“We’re in Amazon’s Sights and They’re Going to Kill Us”

[GlenBarrington]

Originally Posted by darryl

I understand and sympathise. I hope there will always be a place for written books, but there is no doubt that in the longer term they are an endangered species.

I don't think they are endangered, paper books are a great portable, low tech way to read, there will always be a market for them. I still prefer paper magazines and newspapers over their e-versions.

What is in danger is browsing in brick and mortar stores.

[fjtorres]

Originally Posted by GlenBarrington

What is in danger is browsing in brick and mortar stores.

Correct.
More precisely: what is in danger is the idea of 26,000 square foot regional bookstores that expect buyers to travel significant distances to go browse the racks and see if anything appeals to them. A "stock it and they will come" retail model that expect consumers to do all the work.

It didn't use to be that way: in the 90's, before Borders came to my area, there were 10 bookstores within a 15 minute drive; Walden, B. Dalton, Brentanos, and several independents. Ten years later it was down to two Waldenbooks, two Borders, and one B&N within a 30 minute drive. Now it's down to one B&N and one WaldenBooks, both of which are reducing book shelfspace.

Throughout it all, the Big Publishers have done *nothing* to support local B&M retail. If anything, their reliance on volume discounts has aggravated matters by shifting a large portion of the higher-volume book sales (the NYT "bestsellers") to dept stores and supermarkets.

And now they whine about the world they created and encouraged?
Feh!
No, it won't be murder when they're gone; it'll be assisted suicide.

[Kali Yuga]

I'm with Andrew H. on this one.

There isn't much the publishers could have done in 2005 or 2006 to make them more competitive against one of the industry's own retailers.

They didn't have the option of abandoning the print business at a time when 99.9% of their revenues are from print.

They don't have the option to favor brick & mortar retailers over online retailers, both in terms of getting product out and not acting anti-competitively.

They can't change the basic dynamics of the industry, e.g. the largest physical bookstores can only carry around 150,000 titles while online can carry millions. (And an ebook store that could only carry 150,000 titles would already be considered a joke.)

They can't alter the fact that they are competing against new forms of entertainment, notably the Internet and video games.

Publishers can't get together and agree to cap advances at a certain amount, since that kind of collaboration is illegal. (And probably wouldn't work anyway, someone would break the agreement.)

The big publishers have spent a lot of time trying to develop mid-list talent, only to find that it's not working.

Most importantly, it's extremely difficult for multiple established companies to swing away from their entire business, and take huge losses while transitioning to a completely unknown new business. It's much easier for Amazon, which has a diverse business and is a single entity. Even then it's not easy, and they're mostly able to do so because management pushes very hard to innovate, and isn't afraid to take some losses to achieve a long-term goal -- something that few people, let alone CEO's, are willing to do.

[fjtorres]

Originally Posted by Kali Yuga

It's much easier for Amazon, which has a diverse business and is a single entity. Even then it's not easy, and they're mostly able to do so because management pushes very hard to innovate, and isn't afraid to take some losses to achieve a long-term goal -- something that few people, let alone CEO's, are willing to do.

Actually, there's hundreds if not thousands of businesses built around that exact model right now. Most are small, privately-owned, and supported by venture capital. That is the *baseline* operational model in the tech industries. In Silicon valley, in Seattle, and elsewhere.

It's how Google works and it's how Tesla works.
It's how all thriving companies work; you nurture today's cash cow and invest in tomorrow's.
It's how big companies nurture new lines of business; how Microsoft built XBOX, Apple the iOS boxes, McDonalds their coffee business. You see it in the restaurant business, candy business, clothing business and even frozen foods.
The only companies that don't do that these days are the old, fading ones.
'Cause that is how they get to be old fading and companies: by doing what they always did, by focusing on the past instead of the future.

[fjtorres]

I'm somewhat bemused, frankly, by all the angst over Amazon's tiny, nearly irrelevant catalog of books. It makes me think there is something fundamental at play that *truly* terrifies the Big Publishers.

I'm starting to think the publishers are finally realizing that, in the wake of the ebook evolution, book publishing (both p- and e-) is becoming a service industry.

The big publishers have been riding the high horse for so long they've forgotten what business they're in. The world has changed around them--has been changing for 15 years now, thirty even--and they are only now starting to contemplate the idea that *they* need to change. That their whole worldview needs to turn 180 degrees around.

In all their years as gatekeepers the traditional publishers got so used to calling all the shots they lost sight of the fact that they are just middlemen. Just like the agents. Just like the retailers. They are just service providers. They don't actually *own* the product or the market.

