required, which, unlike the e-book, can hardly take advantage of those linked to the traditional model of the paper book. The emergence of the audiobook makes necessary a redefinition of said operational processes within publishing organizations, allowing the integration of this new business model. It is precisely this peculiarity that can lead the audiobook format to move from a business model to industry, given that other business organizations, not necessarily related to the world of books, can adopt it23.
The explanations found after the lack of consolidation of the audio-publishing market in Spain come from supply and demand. From the supply perspective: a) a higher loss of control in the pre-production, production processes and distribution due, mainly, to their outsourcing, compared to the paper book, where pre-production is carried out usually within the publishing company, which also decides whether it wants to have total or partial control of the physical distribution; or in comparison with the e-book, where pre-production and production are wholly internal and only distribution requires the support of technological platforms, and b) the existing legal vacuum around sound rights not usually included in standard publishing contracts. From the demand perspective, the explanation lies in the inexistence of a substantial market segment able to justify the investment in audio-publishing projects.
As shown in Figure 7, the set of main links that make up the publishing value chain for each possible format – paper, electronic and sound –, gives rise to a general book production and distribution circuit.
Figure 5 – General book production and distribution circuit according to format24
Unlike the paper book and the e-book, the audiobook does not require visual but auditory attention, which is an additional option to the mode of content consumption, especially concerning the moment of consumption: when traveling, doing sport or in convalescent states, among others, expanding its original segment of blind consumers.
Access to financing for publishing investment projects beyond the use of own resources and traditional means of indebtedness have been shaping strategies for attracting resources without increasing the risk associated with a growing liability and without having to discard a project editorial due to lack of funding25. Such strategies have modeled publishing business models capable of tackling the publishing of works without affecting the financial stability of publishing companies. Among these models, it is possible to mention: crowdfunding, desktop publishing, embedded advertising, or the freemium model.
Although the idea of crowdfunding to pursue a common goal is not new, the use of the internet for that purpose is since it allows people and organizations seeking financing for their value propositions to be connected quickly and decentralized with those others willing to offer it. Using crowdfunding through the internet and the various existing social networks, a person or company seeks to obtain the necessary funds to undertake a specific publishing project.
Crowdfunding is nothing more than collective or massive financing, making it possible to face publishing works without resorting to traditional sources of financing. In exchange for this crowdfunding, it is possible to participate in the benefits generated or free or cheaper access to the product or service from the funded publishing project. Crowdfunding campaigns in the publishing industry open their business models to clients, co-creating – together with them – a value proposition26.
Co-creation means a collaborative action between the client and the organization to generate value, creating new products or improving existing ones, and among its advantages are the following: a) continuous feedback from clients; b) a more objective evaluation of the quality; c) improved customer satisfaction; d) increased customer loyalty.
Besides obtaining funds for those publishing projects associated with high financial risk or that merely would not find the traditional financing support, crowdfunding also allows publishers and writers to validate such editorial projects and interact with the communities of readers. In Spain, the Libros.com platform has based its business on crowdfunding, so it is a publishing house that ensures quality editing, design, and distribution at no cost to the author27.
Accordingly, the opening of business models in publishing companies is usually accompanied by changes in the value chain of the publishing industry, as shown in Figure 8.
Figure 6 – Traditional value chain of the paper book with crowdfunding28
The phenomenon of self-publication of paper books was statistically very insignificant, given the high costs that an individual – in this case, potential author – would have to assume – production, storage, and distribution (both direct and reverse logistics). This option was not very accessible, concentrating on the publishing sector the decision-making power about what was published or not29. However, with the emergence of the e-book, this decision-making power is displaced, and access to be an author is through said self-publication. In short, the e-book is changing how to becoming an author and encouraging self-publication30.
The internet becomes a space where self-publication takes on its nature through specialized platforms that make the author independent from the traditional publishing company31, as shown in Figure 9.
Figure 7 – Value chain with self-publishing (own elaboration)
Both models (traditional and self-publishing), far from being seen as antagonistic, lead publishers to integrate the phenomenon of self-publishing with the development of their platforms, providing the necessary tools for the author who opts for self-publishing and enabling them to publishers remain at the center of the book value chain.
