Fast Company's Bezos/Amazon Cover Story
The latest issue (July/August) issue of Fast Company magazine features an excellent cover article about Amazon and Jeff Bezos. As I read through it I highlighted a few excerpts and made a number of notes:
Recently, Bezos claimed that Kindle e-books add 35% to a physical book's sales on Amazon whenever Kindle editions are available. Put another way, for every three print copies of, say, Malcolm Gladwell's "The Outliers" the site sells, it also sells one Kindle e-book -- or about 25% of total sales.
This felt like an overstatement to me...till I sat down and checked the numbers. It's true, at least for the top several titles I looked at from our O'Reilly list. Quite a few of the books I looked at had Kindle sales that represented anywhere from 20-30% of the total Amazon sales. The key point: If you're a publisher, you need to get your content into this platform. Authors, if your publishers don't already have your content available on the Kindle, when will they? As much as I hate the Kindle's closed nature there's no arguing with the results. Of course, publishers are also free to sell Kindle content direct to consumers, just like we do at O'Reilly.
Jeff Bezos is trying to do to book publishers what Steve Jobs of Apple did to the music industry. With its iPod and iTunes Store, Apple carved out a largely virgin market so fast that it was able to wrest control of the digital-music distribution system and thus dictate what the record labels could do.
I've occasionally been concerned about this but I'm not sure there's much to fear after all. I'm seeing more and more e-storefronts popping up every week and even though the Kindle is pretty popular it hasn't been the runaway success the original iPod was. Even the iPhone itself is a worthy competitor to the Kindle. Ironically enough, I think it's when Amazon fully opens the Kindle platform that we'll have to worry the most about this. That will probably have to happen at some point, but Amazon doesn't seem to be in any hurry, so relax...for now.
Should that happen, book publishers would have more to fear than just being squeezed. Amazon could phase them out completely, treating them as the ultimate middlemen orphaned by a new technology.
Forget about Amazon. Any publisher that isn't already worried about this in general is asleep at the wheel. With all the great self-publishing services out there and the ever-growing importance of social media and author platform it's crucial for all publishers to determine the value they add to the ecosystem.
In some ways, book publishing operates like one of Joseph Stalin's five-year plans.
This statement made me laugh out loud. Literally. It's painful to admit but true that some publishers still try to lay out 3- and 5-year financial plans. This, in an industry where most have had a hard time coming close to their latest annual and even quarterly forecasts. Ugh.
Here's a doomsday scenario put forth by Richard Curtis, a literary agent and founder of E-Reads, an independent e-book publisher...
The rest of this excerpt would be pretty long, so let me summarize by saying that Mr. Curtis is concerned about Amazon using their BookSurge service to print all the copies they'll sell. Is that really scary? We're talking about a more efficient model! If the unit cost (after factoring in the transportation savings) is less than an offset printing of those copies, why wouldn't the publisher want to do it this way? If anything, it's a wake up call to the brick-and-mortar stores out there to figure out what value they add to the model. Instant gratification. Check. How about beating Amazon at their own game though and offering print-on-demand of an infinitely long title list at the individual store level?
You might think that because publishers profit from this arrangement -- they don't have to pay for paper, ink, manufacturing, warehousing, and transportation or suffer debilitating returns -- they would be pleased. They aren't. Amazon is creating a sticky price in consumers' minds and redefining the cost of a "book" just as Apple did with music.
I disagree. Speaking as a publisher I'm thrilled that Amazon is experimenting with pricing, particularly since it's on their dime. I just hope they share the results with publishers so we can all learn together. The Kindle has been out for more than 18 months though and I haven't seen any analysis from Amazon on this front yet.
Let's also not forget that a simple port of a print book to an e-format, which is pretty much all that's happening right now, is likely to have a lower value than the next generation e-books that truly leverage the platform. That's when things get interesting and let's face it, that pricing model is completely unknown.
The cell phone is an excellent example of what I'm talking about. Remember way back in the days when cell service was all about voice service and the number of monthly minutes? The phones couldn't do anything else so the providers had to compete on monthly rates. There was a time when you'd go from one provider to the next, just to get a better monthly plan. Now it's all about who carries what phone and what additional services they offer. Have you noticed how the monthly rates just keep going up, mostly because we're all adding more services to our plans? Look at your iPhone 3G S today, compare it to your brick-of-a-phone from 15 years ago then look at your Kindle and think about the possibilities down the road...
There is more substantial evidence that Apple may be planning a move into e-books.
That's good news for everyone, except possibly Amazon. Competition is a good thing though, so I hope Apple does introduce a product in this space. I'll buy one.
Unfortunately for Bezos, not only is Apple far more skilled at designing beautiful products people are eager to buy, but it may also be a more desirable partner for publishers than is Amazon. While Apple drives a hard bargain and might be eager to grind publishers into pulp on price, unlike Amazon, it has little desire -- or history -- of attempting to usurp the publishers' role or to control content.
An elegant device and a financial model that would be no less appealing than Amazon's existing one? Sign me up! Again, competition is a beautiful thing.
As for book publishers, they benefit from a fragmented market with no single entity controlling the distribution pipeline. The more that Amazon and Apple duke it out, the better for them.
Exactly! And you can replace "publishers" with "authors" in that first sentence and it's just as accurate.
Looking long-term, as readers migrate to digital books, there is a real possibility the basic form of the book will change.
It's not a "real possibility." It's a certainty and it's also why I'm so excited to be part of this industry.