Barely a month goes by now when the Seattle giant does not either outmanoeuvre a competitor or redefine a sector. Last week was a good example where it did both.
At the beginning of the week it bought 450 children's titles—its first ever acquisition of a publishing list: bought in order to provide compelling, and exclusive, content for its tablet device Kindle Fire (to the inevitable cost of Barnes & Noble). At the end of the week it launched KDP Select, a service for 'indie' writers that locks them up in the Kindle-verse with the promise of ill-defined riches—further establishing its lending credibilities, while moving the goalposts for all other self-publishing companies.
Over the past week I've spoken to many people in and around the book business, and no-one has a good word to say about the e-tailer, even though some admit that as a business it is peerless. Amazon doesn't just want to eat our lunch, is the theory, it also wants to cook it and deliver it to us piping hot for a cost that is less than it would be if we did it ourselves.
But now that we have collectively woken up to the fact that we are all starring in what appears to be The Amazon Show, how do we find the EXIT?
Like any business Amazon will face economic cycles, its shareholders will grow unhappy, and inevitably even the regulators will take an interest. Most important, Amazon does not have a secret formula for success: it is simply very good at what it does and incredibly driven to continue doing it better and better. If companies wish to knock Amazon off this inexorable course then they simply have to improve how they go about competing with it. And no, selling the Booker winner at twice the e-book price that Amazon was selling it was not an example of this.
Furthermore, the rest of the book trade is not without a say in this struggle. Publishers can buy other publishers too; they can develop lists more proactively for tablet devices; they can alter their trading terms in order to safe-guard the wider good; they can make sure rival businesses are given all of the tools to let them compete; they can develop resources that allow them to communicate direct to their customers (i.e. book buyers); they could no-longer ignore 'indie' writers and develop services for authors who for whatever reason are not prepared to go the traditional route. As we learned last week at FutureBook many are already doing this, and even those which are not are certainly prepared to give it a go.
Post FutureBook Conference the conversation is now all about what 2012 will bring: my own view is that it will be the year when Amazon will realise that it is not alone in this game. Both Barnes & Noble and Kobo look up for the fight long term, Google will not sit on the side-lines for ever, while FaceBook could yet make a move. In the UK both Waterstone's and Gardners (with its Hive) will need to decide at what level they are happy to engage. They will need to be bold, as will the publishers who will need to support them, otherwise it really will be "good afternoon, good evening, and good night" for too many.
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Comments
Remember the fundamentals
Rule 1 -- Amazon is a seller.
Implication 1 -- It is primarily interested in obtaining money from customers (as much as possible, as often as possible).
Implication 2 - It must sell products, services or experiences to customers to obtain their money
Implication 3 - Amazon must either obtain the products/services/experiences from third parties or produce them itself.
Implication 3 - Amazon is primarily interested in maximizing revenue and/or market share (priorities somewhat specific to Amazon's history), but it is also secondarily interested in maximizing profit. The implication here being that Amazon is also vitally interested in anything on the procurement side which will maximize profits, such as:
(a) reducing costs of products to Amazon (including a variety of MFN pricing policies);
(b) obtaining exclusive rights to distribute products;
(c) eliminating any entities or costs on the production side which drive up prices (publishers, agents, external printers, distributors, etc.); and
(d) paying for the production or acquisition of content to be "owned" by Amazon if it can do so at better prices than simply obtaining product from third party owners for resale.
Implication 4 -- Amazon is in a unique position to accelerate sales of individual products, at its own whim, both within its online markets and on its devices. Placement, placement, placement. They will "optimize" the visibility of their favored products (whether their own, those of favored producers, or those who pay for placement (just dare to guess how much the big publishers have already paid Amazon for product placement - it'll shock you).
I don't know that I can go too much further in discussing Amazon business models, but the obvious final implication is that "competitors" of Amazon must try to meet Amazon competitively on its own level (product variety, pricing, sales price, ease of sale, e-formats, market features (reviews, cross-suggestions, blogs, e-mail/twitter/other advertising bulletins, etc.), delivery, refund policies, etc.). First, this means competitors need to coordinate and network into an effectively sized and scoped network of competitors, and vigorously position the network as the "alternative" to Big Bad Amazon. Second, the competition must keep Amazon on an appropriate level as a competitor. Vertical integration, preferential pricing/business terms, exclusive deals, etc. all need to be challenged and kept within reasonable antitrust boundaries.
Finally, in terms of authors and content producers, the key to managing Amazon's influence is to try as much as possible to approach Amazon in the same way you approach others in their individual roles (i.e., publisher, online marketplace, etc.). As a publisher, hold Amazon to the same terms as you would expect traditional publishers to give you, including the same level of support and benefits a traditional publisher would give. In fact, go further -- sell no more than 5-year licenses, require that the licenses guaranty publication formats and dates, require strong annual sales to prevent OOP status, require that Amazon publish e-books in formats other than just Kindle (or allow you to do so), require that they give you a right to purchase cover art at the end of the license, etc. They will probably not pay you advances, so you need to push them off of the other tie-ups the traditional publishers have enforced (e.g., license for life of copyright (!), no committed publication date, no commitment to all formats, perpetual tie-ups of foreign rights without timely translation/publication). Next, pay attention to Amazon marketing commitments. They only care about the relative margin between the cost of your product and the returns on your product, as well as any advantages they can obtain in excluding others from your product (whether publishers of other formats, translations, foreign markets, or other distribution channels). They don't directly care about the volume of your sales. If they don't see a potential velocity in the sales of your product, they will put nothing behind it. In your publishing agreement, get them to make commitments that protect you -- limited term length, commitment to exploit all formats, commitments to website placement and PR, and, if you have any leverage, minimum royalties per year. Finally, content owners need to turn the pricing preferentials around on Amazon. Insist on a pricing reset every couple of years, whereby Amazon gives you their current prevailing royalty rate for applicable formats (especially e-book, where the royalty rates have changed several times, but still lag behind what Amazon pays "self-publishing" authors within their preferred price band (which makes sense only if you buy in to the value of "benefits" Amazon will give you as being your publisher). Don't get locked into compensation rates that won't be changed for the life of your contract. If they later start paying better, your contract should require that they come back, do an amendment, and pay you better.