In the old worldview, publishers sat atop the mountain and agents came in, offering up the work of the authors and the publishers chose what to buy and what to turn back. Nothing saw print that they didn't endorse, nobody read anything "of quality" without paying them. They stood atop the gate between consumer and producer and life was good.

Now, they wake up and life ain't so good. They're just *one* source of content.
It's not bad enough TV and Movies are competing for consumer dollars, now they have to compete against other sources of books. Small publishers. (Lots of small publishers and more popping up daily.) Authors selling direct. Agents fronting for the authors. Self-publishing facilitators and aggregators.
All selling their *services* to the authors.
Suddenly, life isn't quite as good.
Somebody has to be out to get them.

They look around and everywhere they look, they see Amazon.
Big time print book retailer.
Big time ebook retailer.
Big time ebook reader vendor.
Self-publishing facilitator.
Worse, they are helping the small publishers reach bigger audiences. Pretty soon, those small publishers might not be so small...

And then, to add insult to injury, Amazon steps up as a publishing house--for printbooks--on their own. Never mind that Barnes and Noble has been doing the same thing for decades (after all, they've been doing the same thing for decades and life was still good), it is time to panic: Amazon is out to kill them!!

A bit of over-reaction, perhaps?
Probably. But...
Has anybody bothered to pay attention to what the authors signing with Amazon Publishing say? How Amazon listens to them? Gives them control over the final product? How Amazon treats them as partners, as a paying customer, not a suplicant?

Because *that* is exactly what Amazon is doing; they are *selling* publishing services to authors.

They aren't "buying" manuscripts, as the old terminology goes. They are selling *their* capabilities for a fee. They *endorse* books but they don't pretend to own them. They even subcontract with somebody else to put their name on them.

Again: in the wake of the mainstreaming of ebooks and the end of gatekeeping, publishing is now just another service industry. Amazon understand that authors are indispensable, readers are indispensable, but publishers are just go-betweens unless they can add value to the retail product.

A savvy modern-day author can hire an editor, hire a cover designer/artist, got to Amazon or Smashwords or PubIt or whatever and self-publish. And not just nobodies; these are things a newcomer may *have* to do if they don't have an agent. But established authors? They have options. They can Konrath-it. They can Pottermore-it. (Oh, and make no mistake: there is no bigger threat to Traditional Publishers than Pottermore. Cause, if Pottermore works, KING-DOM is not far behind, or Grisham Court, or Roberts-land...)

Established and/or high profile authors have options the unknowns don't have. In the ebook age, *they* have the power. They don't *have* to sell their manuscript at 17 cents on the dollar; they can *hire* a publisher at 30% commission. They can hire Amazon. (And if Amazon succeeds, there will be nothing stopping other ebook publishers from following their example. Like Open Road and Rosetta and Smashwords... Plenty of excess print capacity lying around.)

Amazon is perfectly willing to be a middleman and provide those services to the authors and *act* like one. Their services include financing (hence the advances), editing, proofing, formatting, design... all the things a traditional publisher does, but instead of treating them as a cost-center, they are making those services the profit center. The very thing big publishers are cutting back on are the things that Amazon is looking to make money from. Just like the big boys.

Only, unlike the big boys, they don't pretend they own the content; they're just the hired help. And they work cheap, too. (Who doesn't like a contractor that is solid, quiet, and cheap?)

I'm thinking that is why Amazon's tiny little catalog of 50 second-tier books terrifies the Big Publishers. It's not that Amazon wants to control the business; that is baloney; they'll never build up enough of a catalog to do that. Nobody can and they well know it. It's not that their tiny catalog is going to spawn the great bestsellers of the future, either. (Some of their books the Big Guys already passed on.)
They might get lucky, though.
And getting lucky once is all they need.

Their fear is that Amazon's success will make them look bad.
That in a time of declining peak sales for individual titles, their lower commissions (30% vs 53%) and service-oriented approach will win them customers from among the Big Publishers cash-cows. That the authors will demand equal treatment or they'll take their books elsewhere.

I still don't think Amazon is going to kill the big publishers.
But they're forcing them to change and some of them might prefer to die first.

Just a thought, mind you.

[robko]

Well said fjtorres! A well thought out and written post.

[DiapDealer]

Originally Posted by fjtorres

In all their years as gatekeepers the traditional publishers got so used to calling all the shots they lost sight of the fact that they are just middlemen. Just like the agents. Just like the retailers. They are just service providers. They don't actually *own* the product or the market.

Hear, hear!

[Krystl]

very well said, fjtorres. hit the nail so very eloquently on the head.

[sbroome]

Lol amazon's entire ability to undercut everyone else's prices is based on them being a middle man for thousands of other products.. so..

