A recent trip to Warsaw, Poland, prompts these reflections on the evolution of publishing in Eastern Europe.
My first business dealings in Eastern Europe took place a few years after the fall of the Berlin Wall. I was working at Encyclopaedia Britannica at the time, where I was contacted by an entrepreneur who proposed translating and publishing Britannica for the new Polish market. I agreed to meet with him at the Frankfurt Book Fair to discuss an arrangement.
It was a fascinating meeting. The entrepreneur was devout about bringing to his country a comprehensive reference work that was not the product of political ideology. “We cannot create this in Poland today,” he told me, explaining why a translation and not an original work was in order. I told him that we typically received a royalty of 7% of net receipts on every copy or set sold. He slammed his fist on the small table and asserted: “I will pay 10%!” For years I told this story to illustrate the lack of business acumen on the part of people in the formerly Communist territories. I later realized that I had wholly misunderstood him, that he knew that he should be negotiating for less than 7%, not more, but he wanted to impress me with the fact that he would do whatever it takes to bring unbiased information to his country.
This fellow presented me with an unexpected business gift, a Polish calvary ceremonial sword. Whether this was simply a tourist trinket or genuine, I do not know (it sure weighed enough), but it did create a challenge for how to get it through airport security even in the days before 9/11.
Several years later I was asked to provide an operating review of a publishing company based in Warsaw by the head of an international investment group that was purchasing newly privatized companies in formerly Communist countries. (Some of the flavor of this project is captured in the brilliant novel “Prague” by Arthur Phillips.) The CEO of this company, a shrewd and experienced publisher, had me taken on a tour, where I observed a new book superstore in the center of the city, the rival of anything operated by Borders or Barnes & Noble in their heyday. After lunch, I was taken to “the wholesaler district” on the outskirts of town, where a great number of independent book wholesalers operated in rickety, unheated buildings. Stepping into one, we passed the owner guarding the door with an enormous, fierce-looking dog. Walking around the stacks of books, so crowded together that it was difficult not to set them toppling to the floor, my foot broke through one of the rotting floorboards. No one paid attention. The eyes of the owner were on the bookshop managers who drove up in cars and small trucks to purchase books for their stores, warily eyeing the dog at the entrance, then loaded the books into their trunks and headed back to the city. This was the supply chain.
The message from the CEO was clear: the modernization of the Polish book industry was taking place atop the rotten infrastructure of the Communist era.
In another conversation with an Eastern European publisher, I was invited to review samples of the company’s college textbooks. I recognized several of the authors’ names, which were mostly American. The publisher explained to me that her company’s strategy was to acquire the rights to the best book in the world on each subject and then translate the works into the local language. Brilliant. “Our country,” she told me, “will be a net importer of intellectual property for many years to come.”
It was thus a surprise when, a few years later, I was approached by another Eastern European entrepreneur, who sought help in raising venture capital. His new company was dedicated to becoming the leading publisher of Eastern European scientific societies. He would publish only in English and seek a global market. His model? The “Asian Tigers,” with their export-led economies. Something had changed.
Soon after I saw this change at another company, which published software-based supplemental education materials. A meeting with the head of the operation had to be scheduled to accommodate his travel to Germany, where he was negotiating an international distribution agreement. “Is it possible,” he asked me, “to sell my products in the U.S.?”
On my recent trip to Warsaw, I learned that the old book wholesaling district was shrinking in the face of competition that used information technology as a strategic weapon. New systems had replaced the shop owners with the books in the trunk, and guard dogs had given way to encrypted data interchange. I was taken to lunch in a modern mall that oddly resembled the largest one in Santa Clara, California — except that in Warsaw the mall included a bookstore — with many of the same international brands represented. I spent time in meetings that were virtually indistinguishable from many I have participated in in San Jose, with Polish accents exchanged for Indian ones. The topics: ePub 3, HTML 5, the role of dedicated e-reading devices, the strategic implications of books in browsers, and the tricky problem of working with the terms of sale in the iBookstore. Most fascinating was the discussion of selling e-books directly to consumers by subscription. “Ah!” I said. “You mean the Netflix model.” “And what is this Netflix?” was the response. The all-you-can-eat subscription model was being reinvented independently. And, of course, piracy and DRM, the same topic everywhere. One publisher said to me that piracy cannot be stopped by technological means, that the answer to piracy must be new business solutions. I wanted to encourage him to give a presentation in the U.S., where this message is not being heard.
Publishers in the U.S. and Western Europe are eyeing the development of the economies in Asia and Eastern Europe because of the new market opportunities they represent, but there is another side to this story: the net importers of intellectual property will in time evolve into exporters, increasing the amount of material coming to market and intensifying competition. Hungary and Ukraine are not our markets to develop; they are economies seeking their own place in the emerging global system of trade. Over time, they will add to the already disturbing trend of the production of more information than there is time and resources to assess, to navigate, to read. One possible sign of the new circumstances is that when I referenced the Berlin Wall above, I felt it necessary to provide a hyperlink.