Technological Evolution Stirs A Publishing Revolution

This article originally appeared on the Knowledge@Wharton site on 8/5/09.

For publishing, 2009 may go down as the year of the machine.

Consider Amazon’s electronic-book reader, Kindle. Though the first version launched in late 2007, a lighter, faster, cheaper version went on sale this spring. And while the online-only retailer doesn’t release sales figures for the reader itself, its cultural impact was clear by late July, when USA Today announced it would include Kindle editions in its popular weekly list of best-selling books.

With slightly less fanfare, 2009 has also seen the emergence of the Espresso book machine, which will make its New York bookstore debut this fall, having already popped up on campuses in several states. Where Kindle offers consumers a chance to buy some 350,000 books at the touch of a finger — and then read them electronically — the Espresso allows them to print a professional-looking paperback book in about the time it takes to drink a cup of coffee.

At first glance, the machines are diametrical opposites — physically, economically and philosophically. The smallest Kindle weighs 10.2 ounces. The Espresso weighs in at about 800 pounds. The cheapest Kindle costs $299. The cheapest Espresso, produced by On Demand Books of New York, goes for at least $75,000. The Kindle is all about virtual books and online transactions. The Espresso is about physical objects that consumers buy in person.

Yet Wharton faculty who follow the complicated, emotionally fraught subject of how we buy and sell literature say the two devices share something even more important: A role in upending longstanding customs in the slow-to-change business of publishing.

In an industry where inventory problems and overprinting of books is a perennial money drain, the Espresso’s premise — not paying production costs until a reader buys a copy — is a revolution. And in a business where the cumbersome task of routing books to your local bookstore has been a continuing burden — not to mention a risk, since the book may be sitting on the shelf for years — the idea of cutting out the supply chain represents a major development.

"Inventory waste and/or printing time are very important drivers of profitability — maybe the key drivers," says Wharton marketing professor Eric T. Bradlow. "Now the marginal cost of production is zero and the cost of inventory is zero…. The impact that technology has had in both of these cases, whether it’s a Kindle or some sort of print on demand, is that it has increased the opportunities we have to interface with content."

For consumers, the new ways to buy and read books — and the new price points at which to do so — represent a rare expansion of the playing field. "Both [Kindle and Espresso] are great for bookselling," says Wharton marketing professor Yoram (Jerry) Wind. "They basically expand the range of choices that people have. What we must keep in mind is that markets are heterogeneous. There are many segments, and people’s preferences may vary depending on the situation. What we have here is technology offering more options. Some people, especially younger people, may find Kindle terrific. Print on demand is a great solution for people who would like to have a hard copy. They’re not mutually exclusive."

Different Values

The book business has always been more important for culture than for the economy. All the same, moving beyond five centuries of Gutenberg-style production raises questions about how consumers determine value, what they want to read and even how much shelf-space home-builders should design for the living rooms of tomorrow.

For instance, says Joseph Turow, who studies new media as a communications professor at the University of Pennsylvania’s Annenberg School, many readers are subconsciously affected by knowing that the book they see in a store was produced and shipped at significant expense by a major company — a sign that someone who knows the business saw fit to invest in the author. "A large part of the problem is psychological," says Turow. "The fact that publishers have to pay a lot for making a book is kind of a gate to ensure that it has value…. I think the fact that there’s a physical copy that has to go through hoops is part of how people judge the value of something. And that is going to be with us for a long time."

But just how long a time is open to debate. "There are real generational differences," says Wharton marketing professor Patti Williams, who studies the role of emotions in decision making. The rapid decline of news media brands, for instance, suggests consumers of other forms of media have been able to move beyond long-established hierarchies. "Look at what’s happening to readership of newspapers and magazines," she says. Many of those readers are turning to blogs, and in doing so they are saying that they do not "rely on some third party to validate" everything that they choose to read.

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