The Shatzkin Files


Two questions that loom over the trade publishing business


A lot of people in publishing would pay a lot of money to get a reliable answer to these two questions:

When will the growth in Amazon’s share of the consumer book business stop?

Who will be left standing when it does?

I won’t attempt to answer those two questions in this post. In fact, the purpose here is to begin to generate agreement that those are, indeed, the way the industry’s existential strategic questions should be framed going forward. In my consulting work, it is often my role to provide “synthesis and articulation.” This post will begin to document the synthesis that led to articulating the questions, which are actually implicit statements, above. The catalyst for these ruminations was the news last week about Amazon’s dust-up with Independent Publishers Group (IPG), a demonstration of its power and willingness to exercise it that recalls an incident almost exactly two years ago when they were unsuccessful at bullying Macmillan (or the other big publishers) into giving up their notion of implementing agency pricing.

Amazon was not the first online bookseller. But they appear to have had several distinctions from all others from the beginning. One is that they always saw bookselling as a springboard to a much larger business. That meant that bookselling was, perhaps primarily, a customer acquisition tool, not an end in itself. A second is that they saw, long before it was accepted general wisdom, that perfecting the “customer experience” online was the core requirement for success. And the combination of those two things, in concert with the ubiquitious availability of capital for promising Internet propositions that characterized the late 1990s, fueled growth powered by aggressive pricing that has had their trading partners and competitors agape for nearly two decades.

Any discussion of Amazon’s success must acknowledge that the other key component, aside from the strategic components of long-term vision, smart use of capitalization, and customer-centricity, has been the quality of their execution. This has been true from the beginning and it is still true today. Some of this is subjective, but it still looks to me like they offer a better print searching-and-buying experience than BN.com and a better overall ebook ecosystem than Nook or Kobo. I read on an iPhone and use all the ebook purchasing systems from time to time, but I use Kindle the most because it is the best. I am close to somebody who prefers to buy from BN.com because (she says; I don’t do this research…) they give money to Democrats and Amazon gives money to Republicans, but she still does her searching at Amazon because it works better before she hops over to BN.com to make her purchase.

[An update on that last point since the original posting of this piece. I was challenged on the "Amazon is red" statement by a couple of people whose opinions I trust, so I asked my favorite Democrat for citations and I got two. You'll see (if you care and if you look) that both of the analyses that delivered this characterization are squarely within the Bush presidency, so they could constitute a company hedging bets rather than expressing political conviction. On the other hand, B&N was blue throughout the Bush Administration. And the point about the search engines, which was the one germane to this piece, remains true.]

Some of these advantages have become structural; having more customers means more having more customer reviews, more consumer knowledge, more product to sell, and, of course, higher rankings for many searches. There isn’t much their competitors can do about that. But they also keep innovating, most recently announcing an X-Ray feature for Kindle books that does outlining and annotating that could add value for readers of immersive fiction and non-fiction that it will take a while for other ebooks to match.

That’s the good news: good for consumers and good for producers of books that want consumers to buy and appreciate them.

This post is not all about good news.

Amazon’s relentless customer focus doesn’t prevent them from keeping a close eye on threats to their business, whether they come from obvious competitors or whether they are more tacit challenges that spring from trading partners.

This goes back to 1997. Ingram, well aware that Amazon had started its business by simply using Ingram to supply most of the books its customers wanted (Bezos put his business in Seattle because Ingram’s Roseburg, OR warehouse was within a day’s trucking distance), decided they could put many retailers in business the same way. So they announced the formation of I2S2: Ingram Internet Support Services. I2S2 would provide the tools to allow any bookstore to start selling online. Prominent industry thinkers saw I2S2 as the way all booksellers could start to reap the opportunities of the Internet as a sales channel.

Had Amazon not quickly reacted to this threat, they could have gone away so fast that we’d have trouble remembering their name now. But they did. They promptly cut their sale prices so deeply on most of what they sold that the other retailers, focused as they were on their stores, saw no point to expanding into unprofitable web business. Almost as quickly as I2S2 was announced, it was dead.

I2S2 was the first instance of Amazon successfully using price as a weapon but it has been an important part of their arsenal ever since. It has been a powerful one. It works for them commercially because they aren’t just a bookseller; they use book pricing to acquire customers and nurture their loyalty. They lock in that loyalty with their Prime program, by which the customer pays a fixed price annually for benefits that include expedited shipping, thereby making an investment which pays off in direct proportion to how much they buy from Amazon. The more they buy from Amazon, the better deal Prime is for them.

