Meet the publisher

‘The ebook is a stupid product: no creativity, no enhancement,’ says the Hachette Group CEO

An interview with Arnaud Nourry about the future of digital publishing, why he took on Amazon as an opponent and the market potential in India.

With over 17,000 new titles each year and sales of $2,826 million in 2016, the Hachette Livre Group of companies comfortably sits among the Big Five English language publishers, alongside Penguin Random House, Simon & Schuster, HarperCollins and MacMillan Publishers. Headquartered in France, its authors include John Grisham, Enid Blyton, James Patterson, Robert Ludlum and Stephen King. While its India subsidiary just completed 10 years of operations in India, the parent company has been in business for almost two centuries. Supported by an ambitious global acquisition plan, the publishing behemoth has a presence in all forms of trade (non-academic) publishing. The Chairman and CEO of the Hachette Live Group since 2003, Arnaud Nourry, was in India recently to celebrate a decade of Hachette India and spoke to Scroll.in about their strategy and the future of publishing. Excerpts from the interview:

Hachette has over 150 imprints worldwide and comes out with more than 17,000 new titles a year. How does the group maintain a consistent ethos across imprints and geographies? Is that even necessary when the markets and readers are so different in these different regions?
We don’t maintain one ethos. We share values of course – culture, education, freedom of speech, services to authors, creativity, innovation. But beyond that, each and every imprint has its own positioning, spirit, ethos, development and freedom. This is the only way we can be good publishers in India, in Mexico, in Japan, in Spain, or in the UK or the US. These markets are entirely different from one another. That doesn’t mean that some books do not travel, there are successes everywhere. But the local dimension of markets is so huge that we don’t try to be the same everywhere.

Is Europe still your largest market? Which are the emerging markets with the most potential that you see right now?
One-third of our business is in the French language across France, Belgium, Switzerland, Canada and other French-speaking countries, 25% in the US and English-speaking Canada, 20% in the UK, India, Australia, New Zealand and Ireland, 10% in Spanish, and another 10% in the rest of the world.

Our focus and strategy has been to publish in French, English and Spanish and as a second stage of development, we decided to investigate other languages like Chinese, Russian and Arabic. I have to say, China is a difficult country so I’m not 100% pleased with our successes there. The Arabic language is fascinating because there’s such a huge population of readers. Although I have to say that the political and military environment is not of great help to sell books. Russia is quite interesting and we are successful. And of course, India is one of the most exciting markets for us right now.

What potential do you see in the Indian market particularly? We have millions of English speakers but English language readership is still very low as a percentage of that population. What do you think can spur an increase in this readership?
I’m not sure the percentage is that low if you consider all the children reading textbooks. The rate of scholarship in India is one of the highest in the world, so this is promising for the future. I think there’s significant potential for growth in readership in India. We have quadrupled our turnover in the last few years and that does not come from prices, it’s from selling more books. With passing time, people will realise the value and personal developments opportunities that reading gives them.

Yes, it’s estimated that education books probably contribute 70% of all of Indian publishing. But what about the other forms of trade publishing? Are you bullish on that front?
We are not in the education sector. We marginally export education books from England to India, but it is not the core of our business. But I do think that the more textbooks are in the hands of kids, the more they’ll find that buying and reading children books, and when they’re older, adult books, is a pleasant experience. So I’m bullish on the trade side for sure.

In 2014, Hachette famously took on and won against Amazon in deciding who gets to control ebook pricing – them or publishers. Looking back, has that victory helped?
When I took the job of Chairman and CEO of Hachette in 2003, I studied what had happened in the music and video industries, or in the present, take the example of the magazine industry. I realised that they made two mistakes. The first was to delay the digitisation of their product, which helped piracy to emerge. The second mistake was that they didn’t keep control on the price point of their creations, so they were unable to protect their turnover, the revenues of their singers or writers.

So, in the year 2006-2007, when ebooks came to our market, I was absolutely convinced that when we jumped into the ebook market, we needed to keep control of our price. This wasn’t just coming from thinking of our revenues. If you let the price of ebooks go down to say $2 or $3 in Western markets, you are going to kill all infrastructure, you’re going to kill booksellers, you’re going to kill supermarkets, and you are going to kill the author’s revenues. You have to defend the logic of your market against the interest of the big technology companies and their business models. The battle in 2014 was all about that. We had to do it.

