Book Publishing Industry Analysis

The book publishing industry is traditionally associated with a high level of risk. Unlike other fields of business, this one does not provide enough evidence to judge whether a particular publishing project will be successful or not. Nevertheless, books are a very specific product that is used independently of the location or audience. The introduction of e-books has given publishing companies an opportunity to reduce financial risks by introducing advertising possibilities (Smith, 2012). Besides, electronic format is less costly, which allows publishers to collect more revenue without taking the risk of printing high volumes of books. Although the publishing industry is not one of the most stable ones, it has a high chance of staying competitive in the future.

Industry Analysis

Below is an industry analysis broken into two periods. The division is marked by the introduction of e-books and the effect it had on this type of business. The primary tool used for assessing the publishing industry is the Porter’s Five Forces model, aiming to determine the risks associated with it (Hill & Jones, 2010, p. 42).

Traditional Structure

The threat of entry of new competitors is relatively high. The primary issue is that costs associated with setting up a book publishing company with printing facilities are quite high. However, a company may solve this issue by collaborating with an existing typography facility. All other costs make up a smaller part and usually have to be paid out only after a publishing project has been released, e.g. royalty payments to authors. Thus, new companies can be easily set up in publishing.

There is little to no threat of substitute products in the book publishing industry. The primary reason is that books are unique items that can be replaced only with electronic versions. There is, however, a chance of customers choosing, for example, to watch a film instead of reading a book, yet most original plots can still be found only in print. The lowest risk in this category is offered by educational textbooks, that often contain material that cannot be easily found online.

The bargaining power of customers is relatively high in this industry. Printed books may come in all shapes and sizes, yet the content of one author is identical among all publishing companies’ editions. Price and design are the defining qualities that matter to potential customers. A publishing company has to find the perfect combination of these two elements, otherwise, it will lose market share.

Finally, the bargaining power of suppliers is not very significant. The primary suppliers are authors, who send their works that they wish to have published. Usually, they represent the most interested party and agree to terms that are the most beneficial regarding revenues and popularity. However, most publishing companies do not rush to offer high payment to authors, and the latter usually agree to receive relatively small payment until they become widely known.

Finally, the risk of competition inside the industry itself, is very high. There are many publishing houses, yet the number of outstanding authors is relatively low. Publishers either depend on re-editions of old books or hope to find a best-seller story. It is common for publishing houses to release books with the same content, as often happens with classic fiction, since the competition for customers’ attention is intense.

E-Book Era

The introduction of e-books has changed the proportion of risks in the publishing business (Thompson, 2012). Although printed books remain popular due to their aesthetic component, electronic versions are more convenient. It is easier to take one device containing several downloaded books on a long trip than to carry several items that take up space and add weight.

The threat of new competition is very high in this type of publishing. There are much fewer resources required for making an electronic edition and the production process is much faster. As soon as the item is designed and all formal requirements are met, it can be released. However, there is still an issue with the channels of distribution. Most customers prefer well-known platforms like Amazon to search for such items. At the same time, there are not so many e-book retailers, which allows them to dictate contract terms.

The situation with substitute products remains the same as it was with traditional printed books. In fact, there is mostly only one option, which is to choose between a printed book and its electronic edition. There is, of course, an audio format, but not many people prefer to download it since there are too many factors like the tone of voice and emotional background that may influence the process of understanding content properly.

The bargaining power of customers remains high after the introduction of e-books. Now it is even harder to find customers willing to pay for the electronic edition when there are so many options to download content for free. Besides, due to retailers adding a commission on electronic books, they sometimes appear to be even more expensive than their physical copies (Love, 2012). Finally, both electronic and printed versions depend highly on promotion and peer recommendations. Sometimes the revenues from sales do not cover the costs of production and promotion combined.

The bargaining power of suppliers remains the field associated with the lowest risk. With the introduction of electronic versions, publishers have become even more independent from producers of text-based material. Besides, there are many authors that wish to have their works released, leaving publishing companies with an opportunity to discuss a wide range of royalty payment strategies.

The internal industry competition remains very high. There is a great risk of a publisher being unnoticed by the larger audience. Besides, there are now services allowing authors to release their books in electronic form without any literary agent (Butler, 2017). It costs less and authors must carry the risks associated with a lack of buyers. Nevertheless, this factor creates even more competition among publishers.

Opportunities and Threats

One of the most significant opportunities for publishers is the growth of the world’s population. It means that at least textbooks will have a high chance of being required in schools and higher education institutions. Another opportunity is the growth of literacy in the world (UNESCO, 2017). This factor not only makes available new readers but also provides new authors to share their unique ideas. Finally, the development of technology allows publishers to place adverts in e-books to gain more profit.

However, there are many more threats in this industry. The primary one is associated with the economic recession, yet it does not seem to continue in 2017 (Gurdus, 2016). Nevertheless, currently people do not have much money to spend on entertainment, and reading is not considered one of the most popular options. Besides, adults have to work more in such economic conditions, which leaves less time for reading books. There is also the issue of piracy, which allows many books to be downloaded for free.

Recommendations

The main recommendation for publishers includes the advice to reduce the costs of production. While e-books are quite cheap, they still require significant design work to tailor the product to fit screens of different devices. Instead of contacting retailers like Amazon, a publishing house may keep its own online store with electronic copies available for downloading. While this may affect the total number of customers, there is a high chance of retaining the existing ones by offering lower prices and loyalty programme specials. Publishers should also take advantage of technologies, especially any that offer the potential to increase income.

For instance, electronic books should incorporate commercial content related to the reading. It may be advertised by 3^rd party companies that would pay for placement or introduce the publisher’s information, such as news about new book releases.

Conclusion

The publishing industry is highly competitive since it sells similar products offered by different companies. E-books have changed this business significantly, yet now there is a threat of a significant amount of content leaking onto the Internet for free downloading. Nevertheless, the market of potential customers is growing, and publishers must take this opportunity to become visible to the largest possible number of readers.

References

Butler, H. (2017). Five reasons to self-publish. The Huffington Post. Web.

Gurdus, E. (2016). The odds of a 2017 recession are 15-20%, says economist. CNBC. Web.

Hill, C. W. L., & Jones, G. R. (2010). Strategic management theory: An integrated approach. Mason, OH: South-Western Cengage Learning.

Love, D. (2012). Why I hate e-books. Business Insider. Web.

Smith, K. (2012). The publishing business: From p-books to e-books. Case Postale, Switzerland: AVA Publishing SA.

Thompson, J. B. (2012). Merchants of culture: The publishing business in the twenty-first century. Cambridge, UK: Polity Press.

UNESCO. (2017). Education: Literacy rate. Web.

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Book Publishing Industry Analysis

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