But using price as a weapon has another benefit; it puts the customer on your side. Even when Amazon’s lower prices are subsidized by their being excused from sales tax responsibilities that fund state and local governments and disadvantage local retailers who could be their friends and neighbors, consumers want it and defend it.

Amazon opened its virtual doors in 1995. Soon after they fended off the I2S2 challenge, they discouraged their first really well-financed competitor. They competed with BN.com (in which Bertelsmann, owner of Random House, bought a half-interest in 1998 to become partners with B&N) by extending their anti-I2S2 strategy and discounting so deeply that the online book channel hardly made any margin for the retailer. From Amazon’s perspective, acquiring customers for a long haul that was going to include selling many other things besides books, this made sense. From Bertelsmann’s, a company that made money selling content, owned book clubs that made money, and with no interest in being a multi-product online retailer, it made none. They sold back their half to Barnes & Noble in 2003.

And B&N faced the complications of not wanting to cannibalize their own store business with cheaper prices online. They also didn’t want to invest in the site and the search engine for it the way Amazon did. By the middle of the last decade, it was pretty clear that Amazon would be the dominant online bookseller for the foreseeable future and that those sales efforts would be subsidized by margins earned on other products.

Until the Kindle debuted in November 2007, however, publishers didn’t need to see Amazon as anything but their principal online channel and, for trade publishers, that was still ancillary to their principal channels to the consumer. Barnes & Noble was still growing its store presence. Borders was not doing as well (and still recovering from the mistake of handing Amazon its online business earlier in the decade), but was still a robust brick-and-mortar bookseller. The online share of total sales was rising, but even the bookstore component of sales was still a growing business. And expectations that ebooks would change any of that were limited to True Believers (like me) who had been predicting a change from paper- to screen-reading that had not yet gained any traction.

I recall in the late 1990s the suggestion was made by some pundits (but definitely not this one) that publishers should combine to compete with Amazon. If they had, they almost certainly would have failed as ignominiously as I2S2 and the Bertelsmann-B&N combination did. Publishers wouldn’t have gone into online bookselling to lose money and it would have taken vision and guts to use books the way Bezos did, as a springboard to create a global online Walmart. The point I want to emphasize is that it was not a failure on the publishers’ part to have “allowed” Amazon to grow their online hegemony. It was not in their power to have changed it. And, in the meantime, Amazon was making all their books available and selling much more than they would have if they had been trying to produce more margin on book sales. (Of course, store sales would have atrophied more slowly if the publishers had managed to keep online prices higher, but it wasn’t the publishers’ or booksellers’ choice to make even if they had full cognizance of what was to come.)

Of course, since 2007, ebook sales have doubled or more every year, print sales are declining, print sales in stores are declining even more rapidly, Borders has gone away and closed hundreds of stores, independents and small chains keep disappearing, and even B&N is drastically reducing the shelf space it devotes to books. eBooks have enabled commercially viable self-publishing in ways never before anticipated, giving authors leverage in their negotiations with publishers they never had before. And agents now have to share the concern of the publishers and retailers that Amazon could disintermediate them as well by providing their publishing and distribution services to authors directly.

Aside from the pricing pressure and the arm-twisting of Macmillan and now IPG, Amazon has shown in other situations that they will use power when they have it. A few years ago, they tried to pressure publishers who wanted to sell print-on-demand titles to do that printing for Amazon with CreateSpace, not with Lightning. Recently they have instituted charging publishers for posting supporting material for books online that a few years ago they would have begged them to make available at all. There are now reports that they are pressuring for more margin and more coop (Amazon has apparently recently “invented” ebook coop).

This kind of pressure is not surprising. Retailers who account for a large percentage of a manufacturer’s business apply it routinely. What is new and unprecedented is that Amazon sales now constitute 30% or more of many large publishers’ business, between print and digital, and that number is rising.

This would all be difficult enough if there weren’t a huge cultural gap between Amazon and the rest of the publishing industry. But there is. More and more, people who have been in publishing for years see Amazon as “in” the book business, but not “of” the book business. That attitude is exacerbated because the answer to the second question above (“who is left standing?”) for many is “perhaps not me.”

