The Smiling Curve and the Changing Landscape of Publishing

The Smiling Curve and the Changing Landscape of Publishing

In the world of IT-related manufacturing, there is a concept known as the Smiling Curve. This curve illustrates the value-adding potentials of different components within the value chain. It is ironic to note that in the personal computer industry, 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 value chain. This phenomenon creates a curve that appears like a smile on a graph.

Acer, a prominent company in the personal computer industry, serves as a prime example of the Smiling Curve. While they put PCs together, it is the component makers like Intel and Windows that capture most of the value on the left end of the curve. On the right end, systems integrators and value-added resellers like IBM or Accenture capture the rest of the value. Acer and other OEMs in the middle of the curve compete for single-digit margins and experience stagnant growth.

This phenomenon of the Smiling Curve is not limited to the IT manufacturing industry. It is making its presence felt in the publishing industry as well. Traditional publishers are finding themselves stuck in the undifferentiated middle, struggling to capture value while the ends of the value chain thrive.

One of the significant shifts in the publishing industry is the changing consumption pattern of news. More than half of the visitors to The New York Times, for example, access the publication via mobile devices. As people increasingly rely on platforms like Facebook, Google, and Twitter for their news, value moves to the ends of the chain. The readers' affinity is more likely to be directed towards the author rather than the publication hosting the link.

This shift presents a paradox for publishers. While they can reach audiences all over the world through the internet, they no longer have an exclusive on anything. The free distribution provided by the internet is available to every other publisher as well. Publishers are realizing that they need to provide value beyond just hosting content if they want to survive and thrive in this new landscape.

The most successful writers and publications are pursuing a strategy of focusing on what they do best and accruing outsized value relative to the publishers. This strategy allows them to differentiate themselves from the competition and become responsive to the changing needs of their readers. Publishers need to shift from being mere platforms to being facilitators of valuable content and devices.

The internet has removed friction and eliminated the need for intermediaries in various industries. In publishing, value is flowing to aggregators on one side and focused, responsive, and differentiated writers and publications on the other. Publishers must adapt to this changing landscape by providing unique value propositions and embracing new technologies that enhance the reader experience.

Actionable Advice:

1. Embrace Technology: Publishers must invest in technology that enhances the reader experience and provides added value. This could include interactive features, personalized recommendations, and seamless integration with social media platforms.

2. Differentiate and Focus: Publishers should focus on their core competencies and differentiate themselves from the competition. By providing unique content and experiences, publishers can attract and retain loyal readers who value their offerings.

3. Collaborate and Innovate: Publishers should collaborate with writers, content creators, and technology companies to innovate and stay ahead of the curve. By forging strategic partnerships and embracing new ideas, publishers can position themselves as leaders in the industry.

In conclusion, the Smiling Curve phenomenon is not limited to the IT manufacturing industry but is also impacting the publishing industry. Traditional publishers find themselves stuck in the undifferentiated middle, while value flows to the ends of the value chain. To thrive in this changing landscape, publishers must embrace technology, differentiate themselves, and collaborate to innovate. By doing so, they can capture value and remain relevant in the digital age.