Seth Godin is leaving the publishing industry. Since 1986, he has been a book packager. He’s had 120 books published and pitched more than 600 ideas and he’s fed up with the industry’s tired approach to printing, promoting, and selling books.
Over the past two years, he has tried to help publishers, publicists, and agents change their business models and evolve their processes. One publishing CEO “worked as hard as she could to restrain herself, but failed and almost threw me out of her office by the end.” Maybe Seth should have taken her to the Aalsmeer Flower Auction.
Laptops, Cell Phones, and a Clock
The Aalsmeer flower auction.
Welcome to the Aalsmeer Flower Auction. Here, in the third largest building in the world, flowers are sold in what’s become known as a “Dutch Auction.”
Every single day, more than 21 million flowers are sold and shipped around the world from this building. So, those tulips you purchased at the local grocery store, they were most likely bought yesterday during a brief layover here in Amsterdam.
What’s amazing about Aalsmeer isn’t its sheer size, or the volume of flowers they ship. It’s not the high-tech, precision supply chain management process they employ. It’s the financial model they use to set the price of one flower.
The Dutch Auction
Every morning at 5:15 am, hundreds of flower brokers take their seats in the giant auction hall. Their laptops are open and their cell phones are at the ready. Then the auction begins. Every 100 seconds a trolley train of flowers is wheeled into the room and the lot of flowers appears on the giant screen overhead.
The Flower Auction Clock by @interchangeableparts
A giant clock begins ticking down the seconds from 100 and the brokers spring into action. As the time ticks down, so does the price. The first person to bid gets the flowers at that price. The trick here is to secure the flowers at a good price without being beaten to the punch by someone else.
This is what’s known as a “Dutch Auction,” and it’s been taking place since 1860.
Cutting out the Middle Man
In 2004, just a few years after the dot-com bubble burst, Google wanted to go public (in an Initial Public Offering or IPO).
Traditionally, a company like Google would hire an investment bank to evaluate what the company is worth, survey the market to gauge demand, and then recommend a pricing formula for the IPO share price. After the dot-com bust, many investors were disheartened by this traditional process and were skeptical of the high investment banking fees and the tired approach to market valuation. Investment firms had amassed billions of dollars with huge “pops” on the first day of an IPO, while the long-term potential of the companies they represented faltered (and even died).
That’s when a few companies, like Overstock.com and RedEnvelope.com, decided to cut out the middle man (the investment banks). They looked to the Aalsmeer Flower Auction as a model for going public. This new approach set the stage for one of the most innovative and successful IPOs in market history: Google.
In August of 2004, Google went public with lower fees and a more diverse investor base. It demonstrated the power of democratic finance at its finest. Google proved that an innovative approach to raising money (more than $20 billion) existed outside the widely accepted and traditional approaches to investment banking.
The flower clock is ticking for traditional publishers
Seth Godin, author
Fast-forward to 2010. Traditional publishers are in a frenzy. Book publicists, agents, and the publishers themselves are challenged with disruptive technologies that are “destroying” their traditional business models. It looks a lot like Wall Street after the dot-com bust. There’s confusion and frustration in the marketplace. And here is where Seth Godin fits in.
With each and every second that passes by, traditional publishers are watching their market erode. The first publisher willing to stand up and bid on a new publishing model will set the standard for the future. But don’t wait too long; the perfect model is out there and someone is going to beat you to the punch.
Borrowing models to innovate markets
Google, Overstock, and RedEnvelope all saw a successful, market-driven approach to pricing a commodity in a fair, democratic way at the Aalsmeer Flower Auction by cutting out the middle man.
They were tired of the traditional investment banker approach to delivering their product to market, and they challenged those traditions by looking to other models that delivered success for over a hundred years.
I challenge all of you to look outside your industry for opportunities to cut out the middle men in your business. They are the ones fighting to hold on to their market position, justifying their existence at every turn. Don’t fall for it. Look to the most efficient path to your customer in other markets and chart a course based on sound models.
Tick, tock, tick, tock … the flower clock is counting down.
Wow, Andrew; this article is quite a find! Thanks for cramming so much beaut info into such a concise, easy-to-read piece. Thanks also to Sarah Mitchell for pointing me in your excellent direction. Best regards, P.