In fact, what we know is that Amazon’s share of the trade book business has done nothing but grow since the company began in 1995. And however direct or indirect the connection, we’ve lost a lot of players in the business since then, and we continue to.

(Of course, if Amazon had failed in 1997 and I2S2 had succeeded, we would have had a different online and digital history, but there still would have been a digital change and brick-and-mortar would still have declined over time.)

The cultural gap will be covered in an upcoming post that analyzes the impact of Amazon’s growth in each segment of the publishing value chain. Then we’ll start trying to tackle the questions at the top. I expect to get a lot of help with that from the comment strings of this post and the next one on the big questions. From what I can tell, every player thinking about their own future in a world where Amazon just gets more and more important is looking for some help answering those questions as well.

  Back to blog

  • http://www.facebook.com/glenn.yeffeth Glenn Yeffeth

    As always, Mike, the most incisive thinking about what’s happening in this industry. As an independent publisher, I don’t have the luxury of bemoaning or the challenge of trying shape the way the industry is moving. My job is to carve out on ongoing niche in a continually changing industry dynamic. Interestingly, over the last three years, the niches for independent presses like ours are growing, and our business is growing rapidly in size and profitability.

    Your posts always force me to consider whether we are experiencing the success of the turkey before thanksgiving, with Amazon as the executioner. We’ll see. I do know that I don’t envy the executives running the big 6. The challenges they face are intimidating.

    • /blog Mike Shatzkin

      Glenn, it is refreshing to get a comment from somebody who’s succeeding doing it their way but who also has respect and sympathy for others that are, by the nature of their businesses, less nimble. And I appreciate the kind words.

      Just figure out how to make your business *outside* Amazon grow faster than your Amazon business. If you do that, you’ll never lose.

      But, of course, much easier said than done.

      Mike

  • http://twitter.com/jimnduncan J.N. Duncan

    Mike, you always impress. I can say that my knowledge in these areas is pretty lackluster, and as an author, my view is perhaps rather narrow.  That said, I wonder if at some point, Amazon would start approaching what might constitute a monopoly in some form or another. With the continued shrinkage of shelf space in bookstores, it’s easy to imagine that what they stock will eventually become quite narrow. Many potentially great books will be forced into digital only or self-publishing, which seems to only benefit Amazon even more down the road. It’s hard to see anything positive at the moment in Amazon’s continued growth in books. Of course I could just be lamenting the loss of what has been, and not embracing what’s to come, which is likely inevitable. Regardless of the ease, convenience, and benefits of digital content and experience, I still very much enjoy paper books. It’s difficult, for me anyway, to foresee a future that isn’t dominated by Amazon, and bookstores are relegated to having Walmart type selections, and forced into being retailers of merchandise far beyond books in order to survive. I could just be overly pessimistic about all of this too.

    • /blog Mike Shatzkin

      I think you’ve got a clear-sighted view of the future. The question is the speed of the change. But the direction is, I think, pretty well determined and you’ve projected it very reasonably.

      Mike

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  • http://twitter.com/marcellovena marcellovena

    Thanks Mike for the clear vision and communication. Very effective. I couldn’t agree more.

    Clearly, if we don’t change the context is hard to imagine a different outcome than having a monopolist retailer dominating the US trade book market.(not sure about other non-US markets, first movers in smaller markets can have an advantage over Amazon). Especially if we talk of immersive reading (perhaps other kind of reading might experience a different destiny).

    However there are things that can be done and especially if the top 6 publishers coordinate their strategy in a much broader sense than just having an agency contract. They might, hopefully, be quite effective. 
    Of course, nobody has got the solution, nor have I and by far. I’d just like to contribute with a couple provocative thoughts that might help the discussion to further develop:

    – Interoperability of ebooks.

    Any ebook could easily run on any device if it has no DRM. Any customer would be able to shop on different bookshops. Therefore Amazon would not necessarily imprison the readers within its walled garden. The walled garden impair the ability of other ebook retailer to compete on the overall market and push them to the corner of non Kindle readers. Sure DRM is still a taboo, but let’s no forget what happened the music industry when between 2007 ans 2008 all majors lifted DRM also to undermine the iTunes’s walled garden. 
    If piracy is an issue (and certainly is less strong than on music) there are other more effective means to fight it. DRM is very ineffective to fight book piracy. We don’t need to wait until it’s too late to remove the DRM.

