Home » Amazon, PG's Thoughts (such as they are) » What Seems To Be the Problem Here?

What Seems To Be the Problem Here?

31 March 2014

From N+1

I’ve worked in book publishing for most of my adult life; currently I run an online bookstore called Emily Books specializing in the kind of women’s writing that’s typically labeled “difficult.” My business partner is my best friend. Most of my other friends and coworkers are also involved, directly or otherwise, in the writing, publication, and sale of books. When we talk about Amazon an uneasy pall falls over the room, as if we’ve invoked a monstrous, evil entity—Pol Pot or Exxon Mobil or King Joffrey Baratheon, the Ill-Born Usurper of Westeros (lifetime Amazon rank of A Game of Thrones author George R. R. Martin: 14). Amazon’s cutthroat pricing schemes, commanding control of the book marketplace, and experiments with bundling and the publication of original material directly threaten our livelihoods, such as they are.

. . . .

As an independent bookseller, and as a reader, and as a person, this worries me. On the other hand, I realize that a consumer without a dog—and by “dog” I mean “an unnaturally strong and cherished connection to the written word”—in this particular fight might have no stronger response than a shrug at the prospect of Amazon.com: Total Domination. Most of us, understandably, are more concerned with economics on the personal scale of budgets and paychecks and debt and less interested in economics on the corporate scale of interstate commerce or monopolies or taxable presences. Amazon’s violation of the spirit (if not the letter) of American tax and anti-monopoly laws is abstract; one’s rent, phone bill, spending money, student loan payments, a lot less so. And Amazon is very good at addressing economics on a personal scale: their stuff is cheap and there’s a lot of it. One-click purchasing (which Amazon pioneered), low prices, endless inventory, and incredibly fast shipping have made it a company that reported $61 billion in sales last year and a 60 percent increase in stock value over the first half of 2013. The frequently cited fact that Amazon rarely turns a profit in a given quarter is mostly beside the point: if they didn’t spend so much money on building infrastructure for their future new world order, the company would be plenty profitable. And, as The Everything Store makes clear, Amazon doesn’t have to be profitable to become the only significant retailer doing business in many major product categories. Once it’s done that, prices will go up.  Why would they not? Where one falls on this question, I think, depends on whether or not you think the check for the actual cost of merchandise we’ve grown accustomed to purchasing at artificially low prices is ever going to be dropped on the metaphorical table, and who’s going to have to pony up their Visa.

. . . .

There’s a fundamental problem with bookselling as a business: put bluntly, it’s that people aren’t really into buying books. Bezos discovered this via a 1998 survey that found most shoppers didn’t use Amazon.com and probably never would, because—well—Americans buy very few books. This is the part of the story where some booksellers, like me and my partner, might begin wishing we had done something else with our lives, but Bezos was unfazed. Instead he turned his attention to other products easily sold via mail, and shortly thereafter Amazon expanded into music and DVDs.

. . . .

Then, in 2007, Amazon released the Kindle. The new device was made possible by the relatively recent advent of widespread wireless technology; the development of magnetic e-ink, which made the screen readable without a backlight, and the fact that in the years before, Amazon had leveraged its market power to convince publishers to digitize their back catalogs. When the Kindle launched, publishers didn’t see why an ebook should cost any less than a physical book, and set the price at the same as the hardcover—typically, around $26. With the standard 50 percent discount, this meant the publishers would charge sellers $13. Bezos set the sticker price of most ebooks at $9.99, meaning that every time Amazon sold an ebook, he lost $3. For a while, publishers chuckled, but then they grew frightened. What did Bezos have up his sleeve? Amazon could afford to sell ebooks at a loss, but the availability of a cheaper ebook edition meant publishers lost money on their most profitable format (the hardcover) and small booksellers could not compete at all. Amazon no longer adheres to the $9.99 ebook price point as a rule, but the standard had been set, and the company only grew more powerful as the popularity of the ebook format increased. Holiday 2013 sales of the Nook, Barnes & Noble’s answer to the Kindle, fell 60.5 percent compared to 2012 holiday sales. Borders—initially one of the Big Bad, along with Waterstones and Barnes & Noble—went out of business in 2011, and Barnes & Noble is expected to follow any day now.

. . . .

