Morgan Entrekin is happy with the relationships he’s developed with Amazon. As the president of independent publisher Grove/Atlantic Books, he witnessed the industry change as Amazon’s introduction of the Kindle helped publishers like him embrace the digital revolution that has battered other industries.
It’s the future that he’s worried about.
“Right now [Amazon] is allowing me a perfectly fair margin, but what happens when they have total control or twice as much of the market share than they have now?” he said.
Entrekin’s sentiment isn’t unusual. Amazon’s skirmishes with various publishers had been obscure to most until May, when the ecommerce giant began to block preorders of upcoming Hachette books. Since then, the dispute has been a public one, especially by Amazon’s usually tight-lipped nature.
The relationship between Amazon and publishers started out as mutually beneficial. Amazon brought publishers into the digital age, and publishers were happy to provide the content in return for a new revenue stream.
As e-books grew and brick-and-mortar businesses like Borders struggled, the business dynamics between Amazon and publishers changed. Publishers like Hachette — after being boosted by Amazon’s investment and innovation — are now uncomfortably reliant on the ecommerce site and looking for ways to maintain a grip on an evolving industry but finding none.
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“We have to give a tremendous amount of credit to Amazon and Jeff Bezos and his team for the investment that they were willing to make in those years,” Entrekin said. “They did it in an orderly manner, in a way you could trust, and it’s helped us.”
There was a time when e-books were just a small part of the overall market, but now e-books are reaching parity with print. In 2013, some 457 million e-books were sold vs. 557 million hardcovers, according to the Association of American Publishers and the Book Industry Study Group. (Paperbacks were not included in that estimate.)
The sales growth magnifies publishers’ unease with the with the $9.99 price point that CEO Jeff Bezos had decided on — a number that had no basis in economics but rather in psychological pricing, according to Brad Stone’s defining book on Amazon, The Everything Store. Amazon recently defended that price in a blog post, claiming it is better for consumers, publishers and authors.
The $9.99 e-book introduction came after publishers had already seen the prices of books fall as chain stores like Barnes & Noble and Borders drove out independent sellers through lower pricing.
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By outsourcing the innovation to Amazon, publishers were subject to its preferences — including that $9.99 price point.
“[Amazon] put downward pressure on prices because Amazon was always trying to lower e-book prices. Publishers were always trying to prevent that from happening because it lowered the perceived value of books,” said Arun Sundararajan, a professor at New York University who specializes in digital economics.
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Whether publishers can figure out how to manage a $9.99 price point and Amazon’s market dominance may end up being a footnote in history if self-publishing continues to grow.
Authors, attracted by the prospect of keeping 70% of sales as long as they price their books at or below $9.99, have begun to sign up with Amazon, skipping publishers altogether.
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Advocates of self-publishing, like author Hugh Howey, argue that the royalty opportunities are too great to pass up, and that publishers will need to transition into a different role to remain relevant.
“I think today’s successful self-publishing groups will become tomorrow’s boutique publishing agents. The advantage of worldwide distribution through e-books and on demand is already outweighing the advantage of being in a bookstore for three to six months,” Howey said. “And the financial difference between royalties is so massive that more and more authors are discovering this, which allows for colleagues to discover it. I really think in 10 years, you’re going to see a lot more people self-publishing.”
Link to the rest at Mashable