Why publishers should favor open standards and format agnosticism—for now

Joseph J. Esposito is former CEO of Encyclopaedia Britannica and also has worked as an executive at Simon & Schuster and other giants. The must-read essay below appeared in a slightly different version on Read 2.0. – D.R.

Tim O’Reilly recently commented on the Read 2.0 mail group about the need for publishers to avoid getting tied to a particular, proprietary format.  The context was a thread about the strategic implications of the Amazon Kindle.

I agree with Tim entirely.  A publisher who does not pursue open standards and platform agnosticism is courting danger, as there has never been a distribution channel that failed to eye the riches upstream and sought to capture some portion of them.

The true value chain of publishing

Many years ago the demon of distribution was Walden (hard to believe, but it’s true); later it became Barnes & Noble; today it may be Amazon, with its proprietary Kindle.  I wonder what computer book publishers are saying in private about Safari (a visionary, innovative service that I greatly admire).  The value chain of publishing consists not of a congeries of cooperative partners but of a series of individuals and organizations pursuing their own interests, each seeking advantage over one another.

Thus, open standards and format agnosticism.  But what happens then?  Do we expect the creators of hardware devices, who have their own shareholders to appease, simply to allow their part of the value chain to be hopelessly commoditized, with the only viable strategy to be one of tight cost controls and the pursuit of scale (to further unit cost reductions)?  And when one or two such manufacturers prevail over their rivals, will their view of publishers be wholly benign or will they strive for some larger piece of the publishers’ margin?  Think of the now-ancient PC world, where, commoditized by the common usage of DOS and, later, Windows, one independent company after another fell to the robust performance of Dell and HP.  Anyone in the market for an old Morrow computer?  I may have a Packard in the garage as well.

Also helpful to device makers

If publishers successfully support an open standard (and they should), device manufacturers will respond in any number of ways, from attempting to achieve scale, to developing proprietary schema in areas outside file formats, by encouraging the growth of network effects to maintain their market position—to striking exclusive deals with publishers, to cordoning off certain distribution channels for preferred vendors (this is true in the audiobook business today, where the largest vendor also owns the distribution channel to truck stops), and to acquiring content themselves (think of the B&N purchase of Sterling, the Sony purchase of Columbia, etc.).  The youngsters who read this post may not remember a time when hardcover and paperback publishing were two distinct businesses without overlapping ownership—hardcover for original work, paperback for access to mass distribution networks.  The merger of these businesses was a response to similar economic pressures that will be facing publishers and device manufacturers.

Shrewd tactical response

Open standards, in other words, are not a strategic vision for the industry but a shrewd tactical response to a particular set of conditions at a specific moment in time.  Open standards don’t make for a successful business, any more than proprietary formats do.  The value derives from the strategy that sits behind the open or proprietary formats.  Amazon has done exactly the right thing at exactly the right time—for Amazon.  And whom else does Jeff Bezos work for?  We should view open formats in the same light.  Speaking as someone whose sympathies lie mostly with publishers, I am all for open standards—until the next, and better, strategy comes along.

Bio: Joseph J. Esposito is an independent consultant providing strategy assessment and interim management to the information industries. He has served as an executive at Simon & Schuster and Random House, as President of Merriam-Webster, and CEO of Encyclopaedia Britannica, where he was responsible for the launch of the first Internet service of its kind. In addition, he has served as CEO of Internet communications company Tribal Voice and SRI Consulting, both of which he led to successful exits. Among his clients have been such technology companies as Microsoft and Hewlett Packard, various publishers of all stripes, and a growing number of not-for-profit organizations (e.g., JSTOR, the Center for Research Libraries, and the American National Standards Institute).

Moderator: Joe is far from the usual defender of open standards. Read The devil you don’t know: The unexpected future of Open Access publishing, and you’ll understand why his open-mindedness to open standards is significant. I personally see open standards as a permanent strategy, but am pleased that Joe has gone as far as he has. Let’s hope that publishers will pay attention. – D.R.