Paul,
Thanks for taking the time to comment. It’s much appreciated. I hope we see you back.
Thanks,
Drew
Hi Andrew,
Great post. I do think you may have misrepresented Seth Godin’s position on the way forward. What I gathered was that he is not giving up on publishing at all. He just won’t do it the way it has been done. Like Cory Doctorow, he may be more keen on electronic formats going forward to as a way of cutting out the middleman.
Muchiri,
Thanks so much for commenting. I do hope I haven’t misrepresented Seth’s position. I read a lot of his stuff about publishing before I wrote the post and the way I see it is that he’s still going to sell printed books – he hasn’t giving up on the medium – he’s given up on the way that traditional publishers actually work.
Having said that, I do think that publishing electronically shouldn’t be considered a replacement for printed copy. They are entirely different ways of consuming media, in my opinion.
Thanks again for taking the time to write!
Much appreciated,
Andrew
Three things:
1) Are you suggesting that the Dutch auction is a better model for the publishing industry? At first I thought you were, then realized you weren’t.
2) Godin’s piece you reference, although lamenting the brokenness of the publishing industry, seems to be more about understanding who your real customer is (publisher vs. audience) and what is it you actually do (author vs. book packager vs. high-paid speaker/consultant/self-promoter).
3) So how DO you think the publishing industry can reinvent/fix itself?
Matt,
So nice to see you on the blog – virtually anyway! Good point about the dutch auction regarding print… I’m merely suggesting that print publishers don’t need a NEW model they need a different model. Something like the use of a dutch auction as a model for market pricing in the IPO business is a pretty inventive way of finding inspiration for new models outside the comfort zone of what’s accepted.
Your point regarding audience identification is well taken. While I think every author knows their audience better than their publisher (hell, they’re out there at book signings meeting the people that love their stuff) I do think publishers have a really old notion of marketing and building an audience for a book. One of the biggest changes in the publishing industry must center around how they measure and market to an author’s audience. The dialogue is changing… and the paradigm is shifting from the publisher knowing all to the author knowing more.
Number 3 is a loaded question. I’ve done much thinking about this and I think my proposed solution to fixing the publishing industry lies in breaking down the individual elements of a publisher’s role and finding the best solutions within them – for example – publicists need help understanding the new paradigm, editors need help changing the way the interact with talent, agents need help finding new talent in new ways, and publishers need help changing the way the build and sell a talent.
The future of publishing lies in not owning the book – but developing, nurturing and sharing a wider spectrum of revenue with the talent. That’s the opportunity.
Let’s grab a beer soon and I’ll lay it out for you.
Thanks again, Matt.
Ha! Looking forward to the beer and “the rest of the story.”
Of course, I have no idea how to fix publishing but your notion of separating out the various functions of the publisher has to be the way to tackle the problem. Oddly enough, the one element you don’t mention is the element that it would be most difficult for authors to handle themselves: the physical production and distribution of books.
Since authors (talent) have more avenues for promoting themselves and distributing electronic versions of their work, maybe the publishing industry should focus on the “hard stuff” – printing, binding, and shipping physical objects.
Hope to see you soon!
Matt,
You’re right. The physical printing of books is something that publishers do really well and it’s something that they are really good at. However, there are a million printers out there who are arguably better at it than the giant conglomerate publishers with their own presses.
I think that printers are missing a huge opportunity here… they know the business better than anyone else and their technology has a evolved in gigantic leaps and bounds. I know printers who could automatically ingest comments from a blog and print them into a book and send a new copy of the book that very same day. That’s amazing!
Let’s grab that beer!
Great article Andrew. I’ve been a book printer for 20 years and was a publisher before that. I would say, making books is easy, selling books is hard, and with return policies, keeping them sold is harder. I have sold to self publishers and large conglomerates; where the book is the product, or just ancillary to the product. The point is there are so many types of publishing markets: trade, professional STM, law, scholarly, religious, commercial, associations, etc. what works for one doesn’t necessarily make sense for the other. Let me know when you get together for that beer!
Tom,
Thanks so much for chiming in. It’s so nice to see you reading the post. I absolutely agree that the nuances of niche publishing are the kinds of opportunities publishing should pursue.
Maybe we should host a small discussion group to vet some of my ideas.
