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Is Amazon the Sauron of Publishing?

13 October 2011

Passive Guy got way behind the blogging curve today, but he’ll make it up to you.

From Michael A. Stackpole:

Amazon’s announcement of their new Science Fiction and Fantasy imprint,47North, has got me looking toward the publishing future. There are certainly plenty of folks, most in traditional publishing and book retailing, who would agree that Amazon is Sauron, and that the Kindle is the One Ring, and that their goal is to completely vertically integrate publishing into a monopoly that squeezes everyone but authors and Amazon out of the picture. The fact that they’ve gone from being a retailer to a publisher with seven imprints (including the New York imprint—how’s that for jabbing traditional publishers in the ribs?), would certainly seem to justify fears expressed by traditional publishers and every other retailer in the world.

Choosing to open a science fiction and fantasy imprint is significant, especially when one notes the line in the press release that says, “47North will publish original and previously published works, as well as out-of-print books.” [Emphasis mine.] Speculative fiction has a good reputation as being a genre with a solid long-tail: backlist sales, when the books are available, remain strong.

. . . .

More importantly, the “previously published” aspect of that comment is a key to Amazon’s future. They have access to daily statistics and analysis that tells them which authors are trending or about to trend. Even before the authors themselves can translate daily sales figures into a projected future, Amazon will know which authors are going to be a good investment for 47North. They’ll get to cherry pick talent and promote their “discoveries.” Amazon also has the ability to promote digital sales of books and later on produce a print compilation of digital novels, offering a unique print product. This is actually stated as a plan in their press release.

Amazon will use its demographic data to pick winners out of a vast field of authors. This lack of demographic data has always been a weakness with traditional publishers. Traditional publishers have always been in the position of fighting the last war. The surprise popularity of The Girl With The Dragon Tattoo prompted publishers to search for bestselling crime novels that needed translation—a strategy which has failed to produce another It-Girl success. Amazon’s willingness to promote authors—doubling down on an investment which they realize, by having data and analyzing it, is about to crest, simply makes good business sense. When was the last time traditional publishing ever threw promotional money at a title to lift its sales and boost its trend?

Publishers really can’t ignore that this is a shot across their bows—though I imagine they will. Just the fact that Amazon pays on a monthly basis makes authors look on them favorably. Their willingness to promote is another plus. The fact that they’re willing to let authors publish what they want when they want, regardless of whether or not a committee thinks it will be a blockbuster, is a third factor in their favor. True, in this latter case, publishers make a capital investment in books, so need to be sure that there is a reasonable expectation of a return on that investment, but by lowering overhead and by using electronic publishing as a farm system to develop writers, traditional publishers could successfully lock up talent, gather data for analysis, and guarantee that Amazon will have to deal with them if Amazon wants access to the properties they own.

. . . .

For authors, Amazon (and electronic publishing), looks very good. We earn 70% of a retail price we set, and we get the money in sixty days. Amazon spends a lot of money convincing people to buy empty boxes and allows me to supply the stuff they’ll put in those boxes. While some might fear that Amazon—once it establishes its monopoly—will cut the pay rate or otherwise upset the apple-cart, I believe that worry is premature. Amazon’s plan for complete vertical integration requires the compliance of authors. They need what we supply. When Amazon approaches that monopoly position, we know that there will be enough money involved in the business that investors—perhaps even the entertainment conglomerates who own the traditional publishers—will be willing to fund one or more rivals to Amazon’s sales platform and delivery system. The fact that the new Kindles are based on Android means hackers will root them and be happy to supply links to other retail sites. Moreover, users of said devices will become more sophisticated and comfortable in finding those alternate retail sites. But even if Amazon were foolish enough to contemplate pulling a Walmart and demanding that suppliers take less, my guess is that we’d not face that situation for another three years anyway.

. . . .

For writers right now, the course to success is rather simple: create inventory. Bring backlist work into inventory. Write new work. Spread your work around to give readers a greater chance of discovering you. Worrying about price points and why you’re not selling like Amanda Hocking is wasted energy. If electronic publishing is a tide which will raise all boats, the point is not to have the biggest boat. The point is to have as many boats as you can on the water. You want to have a fleet or two because that’s how you maximize the benefit of the rising tide.

Link to the rest at Stormwolf.com

Passive Guy says that a business doesn’t have to promise to be an author’s BFF to be very useful for an author’s career.

Certainly, it’s possible that Amazon could change its attitude toward authors in the future and decide to increase its profits by taking a chunk out of authors’ royalties, but low prices seem be in Amazon’s DNA and indie authors are the perfect partners in that strategy.

Amazon’s incremental costs to add another ebook to its store are minuscule. The ebook is perhaps the optimal product for Amazon to sell.

Electronics, computers and video hardware are big-selling categories for Amazon, but Amazon has to acquire a bunch of boxes full of stuff, warehouse them and ship them to be in that business. Amazon spends significant money upfront before it makes any money on these items. If Amazon buys 10,000 gizmos that don’t sell, they lose significant money.