It’s not that we’re against ebooks. People have to pay a price that is about 40% lower than the print price. And it works. The ebook market has gone down a little bit, not much, from say 25% to 20% in some countries. There is still a readership for ebooks but at a price that keeps the ecosystem alive. That’s absolutely key because the music business has lost half of its turnover in ten years. I love music but books are about culture, education, democracy, so it’s even more important to keep the diversity in book publishing, more so than music publishing.

It’s been a little over ten years since ebooks came to the market in the form of Kindle. You mentioned a small decline – do you think the market has plateaued? Are there formats other than ebooks that publishers should be looking at?
There are two different geographies to look at for this. In the US and UK, the ebook market is about 20% of the total book market, everywhere else it is 5%-7% because in these places the prices never went down to such a level that the ebook market would get significant traction. I think the plateau, or rather slight decline, that we’re seeing in the US and UK is not going to reverse. It’s the limit of the ebook format. The ebook is a stupid product. It is exactly the same as print, except it’s electronic. There is no creativity, no enhancement, no real digital experience. We, as publishers, have not done a great job going digital. We’ve tried. We’ve tried enhanced or enriched ebooks – didn’t work. We’ve tried apps, websites with our content – we have one or two successes among a hundred failures. I’m talking about the entire industry. We’ve not done very well.

I’m convinced there is something we can invent using our content and digital properties beyond ebooks but I reached the conclusion that we don’t really have the skills and talents in our companies because publishers and editors are accustomed to picking a manuscript and creating a design on a flat page. They don’t really know the full potential of 3-D and digital. So we acquired three video game companies in the last two years to attract talent from different industries and see how we can nurture one another and how we can go beyond the ebook on digital. We need to offer different experiences to our consumers.

Lots is said about the impact of Amazon on publishing, both physical and digital. But what about the impact of players like Google and Facebook on the publishing industry?
Amazon has had a fantastic role to play in the publishing industry. Apart from our little battle, it is a very efficient retailer, able to ship books almost everywhere in the world very quickly. It is a real opportunity for publishers. Google and Facebook are third party providers for us in terms of advertising and community management, so they don’t have a central role. Of course, Google ten years ago had the crazy idea of digitising all books without permission. We collectively fought that and won. Google is good for discovering titles. We don’t use it a lot for advertising or keywords – it’s a tiny partner. Facebook is mostly an advertising channel, as we use other platforms of the same nature. It does not deeply transform our business.

Do you really think their role is limited to discoverability and advertising? In term of impact, while not being direct competitors to traditional publishing, they are also providers of content and free content at that. Is that something for publishing to factor into their long-term plans?
I don’t think we’ll ever be publishers who give content for free. It’s not something we’re good at. We’re good at selecting, curating, promoting and selling value-added content, which is kind of the reverse of what others do. I don’t think there’s any kind of competition with Google or Facebook. There is only one thing – it’s that the time spent reading books tends to decline everywhere and goes to social networks. So yes, we are competing for people’s time. It’s why we need to be more attractive in the way we deliver our content. But not beyond that. Even self-publishing, which Amazon does a lot and is sometimes pitched as competition, is the opposite of our business. Our business consists of saying no to three thousand manuscripts and saying yes to one. And self-publishing says yes to three thousand and doesn’t see the one that there should be investment and support around. But yes, because of digital, we are competing against all other forms of leisure. We do need to take that into account.

France, where Hachette is based and which forms your biggest market, has legislation restricting the amount a bookseller can discount a book. It stands at 5%. But what about a market like India where deep discounting is a big part of bookselling strategy? Do you think that’s just a way to develop an untapped market and eventually all book markets should reach a place like France? Or is there always going to be this difference in consumer behaviour across geographies?
The purpose of the law, which was voted in 1981, was to protect all the independent booksellers from the bigger players by preventing them from discounting and putting the small ones out of business. It worked very well. If you’re in a city in France, you can go to a newsstand, a bookstore, or order from Amazon and you’ll get the book for the same price. This being said, there is no such agreement in the US and the UK, where deep discounting flourishes and that also works. There are independent bookstores that specialise in backlists, curation, they still exist. That environment, in fact, helps sell more copies of one book, which in France is more difficult.

