Who survives a recession? Specialization against diversification in the digital publishing industry
| Date | 13 February 2017 |
| Pages | 19-34 |
| DOI | https://doi.org/10.1108/OIR-09-2015-0310 |
| Published date | 13 February 2017 |
| Author | Andrea Mangani,Elisa Tarrini |
| Subject Matter | Library & information science,Information behaviour & retrieval,Collection building & management,Bibliometrics,Databases,Information & knowledge management,Information & communications technology,Internet,Records management & preservation,Document management |
Who survives a recession?
Specialization against
diversification in the digital
publishing industry
Andrea Mangani and Elisa Tarrini
Department of Political Sciences, University of Pisa, Pisa, Italy
Abstract
Purpose –The purpose of this paper is to study the empirical relationship between specialization,
diversification and rate of survival in the digital publishing industry. The sample includes all publishing
companies in Italy that produce electronic content and distribute it through internet platforms.
Design/methodology/approach –The first part of the paper discusses the pros and consof specialization
against diversification, and applies the related economic theories to the digital publishing industry.
The empirical work regarding the factors that affect firm survival is reviewed. The second part is empirical
and analyzes the diversification strategies of 2,838 Italian digital editors between 1995 and 2014, and the
impact of diversification on the probability of survival.
Findings –On the whole, digital publishing companies that are also active in traditional print activities have
been constantly declining. However, those who combine print and digital activities or operate other mass
media businesses have a higher probability of surviving in the market. These findings hold controlling for
firm size and market structure, before and after the economic crisis exploded in 2009, in different geographical
areas and by different legal forms of publishing companies.
Research limitations/implications –As the industry often presents country-specific characteristics, the
econometric analysis should also be integrated with case studies that highlight particular survival conditions.
Practical implications –The study provides mass media scholars as well as practitioners with detailed
information on the digital publishing trends in the medium term.
Originality/value –This research is significant because, in the period under review, many digital native
entrepreneurs with scarce experience entered the industry, targeted digital native consumers/readers and
challenged traditional and established media conglomerates.
Keywords Digital publishing, Specialization, Diversification, Firm survival
Paper type Research paper
Introduction
The first phase in the evolution of digital publishing, beginning in the 1980s, arose from the
development of softwarepackages that enabled publicationssuch as magazines to be laidout
on computer screens and saved as electronic files. However, at this stage, the resulting files
were invariably sent to be printed in hard copy. The second phase started in the mid-1990s and
revolved mainly around the internet. The development of internet technology and its global
diffusion boosted the success of digital contents. The appearance and then proliferation of
online newspapers and magazines, e-books and similar products soon convinced the experts
that a new era ofinformation was beginning. Today,enabling consumers to read newspapers
and magazines via a digital device such as smart phones and tablets, which support the
reconfiguration of paper-based products as apps, can be considered as the third and last phase
in the evolution of the digital publishing industry. In this paper, the term “digital publishing”
refers to the distribution via the internet of electronic information and entertainment content.
The first experiences of digital publishing were seen as “product innovations”,astheywere
launched by traditional media operators, for ex ample, editors of print newspapers, who were
challenging unexplored fields. The content of information or entertainment was similar, but the
presentation of the product and the modes of distribution and consumption had changed
radically. After 20 years, the digital publishing industry is still heterogeneous and publishing
Online Information Review
Vol. 41 No. 1, 2017
pp. 19-34
© Emerald PublishingLimited
1468-4527
DOI 10.1108/OIR-09-2015-0310
Received 18 September 2015
Revised 17 May 2016
Accepted 18 May 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1468-4527.htm
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Specialization
against
diversification
companies have not yet established profitable business models. In addition, consumers have
attained an active role in the production of information. Thus digital publishing is still
“evolving”, and at the same time, it can no longer be considered as a form of product or process
innovation. It is a mature industry where young entrepreneurs and digital natives enter the
market and inaugurate new formats, innovative services and unique contents. They thus
choose to specialize in digital publishing or to diversify towards traditional products such as
print newspapers, magazines and other formats of the “old”mass media.
Of course, historical and technological factors initially drove the combination of print
publishing and digital editorial activities. On the one hand, traditional editors had the
experience and the appropriate resources to be the pioneers in digital markets. In addition,
many of the production factors of print and digital publishing were the same and
guaranteed significant economies of scope, thus increasing efficiency in production and
distribution. On the other hand, the production and consumption of digital content
presented a number of novelties that induced new and inexperienced companies to enter the
market. The consumption of digital content was, in terms of form and intensity, a largely
unexplored field and required a new process of production and distribution. Nobody knew
the preferences of the “digital reader”and many believed that traditional print editors,
linked to old schemes, could not interpret the evolution of consumption patterns correctly.
Who has won after 20 years? The statistics display the relentless decline in circulation,
revenues and profits of print industries. However, digital publishing does not necessarily
ensure profits for the operators, nor, within digital media, have inexperienced and
specialized operators necessarily done any better than their elder competitors. Specialization
in digital publishing is a key to success when economies of scale and network externalities
lead to quasi monopolies, according to the “the winner takes it all”rule (consider, for
instance, Wikipedia). At the same time, diversification and firm experience may guarantee a
higher probability of survival in a large, fragmented and competitive market (e.g. the Wall
Street Journal is the second largest newspaper in terms of print circulation and the first in
terms of digital subscriptions, as of 2013). These issues can now be examined over several
years and in relation to large samples. A medium term analysis can identify the prevalent
patterns of specialization in the industry and how different modes of organization struggle
for survival during the economic highs and lows.
This paper thus presents an empirical analysis of 2,838 digital publishing firms active in
Italy between 1995 and 2013, and studies the relationship between specialization,
diversification and rate of survival in the market. The paper aims to assess whether those
digital companies that are also active in print publishing and other media markets have a
greater ability to resist the impact of an economic recession.
The economic crisis exploded in Italy in 2009 and eroded the Italian GDP by 11 per cent
in five years (2009-2013). The contraction of the business cycle provides an opportunity to
examine the reaction of digital publishing companies to an unpredictable event. One of the
paper’s key features is the nature of the database used, because each company is associated
with one or more activities of the media sector (digital publishing, print publishing, radio
and television broadcasting, provision of internet services, advertising sale). This enables
the degree of diversification of media companies to be directly measured.
In addition, the sample includes all entities that were registered as media companies
between 1995 and 2013. Of course, a large sample means a high level of heterogeneity of
firms. For example, the sample includes large state-controlled multi-media companies as
well as sole proprietorship firms specialized in the provision of digital content. However,
such heterogeneity derives exactly from the specific characteristic of digital markets, which
have long been highlighted by the experts: the production and distribution of content do not
entail high set-up costs and enable small, inexperienced and specialized firms to launch
editorial activities.
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