Emily Books, the online feminist bookstore I run with my best friend, was started as an attempt to create a tiny, but serious, competitor to Amazon. To our surprise, the publishers who will talk in private about how much they hate Amazon did not want to do business with us. When I approached the VP of what I’ll generously call the “Digital Development” department of one of these publishers about selling one of her books via Emily Books, she was dismissive. She won’t do business with retailers who can’t offer digital rights protection (DRM), she explained. OK, I said, that software is far too expensive for most independent booksellers, and for Kindle devices, it’s proprietary to Amazon. What sort of non-Amazon branded digital protection would they require? Was there a viable workaround, an alternative? What if we were able to come up with something? As soon as the words left my mouth, I realized how stupid they were. Surely such a thing—an Amazon workaround!—would be incredibly, obviously valuable.  Surely many people far smarter and wealthier than me were working day and night on it. Well, the Digital Developer reiterated, acknowledging my gaffe by speaking as if to a very slow child, they would need the software required for a Kindle. Never mind that these arbitrary criteria exclude basically all retailers who are not Amazon, never mind that DRM does little to prevent a determined book pirate, never mind that a real-life retailer was literally asking for her business, money on the table. It’s rare to witness someone line up such a perfect shot to their own foot, unless you work in publishing, I guess.

. . . .

But it turns out the way to build the world’s most successful bookstore has nothing to do with knowing your customers or recommending the “best” books or even making money, and everything to do with developing software, recruiting investors, and hiring a bunch of people who used to work at Walmart. This is not news I can use, but it explains the odd mixture of relief and nihilism I felt. Jeff Bezos both created and dominated the industry of his choice, online retail. His success has all but ensured the failure of anyone else who wants to sell not just books but consumer goods of any kind, and I wonder how many corporate biographies will be possible after this one.

Link to the rest at N+1 and thanks to Jan for the tip.

Grumble, grumble, whine, whine. Making excuses and predicting doom for all that is good and right about Big Publishing and book selling makes losing to Amazon a foregone conclusion.

It is interesting that Big Pub’s ignorant worship of DRM squeezes out potential competitors to Amazon.

But back to the bigger picture – How many times did Jeff Bezos hear that Wal-Mart would squash Amazon like a bug whenever Bentonville turned its sights on ecommerce? A bazillion at least.

But now, with Amazon growing by leaps and bounds, the tradpub world sees nothing but the end of corporate biographies in the future.

At heart, Amazon is a tech company. If anybody in Big Publishing had the slightest knowledge of the technology world other than the headlines they read in The New York Times, they would understand that Compaq was once where Amazon is in the public imagination. So was IBM in personal computers and Lotus and Microsoft and Hewlett Packard. PG thinks Apple has passed its point of maximum influence and value and will be much less impressive in three years than it is now.

Staying on top of the slippery pole that is the consumer-oriented tech biz is a hard, hard thing to do. So hard, nobody has managed to do it for very long since the invention of the personal computer and the internet.

PG says Amazon will slide down that pole some day. Not today or tomorrow or next year, but some day.

Of course, in PG’s opinion, traditional publishers will disappear before Amazon does and that’s pretty much what all these articles are about. Not that Amazon will destroy the world, but that Amazon will destroy their world.

 

Amazon, PG's Thoughts (such as they are)

57 Comments to “What Seems To Be the Problem Here?”

  1. Jeff Bezos both created and dominated the industry of his choice, online retail.

    So…because he was successful, every other business person should get a leg up to compensate? Like some kind of golf handicap?

    No. Just no.

  2. “Complaining is not a strategy.”
    –Jeff Bezos

    • Wish this forum had a facility to upvote posts like this.

      • I’ve been looking for WordPress plug-ins to provide this for posts and comments, but haven’t found any that worked so far, JM.

        • Thanks for the reply. I’m a web developer (or used to be) and I can’t find one either! 🙁

      • I dunno. It’s more like a conversation when we can read the comments in order. Upvoting is most helpful on sites where few of the comments contribute to the discussion.

        But I agree with the sentiment. Nice quote.

        • I don’t look at a feature like that being used on tPV as a, “vote to the top” feature (ex: Reddit), but more in the sense of a, “+1!” feature (ex: G+). That way those of us who read can go, “LOL, that’s funny!” or “Good point.” or whatever without flooding the comments with comments that don’t contribute anything but, essentially, “+1”.

  3. Wow. You could read it and understand it? Good on you!

  4. Ashe Elton Parker

    As a reader, she’s worried about more books?

    Oh, wait, she’s also a bookSELLER. Of course. The collapse of all that is Holy in the world of books is guaranteed because Amazon likes to sell books and Trad Pub doesn’t want to cater to readers, something which Amazon does very, very well.

