The Big Picture – November 2014

The Big Picture – November 2014

 

Demolishing the silos.

The Big Picture is the lead article in the “Wessenden Briefing” newsletter.

Breaking down barriers is a common theme when looking at internal company structures, but it is also a consistent thread running through a number of industry developments at the moment.

Both News UK and Hearst Magazines in the USA have made significant moves in opening up their company functions and know-how to external publishers.  Their motivation is very obvious and self-serving – there is money to be made from selling their services on the open market.  Yet there are also much deeper factors at work, as both appear to have a similar view of where their businesses are heading.

Firstly, scale has never been more important in trying to tackle the current challenges and threats.  Both the publishing industry as a whole and also individual publishing companies themselves simply do not have enough scale to survive in a world of Amazons, Googles and Microsofts, who have size, speed and technological know-how at their fingertips.  Secondly, both News and Hearst seem to have a very different view of where they think competitive advantage really lies now than they did a few years ago.  Thirdly, both recognise that the traditional ways of doing things have to change – and destructive, internal, short-term competition is one of them.

This issue has a number of examples of silo-busting and cooperation…..

  • The book industry’s “Super Thursday” is a prime example of competitive publishers working together to grab the consumer’s attention.  Linked to that is a collective sell to trade partners, notably retailers, in order to defend routes to market which are under pressure.
  • Much of what both News UK and Hearst are offering is based on streamlined back-office functions and the biggest of these is IT where publishers look woefully behind the game in comparison to the big digital players.
  • Malcolm Netburn of CDS argues very eloquently for much more inter-company cooperation on data.
  • Both press wholesalers, Smiths and Menzies, have long recognised that they need to break out of their single product silo and diversify.  Smiths’ new same-day click-and-collect delivery service for Amazon and Menzies delivering FMCG goods on behalf of a virtual wholesaler: both are intriguing examples of their own diversification programmes.
  • There is a lot going on in audience metrics at the moment which is no longer the domain of anoraks, but which is crucial to the future of a silo-busting, multi-channel publishing industry.

“Silo-busting” sounds exciting.  Yet the reality of cutting costs, simplifying processes and investing in the future all at the same time is a tricky balancing act which distributors and bureaux are having to manage.  The stresses of doing so are seen in their finances.

Also, trying to gain traction in social media highlights the dangers of cooperation.  Publishers providing exclusive content to Facebook in return for a share of ad revenues sounds like a nifty bit of partnering, but in the long-term could turn out to be a Faustian pact.  What drives the Times+ membership operation, News UK’s (and Time Inc’s) new positions on hard website paywalls is a belief in the value of content and in not giving it away.

Innovation is central to silo-busting.  Yet knowing which digital horse to back is perplexing.  The bets have shifted from digital editions (which will probably turn out to be a niche channel for a defined segment of the consumer market – not the digital future, but not a disastrous dead-end either) to mobile-optimised web, video and live events.

Achieving silo-busting scale and critical mass through aggressive acquisition has always been the traditional way of doing things.  Achieving them through partnering and cooperation is the new way.  Yet this requires different skills and a very different mental outlook and culture.