Ingram Chairman John Ingram
Publishers and Rearranging the Deck Chairs on the Titanic
JANUARY 11, 2012

AUTHOR’S NOTE: Long-time Ingram CEO Skip Prichard left the company in June 2012. John Ingram took over as CEO.

John Ingram has business in his blood.

In 1946, his grandfather, Orrin Henry Ingram, founded Ingram Barge Company, the beginnings of the business empire of Nashville-based Ingram Industries. As business conditions changed and opportunities presented themselves, the Ingram family—Orrin Henry until his death in 1963 and then his sons Frederic Ingram and Erskine Bronson Ingram—nimbly managed and grew the business, making acquisitions, adopting new technologies and expanding into new areas, including content distribution.

Ingram Book Group was founded in 1964 and since then the name Ingram has been associated with content distribution. Today, the Ingram Content Group stands where the book group once stood, spanning eleven companies that do everything from printing and shipping large print runs to processing and distributing digital content to print-on-demand.

As ebooks and other forms of digital content have become a larger part of the publishing business, Ingram has evolved. For instance, Vital Source Technologies, an Ingram company born of the digital age, delivers digital textbooks to nearly two million users across 6,000 campuses in 180 countries.

John Ingram, 50, grandson to Orrin Henry, has been at the forefront of that evolution. He is currently chairman of the board of both Ingram Industries and Ingram Content Group and has been with the company since 1986, when he received his M.B.A. from the Owen Graduate School of Management at Vanderbilt University in Nashville. He also holds a bachelor of arts degree from Princeton University.

He has held various executive positions at Ingram since 1986, including president of Ingram Book Co.

We spoke with Ingram about the company’s growing digital revenues, hiring for the new digital landscape and why publishers should do more than “rearrange the deck chairs on the Titanic.”

What percentage of your revenue was “digital” in 2011?

I don’t have the exact breakdown. I would say that probably 15% to 20% of our revenue is coming through various and sundry digital channels. It’s going to continue to rise.

To what, 20% to 30% in 2012?

I think that’s fair to say.

As you look at the publishing landscape, what do you think is going to be the biggest issue for publishers in 2012?

There’s a real need and opportunity to retool organizations. You’re talking about people, you’re talking about systems, you’re talking about business models. Publishers have two business models to run: a legacy print model and a new digital one.

What competencies are needed now? And if they’re different competencies, and I think they probably are, how do you pay for those? How can the business be restructured so that cash can be created to pay for new things that need to happen?

I can give you an example in regard to our business: We signed a deal with O’Reilly last year where they turned over 100% of their inventory management to us. Part of their reason for doing that was in hopes of freeing up several millions of dollars in working capital that they could invest in the content. That’s a fairly radical change.

Change is here and I want to be somebody that is not rearranging the deck chairs on the Titanic but trying to steer out of the ice field.

Did O’Reilly lay anyone off in this move?

It’s not just that, but there’s some element of that.

There’s a huge amount of waste in publishing. In their case, we’ve promised them 100% of their books will be in stock at a price. That’s something they don’t have to worry about anymore; that’s become our worry. And it’s about more than worry; they [now] have an ability to redeploy capital.

Is your company going through any similar transition?

Life today is about living in transition. We’ve both hired and acquired more digital staff.

How do you attract digital staff in publishing, an industry that may not be as generous with pay packages as other industries that are looking at the same talent, say finance or technology?

You probably have to be in the ballpark of what people can earn and what one has historically been able to pay to attract talent isn’t necessarily indicative of what one has to pay in the future.

The book industry attracts people that are interested in content. It always had attracted people less for the allure of getting rich but because of their interest in the subject mater in which they got to deal.

It’s been my experience that if you need a competency bad enough you better be prepared to pay for it.

Speaking of attracting new, pricey talent, what are the biggest challenges that publishing companies will face in the next few years?

One of the biggest is how to find the balance between what technology can enable publishers to do and what consumers are wiling to pay for.

Take a novel, for instance. In the future, technology might allow a reader to choose different endings. Well, what is a consumer willing to pay for that?

But complexity is generally the friend of people like us. If everything were easy, what’s the need for someone to help? We’ll be prepared for whatever eventuality happens.

