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Amazon is ‘disintermediating’ more parts of tech

1 February 2016

From USA Today:

The list of technology companies in the cross-hairs of Amazon and its CEO Jeff Bezos grows longer every year.

And the Seattle-based company’s operating history shows being in that position could spell trouble for shareholders of those firms.

Amazon’s ever-expanding product portfolio has taken expected growth away from rivals ranging from eBay to Walmart.com.

Revenue at Amazon is expected to reach roughly $130 billion this year, thanks to growth of 20%.

Netflix is the most obvious new target, now that Amazon’s Prime service — which includes digital video entertainment — has signed up nearly half of U.S. households.

. . . .

The jargon evokes another term that became popular during the dotcom era, around the time Amazon went public in 1997.

The word was ‘disintermediation,’ and it was used to describe how companies like Amazon could use the Internet to lower the costs of products and supply chains by eliminating pesky middlemen.

At the time, the people using the term — mostly startup CEO and venture capitalists — assumed that the businesses to be disintermediated would be of the bricks-and-mortar variety.

. . . .

It is true that music, video and bookstores have nearly vanished from the American landscape, as have retail travel agencies.

Meantime, Amazon has become the fifth-most valuable tech firm, with a market cap of $295 billion.

. . . .

Amazon was building warehouses filled with servers before anyone, even Salesforce CEO and fellow cloud pioneer Marc Benioff, was signing ‘cloud’ contracts.

Those massive buildings filled with humans, robots and computers place the company in a prime spot (no pun intended) as corporate America shifts to cloud services.

The problem for Microsoft, Netflix and other tech firms is that Amazon’s cost structure in most of its markets is lower than theirs.

Earlier this month, in a telling reminder, Microsoft slashed the price of some of its cloud services by 17%, a week after Amazon cut its prices 5%.

It was just the latest in a series of price cuts by the two companies.

Bezos has already shown that he can prevail in almost any low-margin market, while the cloud and Amazon Prime give Amazon the chance to attack higher-margin ones.

Link to the rest at USA Today

The story was mostly about tech, but PG noted that USA Today, generally regarded as the largest-circulation newspaper in the US, states that bookstores “have nearly vanished from the American landscape.” While it hasn’t actually happened, in the words of Lee Atwater, “Perception is reality.”

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Amazon, Bookstores

35 Comments to “Amazon is ‘disintermediating’ more parts of tech”

  1. In my opinion, this is where Mark Coker and Smashwords went wrong. Instead of concentrating on becoming an ebook retailer, when they were there at the beginning and could have grabbed a big market share, they decided to become middle men and “distribute” ebooks to other retailers.

    Ebooks don’t need middle men. That’s one of the beauties of the Internet: Direct connections.

    • Ebooks don’t need middle men. That’s one of the beauties of the Internet: Direct connections.

      Tell that to B&N, who won’t let us upload if we’re not in America, and Apple, who won’t let us upload unless we’re using a Mac.

      • See, there’s two middlemen actually preventing you from using their own poorer services — it’s almost like they were steering you towards Amazon …

      • We can’t “upload unless we’re using a Mac.”

        I’m a Windows gal, but wow, just wow!

        I’ve had it in the back of my head to spread myself to other ebook retailers. This is really helpful information.

        No need to wonder why AMZN is eating everybody’s lunch.

      • Good point, but of the three, Amazon, B&N, and Apple, which two have been glued to Big Publishing and their desire to slow the adoption of ebooks in favor of dead trees?

        It’s really all about control, or the illusion thereof. B&N wants to keep control of the brick and mortar market. Apple wants to tie people to their hardware. Amazon wants to control commerce, and they do it by providing the best buying experience and customer service. Which one do you think will win out in the long run?

        • Apple wants to tie people to their hardware.

          With the result that when my iPod died, I decided to leave the Apple walled garden. I replaced the iPod with a smartphone and Tracfone service.

      • Actually you can upload to Apple with a PC now. I can’t find the link to it but I believe it was mentioned in the Digital Reader late last year.

  2. I listened to The SF Signal Podcast (Episode 320): Talking About The Expanse – Books and TV Show. Six fans talking about The Expanse. Of the six, one — count ’em, one — watched two episodes on SyFy and DVR’d the rest. One DVR’d every episode. One watched by a combination of YouTube, DVR, and On Demand. Three watched by Amazon or a combination of Amazon and Hulu.

    When will Comcast become infected with ADS?

    (The podcast gizmo on SF Signal failed for me. I used the gizmo on feedly: http://feedly.com/i/subscription/feed/http://feeds.feedburner.com/Sfsignal
    The podcast is an hour and sixteen minutes of listening. The discussion of viewing streams begins at 57:50 and runs — oh, I don’t know — a couple of minutes, I guess.)

    • Oh, Comcast and the other tv cable companies are in the pre-ADS phase of “cord cutting denial”. You can follow that industry soap opera on Techdirt.

  3. USA Today gets its circulation numbers by distributing papers for free in hotels and forcing local papers owned by its parent company (Gannett) to run a watered-down version inside them. How many people actually *read* it? Hard telling, but in those local versions, there are literally no ads … so advertisers must suspect that precious few read it.