    Actually, the article is a bunch of fearmongering with a decent dose of “That’s not FAIR! *stomp foot*”

  5. As we’ve pointed out before, one of Amazon’s greatest strengths is the publishers’ continual demands for DRM, which prevent Kindle users from moving to another online store. If they sold their books DRM-free, they could easily be transferred to any other device.

    • I don’t know when they approached publishers but perhaps they should go back again. A few publishers are finally backing away from DRM. A bit late for the other online stores though.

    • Puts me in mind of an article John Siracusa wrote on Ars Technica way back before the iPad even came out. Looking back on when he had used to work for eReader, he noted how fixated publishers were on DRM even then. One of them even commissioned a Department-of-Defense-grade security analysis of eReader’s DRM!

      Doesn’t seem like anything’s changed much. Exactly one major publisher—Tor—has given up DRM. Everyone else just keeps on soldiering along.

    • I read an article not too long ago (sorry can’t remember the source or link right now) that argued the epub supporters were shooting themselves in the foot by not promoting interoperability, the best advantage they had to compete with mobi/azw/kf8. By pursuing DRM and unsupported features to create their own walled gardens, Apple/Kobo/BN were killing themselves.

    • I have the Amazon Kindle app on iPhone, iPad, Nexus-7, iMac, and PC. I don’t even think about DRM. That garden has a mighty low wall.

  6. I have “an unnaturally strong and cherished connection to the written word” [unnatural, I say!]. And I believe that such connections are made stronger when the written word is more widely produced and distributed and that no one entity can keep that from happening although it sure is nice when as many as entities as possible approach that process without snobbery and laziness and with sophistication and efficiency. As a consumer, I don’t care who is linking me up with authors. I just want easy access to stories I like at a price I can afford.

    I’ve spent more money on books since buying a Kindle than pre-Kindle. And some of those books are even traditionally published.

  7. Book sellers have done nothing for me. On the contrary. Returning new releases in less the 4 weeks has ruined authors. Thank God for Amazon. I buy all my books from Amazon. Super service! Great selection! Great search engine! Fast delivery.

    And I don’t like Feminism either. It tends to hostility towards everyone else.

  8. Odd that she bemoans the declining readership in America, but dislikes Amazon, which is reversing that trend.
    The kindle is the new Gutenburg press. I can almost imagine some monk in a dusty scriptorum, penning a tract that castigates movable type…

  9. “Not that Amazon will destroy the world, but that Amazon will destroy their world.”

    Exactly.

  10. There are exactly two entities that are critical to the storytelling industry: writers and readers. When Amazon starts screwing with them (instead of, you know, being a boon to both), I’ll care.

  11. If the world would be the way I want it to be, if only. Then I would do what I enjoy, and make money to pay all the bills and a tidy sum for me.
    But $%@#* Bezos hires people from Walmart, WalMart for crying out loud, and screws up everything for me. He doesn’t understand books the way I do. He doesn’t think books are printed for profit. Instead he uses them for his pervasive means. Wake up people! Books were not meant to be cheap.
    “Satan never sleeps. If he did, we would all be in heaven.” from the Pregnant Pope.

  12. Hating Amazon is wrong and a waste of time. Bezos started a business, he was in the right place with the right idea. He found and cultivated a need and provided the answer.

    He is not ruining your bookstore! It is the reader who prefers what Amazon has to offer. Consumers are not mindless. They buy what they want.

    Note: Amazon helps pay the bills, buy the food for over 110,000 employees and their families. Definitely he should be vilified. He provides a retail forum for thousands of authors, who in the arena of public opinion either fail or succeed on THEIR OWN efforts. In a difficult economy, readers can afford inexpensive e-books. The devils work.

    When Henry Ford made automobiles that the general public could afford and preferred to horses and buggies, those in the horseshoe industry cursed them. Those who sold hay hated them.

    Overtime all adapted to the new technology and gas stations popped up and mechanics and body shops.

    The world is changing. Whine about it or adapt. The latter is the better strategy.

    • Ashe Elton Parker

      But adaptation doesn’t permit her to play martyr and demand pity for being a victim of Amazon’s evil takeover of the book market.

  13. “Bezos set the sticker price of most ebooks at $9.99, meaning that every time Amazon sold an ebook, he lost $3.”

    I don’t think that’s true. Bezos didn’t set the sticker price at $9.99 for *most* ebooks. That’s the price he set for bestsellers. In other words, far from *most*.

    • This seems to be a particular sore point with this bookseller. Their e-books are priced at $12.99-$14.99.