In recent years, publishers and bookstores have firmly committed to making a space for themselves in the world of self-publishing as one more line of their business32. In Spain, Bubok is a pioneering online desktop publishing platform that allows you to edit, publish and sell books on demand, both in paper and digital formats. Penguin Random House has created in Spain Me gusta escribir: a social network for writers where, in addition to including resources for writers, advice, or news, they offer self-publishing services ranging from design or spelling proofreading to promotion and marketing. The Planeta group launched in March 2017 the Universo de Letras: a new professional self-publishing platform created to serve those who wish to fulfill the dream of seeing their book published. It works as an observation platform that encourages the discovery of new authors so that those outstanding works can see the light through possible publication under the Grupo Planeta publishing label that best fits the characteristics of the title.
The inserted advertising model commonly appears among publishers linked to the press or other periodicals. However, it is possible to apply this model in the book industry within specific publishing projects such as tourist guides or technical books, where the advertiser can get the desired promotion. In the case of the 24symbols platform, it offers a multi-publisher catalog for free, but with inserted advertising and certain limitations.
The freemium model establishes two possible levels of publishing service: free access to specific content and the premium option, extending publishing services by paying. The implementation of this model enables to finance free services with the returns derived from the premium option, and consequently, it is feasible to combine with the open-access model. Nubico or 24symbols would also fit in this model.
Two possible problems arise that publishers – faced with the advantage of financing free access through the payment option (premium) – must carefully evaluate in implementing this model: a) that the free client does not take the value into account added associated with the payment option given that the free option is sufficient or, b) that the free option is so limited and provides little value that it ends up discouraging the free client from their use and, therefore, from considering the payment option.
The growing relevance of distribution associated with both globalization and the new digital context has driven the development of various business models such as direct sales via the web or social networks, sales via a digital distributor, sales via a digital platform, the sales via licenses to libraries or drop-shipping, among others.
Direct sales via the web suppose the commercialization with no wholesalers or retailers (B2C model). This model implies an added means of revenues to the traditional sales model with agents, such as distributors or bookstores. Direct sales have been promoted thanks to the technologies of information and communication, with the use of the publishers’ website and social networks as spaces for interaction with potential customers, which end up becoming profitable virtual markets, not only for the marketing of paper books but also – depending on of the publishers’ technological capacity – of e-books33. The strength of direct sales lies in direct contact with potential customers and acquiring direct knowledge about their behavior throughout the purchase process, which enables their consumption patterns to be analyzed to adapt to customer requirements and help developing commercial strategies.
Figure 8 – Value chain of direct sales via the web34
Digital distributors replicate the value chain of the paper book so that the publisher contributes the content to the distributor, which, in turn, distributes it among the associated bookstores35. Digital distributors offer an active marketing strategy through their specialized digital bookstore networks. A broad network of digital bookstores – in a similar way to distribution on paper – provides the publisher with greater dissemination of its digital publishing collection and adds, thanks to the commercial strategy of each digital bookstore, better access to the potential customer segment of the marketed e-books.
Figure 9 – Value chain with digital distributors36
On the other hand, there are digital platforms where the publisher uploads the files that, from the very moment the digital platform approves the uploaded file, is sold directly to the reader (short channel).
Compared to the digital distributor, the digital platform is a less active kind of commercialization, given the high volume of digital files usually uploaded. However, the digital platform usually offers the publisher – upon additional payment – a segmented marketing effort, supported by knowledge of the user profile who passes through its virtual space, so its digital fund is visible in a sea of alternative content. In short, a simple hosting of e-books on digital platforms without hiring additional commercial options would leave the entire commercial effort in publishers.
Figure 10 – Value chain with a digital platform37
The sale of licenses to libraries emerges as a new business model or an expansion of the marketing model through digital distributors since they are the latter that concur with their offer of publishing funds to public tenders to provide them.
The ways and means of consolidating this link between publishers and libraries are varied. The most frequent are: a) the traditional licensing model, where the library usually pays a subscription to access the catalog and the subscription is added to the payment by individual loan; b) the annual license per title, where unlimited access to a title is allowed during the established time; c) the pay for the consumption of specific contents; d) the co-payment, where the user of the library assumes a part of the price; e) the permanent acquisition of titles. It is important to note that subscription options may be nuanced with the concurrent or individual use of digital content: access to the title may or may not be carried out simultaneously by several library users.
The various ways in which libraries can agree on access to publishers’ digital collections and offer them to their users can lead to a repositioning of libraries that encourages them in the new digital context, occupying a paramount space in the dissemination of digital culture, which seemed to have diminished with the decline of paper publishing.
