digibyte - Publishers quit ducking Amazon, build their own verticals instead

Jon Reed Profile picture for user jreed January 15, 2015
Publishers are embarked on a vertical strategy that starts with selling to customers directly but invokes a broader business model transformation.

While in New York City, I swung by the Digital Book World show, where publishers of all sizes grappled with Amazon's continuing dominance and reader consumption shifts (new devices, new formats).

But I sensed a change in the air - instead of reeling from the impact of Amazon's market dominance, publishers are embarked on a vertical strategy that starts with selling to customers directly but invokes a broader business model transformation.

Following are some quick hit takeaways from day three of the show:

  • Publisher are learning the dangers of catering to all readers - In the opening session, Seth Godin cautioned against trying to compete with Google and Amazon for "bigness," providing anecdotes of companies that have triumphed through vertical specialization.
  • Amazon continued to loom over the publishing industry, in two key ways: 1. exerting price pressure, due to Amazon's seemingly endless ability to prioritize low cost over profits and not take a hit on Wall Street.  2. As publishers get more serious about going direct to audiences, Amazon's high bar for the ecommerce experience (including free shipping in many cases) is forcing publisher to revamp their online shopping experience.
  • Even the biggest publishers are verticalizing their market plays. The HarperCollins executives on-site addressed their acquisitions of Harlequin (romance) and Thomas Nelson (Christian book publishing) in that context. The narrative about those acquisitions was that it was all about industry consolidation, but for HarperCollins, it wasn't about getting bigger for its own sake. It was about vertical plays, and buying companies that had direct - and in Harlequin's case - subscription based purchasing models with their own readers.
  • Going "vertical" is not just about targeted industries, it's about building opt-in communities around those interests. Publishers are discovering that the arduous process of building out direct commerce channels doesn't stop there - if you want to engage those readers you have to create a deeper relevance, which means building communities around book line topics.
  • Selling directly to customers online is pushing publishers into "data driven" business models - publishers are finding that a huge bonus of building out their own channels is gaining insights into their customer's interests and behaviors they never had before, along with an ability to build new products and services around those interests.
  • Publishers "going vertical" are finding that book sales are not the only revenue option - expanding services might include content memberships, event revenues, or even packaging a range of products/services into one offering.
  • Publishers have to form a digital publishing company within themselves to pull this off - You'd think that publishers would be good at publishing, but they're historically good at publishing books and magazines. Relating to readers via communities and opt-in email audiences requires a dedicated team inside the publisher that may have diverse backgrounds, including online blogging, online magazines, and even mobile gaming experience.
  • Authors must change how they view their profession  - instead of signing a book contract, the author will increasingly be expected to participate in ongoing activities pertaining to the book topic, such as appearing at vertical events, writing follow-on blog posts, and engaging with readers in social Q/As.

These quick hits are a stake in the ground - I'll have more to share on some of these vertical moves soon. But I was struck by the sense that publishers are feeling less defensive, and are now creatively re-defining their go to market. A challenge thrown down by Amazon some years ago is finally taking root - and going in directions that might ultimately disrupt Amazon itself. We'll see.

Image credit: Gold Fish © violetkaipa - Fotolia.com

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