There has recently been debate on DBW.com and elsewhere about the relevance of publishing companies. What value do you think publishing companies add now to the industry? Will that change?

What strikes me is the difference between what’s theoretical and what’s real life. It’s theoretically an easy step to say, “a name brand author can bypass a publisher and rearrange the pieces him or herself and why do they need a publisher?” In theory, I think that’s correct that they could do that. The problem gets to be in practice.

Seth Godin may have a whole business office and a staff that can take care of all these issues—from designing cover art to editorial to their own promotion and marketing. There could be people who are in position to do most of the core functionality of publishers themselves. But it’s far from everybody.

This is a great moment for publishers to really focus on what are the core reason for their existence, which I would contend is the creation and bringing to market of great content and then helping to find markets to sell that content to.

Now, are there other people who might be able to do that? Yes. Barnes & Noble, Amazon and others have publishing arms, but they’re basically doing the same thing. The core functionality of the discovery and curation and bringing to market really good content is something that’s going to exist whether it’s done by publishers or other people, but that functionality is going to be really relevant.

How do you see discoverability working in the future?

One of the main ways this has happened in the past is the physical bookstore and the physical bookstore doesn’t go away in the future, but its relevance will be diminished.

If that discovery vehicle is less out there, then how do things get discovered? It’s one of the key questions for publishers to try to unlock. There’s probably not one overarching thing that’s going to happen that’s “this is how discoverability happens.”

A lot of it is likely going to be through blogs, other parts of social media, where the audience is.

Publishers are starting to go out to market and interact with consumers in a way they never did before when they were mostly business-to-business concerns.

I’d say there’s certainly a lot of potential value in having a connection with the actual consumers of your content. I’m not sure I have some magic advice for how they do that. I’m sure it’s a hot topic at most publishing houses.

They’re starting to experiment more. They may have to kiss a bunch of frogs before they find a prince.

Based on the history of your company and your answers to my questions so far, I’d guess you’d advocate experimentation, even if some of the experiments fail.

There is a big advantage for the publisher that’s willing to be brave and really look at major restructuring. This is potentially self-serving to say, but if you really believe that publishers’ core competence is around curating content and sales and marketing, that would be a very different organization than you see today.

When I think about the trade publisher of the future, I think about a nimble organization that’s focused around content acquisition, editorial and sales and marketing. Most of the rest of what they do could be outsourced. that’s a very different organization than you see today. If you take some fixed costs and turn them into variable costs, then you free up resources for publishers to do all sorts of other things.

The real question is, how do you tell what is rearranging the deck chairs and what is steering out of the ice field?

Right now, their cost structure may need to price hardcovers at $30 or $40 to cover their costs. In a different world, maybe it could be $15 or $20 where maybe the [hardcover] price is not so different from the digital [price]. Maybe it’s a coin toss which one they [the consumer] buy based on their desires. That’s a lot of “what ifs”, but I certainly could see that happening.

It’s easy to look over a fence and tell someone how to run their business. I make my comments with a respectful sense that I don’t know all the ins and outs of what’s happening.

What are you reading and on what platform?

I’ve been reading Clay Christenson [Harvard Business School professor and author of The Innovator’s Prescription and other professional titles] because I spend a lot of my time working on what’s next. This guy looks at a lot of great innovators. It’s been fun to connect the dots with some of the things I’m seeing myself.

I’ve just recently started [Walter] Isaacson’s book on Steve Jobs [Steve Jobs, Simon & Schuster]. And I’ve had Unbroken [by Laura Hillenbrand, Random House], a novel about a guy that get’s shot down in World War II survives in a POW camp, on my bed-side table for a year. It was one of the great books of last year that I haven’t gotten to.

I really don’t enjoy reading on devices and I’m tethered to devices all day long. My preference is to put the device away and read with a physical book. I have both a nook and an iPad, and when I’m traveling, lugging books around is a pain, so I’ve got both, but I have to tell you, as much as my business’s future is about digital, my heart still loves the physical, my senses love the physical.

There’s kind of a continuum between everything physical and everything digital. Most of us exist on that continuum somewhere, whether we choose a digital or physical option is based on what we want, where we want it and how we want it. Depending on circumstances, those answers vary.