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When the Invisible Hand is a Fist
Evan Butterfield
MAR 22, 2013 13:34 PM
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For those unfamiliar with the unique phraseology of Daily Variety, the entertainment industry’s newspaper, it’s how the century-old paper might describe its situation today: Hollywood’s Top Trade Publication’s Poor Financial Performance Forces a Change: Variety to go Online-only, Ends Daily Paper Publication.

Anyway, it’s true: Daily Variety newspaper, which has published industry gossip, insider information, and entertainment news since 1905, is no more. There’s a website, supplemented by a weekly (print) magazine that’s probably not long for this world, either.

We knew everything in publishing was going to change; it’s just changing right now, and very, very fast.

Back in the 18th century, Adam Smith invented the notion of an “invisible hand” that magically guides free markets toward a happy equilibrium among suppliers, buyers, and sellers. That may or may not be an accurate characterization of the operation of unfettered capitalism, which sometimes can get pretty red in tooth and claw, but it’s an interesting notion nonetheless. I’m no economist, but the Invisible Hand seems to me to be a pretty simple personification used to explain how the combined actions of individuals in a marketplace can create certain sometimes-predictable consequences.

Economics aside, we can see the operation of invisible hands elsewhere, like in the publishing industry. In publishing, the Invisible Hand is not so much a financial market force discretely manipulating complex and chaotic systems into some sort of appearance of order as it is a big ol’ slap across the face delivered by technology, creating disorder and confusion out of which, someday, some sort of normalcy may well evolve.

By now, it’s old news that Time magazine decided late in 2012 to abandon the print publication model that had served it pretty well for 90 years, and go totally digital. At the time, all of three months ago, this seemed to be a sound decision, grounded in business, technology, and market realities. Hooray, we all said, for Time!

So it’s a little disheartening to learn that Time Warner has announced that it’s spinning off the Time, Inc. magazine part of its vast portfolio so it can better “focus entirely on our television networks and film and TV production businesses.” The Time Inc. group includes over 100 publications, and efforts to merge it with other publishing groups failed. The company is suffering financially, with 2012 revenue down 7% from 2011, and operating income dropping 25% year-over-year. Time, Inc.’s third CEO in as many years announced that she would be stepping down, and the company announced a 6% staff layoff in February, amounting to 480 people. (http://money.cnn.com/2013/03/06/ news/companies/time-warner-time-inc-spin-off/)

Time Warner is not alone among media conglomerates in deciding now’s the time to purge—er, “set free” their print divisions in favor of more lucrative Web, cable, and film media. News Corp also announced that it’s separating its newspaper and book publishing assets (including The Wall Street Journal and HarperCollins) to focus on its entertainment divisions like 20th Century Fox and Fox News.

Apparently, in publishing, the old adage is true: If you love something, set it free. Apparently the adage’s flip side is also true: If you don’t really like something, set that free too, and focus on the things that make money.

In other Invisible Hand news, Barnes & Noble posted quarterly earnings that showed overall revenue down nearly 9 percent year over year, and sales of the company’s e-reader, Nook, were down 26 percent. In the mixed-blessing department, B&N’s digital content sales were up by almost 7 percent, which is ironic because it was the company’s reasonable concerns about controlling the growth in digital content that led the brick-and-mortar giant to develop its own e-reader in the first place. Overall, B&N showed a loss of $6 million, compared to $52 million in income last year. (http://www.theverge.com/2013/2/28/4039542/nook-revenue-drops-as-barnes-noble-post-weak-q3-2013-earnings)

But all is not bleak, and what the Invisible Hands taketh, it also giveth in great big buckets. Amazon’s Kindle has become comfortably entrenched in the e-reader world, Apple’s iPad is almost cliché in its ubiquitousness, and pocketsized smartphones such as Samsung’s Galaxy and Apple’s iPhone are taking over market space once dominated by desktop PCs. Digital audio is rapidly growing as a potential competitor with e-readers. The times, as they say, they are a-changing, and a lot of money is being made.

The bottom line in all this is that it’s not enough for a publisher just to “go digital” and declare victory. Barnes & Noble thought they could play both sides of the court with brick-and-mortar stores supplemented by a digital reader. They were wrong, and they’re losing on both sides. Time Warner may have thought at one time that taking Time digital would solve that magazine’s problems, but quickly found out that a newsweekly is by definition “old news” in a constantly refreshed and updated information sphere. Variety’s print magazine may learn the same tragic lesson.

Meantime, publishers and content providers that didn’t seek the simple solution, who thought through the process and who created a whole new way of doing things that built on past competencies are getting a pat on the head from the Invisible Hand. Amazon, for instance, started out as a print book distributor that built a business on shipping efficiencies, evolved itself into a company that pours the digital content it holds (thanks to that old model) into the device on your lap (that it sold you) as soon as you want it. Just taking the same old content and putting it online is good, but may not be enough. Publishers need to re-think the whole idea of what content is, how it’s delivered, and how people want it in the real world, not some model driven on assumptions. In Variety-speak:





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