Publishing as a niche business – Part I

This is part of a post I wrote some time ago on One Writer’s Voice – my previous blog where I talked a lot about the ‘business of writing’. Since I seem to have attracted many authors to this blog, I thought I would publish it here on A Writer of History. I believe the ideas remain valid. But more importantly, what do you think?

Recently, on Steven Pressfield’s blog, I saw this comment: Publishing has always been in the niche business. I made a note to noodle on the comment to see if I could gain any insights for writers. After quite a bit of time reading other musings on niche business models and publishing business models, I found a few tidbits.

Tidbits to spark thinking

Over at SEOBOOK there’s a post titled Perceived Authenticity is Key to Profitable Niche Publishing Models and an interesting diagram linking dramatic market changes to the birth of the attention economy. Should probably be called the attention deficit economy.

Sarah Lacy at pandodaily offered Confessions of a Publisher: We’re in Amazon’s Sights and They’re Going to Kill Us with the following quote from an anonymous publisher:

“there’s a bidding war among the publishers over the big books. We all know what the good books are–it all comes down to how much of an advance we’re willing to pay for them. The hotly fought-for books are the ones that sell. And while we might not make huge profit % on these, we make big profit $ on these. They keep the lights on by covering overhead. Better to cover our fixed costs by going all in on a few big books than trying to buy dozens of mid-list books.”

Lacy’s anonymous publisher goes on to say that Amazon is deliberately keeping advances high which will bankrupt publishers.

I’m not trying to replicate what other extremely qualified folks have written on this matter, but it seems to be critical context.

As reported on The Scholarly Kitchen, another quote to muse on comes from Clay Shirky: Abundance breaks more things than scarcity does.

I also found some thoughts on interconnectivity of today’s savvy consumers, a summary of Michael Porter’s thoughts on competitive advantage [his ideas stand the test of time] and a list of nine stable niche strategies.

Sounds like a witches brew doesn’t it?

Reflecting on these ideas:

Authenticity – what does or should authenticity mean to publishers? Various articles I’ve read suggest that publishers have to find ways to connect with consumers (and collect their data) in order to transition successfully and survive. Most consumers don’t care which organization publishes a book, they care about the value of a book’s content in terms they define such as entertainment, usefulness, empathy and so on. Oh, and they also care about price and ease of access to books. Building authenticity within a particular niche in the eyes of consumers (not retailers or distributors) could create a strategic advantage for a publisher.

Profit model – a business model where a few big sellers cover overhead costs for lots of books that do not break-even is unsustainable. Publishing isn’t the only industry where a few profitable customers or products cover up the flaws in a business. I’ve helped several organizations deal with the consequences of such a situation. But that very paralysis is driving more and more authors to self-publish or to find new ways to bring their content to market. And, if the anonymous publisher cited above is correct, Amazon is positioned to chip away at the best selling authors who sustain big publishers. And then where will the publishing industry be?

Abundance – creative content abounds. Creators (writers, poets, journalists, photographers, videographers, instructors etc.) are publishing content without charge or for such a modest charge (99 cent books on Amazon) that price is no longer a barrier. People can consume all day without cost on their laptops or mobile devices.

Attention Economy – as the diagram included on SEOBOOK says “all the rules for business growth, marketing effectiveness and personal performance have changed”. Mainstream brand affiliation is under attack. Growth can be explosive and unexpected. Finding ways to attract attention will be an important skill for authors and publishers.

Consumer interconnectivity – the networked economy enables consumer interconnectivity. This interconnectivity can create positive or negative effects for brands in an incredibly short space of time.

Competitive advantage – according to Michael Porter, businesses create competitive advantage through cost leadership, product differentiation, or focus. Trying to be all of these things to all segments is not a winning strategy.

Niche strategies – global consulting firm, A. T. Kearney, identified nine successful niche strategies (see bullets below). The challenge for established publishing houses would be to determine and act on a strategy that could set them apart. Authors should also think about their niche.

