Publishers and the Smiling Curve: Navigating the Changing Landscape of the Publishing Industry

Publishers and the Smiling Curve: Navigating the Changing Landscape of the Publishing Industry

In the world of IT-related manufacturing industries, there is a phenomenon known as the smiling curve. It illustrates the value-adding potential of different components within the value chain. Interestingly, both ends of the value chain, the critical component makers and the systems integrators, command higher values added to the product than the middle part of the chain.

Acer, a well-known company in the personal computer industry, finds itself at the bottom of the smiling curve. They put PCs together, but it is the component makers like Intel and Windows that capture most of the value on the left side, while systems integrators and value-added resellers like IBM or Accenture capture the rest on the right side. Acer and other OEMs find themselves competing for single digit margins and stagnant growth, as there simply isn't much money to be made in the undifferentiated middle.

This phenomenon is not unique to the IT manufacturing industry. Traditional publishers are experiencing a similar challenge. The rise of mobile technology has shifted the way people consume news and information. More than half of the visitors to The New York Times, for example, now access the site via mobile devices. The home page, once a primary attraction, is becoming akin to the print edition - nice to have, but not the main focus.

When people follow a link on social media or through other platforms, their affinity is not necessarily tied to the publication hosting the link. Readers are more likely to attribute positive feelings to the author and may explore their other works or social media presence. Over time, as people increasingly rely on platforms like Facebook, Google, and Twitter for news consumption, value moves to the ends of the spectrum, leaving traditional publishers stuck in the undifferentiated middle.

The financial prospects for newspapers, for example, are inversely correlated to their addressable market. While advertising revenues have plummeted, newspapers can still reach audiences globally. However, the problem lies in the fact that the free distribution provided by the internet is available to every other publication as well. Publishers no longer have exclusivity over anything.

To thrive in this changing landscape, successful writers and publications must pursue a similar strategy. They must focus on what they do best and create value that exceeds that of publishers who are struggling to adapt. Just as AT&T's decision to lock the Apple SIM to their network is an attempt to delay their inevitable future as a "dumb pipe," publishers must find ways to provide unique value and differentiate themselves from aggregators on one side and focused, responsive, and differentiated writers and publications on the other.

So, what can publishers do to navigate this changing landscape and stay relevant? Here are three actionable pieces of advice:

1. Clearly define the problem: Publishers must have clarity about the problem they are trying to solve. This includes understanding the emotional effect they want to instill, identifying priorities, and knowing who they are serving and how. Starting with a cool technology or trend may seem tempting, but without a clear problem in mind, publishers may find themselves lurching from one opportunity to another without a cohesive strategy.

2. Align the business model: Money is not the sole solution to a successful business model. Alignment is key. Publishers, especially those backed by venture capital, must not delay figuring out their business model. It's important to align their financial goals with their overall strategy and ensure that every decision made contributes to the long-term success of the publication.

3. Embrace written communication: In a remote world where communication happens mainly through written channels, clarity in written communication is paramount. Good writing is not just about conveying information; it is a window into a person's character, style, attention to detail, and the way they think. Leaders who excel in written communication can make a greater impact in a shorter amount of time than those who rely solely on verbal communication.

In conclusion, the publishing industry is going through a transformation similar to the smiling curve observed in the IT manufacturing industry. Traditional publishers find themselves stuck in the undifferentiated middle as value moves to the ends - aggregators on one side and focused, responsive, and differentiated writers and publications on the other. To succeed, publishers must clearly define their problems, align their business models, and prioritize written communication. By doing so, they can navigate the changing landscape and remain relevant in the digital age.