Thanks,
Drew
[...] By Guy LeCharles Gonzalez, Chief Executive Optimist, Digital Book World “The first publisher willing to stand up and bid on a new publishing model will set the standard for the future. But don’t wait too long; the perfect model is out there and someone is going to beat you to the punch.” –Andrew Davis, Seth Godin and the Flower Clock [...]
What a great article! I love Seth Godin anyway, however regardless of whether it’s flowers ,books or widgets, every industry must take a look at what models they’re using in business and ask the question “Does this business model serve us in the 21st century?” “Are we innovative, cutting edge, looking at new markets, new ways to do business and are we running at full potential?” I’m pursuing a new job/career and I want to join a company that is not working from old paradigms and status quo. I want to become part of a company that embraces the “Flower Clock”
Lita,
Thanks so much for the comment! So nice to hear from you! You’re right, companies should make sure that the models they adopt work in the 21st century, but sometimes we should look back to move forward. I really believe that history repeats itself (especially in the media world) and sometimes a look into our past reveals opportunities for the future.
I do hope you work for a company that embraces the Flower Clock!
Thanks again for posting!
Andrew – Interesting information and perspective. I went with a niche national publisher who was not as some of those who you described for my book. Agree publishing a book is relatively easy to selling one that is very difficult given the plethora of books in the marketplace. A couple of years ago I came across some statistics that suggested nationally published books fail to sell 3,000 copies and most self published books fail to sell 100 copies.
What I heard in your article, selling is still about value.
Leanne,
Thanks for commenting! Your stats are great! It’s so sad to think that most books would be considered failures (I guess if the numbers are so low.) I think you’re right. Selling is about proving value, but I’d say most authors might be selling a book, but what they are really selling is themselves – their ideas, their stories, their imagination. Sure, the book is the product of all of that, but to have legs in the publishing world (or the TV world, or the radio world) they must have more than one idea, book, show or concept.
Thanks again,
Drew
Andrew, you are welcome. If the goal is to sell books, then those stats represent failed achievement of goals. This is pretty consistent in sales generally where anywhere from 30 to 70% of all sales targets are not met.
Absolutely, in business for many new authors myself included, having a published book speaks to credibility and expertise so that is it easier to sell yourself first because people are buying your ideas, thoughts, wisdom, etc.
I had always imagined my first book to be a science fiction one instead of a book on sales. Well, sometimes sales seems to be science fiction.
Um, Drew…. isn’t TippingPoint Labs a “middle man” as well? Forget publishing. You’re using it as an example here.
Arjun,
That being said, I don’t think all middlemen are going to disappear… they need to evolve.
You are absolutely right. We are a middle man… I do hope we’re the right kind of middle man.
Can’t wait to see you again at some event! Where are you these days?
Please stay in touch and thanks so much for taking the time to read my post. BTW, I’m working on a Sparksheet post today… all about … well, you’ll just have to wait and see.
- Drew
Andrew,
What a provocative image you’ve painted here – publishers must look at new distribution models to survive. Barriers to entry (need a publishing press and distribution channels) are eroding and opening up opportunities for new content sources (don’t need to restrict access to what publishers deem the best when an expensive print run isn’t required).
Publishers should recognize their core competency is content curation and adapt their business models to support this. I’m not certain we’ve yet seen the new models, but look across the spectrum to music – how Pandora can introduce new talent to a ready audience, and movies – where Netflix offers the potential to provide independent film makers distribution direct to consumers.
The more time publishers spend trying to inspire faith in what is quickly becoming a discarded model, the more likely they will be to find they’ve lost relevancy in the market. They’re opportunity is now – when the market is flooded with large amounts of low quality content – they can be a beacon and establish themselves as the source for the best content. Or, they can watch as new market entrants take that mantel away.
In short, I agree. Tick,tock.
Bob,
Thanks for taking the time to write such a great comment – it’s a post in itself! Much appreciated! You couldn’t be more dead-on! I really do believe that publishers (editors specifically) are really talented. They know how to spot talent, shape great content and deliver it (only in one medium albeit). The clock is certainly ticking and everyday they’re wasting away worrying about how to get their latest book on the iPad is a day wasted no reinventing their business.
Stay in touch!
- Drew