Writing Business – who “owns” the customer

In a previous life, I worked for IBM. More than ten years, in fact, at that icon of the technology world. One of the skills I learned was sales and one of the expressions I recall was “owning the customer”, an arrogant expression for sure, but that’s the way IBM sales management spoke about clients. If you were in sales, you had to find ways to “own the clients” in your territory so they would buy from IBM almost 100% of the time.

What’s Mary babbling on about now, you ask? Mike Shatzkin, a publishing industry guru, has recently written Four players in the book business with the power to rewrite some of the rules – and I thought you might be interested in a synopsis and a bit of commentary but first, a diagram. Diagrams help me think.

Four-Dominant-Players

According to Shatzkin, the US market is dominated by four players (those with the red stars): (1) Penguin Random House is almost the size of the four other Big Five publishers combined; (2) Barnes & Noble is the leading book store chain; (3) ReaderLink has recently purchased Anderson News thus becoming by far the dominant distributor to mass merchants like Target, Walmart and Sam’s Club; (4) Amazon is far and away the dominant online retailer. Or to use the IBM terminology: Amazon owns the online consumer; Barnes & Noble owns a significant portion of the book store customer market; ReaderLink owns the mass merchandiser relationships; Penguin Random House owns a huge whack of content readers desire.

Dominance = power. For the most part, writers have no power.

Other aspects to consider. Each step in the process of producing content and delivering it into the hands of readers costs money. Each organization has to make a profit.

But consider what’s happening in the publisher space.

 

Amazon-Publishing-ScenarioAmazon now has at least seven publishing imprints. (Full disclosure – my latest novel Time and Regret will soon be published by Lake Union, an Amazon publishing house.) Collectively, the organization knows what consumers buy and has a powerful database of reader information. The link from Amazon Publishing to Amazon Retail is represented by a dashed line to demonstrate that it is more seamless – and thus less costly – than connections between disparate organizations.

Will this new publishing dynamic deliver more compensation to writers? Will Amazon grow its physical store presence to be a serious threat to Barnes & Noble? How will Penguin Random House (PRH) use its leverage? Mike Shatzkin suggests that PRH could create a direct relationship with mass merchants and thus cut ReaderLink out of some of the action and he has previously suggested that they could “create their own ebook subscription service”. We shall see.

Other posts on the publishing industry: Follow the Money, Lifetime Value of an Author, Facilitate Connections Between Writers and Readers.

FOR MORE ON READING & WRITING HISTORICAL FICTION follow A WRITER OF HISTORY (using the widget on the left sidebar)

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 from Amazon, NookKoboGoogle Play and iTunes. Her debut novel, UNRAVELLED: Two wars. Two affairs. One marriage. is also available from these retailers.

Mary can be contacted on Facebook, Twitter and Goodreads.

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.