Threat of online Publications to the Traditional Publishing Industry

he Threat of Online Publications to the Traditional Publishing Industry

The aggregate demand of published material, both online and offline, is a fixed number. Publishers in today's mass media market face fierce competition; each customer that an online publisher wins comes at the expense of its offline counterpart. To illustrate, imagine the unequal slicing of a pumpkin pie representing market shares that vary in size. The sum of all shares, or 'slices,' adds up to the total client base. Although each publisher already owns a portion of the pie, it still covets those who have a bigger slice. In this zero-sum game, with each new slice that a publisher gains, its pie becomes incrementally larger, while the competition's becomes incrementally smaller. Statistics have shown an upward trend in e-journal subscriptions in recent years, mainly because online periodicals are more frequently updated, cheaper to produce, and accessible everywhere (Greco 2). To that end, the internet has helped many web-based media business increase their market share while simultaneously decrementing those owned by their offline competition. Given their inferiority in cost, channeling, and time-to-market, how do traditional publishers stay in business? In the same way opposing forces in nature result in a state of equilibrium, there is a single overarching mechanism in the publishing industry that is designed to buffer short-term market gains and resist long-term change.

This built-in mechanism in the media business consists of a multitude of socioeconomic factors. We will first explore the economics behind the publishing industry, which includes the horizontal integration of ownership and realizing specific market segmentation, such as textbooks. Then, we will scrutinize the social implications such as conventions, content censorship, and government regulation, and finally, delve in on a specific case of value-added books.

In assessing the economics of the media business, it is helpful to first examine the ways in which publishing companies are owned and financed. Broadly speaking, media systems can be owned by the state, by private corporations, or by a mixture of both, all of which are financed through advertising (McCullagh 75). As with any other business, the publishing industry is profit-oriented, and the premise for all strategies deployed and actions taken is ultimately a means to achieve financial rewards.

Many major national periodicals and magazines have developed web versions in the past two to three years, a move that helps strengthen media ownership (van dur Wurff 217). Large media companies buy into or merge with other media companies that serve the same market, a process known as horizontal integration (McCullagh 75). For example: the merger of America Online and Time Warner in 2000 brought together CNN, Netscape, Warner Brothers, and Time Magazine.

It is very common to find well-known magazines such as TIME, Fortune, or Newsweek that offer full access to the same published content online. This requires some initial cash outlay to setup the proper web-hosting infrastructure, but once the host servers are in place, no additional capital is required to run the internet operation. Web versioning transfers ready-to-go material onto the World Wide Web, which compared to the original paper content, is simply an alternative mode of display. For example: TIME magazine invests some initial capital to create www.time.com. Once the website is operational, it then attracts new readership and advertisers and generates more revenue.

From a project valuation stand point, the online content has already been paid for; therefore web operations can earn additional profit while incurring negligible added cost. Companies integrate horizontal markets1 not only to achieve operational efficiency, but also to attract advertisers and readers with different demographic profiles. In that sense, the online-offline combination seems to achieve synergy and reinforce the traditional publisher's position in the market.

Market segmentation is another economic reason that traditional publishers stay afloat. Rather than becoming a powerhouse in the open market, such as consumer products conglomerate Proctor & Gamble, smaller companies tend to specialize in selected products and enjoy a large market share in a small market segment. For example, companies that specialize in manufacturing artificial hearts face mild competition because very few competitors exist; therefore product demand is predictable and recurrent. In general, smaller companies that specialize in one or two products can stay profitable just by satisfying a particular market niche.

Similarly, the K-12 textbook market has its own niche that is free of online competition. Beyond K-12, most universities rely on printed textbooks as the major venue for learning, too. (Blog-based classes such as STS125 are the minority) Publishers are always looking for ways to revise textbook contents as frequently as possible. They are able to create 'new' demand for textbooks every year by correcting typos, updating diagrams, or switching the problem sets in order to roll out new editions. This unique demand for printed material in the educational system gives rise to market segmentation and ensures steady cash flow and profitability for traditional publishers. Hence, as long as history is being documented and new scientific discoveries are being made, textbooks will continue to evolve and improve, and traditional publishers such as McGraw Hill will remain in business.

This change-resisting mechanism in the publishing industry is not only rooted in economic factors, but social ones as well. Conventions, content censorship, and government regulation are social reasons that traditional publishers still flourish. In our society, most readers follow certain reading habits, or conventions, that correspond to human nature. For avid readers, reading books and magazines are far more convenient than browsing through PDF files on a computer. The former can take place under a tree or inside a busy bus terminal and would only require a single piece of printed literature; whereas the latter would require a computing environment with power outlets, internet connection, and other peripherals. For fiction lovers, pocket-sized novels offer a personalized reading experience and can foster close relationships between the book and the reader. In that sense, readers prefer printed material because they are tangible, substantive, and most importantly, possess character. The rugged paper texture and the moldy scent of the book (yes, old pulp does smell) instill sentimental value and add to the joy of reading. These preferential human conventions promote book sales