POWERING THE PLUMBING

John Ingram

As you look at the various parts of the business, what stands out to you as things where you’re paying extra attention these days?

I’d like to believe I always keep one foot in today and the other always searching for that next thing to step up to. It’s interesting that you should ask this because I just had a conversation yesterday about NFTs, non-fungible tokens, and how those might play in the book business.

A few weeks ago, I’m seeing Elon Musk talking about not just Bitcoin and making what I thought was a joke about how much energy consumption is used to make these tokens. I thought, “Come on, this is digital.” I didn’t realize all the computations that go into that.

So that’s my way of saying how little I really understood about it on one level. But I think there’s a real role for that in books and almost any piece of content. In terms of the authentication?

That and the fact that each piece is unique. Typically in the book market, a book — a physical book or even a digital book — is sold once, right? And then it goes into this whole other world of the used market where authors and publishers get no compensation. Well, it doesn’t have to be that way in a world of non-fungible tokens because each one is unique. I just point that out as something I’m interested in.

There are all kinds of new models that will include selling content. New, different models of digital book clubs and ways to discover content. Every time I come across one of these, I’ll call them up and introduce myself and say, “Look, authors and publishers love talking about their content but don’t forget they equally love selling it. And we’re really well positioned to be so much of the plumbing and infrastructure on the back end of making that easy for you to do.” Because the book business, for all the success Amazon and others have had, still exists. It didn’t get destroyed the way so many people predicted.

I want to say the pandemic was really positive for book reading in general. I guess we were all trapped, more or less, and books — whether one prefers reading physically or digitally — were one way to escape. It was a moment for that and I think that has continued on. Certainly, our business has been strong into 2021 as well.

When the pandemic hit, was it a matter of figuring out where you needed to invest? Or was the scale the company needed already there and it was more about being open to whatever might come?

We do a number of different things but it was really fascinating. I think the country really shut down about March 13. Between March 13 and March 16, our core business — a lot of it is shipping books to people’s homes on behalf of retailers and publishers — went up 300 percent in three days. It was like a rocket shot.

It didn’t stay at 300 percent but it stayed above what I would say are normally our busy-season levels, which is Thanksgiving through Christmas. And it has remained above that. It’s really an illustration of how we have the infrastructure, the capabilities and the scale to be able to step into the breach and get books to people along with the Postal Service, UPS and FedEx and other people.

One of the other things people don’t really know is this: The murder of George Floyd in Minneapolis — not one of our country’s greatest moments by any means — last year triggered a huge desire for content around racism, social justice, equity, things like that. Well, the pandemic had created an absolute mess of the printing world, too, [which led people to] our ability to print on demand. In the month of June, 50 percent of the New York Times bestseller list for softcover nonfiction was basically sole-sourced from us — and it was all these types of books. We made over 400,000 of these titles in a three- or four-week period. The normal printers publishers might have wanted to use weren’t functioning and it was taking too long.

That’s one of the things about the book business. People ask us, “Well, how often do these events like that happen?” And the truth of the matter is, “Every day.” And it’s somewhat self-serving for me to say but also for publishers: Every title that they can put into print on demand, that they can make available, they ought to do it. It’s as easy to activate as going to your computer and flipping a switch and then it’s available and people can get the content. Kobe Bryant’s helicopter goes down, this happens, that happens. It’s every day. So thinking about this dynamic of things flaring up and having the capacity to react, how do you make longterm technology decisions and feel good about those being the right way to go for the next X number of years?

I’m less concerned about the technology because it’s always changing. The key thing is, “What is the service you want to provide? Why do you want to do it? What’s the value it adds — and is that sustainable?” We’ve changed out the technology in terms of the printers we use at Lightning Source three or four times, just wholesale from this manufacturer to that one. Honestly, I don’t really care.

The point is: Does print on demand make sense? Is there a real business rationale for it and do consumers like it? The fact of the matter is that the books we make today are basically indistinguishable from the ones that publishers have more traditional printers make. So as long as you as a consumer get your content when you expect it, you don’t care where it comes from.