    – Effective Direct sales. 

    With the above mentioned interoperability it could be possible to achieve massive sales directly from a publisher direcly (bypassing Amazon) to consumers. Even to Kindle owners (DRM free files can be imported on Kindle).  The 30% Amazon’s commission would be saved and could be used to run advertising/communication campaign to drive traffic and sales to the publisher own store. Since the market is pretty big, 30% saving would mean a lot of economic means to run campaigns and subtract sales from Amazon. Even if the retail price were the same as on Amazon, because of the agency agreement with Amazon (which might not be necessarily the case) a publisher bookshop could offer to their customers many services, extra content, loyalty bonus, and private discounts (non publicly available).

    – Manage social media and book discovery (outside points of sales, i.e.: Amazon,…). 

    Publisher can get out of their offices and be seriously online and on the social media. They can create/aggregate traffic and point them to the preferred shops (which need not be Amazon). They might even divert traffic from Amazon to other bookshops, to even their own bookshop, if they own one. And without DRM this could be fairly possible. The real market doesn’t end to Amazon. Amazon is a retailer that gets all the benefits of being the most popular and the most closed one. However Amazon it’s just the end point of the sale process. 
    If Publishers manage to have many book discoveries outside Amazon then the eBook can be sold anywhere. Selling an eBook to  consumer that is ready to buy it and it’s keen to buy it is a commodity service that is not worth 30% commission nor worth to be given away to Amazon. Anybody managing the book discovery process can reduce Amazon’s power.

    Of course there would be a strong opposition on Amazon’s side, and any of the things proposed above are much easier to say than to do…

    I’d love to hear your thoughts Mike. 

    Thank you very much,

    Best from Italy

    Marcello

    • /blog Mike Shatzkin

      Very thoughtful comment for which I thank you. In response to your suggestions:

      On removing DRM, Anobii CEO Matteo Berlucchi made the case for this at Digital Book World in January and his point was precisely that he wanted to sell to Kindle customers and he couldn’t unless the publishers would allow him to sell without DRM. What’s noteworthy is that Matteo’s company has major investment from three Big Six publishers in the UK: Penguin, Random House, and HarperCollins. The solution is “social DRM”, putting the name of the person who owns the file on the ebook. That would make most people reluctant to pass them beyond what the terms of sale called for. (But, I have to add, it would undoubtedly cost us some sales that are being made today.)

      I agree about the direct sales, in general, except that it is very tricky for the biggest publishers. It makes the most sense in market niches. There are many cases of romance and sci-fi publishers with substantial direct sales capabilities. The big publishers should be doing it in those areas and aren’t. There are a lot of reasons why “not yet”, but one has always been that they’ve been reluctant to annoy Barnes & Noble, who has always looked askance at publishers selling directly to end consumers. I don’t think the strategic imperative can be resisted very much longer.

      Social media is personality- or niche-dependent, in my opinion. To be
      effective, publishers need to define the niches they’re in — markets that
      people in them would understand themselves to be a part of — and
      systematically track the influencers — blogs, of course, but also the
      people who frequently comment on those blogs — frequent tweeters, etc. But
      these efforts have to be targeted at communities and they can’t be about
      selling all the time. These techniques are very much still being figured
      out, but big publishers are definitely working on them.

      Indeed, publishers that are “part-trade” like WIley and McGraw-Hill have
      ways to reach customers that aren’t Amazon-dependent. It will take more
      than sales going to 70% ebooks for Amazon to be able to steal an author
      from Wiley in an area where they have strong direct audiences. But when
      that day comes, they’ll have a powerful proposition for a major fiction
      author.

      Mike
      ————————-
      Mike Shatzkin
      [email protected]
      Founder & CEO, The Idea Logical Company, Inc.
      Conference Chair, Digital Book World
      Partner, Publishers Launch Conferences
      212-758-5670
      /blog

    • /blog Mike Shatzkin

      I see the virtue in removal of DRM and I think publishers may be beginning to see it too. It definitely would allow other retailers to compete for Kindle customers in ways they simply can’t now.