      • “Their e-books are priced at $12.99-$14.99.”
        Ugh. That explains almost everything.
        I do agree that Amazon *might* someday raise their prices when (and if) they actually achieve world domination, but critics don’t seem able to come up with a strategy alternative other than whining.
        This quote, from TFA in reference to the DRM was especially relevant, however: “It’s rare to witness someone line up such a perfect shot to their own foot, unless you work in publishing, I guess.”

      • Unless I miss my guess, this company is losing quite a few dollars. By lowering their prices to $9.99 they would keep an extra $2 per eBook in the 70% royalty tier. They may also increase sales through the price drop.

        But that’s math, not publishing.

        • M Frank, at the time Publishers were selling through Amazon under a wholesale model, not agency; so Amazon was losing $ on bestsellers priced below the wholesale price.

    • This is one of those areas that confuses people. Most ebook titles were not priced at $9.99 or less. Most ebooks sold probably were (because bestsellers sell the most copies). But most ebooks were not sold at a loss, because wholesale prices came down when those bestsellers had paperback runs.

  14. “How many times did Jeff Bezos hear that Wal-Mart would squash Amazon like a bug whenever Bentonville turned its sights on ecommerce?”

    Liked this. And I’ve been looking for an article/interview for some rime now: where an meeting took place betwen B&N CEO Riggio and Bezos back in the late 90’s, early 00’s, where Riggio tried to intimidate Bezos into selling Amazon on the grounds that he couldn’t possibly survive a war of attrition with B&N.

    Ring a bell with anyone?

  15. Ruth Curry’s partner in Emily Books is Emily Gould. It all sort of fits together, this is when I last remember reading something by her:

    http://www.thepassivevoice.com/02/2014/how-much-my-novel-cost-me/

  16. I’ve always adored bookstores. I worked for Brentanos in NYC back in the 70’s, and I couldn’t imagine a better job than working in a bookstore. I feel badly for folks who own small indie bookstores, but like all the mom & pop stores and small local businesses, they’re in trouble. Life just isn’t the way it was pre-internet and pre-amazon. I used to care about this issue a lot, but the reality is that we have bills to pay and mouths to feed.

    I think I’ve bought maybe one book in the last five years from an indie bookstore and that was while we were on vacation and attended an author reading. I can’t afford to pay the retail cover price for books. I love my Kindle.

    I am a huge amazon fan, not only for books, but for other stuff I can’t get anywhere else and at such great prices. Their customer service, on average, is pretty good. (I’ve had a few serious issues with them and they resolved most to my satisfaction.)

    So, who benefits?

    The customer and the writer. (I am both.)

    And I agree, when Amazon starts screwing with me, I’ll care.

  17. PG, you really need to stop posting such 🙂
    Just too darn tempting to be reading and muttering about, when I should be writing…

  18. “Grumble, grumble, whine, whine. Making excuses and predicting doom for all that is good and right”

    OK…that does it. PG, I’ve enjoyed many of your links and some of your comments, but this one finishes me with you. You have no concept of what a real bookseller was or would be today w/o the Big A and I’ve reached the limits of my tolerance for your snide attitude.

    • You have no concept of what a real bookseller was or would be today w/o the Big A …

      I know where they’d be: put out of business by Borders and Barnes & Noble.

      • “I know where they’d be: put out of business by Borders and Barnes & Noble.”

        Which is the REAL reason there’s so much literary scorched earth outside of metropolitan areas today. But that doesn’t support the “Great Satan” argument regarding Zon too well.

        So it’s conveniently forgotten by Legacy Heads.

  19. Yawn. So much whine, and fail, and poor bookstore and evil Zon. Couldn’t even finish it. But I did make it this far…

    “…Amazon doesn’t have to be profitable to become the only significant retailer doing business in many major product categories. Once it’s done that, prices will go up. Why would they not?”

    Konrath has argued this countless times. Often with extensive facts and details that point to no US monopoly ever successfully controlling any one market (for long) AND raising prices with impunity. And getting away with it.

    Except for the cartel of BigPub.

    • I read an economist arguing somewhere that Amazon can’t raise its prices, because the moment it does, it makes it worthwhile for someone else to enter the market and undercut it. Amazon has to keep competing not just against the competitors it has now, but against the competitors it might have.

      Anyway, the article contains its own contradiction. She says it herself: if Amazon wants to start making a profit, all it has to do is stop building out so much infrastructure. Why on earth would it want to raise prices too?

      • “…because the moment it does, it makes it worthwhile for someone else to enter the market and undercut it.”

        If you felt like digging through Routers, Forbes, Bloomberg and WSJ you can find a thousand examples of this in US business history. Amazon would probably be a prominent example of doing things better for less, earning fierce customer loyalty and thus explosive growth.