For ebooks, all Amazon has to do is keep its computers plugged in and mail out checks. PG would bet that Amazon’s return on invested capital for ebooks is huge.

Amazon never has to pay indie authors upfront with its own money. Royalty payments don’t carry any sort of risk. Amazon collects the customer’s money, then forwards the biggest part of it to the author, gives a penny to the electric company and another penny to the piggybank it uses to buy new cheap computers, pays Mastercard something and spreads other bits here and there, but none of it is money Amazon has to generate. Amazon’s biggest costs – royalty payments and Mastercard fees – are not payable until after Amazon has collected the money to pay them.

One other point, perhaps the most important one: Indie publishing has changed authors from helpless little children who cry and wait for their agent or publisher to come and wipe their noses into savvy and intelligent entrepreneurs, people who know how to do things for themselves. Indie authors can write their own books, prepare their own books for publishing, find lots of different places online to sell their books and promote their own books through their own efforts.

If Jeff Bezos wakes up one morning and decides to become a Dark Lord, indie authors will take their books and sell them someplace else. Once Amazon shows how to make money with ebooks, it is not difficult for Amazon competitors to replicate an online bookstore. It is very difficult to compete with an Amazon that is acting smart, but Amazon is a serious and difficult competitor only so long as it continues to be smart.

If Amazon chugs a big glass of stupid, it will immediately be much easier for competitors to beat Amazon in the marketplace. Indie authors will be some of the first people to send Amazon down the drain if it turns into Sauron.

UPDATE: After PG put up the post, he thought about Netflix as the perfect example of a company that did a lot of smart things, then made a big mistake with the “We’re going to make many of our customers deal with both Netflix and something called Quickster to keep getting what they really want.”

Netflix was immediately and severely punished for its mistake and has since reversed course in a big way. PG won’t predict the long-term future of Netflix, but he will bet a nickle that Hulu and other Netflix competitors quickly received a lot of new customers while Netflix was on its stupid-chugging binge.

Amazon, Big Publishing, Self-Publishing

12 Comments to “Is Amazon the Sauron of Publishing?”

  1. Agree wholeheartedly with your analysis. Amazon might have the ABILITY to become a ruthless oppressive monopoly, but they are smart enough to recognize that when they do people stop seeing them as the best of all options. And when people stop seeing them that way, people stop using them, and Amazon stops making as much money. The bottom line is, Amazon is in this business to make money. Yes. That’s exactly why I don’t think they WILL do that kind of switcheroo once they’ve killed the competition (if they ever succeed in becoming the one and only book source, which I don’t think they will, anyway). They’re a savvy company, and a web-based company. They know competition is like zombies. Or the hydra. They just get back up and come at you again and again.

  2. One can’t blame Amazon for utilizing the technology they developed to become the world’s largest online marketplace. As an author, I have mixed feelings about Amazon. I don’t think they are evil, but I don’t like the centralization of the book buying experience under the all seeing eye of Amazon.com

  3. I like what Amazon is doing now, but I worry about them becoming so big their big foot squashes everyone near them. Thanks … for the hope that they might self-correct.

  4. Passive Guy says that a business doesn’t have to promise to be an author’s BFF to be very useful for an author’s career.

    Amen. And, conversely, a business that is very useful for an author’s career shouldn’t be confused with a BFF — unless, y’know, you actually know the people who work there.

    See… Agents used to be an author’s BFF. Publishers used to be an author’s BFF. Both groups evolved to become… well, a lot more varied in BFFiness, shall we say, with some providing value to their authors and some… not. But the ingrained “Publishers/Agents are my BFF!” mindset works against authors, keeping them from striking out on their own when it would be in their best interests to do so, and encouraging them to not worry their pretty little heads over dubious contract terms.

    Likewise, if Amazon successfully inculcated a BFF feeling in the authors who use it, then sometime in the future — the next 5, 10, 15 years, or whatever — became Sauron with One Kindle To Rule Them All And In The Darkness Bind Them… Authors who were thinking emotionally, BFFily, would be less able to make the jump to rivals, and that would reward Amazon for being Saurazon, making it less likely that Amazon would refrain from abusing its power.

    (And then there’s a bit of history about the first Kindle contract: http://www.sfwa.org/wp-content/uploads/2009/07/Amazon_digital_publication_distribution_agreement_annotated_v3_080329.pdf — just a tad sloppy in places. I, a cynic, don’t think that they modified it out of legal aesthetic desires. I am betting that they took flack for the sloppy bits from authors, author’s associations, and publishers, and modified it in response to being poked with sharp sticks.)

    Authors just have to keep clear eyes about any business, rather than fall into lovely muzzy emotional feelings that Prince Whoever will take care of them. If our sticks are sharp and we aren’t scared to poke sloppy stuff, Amazon will be a good business association for a long time. If we give up our sharp sticks because “Amazon’s the only worthwhile game in town,” then… why would we expect any better treatment from Amazon in the future than we now expect of the Big Six traditional publishers?