Within the publishing sector, drop-shipping consists of selling titles without having them and transferring the purchase order to the publisher or digital printing, as appropriate. As can be seen, drop-shipping is a model designed for the retail company that deals directly with the customer so that bookstores can benefit from this marketing without prior funding. However, also publishers that have outsourced production and do not have their commercial network or logistics can adopt this model in such a way that, before order, they transfer the information to the collaborating digital printing company so that it not only produces the copy but send it directly to the customer. According to the Transaction Costs Theory, the success of this model among publishers will depend on the costs of controlling compliance with the agreement agreed with the collaborating digital printers, which could tend to breach it, independently marketing the produced titles.
The publishing business models developed based on a new focus on the mode of consumption are those that, so far, offer the highest number of possibilities: subscription, membership, pay-per-consumption, fragmented consumption, open or bundled access are some of the alternatives that Spanish publishers can find to redefine their respective models.
The subscription model facilitates the adaptation of supply and demand, as well as adequate business planning. Subscription as a model reaches the publishing sector through technical works and legal compendia aimed at professional practice. Currently, in Spain, there are digital platforms that market these services in Spain: 24symbols (pioneer of this business model) or Nubico, among others. There is also a subscription model within the environment of children’s digital reading: Metaforic. It is a subscription reading service for readers aged 6 to 18 of the publishing house Leer-e.
The affiliation model (membership) transforms the client into a member (or partner) of a group (or service) with access to services and content offered by a company. In the Spanish publishing sector, the most paradigmatic example of this model was Círculo de Lectores.
The pay-as-you-go model allows customers to pay for their consumption, regardless of it is partial or complete. The Planeta group has also integrated this model with Planetahipermedia.com, dedicated to business training content.
The commercialization of fragmented content over the internet takes shape in the Spanish publishing sector with the Gestión 2000 seal (Grupo Planeta), pioneer commercializing individual book chapters.
Open access is a model widely used by publishers oriented to the segment of academic journals38. The reason lies in the requirement to disseminate and divulge scientific knowledge: both the authors and the academic journals acquire prestige for their impact factor, that is, for the volume of citations and references in published research; hence the open access is an excellent strategy to attract other researchers, both in their work search to analyze the state of the art on a topic, and to assess the publishing of their work39.
The problem with this business model lies in the fact that the reader does not pay anything to access the contents of the periodical publication, which makes its commercial implementation difficult. Many open access academic journals depend on public institutions, being financed through their budget, and included within the social objectives of generating and disseminating knowledge. Nevertheless, publishing companies need to readjust the open-access model to make it profitable. One way consists of transferring the cost of revision, publishing, and dissemination either to the authors or their academic institutions. Another way is developing mixed academic journals in which authors decide whether their work is open access for a price or a donation of a certain amount of money. Finally, it is possible to profit open access by maintaining a mixed format, using it only after some time to obtain previously the profitability of said publications and, subsequently, set them free. In Spain, scientific publishing and repositories such as those of the CSIC are open access.
The bundled is a business model that proposes the consumption by packages of products or services – from the same or different nature. The advantage of this sale and consumption by packages is that the price of the pack is significantly lower than that which would result from buying separately each of the products or services it contains, in a similar way to what would happen in a tourist package. In Spain, the Lektu platform adopts the Humble Bundled model – and its commercial strategy –, with a broad list of independent publishers and author-publishers in its business portfolio.
The price variable is the most relevant in a marketing-mix strategy since it is the only one that provides income, compared to the other variables (product, promotion, and distribution) that involve costs.
Altering prices involves taking a non-negligible risk for any business since correct or incorrect pricing can boost or break a business. That is why the co-creation of prices through the pay-what-you-want model has not spread as a sustainable model over time but rather as a commercial strategy to attract readers.
In Spain, the Lektu platform uses this approach, but starting from a minimum price suggested by publishers and based on said price, the reader can decide how much to pay for the content.
Social payment and gamification are two of the publishing business models that redefine the promotional strategy.
Social payment consists in that, in exchange for partial or total access to the contents of a work, the reader must promote it through their social networks, turning said promotion into the form of payment. Again, the Lektu platform uses this promotional strategy from which both authors and publishers can benefit.
Gamification gets into the dynamics of games as tools to promote authors and works. This business model increases the users’ traffic of the website of a publisher, bookstore, or digital platform and their commitment and loyalty.
The emergence of these business models is a starting point for a deliberate reflection on the future scenarios that the Spanish publishing sector will address.