In the end, of course, it's a question of leverage. As independent publisher/self-publishing author, your leverage is Amazon's desire to compete with other marketplaces. If they want you to sign an exclusive, make it lucrative, guaranteed, and cancellable. As an author they want to publish, the leverage is that you've been selected as a potentially higher value product and they actually want to own you. Again, make them pay for the right and at the same time don't give them the right forever or unconditionally. Everyone will have different leverage, but the good news to remember is that (a) Amazon is not the only game in town (and very much thinks about reacting to and beating competition in every regard), and (b) Amazon is willing to customize and negotiate deals to various degrees, to get what it wants.
Traditional Publishers Far Nastier than Amazon!
I can't imagine for a moment that Amazon is anywhere NEAR as limiting, restrictive, greedy, obtuse, exclusive, and untouchable as the traditional publishers have been for decades. In fact they've done MORE for authors than any publishing house ever has, by opening up the channels for self publishing. While there might be roadblocks and knots of confusion and dissent, I still think it's a mighty fine challenge to those bastard traditional publishing houses, who are now loading up the prices on their e-book releases and making them undesirable and unaffordable. Pretty sick to death of the traditional route, so while Amazon has some evil under it's newly-spread wings, it doesn't measure up to the lock-down bullshit that the traditional publishers have revelled in for decades.
And in today's online news, it's revealed how trad. publishers are hiking up the e-book pricetag to try and level the playing field. Nasty tactics... http://www.dailymail.co.uk/sciencetech/article-2074946/An-eBook-reader-Christmas-tree-Bad-news--publishers-band-hike-prices-higher-real-books.html
Go Amazon, I say!
Prepare to be amazed...
1. Go to the Vintage website.
2. Try and find the 2011 Booker Prize winning novel.
3. Go to the Julian Barnes pages on the Vintage website.
4. Try and find the 2011 Booker Prize winning novel.
5. Look at the e-book prices for it across the three outlets suggested.
6. Sigh.
This dialogue reminds me of
This dialogue reminds me of that same dialogue about Amazon in the late ninties. People then derided their model and didn't understand positive cash flow and as many accountants saw a goose but did not know how to account for , or understand the golden egg. The egg has been delivered and in doing so amazon looked hard at publishing and understood the weaknesses and opportunities and has been addressing these progressively to the point where their position is difficult to attack. Are they a publisher, agent, retailer, printer, metadata agentcy etc? Are they limited to just physical, or digital, music, films, books, games, software? Amazon has adapted learned and built a USP by addressing the things others didn't see or want to address, then like any market leader they have accelerated the turning of the screw. You may equally look at Walmart and Tesco to see how companies with vision and strategy can create the lead and then exploit it. It is not about being the market leader it is about being a catagory killer.
Publishing is however not doomed and amazon can continue to be good and built the market for all but a few little intiatives isn't going to make a lot of difference and natural attrition is inevitable with change.
Its intresting that with the exception of B&N all the other gorillas mentioned are technology giants not publishing giants. The industry's track record of cosing up top these players is littered with far larger nightmares than Amazon (GBS, Agency etc). The industry actually has the mechanism to compete and has the ability to sieze some of the agenda, but unfortunatley often lacks the leadership drive and consolidation and has parochail not holistic views.
Diversify
I'm a self-published author with 14 titles up on Amazon. Luckily, I also have my books with B&N, Kobo, Apple, and a lot of other retailers in the US and abroad, otherwise I'd be jumping off the Golden Gate Bridge by now.
Putting your eggs in one basket has never been a good thing, but that' exactly what a lot of my author colleagues seem to be doing. Apparently over 90,000 books have already been enrolled in Amazon's Lending Library. Do these people really know what that means? I means that all these books had to be taken down from all the other retailers, producing excactly .... wait for it ... Zero revenue. Why would authors do that to themselves?
The pot from with all these "lending participants" are being paid from is only $500,000 - not nearly enough for anybody to make any real money on this deal, while losing out on revenue they could have gotten from other retailers.
While all these authors watch their dashboard to see how many lending downloads they get, I'm busy reaching out to retailers in the US and abroad, and pushing hard to get my books translated into German, French, and Spanish, so that I can conquer more markets --- not less!
Diversify - you have to if you want to survive.
Tina Folsom, Author, San Francisco
I agree, Philip, and as I've
I agree, Philip, and as I've been caught saying recently, "Hating Amazon is not a strategy". Most cannot afford to compete head-on with Amazon on their terms, so we all must find ways to add value and attract customers (and content) that Amazon can't. Whining (or 'whinging', if you prefer) is not a substitute for hard work and innovation.
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