I don’t think India will have the experience of several years of discounting to grow the business and then change. You can either go one way or the other, it is impossible to go from one to the other. All the players who have enjoyed the discount-based industry will hate going to a no-discount landscape. It also seems like nobody in the Indian government might be open to doing that.

Indian authors contribute about 8%-10% of the revenues of Hachette India. Are you happy with that figure since there is a significant amount of investment in international big name authors? Or do you hope that the proportion will increase?
We would love the proportion of Indian authors to grow and are in a position to do so. We now have an attractive platform and a pristine reputation that should be attractive to Indian authors. Having said that, we knew when we created the company that the model would primarily be one of importation of titles from the US and the UK. We also keep growing in these territories by buying companies so the number of foreign authors automatically increases. My vision is that we should publish more Indian authors but Hachette India is directly impacted by what we do in the US and the UK.

You just mentioned the continuous acquisition of smaller publishers. How does that affect the publishing and editorial landscape – when smaller publishing houses end up under the umbrella of a larger conglomerate, sometimes swallowed by it?
You’ve used a word I hate – conglomerate. I’m not a very good swallower. Acquiring a publishing company to swallow it is the stupidest thing you can do. Its value comes from the fact that it is a different imprint. Of course when you acquire an independent publisher, you’re not going to keep the accounting department, the IT department, etc., – that doesn’t make any sense. In most cases, these companies don’t have huge profits due to costs that bring them down. So we get rid of that and let them grow and develop their publishing list and have entire freedom.

The last big acquisition we made in the US was Perseus, two yeas ago. Yes, they have offices in New York and in Boston. But they also have offices in Philadelphia, in Berkeley, in Boulder, Colorado, they still have them. We could have closed their offices in Boulder, right? (Laughs) But we thought this company is doing well, it has publishing talent. Let’s not touch things when we don’t know what’s happening on the inside but the model works. We’ve always done that and we also always keep the executives, if they want to stay. I think we’re very good at doing that because we’re not a conglomerate, we’re a federation of imprints. We’ve been like that for the almost two centuries we have been around and some of the imprints are even older than that. It’s the DNA of the group.

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The next Industrial Revolution is here – driven by the digitalization of manufacturing processes

Technologies such as Industry 4.0, IoT, robotics and Big Data analytics are transforming the manufacturing industry in a big way.

The manufacturing industry across the world is seeing major changes, driven by globalization and increasing consumer demand. As per a report by the World Economic Forum and Deloitte Touche Tohmatsu Ltd on the future of manufacturing, the ability to innovate at a quicker pace will be the major differentiating factor in the success of companies and countries.

This is substantiated by a PWC research which shows that across industries, the most innovative companies in the manufacturing sector grew 38% (2013 - 2016), about 11% year on year, while the least innovative manufacturers posted only a 10% growth over the same period.

Along with innovation in products, the transformation of manufacturing processes will also be essential for companies to remain competitive and maintain their profitability. This is where digital technologies can act as a potential game changer.

The digitalization of the manufacturing industry involves the integration of digital technologies in manufacturing processes across the value chain. Also referred to as Industry 4.0, digitalization is poised to reshape all aspects of the manufacturing industry and is being hailed as the next Industrial Revolution. Integral to Industry 4.0 is the ‘smart factory’, where devices are inter-connected, and processes are streamlined, thus ensuring greater productivity across the value chain, from design and development, to engineering and manufacturing and finally to service and logistics.

Internet of Things (IoT), robotics, artificial intelligence and Big Data analytics are some of the key technologies powering Industry 4.0. According to a report, Industry 4.0 will prompt manufacturers globally to invest $267 billion in technologies like IoT by 2020. Investments in digitalization can lead to excellent returns. Companies that have implemented digitalization solutions have almost halved their manufacturing cycle time through more efficient use of their production lines. With a single line now able to produce more than double the number of product variants as three lines in the conventional model, end to end digitalization has led to an almost 20% jump in productivity.

Digitalization and the Indian manufacturing industry

The Make in India program aims to increase the contribution of the manufacturing industry to the country’s GDP from 16% to 25% by 2022. India’s manufacturing sector could also potentially touch $1 trillion by 2025. However, to achieve these goals and for the industry to reach its potential, it must overcome the several internal and external obstacles that impede its growth. These include competition from other Asian countries, infrastructural deficiencies and lack of skilled manpower.