      I also agree that publishers have to start figuring out how to do direct sales, even though it will annoy B&N immensely that they do that. If tiny fledgling romance publishers can build direct business, then certainly the big publishers can.

      I think the big publishers are doing the best they can with metadata and discovery and social networks, but they’re handicapped by not being “vertical.” It is harder to use those tools effectively if your audiences are all over the place.

      But your suggestion of concerted action, which you lead with, is a non-starter. Publishers are afraid to talk to each other at all these days, with the class action suit (which started out of Seattle, no coincidence likely there…) that is currently active. Millions are being spent defending against it and the last thing any of these publishers need is the faintest hint that they are joining forces.

      Mike

  • William Ockham

    Anybody who thinks that those two questions are how the publishing industry’s existential questions should be framed is unconsciously admitting that the industry is doomed.

    When? Really? Why would anybody care about “when”? That is the question of a loser. Asking this question means you have no earthly idea why Amazon’s share is rising and don’t realize that you have already lost the plot. Asking how to stop Amazon’s growth is useful. Asking who can stop Amazon is at least helpful in focusing your mind on the problem at hand in trad pub. Asking how high could Amazon’s share of the consumer book business go would be a starting point to envisioning the future.

    • /blog Mike Shatzkin

      First of all, “the industry” can only be “doomed” if people don’t want to read books anymore. Under any other set of circumstances, we’ll have an industry. The topic under consideration is of what that industry will be composed: Amazon and who else? So, unless you think that a) Amazon won’t survive and we shouldn’t be considering that, or b) nothing will change and everybody here now will continue to play (now that Borders is gone, of course; that doesn’t count), I think, actually, the questions I’ve framed are a pretty succinct way of summarzing what a lot of people would like to figure out. I think most of what you pose falls under the heading of that discussion.

      Or, it will, as I write more posts on it.

      Mike

  • Andrewrmalkin

    Mike,
    I had no idea about I2S2 despite having worked at Ingram for 3 years and working every day with the transportation team. Never heard it ever referenced (probably because it was a bust but IPS’s predecessor was discussed now and then). Was this a Phil Pfeffer initiative? Choosing Seattle due to proximity of Roseburg OR was surely only one of many factors for AMZN no? Ingram may not admit it but they seemed to regret not having that distrib center closer to B&T’s in Reno unless the space and terms in OR were especially sweet? (as it was not nec the biggest in terms of stock or best from location and speed to consumer POV). Thanks for the post.
    Cheers,
    ARM

    • /blog Mike Shatzkin

      Andrew, since I2S2 never actually got off the ground, I don’t think it is surprising that it doesn’t make a lot of internal Ingram discussions. I don’t remember who the responsible executives were but it would seem to have been during the Phil Pfeffer era. I don’t think Ingram lost a lot of money on it. It would have seemed like an opportunity, and it was. But its significance is more in what it showed us about Amazon’s ability to react quickly and aggressively than for what it says about Ingram. In short, it belongs in any history of Amazon, but it might not belong in any history of Ingram!

      Don’t know how much early AMZN sourced from B&T as well as Ingram, but almost certainly *some. *We should recall that AMZN’s title database came from B&T.

      Mike

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  • Simon Petherick

    That’s a really succinct and accurate post. I just wanted to add a commentary, which is that the best New York publisher that I know – who has recently left her job – told me over the last two years that all her time (and she didn’t exaggerate, she meant all her time) was spent on focussing on non-traditional sales. So she had no interest, absolutely none, in the company’s sales team’s reports on relationships with B&N and others. She ignored that. She made no attempt whatsoever to try and make inroads into Amazon’s continued growth. What she spent all her time on was talking to clothes shops and design shops and basically any shops she could talk to who might be interested in opening up discussions about physical books becoming a new tool in their own high street retail armoury. That was her perspective on how a major NY corporate could deal with the effect of Amazon v High Street decline. Really, what that means is accepting that the physical book market is going to decline, and that efforts are going to need to be made to make the sales of those physical books attractive. You’re well aware of that, I know, and the answer to your implicit question lies there too.

    • /blog Mike Shatzkin

      That publisher’s focus was absolutely spot on. That is *exactly* what publishers should be doing! The vertical you suggest is a particularly fertile one because there is a lot of brick-and-mortar and a lot of reasons people will prefer to buy the goods in physical stores rather than online.
      Mike

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  • http://www.facebook.com/profile.php?id=1253414781 Rod Eichelberger

    I am not from the publishing world, nor do I claim to have any keen insights from that perspective.  I ran across your posts while researching the ebook ecosystem and have enjoyed following along ever since.

