“The Future – transformation from publisher to information provider”

Robert Rigby Hall

Senior Vice President, Reed Elsevier

August 28, 2007

Good afternoon. Thank you for the opportunity to share some ideas with you about the future of the publishing industry from our perspective as a global online information provider.

Let’s start by looking at some things that happen when new media are introduced:

§New institutions are formed and new professions emerge

§New languages and formats take shape

§Cataloging and searching for information becomes much easier

§Fights erupt over intellectual property

§Boundaries break down between what is public and what’s private

§And a lot of silly ideas appear.

You may think I’m describing the past 10 or 12 years of the Internet and online era... but actually that’s the way it was in the late fifteenth century.  

In her classic book “The Printing Press as an Agent of Change…” Professor Elizabeth Eisenstein thoughtfully examined the cultural transformations that took place for nearly a hundred years as Europeans learned how to take advantage of their new technology.

For example… the printing press standardized language and writing styles. Whereas ancient and medieval scribes and scholars had to search for scattered manuscripts then copy them by hand… the printing press and new distribution systems brought consistency and efficiency. Scholars could focus on gathering new data… thus creating new professions and generating new knowledge.

At the same time… the first editors and publishers of that era were coming up with words and syntax for the new institution of publishing. Their efforts five centuries ago evoke the creations and new initiatives of the electronic publishers and Web managers during the past decade.  

Literacy expanded in the first few hundred years after the invention of the printed word. That enabled a widely scattered readership to respond and contribute to the dialog and vocabulary. Artisans and translators… as well as professional “knowledge workers” of that era… added their views and research. These activities resemble today’s collaborative online sites and social networks.  In fact… if these knowledge workers were alive today… they would probably have their own blogs.

The concept of technology changing the ways we work and live is nothing new. Of course… now the transformations take place in “online time.”  

It took five centuries to create the business structures and revenue models of publishing that we grew up with. Now… in barely a decade… we’re seeing an overhaul of our entire system. 

And as we know… it’s a lot more complicated in the electronic age.  We’re facing the confluence of technologies… financial requirements and legal safeguards. They are all coming together… and coming at us… at a speed unimaginable to Gutenberg.   

For the next few minutes I’d like to share our perspective with you on a number of topics related to the future of publishing… but first… a little bit about us.

Reed Elsevier is an 8-billion dollar world-wide publisher of information. Every year our science and medical… legal and risk… and business-to-business operating divisions produce more than 15,000 different magazines, books, CD Roms and internet-based data and information services for professional users.  Reed Elsevier’s business segment revenues are growing between 5.7 and 7.2 percent.

Reed Elsevier has invested in China for many years. Today in mainland China we have revenue of 100 million dollars and employ more than 500 people.

As publishers we translate and distribute some 1,800 books, journals and electronic products through out Elsevier Health/Science Divisions.

Elsevier is also the number one publisher of high quality research from China… publishing almost one third of all Chinese articles indexed by the Institute for Scientific Information. We also work closely with Chinese journals to help them achieve international-level quality.

Though LexisNexis… our legal division… we supply China Online – a powerful research tool specifically developed to help customers quickly and easily research changing legal and regulatory issues. 

Reed Business supports Chinese industries by delivering world class business-to-business publications. Reed Business has launched 12 magazines and websites in China – including Interior Design… TWICE… Instat…and EDN China.com. In August of this year we formed a joint venture with CBI China to create China’s largest commodity market information company. And Reed Exhibitions will produce 38 trade exhibitions in China in 2007… either directly or through partnerships with organizations like China National Machine Tool Company and CCPIT.

Reed Elsevier is one company in an industry of more than 6,900 companies that create… publish and aggregate content to the tune of 362 billion dollars each year. So to say that we keep a close eye on publishing industry trends is probably an understatement. We recognize that our company must evolve and change as the industry evolves and changes.  The alternative is to get left behind.

One trend clearly caught… and has kept… our attention. For the last few years we’ve looked at the worldwide revenue growth rate for print and electronic publishing. Two numbers stand out. The first number is 1.9 percent. That’s the Compound Annual Growth Rate for print. The second number is 17.4 percent. That’s the Compound Annual Growth Rate for electronic. Numbers don’t always tell the whole story but in this case I think they send a pretty clear message – the move to electronic publishing is well underway and it isn’t slowing down anytime soon. 

Publishing is going electronic for a number of reasons.

The first reason is that it’s easier to access information electronically than it is to access information in printed form.  You can electronically access content from anywhere in the world!

I remember going to the University library to get books I needed for class and leaving empty-handed. My classmates always seemed to get there first and check out the required texts. 

