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One of my first posts on this blog was an assertion that e-books are about benefits not technology. Despite widespread Kindle adoration and mounting anticipation of the UK release of the Sony Reader, I still believe that ultimately consumers will not take up e-reader devices in game-changing numbers. Certainly, I don’t think device sales will be large enough to deliver an “iPod moment” to e-books. Why? Because e-readers offer limited benefits. Despite their many nifty features, they are ultimately only single function devices. They allow consumers to read books.

On the other hand, as of sometime in May this year, half the world’s population owns a mobile phone. The ongoing spread of 3G handsets and the versions that will come after them offer multi-function devices and hence multiple benefits.

The single versus multi-function debate has been discussed this week through coverage of Nancy Herther’s article in Searcher magazine, The Ebook Reader is Not the Future of Ebooks, at DearAuthor and Teleread among other places. From most reports, the Kindle is a joy to use but despite Amazon’s dominant online retail position I think it will struggle to lock in Kindle customers to Amazon content. And here in Australia I’m still unable to purchase one or buy Kindle books online and all the while the iPhone is increasing market penetration daily. I’m an ebook enthusiastand even I will need convincing that it’s worth my money (and the DRM headaches) to channel my book-buying budget into a Kindle instead of flexible apps and files I can use anywhere with a 3G phone.

An article over at SNL Interactive explores the delicate business of dealing with Amazon. Sarah Barry interviews Michael Cairns of PersonaNonData and Mike Shatzkin of The Idea Logical Company about the ways publishers have responded to the growing market power of Amazon, and the online retailer’s willingness to use it.

Despite the strained relationship between Amazon and the publishing community, neither Cairns nor Shatzkin believe publishers will decide to stop dealing with Amazon altogether.

“I wouldn’t say it’s a love-hate relationship; it’s more of need and fear relationship,” Shatzkin said. “They need Amazon because it’s probably every publisher’s first or second largest client. But they fear Amazon because it’s every publisher’s first or second biggest client.”

Link [Thanks Jose, via Read 2.0!]

Amazon has been flexing its muscles in both good and bad ways in recent weeks. A few publishers, namely Hachette Livre, have been making a show of defiance in the face of Amazon’s demands for a bigger discount from publishers. Bookseller.com reported the ongoing dispute had prompted Amazon to remove the “Buy Now” button from several titles by big-name authors, including Stephen King and James Patterson.

Hachette, quite reasonably I think, points out that Amazon already gets a very generous discount, up to 60%. That’s a huge step up from what bricks and mortar booksellers command. Publishers work on pretty slim margins for books, it’s one of the reasons why they have to publish so many titles to make the general trade publishing business model work. Any additional price discount to Amazon gouges the profitability of what, for many titles, is already a marginal proposition.

The industry is watching closely. Authors may well be worried if their titles are not on sale during the dispute. They’ll be even more unhappy when it comes time to negotiate their next contract, however, if publishers offer less because they can’t make the P&L stack up.

But here’s why everyone’s so nervous about it, and why it’s so important to find a solution to “the problem of Amazon”. Wall Street Journal reports that Amazon turned a literary novel by a first-time author into a 90,000 sales sensation. In one week.

The Web retailer chose the book as one of the best books of June and aggressively hyped it, including by posting a long and enthusiastic blurb from best-selling author Stephen King. The same blurb was printed inside “early reader” copies sent to reviewers, bloggers and booksellers.

Amazon also kept “Edgar Sawtelle” on its home page for two weeks at a 40% discount before the book hit stores, and posted an essay written by the author at Amazon’s request. “We also had a preorder banner in May, which is something we do for books that we think will have significant interest for our customers,” says Tammy Hovey, an Amazon spokeswoman.

The advance word — by a site thought to account for 15% of U.S. book sales — had significant impact. Ecco initially printed 26,000 copies but went back to press three times before the book hit stores, adding another 12,000 copies.

With this kind of power over a book’s impact in the marketplace, it’s no wonder everyone gets nervous when Amazon withholds its “Buy Now” button. It’s why Hachette’s insistence on standing up to a company that is increasingly behaving like a marketplace bully is so admirable.

Sorry for my absence for the blogosphere lately, chickadees, I experienced a few health hiccups but am now back at the keyboard.

And while I was away those sneaky folk over at Amazon did a 180 on me. Here I was thinking how helpful and forward-thinking their services were for small presses and self-publishers. It turns out monopolistic and aggressive might have been better descriptors.

As first reported over at Writers Weekly Amazon are now insisting that Print on Demand (POD) books be printed by Booksurge (an Amazon-owned company) or they will not be offered for sale on Amazon’s website. POD publishers and small presses who are printing with other companies, Lightning Source for example, will have to shift their lists to Booksurge or have the “Buy” button taken off their amazon listings. According to Writers Weekly, Amazon representatives have admitted that eventually their desire is to carry only Booksurge printed POD titles.

Though egregious, I agree with Booksquare that this is hardly surprising. Vertical integration is a tried-and-tested method of increasing efficiency and hence profitability within industries, and for a mature company like Amazon this is a strategy that makes sense.

What I’m interested to see next is how publishers respond and whether they’ll be able to leverage any collective power to win changes. While this appears like agressive even bullying market behaviour on Amazon’s part, it seems unlikely that it is in breach of antitrust laws or competition legislation.

One of the biggest problems for small presses and self-publishers is distribution. Most small publishers in Australia cannot attract a distributor because their print runs are too small. Yet the economics of a higher print run in Australia don’t really work, the market size doesn’t warrant, for example, a print run of 1500 copies for a poetry collection or short story anthology. So small publishers do the hard slog of selling the book themselves, usually direct to market through their website, personal networks, literary events or through relationships with independent booksellers wherever they can.

This means two things: firstly, small publishers (or in this post I really mean micro publishers) must handle the physical process of distribution themselves, keeping boxes of books in their garage, handling invoicing, returns, etc. Secondly, they are usually restricted to a local market geographically (sometimes even within one state let alone one country) because they don’t have the resources to develop distributor relationships with retailers further afield and because customers start to pay prohibitive amounts for shipping.

What if these two things could be magically solved by a fulfillment service? Enter Amazon Fulfillment Web Service (Amazon FWS).

Amazon Web Services

As ReadWriteWeb reports:

FWS offers two APIs (application programming interfaces) – one inbound and one outbound. That means developers can now progromatically send physical goods to an Amazon warehouse (fulfillment center) and then have Amazon do the shipping of those goods out to customers when items are purchased through 3rd party sites. Amazon has offered other businesses access to its fulfillment infrastructure for some time through the Fulfillment by Amazon service, but today’s announcement means that the whole process will be automated. It’s a webservices world!

This could be an amazing opportunity for some publishers to expand their geographic markets and streamline their businesses. For example, a small Australian publisher could more cost-effectively offer books for sale to US and UK customers without those customers having to pay international shipping, and without the publisher having to handle the physical goods.

It’s not without its challenges. Firstly, a publisher may need to make a substantial investment to get a programmer to set up the web interface between their site and Amazon’s Fulfillment Service. And while the web APIs might be free, Amazon do charge for the physical storage of goods and shipping costs. But I would think this need not be any more expensive than a publisher would pay in percentage margin to a book distributor to perform exactly the same functions, and could well be a lot less.

Since small presses and self-publishers are usually working unpaid, they are limited in the time and energy they can devote to all the functions of publishing books. If they could alleviate even a portion of that workload through something like Amazon FWS they’d have more time and energy for marketing and promotion, lifting their overall productivity and, ultimately, book sales.

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