        As many big box stores as I’ve seen shutter to be replaced by new entrants in my life, which really hasn’t been that long, I would think this would be common sense to the average consumer by now. Clover, Builder’s Square, Hechinger’s…ring a bell anyone? Target and Lowes didn’t re-invent the wheel. They’re in the exact same markets, only doing things better and for less.

        But again, none of that helps the “Evil Zon” argument.

  20. How sick I am of the argument that once amazon finally conquers the world, then they will finally raise their prices and kill us all.

    Umm, I buy most of my books from amazon because it’s cheaper to do so. If amazon raises its prices, I’ll shop somewhere else. Simple as that.

    Amazon’s “monopoly” is not based on something structural, like ownership of a railroad track or a piece of real estate. It’s based on billions of individual consumer choices which could shift allegiance to a different retailer in the time it takes to click a mouse button.

    • Amazon’s “monopoly” is not based on something structural, like ownership of a railroad track or a piece of real estate. It’s based on billions of individual consumer choices which could shift allegiance to a different retailer in the time it takes to click a mouse button.

      I guess some part of me must have already known this. But I feel like this insight has given me a new perspective. Well said, Amy.

  21. Pol Pot: murdered 1.5-3 million people.
    Jef Bezos: makes millions of readers and writers happy every day.

    Yep, absolutely no difference between those two :-/

  22. It would take a lot of hefty price raises by Amazon to ever reach the prices of pre-Amazon/ebook/Internet days.

    And if they did, wouldn’t a new Amazon arise to go back to those lower prices? I’m not naive about modern capitalism, but I think this is a case where it would be hard to sustain a predatory monopoly for long. The barriers to entry in the internet world are too low.

  23. Publishers hate Amazon…but are committed to DRM, which locks readers into a single provider’s eco-system, which statistically is going to be Amazon (especially with B&N and Kobo being fundamentally inept and Apple just being smugnaciously-Apple).

    If publishers are *really* that terrified of Amazon, they need to ditch DRM and let all sorts of competitors sell to all readers — without DRM, it is relatively easy to provide an alternative to Amazon, as seen by DRM-free ebook vendors like Smashwords, Weightless, Book View Cafe and even direct-to-customer vendors like Gumroad.

  24. “PG thinks Apple has passed its point of maximum influence and value and will be much less impressive in three years than it is now.”

    “Not that Amazon will destroy the world, but that Amazon will destroy their world.”

    Pearls.

  25. I do not think it is a coincidence that Amazon’s success has corresponded with a significant contraction in the book publishing industry, one marked by mass layoffs, the merger of two major companies, drastically reduced royalties for writers, and a remarkably embarrassing price-fixing lawsuit.

    So much fail, distilled so neatly.

    1) The book publishing industry has not contracted. It has grown beyond (literally) all measure. The part of the industry that publishes paper books meant to be sold in stores has in some cases contracted, especially at the mid-tier to lower end. Not. The. Same. Thing. And a lot of that “contraction” has been the beancounterization of said industry part, largely related to their ongoing Blobnification into consolidated entities and affiliation with even larger entities. That’s the whole point of consolidation.

    2) Who’s been having mass layoffs? If it is BTPH, see #1. If it’s smaller publishers, well, they aren’t *needed* so much anymore. Sad but inescapable.

    3) Companies pursue mergers, especially companies with deep pockets behind them in their super-holding-entity ownership. All the time. If there’s enough money in them to justify M&A, well, guess what, they’re not doing all that bad.

    4) Say WHAT now? I make 35% to 75% of cover. In what universe is that “drastically reduced royalties,” lady? Oh, you mean that authors with TBPH are getting the shaft more *visibly* these days, especially on ebook royalties? Too bad, so sad, you get what you ask for. Especially when trucking with beancounterized megacorps.

    5) Yes, it was embarrassing, but I’m not sure that it was embarrassing to the people for whom it should have been embarrassing, since they show no inclinations to admit any embarrassment or stop acting like demented jackasses.

  26. Feh. “I can’t get that book for you right now.”

    Give customers what they want, or stfu and go out of business. WELCOME TO THE WORLD OF COMMERCE. You don’t get to survive just because you’re a precious jewel of under-represented culture. You survive because readers want you to survive. If readers no longer value a feminist bookstore, well…I don’t know what to tell you.

    At least the authors who produce all those books you sell will still be able to survive and pay their electricity bill and rent and student loan payments. Maybe you oughtta take up writing instead of running a super-niche brick-and-mortar store in an already dying market.

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