At USV one of our big investment thesis is that the internet is resulting in massive unbundling of existing business models and value chains. Newspapers are a great example of this process with different sections, including crucially classifieds, now being unbundled across many different web sites with breaking news on Twitter. In education we are seeing it with individual courses or subject areas being unbundled through the likes of Coursera or Codecademy. And in finance traditional banks are being unbundled with specific areas such as consumer credit taken over by companies such as Lending Club.
Publishing too is likely subject to unbundling. The historic bundling of selecting, editing, designing, marketing, selling, printing, distributing and licensing arose in a world in which printing and distributing was expensive. That expense is at the heart of the publishing model in which the publisher finances the expense and in return owns the content. Today printing and distribution on the Internet are free. And we are already seeing the beginnings of the unbundling happening.
Selecting: With printing expensive there was a premium on selecting first and publishing second. In that world selecting was done by highly paid specialists. Now everyone publishes and the universe of readers are all engaged in the selection process.
Editing: A quick look on marketplaces such as ODesk and eLance let me find thousands of freelance proof readers and book editors already. And here too readers can be much more involved than before as you can publish first and correct errors easily.
Designing: Networks such as Behance are making access to creatives available for everyone. On community sites such as Wattpad, community member are creating cover art and illustrations.
Selling, Printing and Distributing: These steps are disappearing and/or being replaced by automated self-service models that are openly accessible to anyone.
Licensing: Parceling out subsidiary rights or dealing with movies was done by publishers because they held the rights due to the financial model. But in a world where more creators own their rights this will become a separate function handled more in the model of a talent agency.
Financing: In a world where the core traditional expense has been eliminated and other expenses are shifting to networks of individuals (editing, designing) the remaining step to be unbundled is financing. And there crowdfunding is making a real difference. Kickstarter alone has seen over 3,000 funded book projects that have raised over $20 million total.
What does this mean for existing publishers? Of course this unbundling process won’t happen overnight. So in the near term, I expect that we will see ongoing consolidation in the industry, not unlike what we have seen in music publishing. At the same time, new businesses will arise that will specialize in some of these functions, much as we have seen in other industries.