I'd like to think that I'm gaining a pretty interesting perspective on the disruption of the publishing industry.  As I've pointed out before, I was instrumental in the conversion of Stratfor into a web publisher in 1999.  I got a crash course in Internet Advertising in 2002-2003.  I've been the tech editor of one book and the writer of a second book over the last two years, so I've met a lot of folks in the book business.  And over the last year, I've been talking with folks in the newspaper business at a variety of families, big and small.

I think Marc Andreesen had some great yet unrealistic comments in the recent TechCrunch article, "Burn the Boats".  Sure, most publishers need to make their businesses more Web friendly today and without delay.  But put yourself in the shoes of an executive at one of these companies… can you honestly say you'd ignore cash flows from legacy businesses?  Especially when those cash flows are 1) admittedly declining yet significant, and 2) the only thing you really have?

Newspapers, television, and book publishers are all the same — just with different challenges. Their businesses are being modernized, but each has put systems in place to maximize old revenue while experimenting with ways of bringing in new revenue.  Some prioritize the old revenue more, others are more adventurous.  Some put more investment dollars into new businesses, some less.  Some treat new technology with great enthusiasm, others with suspicion.  Some are quicker to analyze the impact of new technology on the old business, and others are quicker to experiment. 

Just about all companies that go through this transition have one thing in common — they're woefully uncool.  They're uncool because they do a lot of things to preserve the old business that outsiders and tech early adopters simply don't understand.  I've made the case before on this blog that Microsoft is one such business.  Although I didn't make these decisions at Microsoft, I had a pretty good idea of the problem Steve Ballmer and other execs faced every year when prioritizing investments.

Here's a hypothetical example.  Say Steve has $1 billion in discretionary investment dollars that he can deploy across a variety of businesses.  So he decides to host leaders of a variety of business units so they make their investment ask:

• Office — $400 million for an advertising campaign in the BRIC countries in 2011 that will generate an incremental $1.5 billion in company revenue over the next 5 years.
• Windows — spending an additional $300 million on anti-piracy technology and an advertising campaign will result in $1.2 billion in incremental company revenue over the next 4 years.
• Office Live — $250 million needed over 5 years to create a new Web-based Office integration product.  Product will be revolutionary but will be given away for the first 3 years, followed by an anticipated $200 million/year annual business.
• Server and Tools — $500 million needed to accelerate development of additional Windows Server, SQL Server and developer tools features necessary to help enterprises build better client applications.  Total estimated impact to Microsoft across all businesses is $400 million/year starting in 2014, and is needed to also preserve other parts of the Client business.
• Azure — $550 million in additional server capacity to support the growing business.  Impact unknown — an additional $100-$400m/year in revenue is expected.
• Mobile advertising — $800 million for new mobile advertising business unit, mobile provider partnerships, advertising campaign, and rollout of new location-based advertising initiative to advertisers.  $400 million annual business is estimated by 2015.

For those of you keeping score in our hypothetical example, that's $2.8 billion in new investment asks with only $1b to spend.  There are requests across old businesses and new businesses.  Some asks are inherently more speculative, while others are more certain.  All decisions are not made in a vacuum — there are pressures to bring predictable returns to investors while modernizing the business at the same time.  Saying "it's complicated" would be grossly underestimating the problem.

I think my hypothetical example is a lot more real than most people would like to admit.  Most executives at publishing companies — newspapers, book publishers, and television — are dealing with similar issues every day.  

Disruptors are sexy because they don't have to deal with legacy annuities.  They have a business vision and they need to execute on it and it alone more or less.

What incumbents lack in agility (because of those cash flows), they make up for with… well… those annuities.  Even in decline, those annuities are significant and thus can't be ignored.

I am not saying anything new when I say that the best executives and the publisher incumbents that win will be the ones who effectively balance the needs of their organizations.  Jump in to new technology too fast, and you'll diminish those annuities prematurely.  Jump in too late or let process overtake you, and you'll miss the wave.

So should publishers burn the boats as Marc Andreesen suggests?  Maybe not yet.  But it's time to hunt in the jungle because you may just be here awhile.