There is a common sentiment across big manufacturers that India lacks the eco-system for making sophisticated components. According to FICCI’s report on the readiness of Indian manufacturing to adopt advanced manufacturing trends, only 10% of companies have adopted new technologies for manufacturing, while 80% plan to adopt the same by 2020. This indicates a significant gap between the potential and the reality of India’s manufacturing industry.

The ‘Make in India’ vision of positioning India as a global manufacturing hub requires the industry to adopt innovative technologies. Digitalization can give the Indian industry an impetus to deliver products and services that match global standards, thereby getting access to global markets.

The policy, thus far, has received a favourable response as global tech giants have either set up or are in the process of setting up hi-tech manufacturing plants in India. Siemens, for instance, is helping companies in India gain a competitive advantage by integrating industry-specific software applications that optimise performance across the entire value chain.

The Digital Enterprise is Siemens’ solution portfolio for the digitalization of industries. It comprises of powerful software and future-proof automation solutions for industries and companies of all sizes. For the discrete industries, the Digital Enterprise Suite offers software and hardware solutions to seamlessly integrate and digitalize their entire value chain – including suppliers – from product design to service, all based on one data model. The result of this is a perfect digital copy of the value chain: the digital twin. This enables companies to perform simulation, testing, and optimization in a completely virtual environment.

The process industries benefit from Integrated Engineering to Integrated Operations by utilizing a continuous data model of the entire lifecycle of a plant that helps to increase flexibility and efficiency. Both offerings can be easily customized to meet the individual requirements of each sector and company, like specific simulation software for machines or entire plants.

Siemens has identified projects across industries and plans to upgrade these industries by connecting hardware, software and data. This seamless integration of state-of-the-art digital technologies to provide sustainable growth that benefits everyone is what Siemens calls ‘Ingenuity for Life’.

Case studies for technology-led changes

An example of the implementation of digitalization solutions from Siemens can be seen in the case of pharma major Cipla Ltd’s Kurkumbh factory.

Cipla needed a robust and flexible distributed control system to dispense and manage solvents for the manufacture of its APIs (active pharmaceutical ingredients used in many medicines). As part of the project, Siemens partnered with Cipla to install the DCS-SIMATIC PCS 7 control system and migrate from batch manufacturing to continuous manufacturing. By establishing the first ever flow Chemistry based API production system in India, Siemens has helped Cipla in significantly lowering floor space, time, wastage, energy and utility costs. This has also improved safety and product quality.

In yet another example, technology provided by Siemens helped a cement plant maximise its production capacity. Wonder Cement, a greenfield project set up by RK Marbles in Rajasthan, needed an automated system to improve productivity. Siemens’ solution called CEMAT used actual plant data to make precise predictions for quality parameters which were previously manually entered by operators. As a result, production efficiency was increased and operators were also freed up to work on other critical tasks. Additionally, emissions and energy consumption were lowered – a significant achievement for a typically energy intensive cement plant.

In the case of automobile major, Mahindra & Mahindra, Siemens’ involvement involved digitalizing the whole product development system. Siemens has partnered with the manufacturer to provide a holistic solution across the entire value chain, from design and planning to engineering and execution. This includes design and software solutions for Product Lifecycle Management, Siemens Technology for Powertrain (STP) and Integrated Automation. For Powertrain, the solutions include SINUMERIK, SINAMICS, SIMOTICS and SIMATIC controls and drives, besides CNC and PLC-controlled machines linked via the Profinet interface.

The above solutions helped the company puts its entire product lifecycle on a digital platform. This has led to multi-fold benefits – better time optimization, higher productivity, improved vehicle performance and quicker response to market requirements.

Siemens is using its global expertise to guide Indian industries through their digital transformation. With the right technologies in place, India can see a significant improvement in design and engineering, cutting product development time by as much as 30%. Besides, digital technologies driven by ‘Ingenuity for Life’ can help Indian manufacturers achieve energy efficiency and ensure variety and flexibility in their product offerings while maintaining quality.

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The above examples of successful implementation of digitalization are just some of the examples of ‘Ingenuity for Life’ in action. To learn more about Siemens’ push to digitalize India’s manufacturing sector, see here.

This article was produced on behalf of Siemens by the Scroll.in marketing team and not by the Scroll.in editorial staff.