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The subscription scheme will also work for entrepreneurial publishers. Anyone can be a new publisher; all you need is an audience. A startup with as few as 20 productive authors and 10,000 captive readers, charging each reader only $10 a month, will gross $1.2 million.

After display technology becomes cheap enough there will be a (perhaps) 5 year window of opportunity for capital-light startups. Initially the market should be similar in growth potential to the software market of 1977-1984. After that period of explosive growth (and huge profit) the market should stabilize to a few large companies and many niche companies. Then the largest companies will compete for market share and the thousands of niche companies would become the self-replenishing part of the market. Given an audience, by 1996 anyone could become a publisher without getting a mortgage.

For example, a race car enthusiast might acquire titles on formula racing, racing news, racing in history, car maintenance, car technology, biographies of racers, short stories, and adventure novels. Further, there may be discussion groups handled by the publisher's machine on aspects of racing or on that month's novel or story. And the same would be true for a lover of 19th century novels, or science fiction, or any other niche. Each title may be almost useless to its author, but being selected as part of a well-chosen group gives social and economic value to the author, publisher, and readers. Few authors have the capital or the will to develop, promote, and distribute their titles.

Besides salaries, advertising, and phone bills, such a startup today only needs an initial capital outlay of about $20,000 to buy (or even lease at 1/10th the cost) the machines answering the phone, and a continuing cost of perhaps $10,000 a year for maintenance. And these costs will halve every 2 to 3 years as equipment prices continue to plummet.

Expansion of the number of distribution sites is even more non-linear than increasing print run size today; a few thousand dollars of equipment translates to support for millions of dollars of subscriptions. Rents can be low too since distribution sites need not be in New York. No humans are necessary, so Alaska will do just as well.

Not even the phone bills would be that high. A subscription service can first send each of its users a fixed program to uncompress its books, and send books on demand in compressed form, taking only a few milliseconds to complete each call. Such a startup could attract $1 million in venture capital with a short payback period, unlike startup paper publishers today. With venture capital and a ready market, it could become a billion dollar publisher in 10 years. The fortunes of 7 of the 10 richest U.S. billionaires are based on media, communications, or computers; publishing is right in the middle of this triumvirate.

Established publishers should brace themselves for increased competition.

next up previous contents
Next: Technological Hammers Up: Pricing, Positioning, and Profits Previous: Competition
Gregory J. E. Rawlins