[fjtorres]

Originally Posted by sbroome

Lol amazon's entire ability to undercut everyone else's prices is based on them being a middle man for thousands of other products.. so..

If Amazon undercut's *everybody's* prices because they make their money elsewhere, which elsewhere are their *slim* profits coming from?

Could it be simply that their *costs* are lower because they are a lean organization?
Or the fact that other people pay for their servers and IT facilities...
Or the fact that their fulfillment warehouses are heavily automated and roboticized...
Or the fact that the salaries they pay are on the low side...
Or the fact that the would sooner buy a company for its tech than license somebody else's, or for its market share than fight to the death with them...
Or because they are willing to bend backwards on customer service, thereby generating some pretty fierce customer loyalty?

Amazon is a highly competitive company built to compete. They're not the first nor the only one out there. There is nothing magical or insidious about them. They can be matched and they can be beaten. (Here: http://www.msnbc.msn.com/id/39633906...y-its-diapers/)
But not by whining.

[sbroome]

Originally Posted by fjtorres

If Amazon undercut's *everybody's* prices because they make their money elsewhere, which elsewhere are their *slim* profits coming from?

Could it be simply that their *costs* are lower because they are a lean organization?
Or the fact that other people pay for their servers and IT facilities...
Or the fact that their fulfillment warehouses are heavily automated and roboticized...
Or the fact that the salaries they pay are on the low side...
Or the fact that the would sooner buy a company for its tech than license somebody else's, or for its market share than fight to the death with them...
Or because they are willing to bend backwards on customer service, thereby generating some pretty fierce customer loyalty?

Amazon is a highly competitive company built to compete. They're not the first nor the only one out there. There is nothing magical or insidious about them. They can be matched and they can be beaten. (Here: http://www.msnbc.msn.com/id/39633906...y-its-diapers/)
But not by whining.

Cool. What you actually said though was that they were different from other middle men that they were competing with in the publishing industry. The reality is that their publishing model is designed to make less money because they're making it elsewhere.. as middle men. They're a retailer. If your interest is to support low-paying, automated, big box style outlets for your books, that's your prerogative.

[davidwfleming]

I agree with earlier posts that Amazon is trying to force other competitors out of the market. And yet (as has been said) it's near impossible to control the entire internet.

Already, I see the popularity of KDP select freebies waning amoung Kindle users. Smashwords and it's plethora of distribution partners will continue to gain marketshare and footing. The ebook marketplace will gain diversity if for no other reason than people have loyalties to their favorite ereaders, tablets and other hardware devices.

The possibilities for traditional publishers to "get-in-the-game" and contribute to modern culture are palpable. The ebook market is sorely missing their guidance and refinement.

[JAcheson]

Meanwhile, Baen continues to thrive, having embraced ebooks long ago.

One other thing: you used to hear about editors at publishing houses working with their writers, helping them improve their work, and providing meaningful feedback. But nowadays that seems to be a lost art. It just doesn't happen any more. And that's one more strike against using a publisher: the middleman provides no service.

[sbroome]

Originally Posted by JAcheson

Meanwhile, Baen continues to thrive, having embraced ebooks long ago.

One other thing: you used to hear about editors at publishing houses working with their writers, helping them improve their work, and providing meaningful feedback. But nowadays that seems to be a lost art. It just doesn't happen any more. And that's one more strike against using a publisher: the middleman provides no service.

I assume you've considered that they don't have the money for that, the same way music labels don't have money for artist development anymore which is why music is so awful?

[SnarkHunter]

The whole situation with ebooks is bizarre given that the big publishing houses have surely enough examples of the outcome of a "head-in-the-sand" attitude from the music industry! I applaud Amazon's success in making e-reading more widespread and mainstream but deplore their efforts to monopolize through their use of a closed, propriatory format. Three thought occur:

1. As has been mentioned, the big publishers' back catalogues are a potential goldmine. Many of these books will never be physically re-published but the minimal costs of e-publishing should make re-prints possible at a reasonable price and, hopefully, without neurotic DRM being needed (this is, afterall, extra income from books that the publishes will never make anything from otherwise).

2. The industry needs to find a DRM model and system that works - one that mimics how people use books (such as lending them to friends and family, borrowing them from a library and maybe even passing them on permanently) and that doesn't lock users out of a book just because they connect their reader to a different PC!

3. Price and quality: Lets see a price that recognises the savings from not needing to print, store and transport physical books and lets have better quality control on ebooks - there is no excuse for typos or poor formatting, especially at the moment when the price being asked can equal that of a hard-backed book!

Just my tuppence-worth