Technology is a vehicle and you try to use whatever the best technology is. But the point is: What are you solving for and what is the pain point you’re trying to fix? I’m a big believer that we as humans like to be out of pain, whether it’s physical pain or the pain of something being complicated or time-consuming or not up to our expectations.

If anything, we as consumers have become more demanding over the years.

We’re more demanding and if you can solve for that, you can go figure out what technology works and take advantage of the opportunity.

A few weeks ago, you announced you’re selling VitalSource Technologies, your educational publishing technology platform. Put that on the broader story arc of the company if you would. Is that not core to the business anymore or is that a market you can’t address as you want to?

We bought VitalSource back in 2006 when it was very small, a $4 million company. And it was a technology company; they had cre-

‘Authors and publishers love talking about their content but don’t forget they equally love selling it.’

ated the first all-digital curriculum for dental schools and they put all that content on IBM PCs and gave you unlocking codes.

We got it when we were trying to make acquisitions in digital technologies that we thought could have broad applications for us. It really didn’t have broad applications for the rest of the business and it kind of has had its own life. It’s been very interesting and we’ve learned a lot about the higher education market. What ended up happening is that it really is a technology company, almost bleeding edge — which is almost farther out than the rest of our organization can deal with.

Ever since we’ve had it, we’ve asked, “What do we do with this?” So I made a deal with my older brother that we’d grow it as fast as we can and keep it around break-even. That seemed to be a good deal.

But COVID accelerated the heck out of it. It was already beginning to accelerate as more and more institutions were adding digital curricula in a much more meaningful way and having it penetrate more deeply within universities. It really exploded in a positive way during COVID.

You mentioned NFTs as among the things you’re watching. For the rest of 2021, what are some of the other questions you want the organization to answer?

Well, there’s the very interesting question of, “What does the new normal look like? Where does this settle? Does this settle?” I don’t expect things to go back to how they were pre-pandemic but where is the new balance point? And what does that mean for investments we need to make and things we throttle up and throttle back? I think there will be a lot of that that occupies us for the balance of 2021.

I would be remiss if I didn’t say that finding a willing workforce is another thing. I’m not meaning this in a political context and I won’t say it that way but when you’re talking about warehouse workers or manufacturing workers, if you pay them more to stay home than go to work, they’re going to stay home.

Is that dynamic holding you back in some areas where you want to move more quickly?

To a certain degree. I think the other thing — in kind of a perverse effect — is that it makes looking at automating things more attractive. If you don’t have a reliable, affordable workforce, you have to figure out how to substitute for that. If you want a $15, $17, $20 minimum wage, you’re going to create fewer of those jobs because businesses are going to look at that and say, “I now can afford to automate that.”

THE NEXT THE NEXT WAVE WAVE

DURING THE PANDEMIC, U.S. residents launched new businesses at a faster rate than in any other year on record. In Tennessee, about 55,000 new businesses were registered with the Secretary of State in 2020 and a record fi rst quarter of 2021 pushed the annual pace to more than 62,500. By comparison, fi lings for new entities — see the chart here — had risen from about 35,000 to 45,000 from mid-2016 through late 2019.

New entity fi lings grew an astounding 55 percent year over year in Q1, with domestic limited liability companies (+69 percent) leading the way. Some of these ventures have been born out of opportunity as people chase lifelong dreams of starting their own businesses. But many more have launched out of necessity: As the economy su ered through shutdowns, job losses — Middle Tennessee’s economy is still about 20,000 jobs shy of its 2019 levels — and a gradual reopening, people had to seek out ways to di erently monetize their skills.

On the coming pages, we examine some of the drivers behind this new wave of entrepreneurship, look into the broader business environment and talk with some Nashvillians who, when faced with adversity, took matters into their own hands.

TENNESSEE NEW ENTITY FILINGS

Source: Tennessee Business Filing Data and Bureau of Labor Statistics

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