Spanish publishers, although approached the new technological proposals with interest, have made a short journey in the design of innovative strategies capable of promoting new tools and digital infrastructures that allow them to take advantage of all the potential implicit in information and communication technologies and, at the same time, make them less dependent on sectors outside the universe of the book.
The Spanish publishing sector has suffered a relatively abrupt change in its competitive environment: going from a calm water space to a very different one, with turbulent waters, promoted by the influence and transversal impact of sectors linked to the technologies of information and communication, which has broken the relative stability of the traditional publishing markets, adding a high level of uncertainty and risk to their investments.
The future scenarios try to show the roadmap of the Spanish publishing sector and are the result of the logical evolution of certain situations previously outlined in the description of the publishing business models.
First, it is inescapable to consider the business potential of the audiobook. This line of future development may be relevant to such an extent that it is feasible to build an entire industry around this format like what happened, for example, in the United States.
Second, omnichannel will become more and more present and necessary in publishing organizations, opening new paths of access to markets and new formats of content consumption.
Third, publishing companies will see the need to implement new coordination models that favor the correct management of business processes, increasing levels of efficiency, especially in publishers that develop content in paper and digital format, enhancing complementarities, and avoiding duplicities. The cost savings derived from the new coordination mechanisms will make it possible, for example, to redirect such resources to future more innovative publishing projects.
Fourth, the survival of the paper book will inevitably go through the implementation of print-on-demand: more efficient and environmentally sustainable, leaving for the annals of publishing history the traditional runs of large numbers of copies to reduce average costs. With printing on demand, the need for storage and the costs associated with reverse logistics will diminish, making it possible to keep alive those works of the publishing fund for which their demands would not justify reissues with minimum runs similar to those made for the first time.
Fifthly, expressions such as business analytics, business intelligence, and big data will be increasingly present in publishing businesses to provide answers to many of the questions for which, today, are only answered from the editor’s intuition rather than from the reason and evidence of the data: what are the preferences of the readers, their reactions to the news, what works and when to publish, or in what format, would be some of the many questions for which the tools and means coming from business intelligence and analytics applied to large databases can provide scientific rather than romantic answers to crucial questions for the survival of publishing organizations.
Finally, in sixth place, the book’s need for resilience will drive its evolution towards hybrid formulas where sensitive and intellectual experiences will mix beyond reading itself: image and sound, along with other strategies associated with gamification, will be combined, altering the DNA of what, nowadays, is understood by the book.
In the first place, the Spanish publishing sector presents two lines of business that coexist as complementary and not as substitutes: on the one hand, the paper book and, on the other, the e-book. However, despite the existence of publishers exclusively oriented to the production of e-books, a part of the Spanish publishing sector either does not end up adapting to technical change, or it does so at a slower pace than would be desirable, which leads to the e-book not becoming a more commercially profitable alternative to the paper book. To these cautions of the publishing industry is added interest from the authors to continue seeing their work published on paper and a firm attitude of the readers to continue betting on the paper book rather than using an e-reading device. All this leads to the old business models coexisting with the new ones. Although Spanish publishing companies have acquired digital knowledge to position themselves and respond to market transformations, digital products are still secondary to the paper book. The distribution systems developed around the e-book, such as the Libranda platform, replicate the traditional chain.
Second, the innovative caution of Spanish publishers is holding back the development of the e-book market on the supply side, given the low volume of works published digitally compared to those on paper. Spanish publishers glimpse problems such as lack of financial resources, lack of specialized personnel, fears associated with digital piracy, and a lack of institutional support translated into public policies facilitating the digital transition. The Spanish publishers accept a dependence – more assumed than desired – from external innovations since aesthetic and commercial risks linked to publishing activity have pushed them to the limit of their financial possibilities.
Third, the lack of joint digital initiatives, that is, between the different agents of the book value chain, has caused hardware manufacturers and internet service providers to enter the book industry, surpassing, in many cases, traditional industry players in the creation of new business models for digital content.
Finally, the current pandemic situation has represented a turning point in the attitude of a part of the Spanish publishing sector, forced to focus on the need to carry out an accelerated digital transformation to continue with its activity, for which the Covid-19 has indirectly catalyzed, as a collateral effect, the urgency of organizational change.
Articolo proposto il 25 luglio 2021 e accettato il 18 aprile 2022.
Last website consultation: September 18, 2021.