    I am an avid reader and while I have moved to ebooks over the past few years, I still find I prefer a physical book.  I may be old school but there is something about the look, touch, and smell of a book.  I have five children three of  whom are teenagers, and they feel the same way.

    I use an iPad, Nook Color,  and a Kindle Fire for my e-reading and find as a consumer I resent being locked into the walled garden of BN, Apple, and Amazon, the first thing I do with each device is install the readers for the others.  

    I would like to see the publishers move to either a DRM free system or a system where they control the DRM and the seller is just an intermediary for file delivery.  DRM free would be preferable.

    As a lover of physical books, I would love to see the publishers get more creative in keeping physical books relevant.  Perhaps I am too naive in how the business works, but as a consumer I would react positively to a model that borrowed from what is done with DVD releases.  

    I would love to walk into a store and instead of buying a new release hard-back at a discounted price, I would rather pay full price and have it come bundled with a digital download of the ebook as well.  In our current DRM system the publishers could chose to deliver it through multiple walled gardens, as the movie industry does with digital downloads, or they could create their own.

    Maybe this would not succeed with other consumers, but I know I am willing to put down an extra $7-$10 for a DVD with a digital download (it’s cheaper than buying the DVD and download separately), and would do the same for a Hardback with and ebook bundled.  I feel that books, like DVD’s, are an item where people want a physical copy AND digital item.  

    I am sure there are reasons why the concept won’t work, but I can dream.

    • /blog Mike Shatzkin

      Rod, there are definitely people in publishing who see the book-and-ebook bundle as an opportunity and are trying to figure out how to execute on it. For starters, B&N’s cash registers and checkout systems can apparently manage the transactions, and that’s a start.

      There are a lot of complications, including the contracts around agency pricing and making agents comfortable with ‘deals’ here. But this will get tried. Evan Schnittman, the global head of sales and marketing for Bloomsbury, thinks there could be a market of between 10 and 35 percent of customers for a book who would like the bundle. I think that’s high, but all incremental revenue is worth going after in this day and age.

      Mike

  • http://asknicola.blogspot.com/ Nicola Griffith

    A wonderful post, as usual.

    My guess as to who, in addition to Amazon, might be left standing: whoever buys Goodreads. Plus whoever figures out: how to implement bundling in the face of the agency model; DRM-free sales; and–what the heck, just for fun–rationalizes territorial rights in a digital world…

    • /blog Mike Shatzkin

      Buying Goodreads might be useful for a retailer. But I’m not sure it would help a publisher.

      I think the idea that DRM is a friend of Amazon’s is an idea that is gaining traction.

      Mike

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  • Peter

    “The point I want to emphasize is that it was not a failure on the
    publishers’ part to have “allowed” Amazon to grow their online hegemony.
    It was not in their power to have changed it.”

    Yes it was.  Publisher’s could have stopped Amazon at any time, and still can, by simply telling them NO SALE.

    The publisher’s own extensive backlists- Amazon does not have that yet.  At the end of the day, Amazon must have all virtually books (and every other object, for that matter) available for purchase at all times.  If they can’t do that, not only do they lose money and search ranking, but prime is a non-starter, the proprietary Kindle is a non-starter.

    The entire Amazon business could be kneecapped by a single large publisher (maybe it would take two) brave enough to simply pull their books, all formats, and never look back.

    Now, realistically, this would be a PR nightmare if done bluntly.  BUT, there’s no law that says you need to just give Amazon the same terms and conditions as everyone else in the industry, when they don’t play by the same rules.  If publisher’s truly fear Amazon’s business model, then why not just keep Amazon in line by forcing them to pay higher wholesale prices than real bookstores and other brick-and-mortar retailers?

    And if Amazon shoot themselves it the foot by not carrying your titles, oh well.

    • /blog Mike Shatzkin

      Peter, it not only is a remedy that is akin to blowing up your house to prevent somebody from robbing it, but it also won’t work.

      Yes, they could pull their ebooks from Kindle successfully. They’d have to explain to the authors why they were throwing away half the sales, but they could actually do it if they wanted to.

