Information Goods – Technology of the Week – Group 37
Advancements in the information technology have had a huge impact on many different industries, such as the book, the movie and the music industry. These industries all have one thing in common: they sell information goods. You don’t buy a book for the ink and paper it has, but for the information you can get reading it.
In our research, we looked at 3 parts: first, at how the book industry has evolved, second how technological changes have disrupted business models and impacted stakeholders and last what we can expect from the industry in the next years.
The disruptive innovation in the industry came up with the release of the Amazon Kindle. With its revolutionary E-ink displays, the E-reader was easier to carry and all of a sudden, it was possible to carry up to 4000 books in your pocket. Also, this made buying books more attractive because the reader had now access to more than 10x the number of books through online stores. Due to this, the whole industry has shifted and different business models started to evolve, such as flat rate subscriptions and pay-per-page models.
In order to analyze the industry evolution, we decided to use Porter’s five forces to describe how the power of the stakeholders have evolved over time.
• Writers now have higher bargaining power, since the competition among publishers has increased and self-publishing has become a more effective way to get to the market.
• Consumers now have more book options to choose from and more platforms on which they can search for books, which increases their bargaining power.
• Given the ease of self-publishing, standard publishers struggled to retain their market share, due to reduced entry barriers. Furthermore, since creating platforms on the internet is relatively cheap and easy, an increased competition has further reduced their bargaining power.
• On the one hand, the switching costs have increased, because E-books can be published in different file formats, some of which are unique to a certain E-reader. On the other hand, the presence of new substitutes, such as audio books, have increased the possibility of diversifying the market.
In terms of possible future evolution of the industry, based on recent development and evolution of the market, we forecast two major possible trends:
First is the fact that the physical book industry will not die. Surprisingly, nowadays a book is still more likely to be sold as physical-, rather than a digital copy. This is because a large group of people still appreciate the experience of buying a book, talking to the library staff to receive suggestions, touching the book or seeing its cover.
Second, thinking about how much time people spend driving a car, cooking or showering, we predict that audio books will gain a large market share in the long term. This particular kind of book gives value to that time and thanks to devices such as Google Home and Alexa, this is even easier than it used to be.
The video can be found here: https://www.youtube.com/watch?v=5aifQ8UhH8A&feature=youtu.be