  4. “bookstores have nearly vanished from the American landscape”…

    In my neck of the woods, this happened when the big book store chains rolled in… over each previous one… and out… sequentially… before Amazon existed. Compounded by Walmart and Sam’s Club… WaldenBooks, then B Dalton, then Barnes & Noble… with only Barnes still around and likely to vanish some January when their lease runs out. Perhaps then we’ll get an indie general bookstore here again.

    But hey, Amazon as all purpose scapegoat gets clicks…

  5. “Perception is reality” explains the new “bookstores are back!” meme, usually mentioning rising membership in a trade association.

    You can do some independent research and see a different side of things that apparently doesn’t qualify as a meme.

    Try googling “bookstore closing”, switch to ‘news’, and see what is said. Article after article show small bookstores around the country (and the UK) closing, citing low foot traffic and evaporating viability. “We wanted to sell, but couldn’t, and it’s time to retire.” is a common theme, along with “it’s just not paying the bills anymore, but we’ll still sell online.”

    “bookstore opening” turns up a few hopeful souls who, imho, have not done their due diligence.

    • Well, the ABA was saying their membership was growing. Maybe some of them are web based business or more negatively they are still paying fees despite closing. I’ve yet to see an update by the ABA saying they are shrinking. Which I’d assume they would admit since they would blame Amazon anyway.

      Personally I’d guess it is the same factor that puts stranger abductions on the news despite it only being 3.1% of the cases. It’s news when a 20, 30, or older store closes but businesses open and rarely get publicity. Drama >> Hope.

      Does the ABA have any breakdown of their membership somewhere?

      • Here you go:

        http://www.bookweb.org/membership/aba-bookseller-member-directory

        They are growing but a lot of the growth in ABA membership includes businesses that arent’t exactly consumer bookstores. Museum gift shops, newstands, textbook stores, etc. Plus used-book stores.

        There’s a bit less than meets the eye to their numbers.

        • I quickly browsed it but didn’t see any breakdowns of how many of each type of store. I know I’ve seen articles on here, and Publishers Weekly, of new bookstores opening but yeah how many new consumer stores vs. used vs textbook vs etc. would be interesting.

          Their Winter Institute 11 news article mentions a “Record-Breaking” year and that profits across the stores were up 10% in 2015. But that’s still pretty vague.

          • I saw on report of a Chicago native that said something like a third of the listings for the area weren’t actual book stores. Essentially, their listings allow anybody selling books to sign up. Comic shops, for example, could sign up, as could drugstore chains or even WalMart.

            Muddies the waters when it comes to growth or decline of traditional indie bookstores.

  6. And none of these companies do ‘customer service’ well.

    Hmmm. Blame it on someone else is always easier than doing the work.

  7. Our town (population 72,000) still has a couple of bookstores. It might have once had three or four, but these days you don’t see book promotions on ‘ends’ in grocery stores, for example. Very few paperback racks in variety stores, and there used to be a few of those.

    But as an author, keeping the costs down and operating on a very slim margin is a good lesson. I actually think we can upload to Apple using their app on a Microsoft computer, but operating in their ecosystem looks like a new learning curve…

  8. Uh, no–cable is suffering because of Prime ($99/year) AND Netflix ($7/month, if I recall). Netflix is not suffering because of Prime. I have both, and will cancel cable soon.

    Bookstores are still around. Music and video stores have disappeared because of technology, not Amazon. I don’t want to buy DVDs or CDs. Who wants to store that stuff, unless you collect vinyl? I’ve also reached maximum capacity on physical books, but I know some don’t.

  9. Amazon built up the cloud business while no one paid attention and now it looks as if it is doing the same with Echo and Alexa http://www.fool.com/investing/general/2016/02/01/amazon-is-winning-the-smart-home-race-and-nobody-i.aspx

    It doesn’t pay to ignore Bezos.

    • O Passive Guy, I seem to recall you welcomed a robot overlord (Echo) into your home. I would very much like to hear your musings on “Alexa, Threat or Menace?”

      Me, I am waiting until the Echo will accept the name Jeeves 😀

      • I’d be interested if you could go with MYCHELLE since tbey’d need a male voice for MYCROFT. 🙂

      • Having the name “Alex” means that using “Alexa” as a wake-up word would not work in my household.

        Personally, I want an Echo that sounds like a British butler and would respond to the name “Jarvis.”

  10. “Amazon is ‘disintermediating’ more parts of tech”

    Is there no end to the nefarious scheming of Bezos and Company in their relentless quest to conquer and control the entire planet? 🙁

    • Who said they’re stopping at atmosphere’s edge?
      Blue Origin is proof Bezos is aiming beyond the planet.
      Elon Musk wants a city on Mars and Amazon aims to be ready to do same year deliveries to that city.

  11. I know that newspapers no longer employ copyeditors, but the lede requires small editorial adjustments:

    “The list of market opportunities that Amazon researches and tests grows longer every year.

    “And the book “Who Moved My Cheese” shows that CEOs who lose focus or execute poorly on their own pursuit of market opportunity will also lose their shareholders.”

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