      But they can’t stop Amazon from selling their print books unless they also want to cut off all the wholesalers, which would also do huge damage to the entire rest of the trade. If Ingram and Baker & Taylor have the books, Amazon can get whatever they want. (They already buy a lot from both of them and other wholesalers now.) If Amazon and B&T do *not* have the books, you’ll be hearing the howls from other stores and libraries all over the world.

      So, strictly speaking, you’re right. They would really hurt Amazon if they stopped them from selling their books. You’d also be right if you told people that if they shot themselves in the head they would definitely not get cancer.

      Mike

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  • http://www.ipgbook.com/ Curt Matthews,CEO IPG

    Amazon’s Capacity to Serve as a Custodian of Our Culture
     
    The really important issue here is whether or not the purveyors and packagers of book content are going to be allowed to control that content for their own purposes. Should the reseller (not the creator) of book content, or the outfit that makes an e-reader for book content, be allowed to control what we read?
     
    There is of course the very dangerous possibility of censorship to consider, and in the case of printed books we have been over this ground time and again. Do printers control what books are printed? Do booksellers decide what ought to be sold? No, they do not, although at various stages in our history they tried to. Should Amazon be allowed to control what we can read on an eBook reader? As a society we have faced these censorship issues again and again and in all instances we have said NO except for very extreme cases involving pornography or the protection of children.
     
    But the real danger is much more prosaic. Those of us little guys who have had to deal with large corporate entities know that getting inadvertently stepped on is the serious problem. If you are a mouse sharing a stall with an elephant, at some point that elephant will need to scratch his ass against the rough boards of his stall and you may be in the wrong place at the wrong time.
     
    Nothing personal about it, but you are squashed.
     
    The Amazons of this world may intend no evil, but then again they intend no good either—except for their stockholders and senior executives. But books are not widgets, and this standard of corporate virtue is just not good enough when the viability and vitality of our literature is at stake. No monopoly is ever a good thing, even in the case of widgets. A monopoly on book content, whatever the intentions of the monopolist, would be a cultural catastrophe.
     

    • /blog Mike Shatzkin

      Curt, I am fully aware of the challenges any publisher, particularly one without a persistent presence on the bestseller lists, has negotiating with Amazon. But I’m not sure that framing your argument around “censorship” is the most persuasive way to present it. What’s happening here has nothing to do with their attitude toward your content and everything to do with their attitude about how the swag should be divided (and perhaps, how prices should be set.) What I believe is happening here is purely commercial and economic and I think most other people see it that way too. Certainly, if Amazon were, over time, to succeed in becoming a true online monopoly of ebook sales (there really are viable alternatives today; they would diminish awareness much more than actual availability) they *could* exercise
      judgments about taste or politics that could be damaging to society, and I’ve tried to say that. But I think most people would see being that apocalyptic about it now as scare-mongering and it distracts from what is really at issue in the dispute.

      At least, in my opinion…

      That doesn’t mean I’m not inclined to be sympathetic and, without knowing the facts of the dispute, annoyed that Amazon would employ such a nuclear option over what must be an argument over margin. They’re most persuasive argument, if they can make it, would be that they can’t give IPG better terms than they give other distributors without tilting the playing field
      away from aggregators who give them a better deal. I think, if they were to
      say that, you’d have to answer it and that would make much more sense to
      most people than an argument that they were censoring.

      Mike

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  • Patrick Fanning

    I think medium sized publishing companies like ours, New
    Harbinger Publications, will be left standing because we’re looking beyond
    print books and enhanced ebooks to interactive websites and apps that deliver
    our content in new ways, direct to consumers, largely outside of the existing
    stream of ecommerce through amazon.com.

                We
    publish a lot of self-help psychology workbooks that in five or ten years will
    evolve into an entirely new way of delivering psychotherapy on the web. Our
    first web-based therapy site is up and I invite you to take a look: http://www.cbt-self-help-therapy.com.

                It’s
    based on our recent workbook Mind & Emotions, but goes far beyond a print book or an ebook. The experience of doing
    therapy on the site falls somewhere between reading a traditional self-help
    book and working with a live therapist, for $29.95, not much more than the
    print version of the book.