But today… a member of my staff studying for an advanced degree buys all his books online. He can also find the book’s content imbedded in other tools. If he wants more information on the same subject… he just points and clicks his way through millions of newspaper and magazine articles. And if he get restless… with a few key strokes he can find a new recipe for his evening meal… new architectural ideas for his wife’s latest home improvement project… review his son’s school assignments… and download works of classic fiction and music. 

There is a comedian in America who talks about how we select homes based on how many possessions we have. For example… he says when we’re young we select small homes because we have few possessions. But as we get older we select bigger homes because we accumulated too many possessions. He says we keep moving because even though our homes are big enough for us… we typically run out of room for our possessions!

In a sense… the publishing market is moving from print to electronic for the same reason that we move to bigger homes. The industry’s prized “possessions”… its content… needs a bigger home! We have more content now than ever before. And it is much easier… and more cost effective… to record large amounts of content in a database rather than in a printed document. And as a user… it is much easier for me to browse through a database than it is to search through volume after volume of an ever-growing stack of books and periodicals.

This ever-growing move to online is forcing publishers – including our Elsevier Science business -- to change or get left behind. 

Our recent series of investments that resulted in Science Direct and Phoenix have transformed our world. In taking advantage of the vast expansion of the internet… we have successfully migrated from the print-only world of 1997 to a more than 2/3 e-journal world in 2005. This covers everything from the Lancet’s first issue in 1823 to the journals published today. And since so much more content is online… we see a corresponding growth in our electronic journal publication and usage. More users are thinking online first… and print second.

Users who think online first have forced publishers to change in another way – and I imagine this change is a delightful surprise to authors.

Thanks to users going online… we’re seeing a decreased emphasis on publishing and increased emphasis on content.

Historically authors would spend years pouring their blood… sweat and tears into researching and editing their manuscripts… only to discover that those years were often the easiest part of the publishing process.

Today authors may still agonize over every word in a 100,000 word manuscript… but publishers no longer hold all the keys to the publishing process. Once again – its change or get left behind.

In our Elsevier Science business we focus on delivering the very best content. We want to delight our authors… editors and reviewers with our customer service. We’ve sped up the publication cycle by two months for faster exposure of content…. and we now post accepted manuscripts in 5 days… as opposed to 7 weeks!

The increased focus on online content also gives new meaning to Sir Issac Newton’s third law of motion.  In the publishing world… one equal and opposite reaction to an increased focus on content is the birth of more authors. 

Free from the restrictions of traditional publishing… authors have discovered that online gives them the ability to imbed their content in different tools. Different tools create different… and larger… audiences for their work. And niche authors… authors who couldn’t get published in the past because the potential audience and corresponding profits were too small for most publishers – are all of a sudden attractive. Why? Because online publishing costs are much cheaper than traditional publishing costs and now publishers can turn a profit with these authors.

And what is the opposite and equal reaction to this action?

The additional researchers and published articles around the world force publishers like Reed Elsevier to raise the level of productivity gainers for researchers. 

These electronic tools help users sift through mountains of information. In addition… these tools allow users to sort out the great number of unfiltered… un-qualified information and exchanges that are irrelevant to their communities.

I’m convinced that this is the arena where the most challenging… yet important… improvements will be forthcoming. We are not talking about major new launch like Science Direct in 1997… but a myriad of experimentations – taking a chapter from Google’s constant beta-testing environment. We aim to increase the efficiency and quality of the research process by providing educational… administrative and personal tools that researchers can use in their primary activities and that serve the tasks beyond these direct research activities. I hope you are as excited as I am about what’s ahead.

So far… it seems we are on the right track. In fact, a study showed that among the professions with the heaviest information use (including legal, IT, sales & marketing and manufacturing & purchasing)… only the science and engineering sector has decreased the time spent “looking” for information and increased the time spent “analyzing” information.

We’re all going to have to get better at finding information so we can spend more time analyzing it. Today we live in a world of easy… constant access to information.  Our Blackberries…and soon our iPhones… deliver the internet 24 hours a day… seven days a week. Blogs and social networks like YouTube and MySpace break down geographical barriers and allow for truly global communication.

Last week I hosted the launch of a LexisNexis book called Constitutional Landmarks in Malaysia: The First 50 Years. We published the book in conjunction with the celebration surrounding the 50^th anniversary of Malaysia’s independence.

Before the ceremony I was sitting with Malaysia’s Minister for Culture, Arts and Heritage…. an ex-chief justice and two very distinguished managing partners of Malaysian law firms.

Somehow we got onto the topic of philosophy and we were trying to remember the name of a Greek philosopher who died by throwing himself into an active volcano so that people would believe his body had vanished and he had turned into an immortal god. 

Nobody could remember his name so I took out my Blackberry and used mobile Google to “google” him. I was instantly able to solve a problem that was clearly vexing the group – his name was Empedocles. That’s how easy it is to access information if you know where to look.   

