Quote:
Originally Posted by charlesatan
Operational costs. Amazon can afford not to make a profit selling eBooks (i.e. forgoing its entire 30% share (assuming they actually do this... they've done so in the past but there's no guarantee they'll do so now). Barnes & Noble can't. (They're not losing money but it's hard to sustain a business when you're not gaining any revenue.)
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Backtracking a bit: B&N is claiming they need protection because they are incapable of openly and fully competing with Amazon. I have my doubts about that, I think they're just lazy and don't want to work hard for their money.
Now, as repeatedly pointed out, Amazon does not in fact lose money selling ebooks so it is hypothethical rather than actual to suggest it as a reason for B&N's claimed inability to compete. More, that specific innabily presupposes that B&N *has* to price match Amazon across the board. There is no law that says they *have* to match every single last price on the Amazon catalog, though. Or any of them. Since Amazon's product line (Kindle-format ebooks) is not plug-compatible with Nook readers, one can argue that the two markets are distinct enough that B&N does not necessarily *have* to match Amazon prices across the board. That lock-in effect that Amazon detracts bring up every once in a while? B&N has its own lock-in; their customers have to jump through hoops to buy from Amazon and most don't. Having sold consumers on the glory that is epub or the their glowy nooks or their extensive line of Nook-exclusive books, B&N can afford not to price match every last Amazon title. They just *choose* to do so. (Monkey see, monkey do?)
So their complaint starts out with a self-imposed condition: they *choose* to match all prices even when they dont have to and when doing so results in losses. Oh-kaaay...
Now, you *do* have a valid point in that B&N operational costs *are* higher than Amazon. In several ways: debt servicing, revenue-sharing with partners, etc.
Even if their NewCo were book-kept free of their B&M overhead and their Nook business were every bit as efficient as Amazon's in getting ebooks to customers, Nook has one added cost Amazon doesn't: ADOBE DRM costs. But that is another self-inflicted wound: surely it isn't Amazon's fault that B&N knowingly adopted a DRM scheme that increases their operational costs. Especially since B&N already *owned* a perfectly serviceable DRM server system in Fictiowise and their DRM servers. Purely as a WAG, I'm going to posit this was a case of the marketters ("We can use library ebook compatibility to claim we're better than Kindle!") winning out over the beancounters ("It increases our costs, reduces our margins, and reduces our attach rate--people reading library books aren't generating revenue for us!").
Whatever their reasoning, if their operating costs are higher, that is hardly Amazon's fault. If anything, I see it as further proof that the whole "Amazon is unfair" debate is based on treating operational costs as cast-in-concrete and fixed rather than variable, something a well-run company is constantly looking for ways to reduce. Their costs are higher and are going to stay higher until they *actively* find ways to bring them down; if not by getting rid of the ADOBE tax (unlikely by now) then by finding offsetting savings or revenues elsewhere, by being better than Amazon at *something*. Which is something the Nook hardware guys seem to get but not their ebook-peddling kin down the metaphorical hall.
So we have a company *choosing* to compete on price, when they don't have to, even after *choosing* a production process that has higher inherent costs?
B&N's whine is essentially saying they are incapable of competing on merit in a business they *chose* to get into and that consumers and authors should be penalized to protect B&N the consequences of their own actions.
That sounds a lot like another bailout plea like the ones we've heard so much of late.
So, is B&N "too big to fail"?
Do we bail them out?
Me, I think the real issue hidden behind the whining is that B&N got used to being top dog, after stomping half the indies in the land out of business, and they can't even conceive of a world where they are at best a distant second. So instead of looking for ways to be profitable and prosperous as number two, they pout, they whine and gripe, and keep looking for magic bullets to slay Amazon.
I think they ought to stop whining and find a way to compete on something other than across the board price-matching. The way Target competes against Walmart without getting into a race to the bottom. In fact, Target forced Walmart to try to match *them* by being better in crucially profitable areas. Because that is what competitors do; they find ways to do what the other guy isn't doing or can't do.
In other words: B&N grow up!
(Kids these days...)