                This
    is a new, book-related but non-book product that we can market direct to consumers
    or to mental health providers like Kaiser Permanente. It has some fascinating
    implications for research going forward: because standardized demographic
    information and assessment questionnaires are built into the website, we will
    be accumulating data on which treatment components work best on which mood
    disorder symptoms. We can’t do that with print books. It’s like having a focus
    group going 24/7, telling you what chapters in what books your readers really
    love, so you can publish more of what they want to buy.
    —Patrick Fanning, New Harbinger Publications, Inc.

    • /blog Mike Shatzkin

      Without looking at the product (which I don’t have time for at the moment), I agree from your description that you’re well-positioned for the future. You’re moving right along with the tech. The more “professional” is the trade book’s purpose and audience, the more sensible and intuitive the transition will be.

      Mike

  • InklingBooks

    Your article comes at an interesting time. Just today I got an odd email from Amazon with the subject: “Amazon US Books – Aging Unfilled Customer Orders” that opened with this remark:

    “The following titles are at risk of missing pre-holiday customer promise. We believe that Amazon will not receive sufficient supply for these titles with enough time to deliver to our customers by Christmas Day.”

    Although we have dozens of titles, the list only includes one of them, although it is one that’s likely to sell well around Christmas.

    That’s odd, I thought, Amazon’s been getting copies of this book from LSI/Ingram for over a decade. Did they suddenly forget that? Your article suggests other reasons.

    1. Their email wants me to supply them with copies. That, of course, means I get stuck with the shipping cost and the expense of maintaining their inventory until the copies sell. That’s much like how you suggest in its early years Amazon used Ingram to jumpstart their company.

    2. They want me to print the books as a short order through LSI, perhaps bypassing Ingram, a competitor. Again, if I do that, I get soaked for the shipping and inventory costs and Ingram gets hurt as well.

    In response, I told Amazon, most politely, to get the book through Ingram. I also offered to place that book in CreateSpace, but only if Amazon would agree to promote it this Christmas season.

    Finally, there is a possibility that the email is a bogus one, even though the return address is one at Amazon: [email protected]

    What’s strange about that email is that the email address it came to me through is one that hasn’t been legitimate for many years, one that a long gone Internet provider seems to be faithfully forwarding it to me still. In fact that email address dates from so long ago, I can’t imagine any hacker having it. At best, it might have been one I was using when Amazon first got that title long ago. If so, then why is Amazon using such a long-defunct database entry? That’s not the sort of mistake Amazon makes.

    Supporting that is that the email comes with a CSV file attached that could carry some gosh-awful virus. Also some of the wording is a bit odd, such as: “will not receive sufficient supply for these titles” rather than “will not receive A sufficient supply OF these titles.” Since they are so idiomatic, non-native speakers have trouble with English articles and prepositions.

    A few years back, I sent copies of these potentially scaming sorts of emails to Amazon to help them. Now, I have a more ‘why bother myself’ attitude toward the company.

    To loosely quote one of Tolkien’s Ents: Until Amazon shows that they’re on my side, I see little reason to be on theirs.

    In the long run, that’s the problem Amazon faces. It’s easy to ride roughshod over people on your way up. They can do little to stop you. But on your way down, it can be discouraging to discover how few friends you really had.

    –Mike Perry

    • http://idealog.com/blog Mike Shatzkin

      I gotta admit I lose you a bit in the narrative.

      You say Amazon wants you to print these books with LSI but Ingram would be hurt. Well, not exactly, Ingram OWNS LSI!

      And Amazon *could* order whatever inventory they’re asking you for from Ingram (who I take it is the only supplier of the book anyway) and Ingram would print them through LSI and deliver them. Unless they have a no-return policy on these books.

      Another thing to contemplate, which I think is likely, is that this is a note generated by an automated program that pushes publishers systematically by algorithmic selection to ship inventory to Amazon in this way.

      What mystifies *me *about all this is that it would seem the tactic for Amazon would be to say to you “if you don’t put this book in CreateSpace, you’ll lose sales and probably lose some margin.” THAT should be the winning argument.

      And the analogy to how they built the business on Ingram credit is flawed. The point was that they got and sold the book the same day they got the bill from Ingram. In this case, they’re talking about piling up inventory some weeks in advance of urgent need. It’s not the same.

      Mike

  • aleena rose

    The blog and data in this, is very good and informative also.
    http://www.coghlancapital.com