European report analyses digital business models
Jim Bilton of Wessenden Marketing and Brandlab, focuses on the business models encapsulated by the three “Rs”: Re-inventing, Re-imagining, and Re-structuring as companies up and down the supply chain flex to meet the challenging conditions out in the market.
European Digital Media Landscape to 2020: The Future of Paper & Print is a new report which maps out the future of paper and print in a digital world. One of the key themes of The Stationers Company’s report is that the business models behind the main digital players are just as important in shaping the environment as technological change or even changing consumer behaviours.
Jim Bilton, one of the consultants who produced the report (with Martin Glass of EMGE) focuses on these business models.
“Restructuring” has a hard, pragmatic, cost-cutting feel to it. Although Future may dress up its reorganisation as “transformative restructuring”, the company itself makes no pretence about the need to make its finances much tighter than they have been and simple cost-cutting is fundamental to that. The same with retailer Morrisons, who still seem a little adrift as to their positioning in the intensely competitive grocery market and who have been drawn into a dangerous price war. And just when they thought that Aldi and Lidl were enough to think about, along comes Hema and back comes Netto to the UK.
“Reimagining” is altogether softer and more creative. It is a word which recurs in the Stationers’ Report about the future of print and paper. The conclusion is that there is a long-term role for both, but that it is a niche, high value, low volume, value-adding role, adding depth of engagement to the lean, mean comms machine that digital is becoming. One of the challenges that the report raises is of people involved in print and paper needing to be much more creative and lateral-thinking in how tree-products fit into the emerging world of the “internet of things” which will make the current “mobile whirlpool” look simple. Being able to “reimagine” is vital.
“Reinventing” sounds strategic, radical yet robust: taking things apart and then putting them back together again in a different way. That is what the UK Professional Publishers Association (PPA) called its conference. That is what US magazine publishers say needs to be done to their wobbly supply chain. That is how UK retailer Asda/Walmart describes its store management changes – there is a real cost-cutting thread to what the grocer is doing (all the new digital jobs it has created are lower paid than the old store management posts it has cut out), but there is also a real intention to try to bring online and bricks-and-mortar together into a more seamless shopping experience.
Looking at what retail is doing was a theme of the recent US Retail Marketplace conference reviewed in this issue of “Wessenden Briefing”. The balancing of bricks-and-mortar and online in retail is a direct parallel to the balancing of print and digital in publishing. The mobile-enabled “endless aisle” has a mirror image in the “endless magazine”. And so on. Retail and publishing have a lot to learn from each other and should be talking together more strategically than they do currently. The scary fact is that publishers have a lot more to learn from retailers (or at least the better retailers) about practical digital applications than vice versa. Also, retail has a scale to it that publishing simply does not. So, seeking out more publisher/retailer alliances should be on the “to do” list of publishers.
This talk of business models, scale, retail and vision brings us inevitably to Amazon who is currently locked in a battle with book publishers over terms, margins, consumer pricing and processes (virtually everything!). Amazon boss Jeff Bezos bought the Washington Post with a fanfare last year and has seemingly done nothing with it since, but has quietly dropped the suggestion recently of a global digital newspaper available on the Kindle. At the same time, Amazon’s accounts reveal that its UK division operated on a pre-tax profit margin of 0.3% last year. It is not just hiding its profits from the taxman. It is also pumping its profits back into the leanest, meanest digital operation in the world which has an ongoing fascination with media products and seemingly no intention to aim for a profit margin much over 1% for ever. And they’ve just launched their own smartphone, by the way.
The brutal fact is that whatever restructuring, reinventing or reimagining takes place in company “strategy days”, publishers are simply not big enough to have a material influence on the digital landscape. The industry’s future lies in being smarter, faster and more creative. And in forging partnerships with scale, digital players. At the same time, there is a real need to make what works now (and that includes print and boring old legacy stuff such as retail supply chains), work better and for longer than anyone had counted on, because the digital gravy train has been held up at faulty points down the track even though we can hear it whistling in the distance.
This article is an extract from Wessenden Marketing’s regular newsletter, “Wessenden Briefing.” For more details of the newsletter or of The Stationer’s Company report contact Jim Bilton (firstname.lastname@example.org)