By the way… Google is the number one information company worldwide in terms of revenue. Reed Elsevier is number two. But Google is also an occasional partner of ours. We’re using Google to point users to ScienceDirect – harnessing the Google’s power to attract more customers.

But back to my point -- translate our answer to the Greek philosopher question into a practical issue. Say a lawyer in a small law firm in Auckland, New Zealand receives a call from a client regarding a property that should have been completed but hasn’t. The client is about to go overseas and may even want to grant the lawyer power of attorney to handle the transaction in his absence.

The partner is currently in his car and needs to respond to this request immediately. Using his handheld device he searches the clients name on his secure office server and using the mobile case management system pulls up the details of the transaction. The transaction cannot be completed before the client leaves so now he needs to create a power of attorney document. Using the case management system he pulls up a standard agreement form and automatically populates it with the clients’ information. Then he emails it to the client for his signature. The case management software also logs all of this activity and adds the time spent to the client’s monthly bill. The lawyer did all of this from his car – hopefully after pulling over to the side of the road!

These developments are the first few baby steps to a completely new world of information delivery and response. In another decade… barriers to the free flow of information probably won’t exist. We will have devices in everything that will always be on… and we’ll always be networked.  My wife probably won’t like it much… but my children will love it.  And they’ll expect information to be available wherever and whenever they want it.

How we will access that information is certainly unclear… but that doesn’t really concern me. What I am more concerned about is the role of publishers and information providers in that future world. I think this role depends on three things:

First is the changing role of published content.

Second is the importance of instant customization… and

Third is the previously mentioned full-time connection to that information.

I’ve mentioned that the recent rise of user-generated content means that publishers aren’t the sole content providers… and the move from paper to electronic has drastically increased both accessibility and functionality. However the biggest challenge for authors… users and publishers alike is making all the available content work together.

If we’re smart… publishers will have an important role in that.  And our editorial staff will have to come to terms with the fact that their role is to produce content that can be used in many different forms rather than produce printed materials.

Information providers must find new ways to help users make sense of all of this author-created information… and one way to do it is through customization. I think over the next decade we’ll see an unprecedented shift towards new… flexible publishing models. Users will choose how they wish to consume information at the moment they choose to consume it. 

Publishers are also developing tools to increase researcher efficiency and reduce wasted time.  “Just -in-time” delivery revolutionized the manufacturing and retail process by reducing overhead costs and shortening the cycle of creation to purchase.   I think “just-in-time publishing” is just around the corner for us. We will deliver whatever is the most relevant information for you directly to you.

I don’t believe information publishers will go away in the next decade… although we may look somewhat different.  We can help decide which commentators are valuable. We can provide tools that allow readers to dive into the data… and make it possible to view the article in 10 different media formats. All this change is good for us and… more important… good for our customers. Our users will be empowered to do exactly what they want… when they want to do it. And we will be there to make it happen.  With this ongoing transition to Business 2.0… it’s an exciting time.

Also somewhat exciting… if you are interested in the business side of the discussion… is the merger and acquisition activity that is also shaping the future of the publishing industry.

Merger and acquisition transactions and values are at the highest level they’ve been in the media sector since 2004. Valcom acquired VNU… Reuters and Thompson are merging and many of the large media companies have sold their education business – including us.  We’re selling our Harcourt Education business to Houghton Mifflin Riverdeep. 

Why is this happening? Well in part because media companies increasingly want to own customer groups and deliver information to them in different ways. As I said –exciting times.  The competitive landscape is constantly changing.

So what is the key message for the publishing industry in China?  I say focus on ways to get closer to your customer.  Go deep and own all the information that they need.  Deliver it in different ways.  In some instances you may already be doing this … but I’m sure there are other opportunities for you to partner with publishers… content providers or technology companies – such as Reed Elsevier.

In a sense… maybe we have come full circle.  Some of you may have heard of the Project Gutenberg. Today the project has 20,000 free books that are outside U.S. copy write laws. Their philosophy is simple – make information… books and other materials available to the general public in forms a vast majority of the people can easily read… use… quote… and search.

Did you know that of the top five most popular downloaded books – three are scientific, one is a comedy and one is Pride & Prejudice by Jane Austen?  What this tells me is that both professionals and consumers are reading in ways that Guttenberg couldn’t have dreamed of back in the late 1400s.

But even more important than the ease… cost and convenience of electronic publishing is the benefits it can offer society. As Michael Hart… the Founder of Project Gutenberg wrote… "For the first time, we have the capability for everyone on an Universal scale… literally… to have information… education… and literacy at their fingertips… should they choose to be informed… educated… or literate. Perhaps the best use of the Internet is to fight this epidemic and to make the cures for illiteracy and ignorance available so cheaply that there can never again be any excuse for ignorance and illiteracy - - forever."

Thank you