    *beth twirls her sharp stick (it may be little, but it’s mine) and checks her Kindle sales*

  5. I wonder just a bit if Amazon was more motivated to this by the publishers’ insistence on high prices for ebooks.

    There is a demand out there for moderately priced ebooks, a demand Amazon wanted very much to fill. They tried (a bit ham-handedly, to be sure) to coax the publishers into this pricing model. The publishers pushed back, and “won”.

    And thus there are endless comments in Amazon reviews from customers giving a 1 star review because of the price. (Many of them foolishly blame the author, but that’s a separate discussion.)

    That market niche remains. It’s wide open. I have to imagine that’s tempting to Amazon. “Hmmm… If WE were the publisher, we would have no problem on getting the price point we want…”

  6. They have access to daily statistics and analysis that tells them which authors are trending or about to trend.

    I do wish Amazon would share more of its statistics with its writers . . . as it’s set up now it’s a bit of a black box. How many people click on my books’ pages, for instance? Amazon, unlike Smashwords, doesn’t even tell you (as far as I can find) how many people download samples . . .

  7. Interesting that you post this the same week that Bank of America announces the $5 charge per debit transaction.

    Will Amazon start pulling crap on writers and consumers? Yeah, probably, eventually. But everyone forgets how young of a company they really are. When Amazon does becomes Sauron (or a dinosaur) then some young fuzzy mammal, ur, company will take its place.

    • Only if Congress arbitrarily limits Amazon’s income stream, as they did to the banks.

      B of A, et al, are responding to intervention from outside the marketplace and passing the cost on to their customers. So instead of a 40-something-cent transaction fee that was priced into the inventory, they’ve got to charge people directly. It sucks but they’re not going to just sit there and take it in the shorts.

      In the meantime, I don’t see retailers knocking their prices down in response. You could say that’s even worse, as it’s money going straight into their pockets.

      Unintended costs almost always get passed on to the customer, whereas unintended savings almost never do.

      So if Congress ever goes after Amazon under the guise of “helping the consumer”, look out.

  8. PG, you and other people on this forum are dreaming when you believe that if Amazon changes the terms it offers to indie writers and e-publishers, you’ll be able to just pick up your toys and stomp off to some “competitor” who offers you better terms, and somehow make as much money as you would if you stuck with Amazon, no matter what terms it offers. I realize there are some people here who love to self-dramatize about how “eagle-eyed” they are about Amazon’s contract terms and now they’re not all emotional and “BFF-y” about Amazon, but they are living in dreamland if they think there’s some alternative. The first part of being a good businessman is waking up to reality, and the reality is that as long as Amazon has the readers and the purchasers of content, then that’s where the money will be. Don’t like Amazon’s terms? Fine — go put your stuff up on Smashwords. Let us know how that works out for you. Or better yet, don’t bother, because we already know how well that’ll go.

    • KW, I think you misunderstand. We know that we would lose money by jumping the Amazon ship. But we’re indies. We take risks. If we’re willing to walk away from (admittedly dwindling) traditional publisher advances (money, I must emphasize, that is much more concrete than possible future royalties), why wouldn’t we be willing to walk away from Amazon’s deals if we decide that we don’t like what they’re doing? (See Beth’s lovely comment above about not thinking a company is your BFF.)

      I have a day job. What was once a burden to my writing has become incredibly freeing. I’m not dependant on my writing for my income, so I can tell whatever company I want to pound sand if they make things that untenable. And I have a feeling that’s the case for most of the indies.

      If you think there’s no alternative, then you haven’t been paying attention. A few years ago there “wasn’t an alternative” to traditional publishing, either, and look how untrue that became. The alternative may not be as lucrative, but it’s better than letting someone stick it to us in uncomfortable places.

      • Mercy — if you and beth want to waste your time by fretting about something that 1) Amazon isn’t doing now; 2) Amazon is highly unlikely to do in the future, for solid economic reasons, and 3) you wouldn’t be able to do anything about it even if Amazon were to do it — fine; be my guest. Meanwhile, I and other writers with a business-like rather than self-dramatizing approach to their careers will be putting more indie ebooks up on Amazon. No skin off our noses if you want to “take risks” by publishing your books somewhere else.

  9. Agree that this is your most important point:

    “Indie publishing has changed authors from helpless little children who cry and wait for their agent or publisher to come and wipe their noses into savvy and intelligent entrepreneurs, people who know how to do things for themselves. Indie authors can write their own books, prepare their own books for publishing, find lots of different places online to sell their books and promote their own books through their own efforts.”

    That’s what sold me on the idea, once Amazon smashed the distribution barriers. Having so much of my career dependent on strangers of questionable taste nearly killed my desire to write. I was happy to jump off the query/reject/repeat roller coaster and am more motivated than ever.

    It’s great to actually approach this as an independent businessman.

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