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’s 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 Tidbits

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, and I’m personally experiencing the paralysis of an industry afraid to take on a new author. 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 they 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 brand in an incredibly short space of time.

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

Niche strategies – global consulting firm, A. T. Kearney, identified nine successful niche strategies. 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

A while ago I posted about Amazon’s ‘divide and conquer’ strategy, explaining it with a diagram similar to the one above. What I’ve added to the diagram are the challenges facing each player. For example, authors are challenged because of the abundance of content/competitors and poor levels of remuneration, publishers are challenged with profitability 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.

Questions to consider

Perhaps one question to ask is how are publishers adjusting their niche strategies to tackle challenges of profitability and lack of consumer data? Another question, how should authors adjust their strategies to take advantage of niche publishers? It seems to me that publishers have buffered themselves from authors – except their own stable of authors – and consumers; the one through agents, the other through retailers. Could cooperation strategies link authors and publishers in a more symbiotic relationship through well defined niches? Can authors capture their own consumer data?

Which publishers operate successful niche strategies? Harlequin comes to mind as a publisher with presence in the mind of consumers.  Hay House concentrates on self-help and inspirational books, Osprey’s focus is military history books, Chelsea Green’s focus is the politics and practice of sustainable living. I’m sure there are many more examples. With such specific focus come strategic alliances, marketing strategies, author support, distribution arrangement, conference participation and other tactics that are different from broadly based publishers like Hachette or Random House.

To add to the list of questions – are these niche players more sustainably profitable than the famed ‘Big 6′ players in publishing? If you write content in the markets they serve, can you develop a different kind of relationship with these niche players?

Just to leave you with one further thought – the following diagram occurred in a post about reader-writer relationships. Here’s the question: how should publishers insert themselves into the interconnectivity mix in order to add distinct value?

I’m sure I’ve missed many other insights and of course asked more questions than answered. Perhaps the post will spark some dialogue.