  • regional – a solid understanding of cutovers in a clearly defined regional market
  • target group – target certain customer segments and deliver personalized services, like Four Seasons hotels
  • product – a highly defined product niche
  • branding & lifestyle – examples such as Porsche and Mont Blanc create communities of dedicated customers who value the brand
  • speed & lightning consolidation – companies like Amazon or Facebook reshape a market, grow fast and cut out the current market leaders
  • innovation – companies define their niche in terms of innovative products
  • cooperation – small companies form alliances to compete against large scale leaders
  • market splitting – identify and exploit a weakness in the value chain of their industry
  • counter – these niche players identify and exploit a weakness in current sector leaders and force a game-changing strategy

Looking at the players and challenges in the industry

Publishing - a niche business

I updated this diagram from the one I produced in July 2012 – hence version 2.

Each player in the chain of bringing books to readers faces challenges. For example, authors are challenged because of the abundance of content/competitors, poor levels of remuneration and finding ways to connect with readers, publishers are challenged with profitability, authenticity in the eyes of readers, competitive advantage over other industry players and, because they have not interacted directly with consumers in the past, they are challenged with lack of consumer data. Each player has challenges, even readers are challenged to find the kind of quality they desire because of an abundance of product and an abundance of reviews.

More in my next post. I welcome your thoughts.

M.K. Tod writes historical fiction and blogs about all aspects of the genre at A Writer of History. Her latest novel, LIES TOLD IN SILENCE is set in WWI France and is available in paperback from Amazon and in e-book formats from AmazonNookKoboGoogle Play and iTunes. Mary can be contacted on Facebook, Twitter and Goodreads.

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10 Responses

  1. I think what really scares Publishers nowadays is the ability of writers to connect directly with readers, something that was unthinkable a generation ago. Social media like Twitter, Facebook, and Goodreads have torn down the ivory tower that Publishers spent 100 years building up to protect their exclusive control over content and content creators. A savvy writer will use all of these to his advantage (And no, I don’t advise stalking a harsh reviewer.) But all of these activities require a fine balance of one’s time and efforts.

    Okay, we all agree that the industry is in change, and that the change has largely come about because of Amazon’s amazing foresight. And we’ve seen how this change has made huge, vast improvements in: a) discoverability (marketing a book to readers has never been easier or cheaper); b) cost (could you imagine when you were a child buying a novel in good condition for 1 cent? By the same token, could you imagine when you were a child that you could publish a novel for next to nothing?); and variety (reader’s options have exploded in the last 10 years). The important thing to remember is that authors, agents, publishers, and retailers are looking for the same thing—a selling novel—but only the author is capable of producing it. Isn’t it time they took more control over their own careers?

    1. Great comment, Rachel. No quarrels with authors taking control of their careers – however, one major problem still remains and that’s the problem of revenue. Making enough money to compensate for the time and effort (investment) required to research and write either fiction or non-fiction. A novel for 1 cent doesn’t deliver any return on that investment. Even at 99 cents, you have to sell a hell of a lot of copies to make a reasonable return. I’m assuming a self-published author. What’s your image of taking control?

      1. The competition is so intense now I think one as a writer has to be happy with personal satisfaction, keeping busy and challenged. I am quite pleased I have actually published beating many of my august friends who say they are going to, but they have not yet done so yet. My own mantra is writing and reading for pleasure. Any returns will pay for coffee and red wine … there is not much risk of getting too inebriated!

  2. My image of taking control is writing what I want. I love the freedom, the possibilities, the personal rewards of writing a story that needs to be told. I feel like writers are the midwives for great stories. There is NOTHING greater than finding and telling a spectacular story.

    Regarding the money issues. My only advice for writers starting out is marry well.

    1. I really like the way you’ve framed this, Rachel. I too love the freedom, possibilities and personal rewards. The other day I heard from a reader with the opening words “Wow, Wow and more Wow.” What can be better than that!

  3. I think the industry is still in flux, and the quote from the editor above about competing for the “big” books is indicative of publishers not responding well. What irritates me about the state right now is not the pricing models, but that they have squeezed the pipe of what gets sold and are narrowing the choices for consumers. They’ve become a bottleneck for content and that alone will hasten their own death. They only have a couple of competitive advantages over Amazon. One is the perception that their product is higher quality, and many times it is. The other is that they are better at traditional marketing, e.g. book covers, publicity, buzz at industry events, shelf space, signing tours, etc.. They also have better connections to agents who sell dramatic rights, which in turn sells books. Off the top of my head, I can’t really think of another advantage, can you guys?

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