Amazon

Amazon Is Picking Up ‘The Expanse’ From SyFy, Because Streaming Is Eating The Universe

27 May 2018

From Fortune:

Amazon has picked up sci-fi epic The Expanse for a fourth season on its Prime Video service, following its cancellation by the SyFy channel and an impassioned social media campaign to save the show. That will be welcome news to a large cadre of fans – but also holds important lessons for the shifting landscape of subscription television.

The Expanse announcement, stunningly, was made personally by Amazon CEO Jeff Bezos during a Friday panel at the International Space Development Conference, where Bezos was receiving an award for advocacy in the colonization of space.

. . . .

Amazon has picked up sci-fi epic The Expanse for a fourth season on its Prime Video service, following its cancellation by the SyFy channel and an impassioned social media campaign to save the show. That will be welcome news to a large cadre of fans – but also holds important lessons for the shifting landscape of subscription television.

The Expanse announcement, stunningly, was made personally by Amazon CEO Jeff Bezos during a Friday panel at the International Space Development Conference, where Bezos was receiving an award for advocacy in the colonization of space.

. . . .

But taking over The Expanse is more than a billionaire’s pet project. The show has been critically lauded, with a complex plot and gritty approach to space travel that earned it comparisons to HBO’s Game of Thrones. Yet, The Expansenever generated anything like Thrones-level ratings for SyFy, underperforming even the network’s other niche dramas, such as The Magicians and Krypton.

Perhaps more damaging to The Expanse’s status at SyFy, though, was that, according to Deadline Hollywood, the network only had first-run rights to the show. SyFy streams episodes of the current third season, but the first two seasons of The Expanse stream on Amazon’s Prime Video service.

Link to the rest at Fortune

Selling Out: Going Wide or Going Exclusive to Amazon

24 May 2018

From The Book Designer:

When most new publishers think of selling ebooks, the first place they think of is Amazon’s Kindle Direct Publishing (KDP) program.

This makes sense — after all, Amazon represents somewhere between sixty and eighty percent of the world English market for ebooks. Who wouldn’t want to have their book sold in the biggest storefront of all?

Amazon has created a program — KDP Select — that rewards publishers for offering their titles exclusively through the Kindle Store. A lot of publishers — and not just new ones — decide to put all of their eggs in the Amazon basket. They make some compelling arguments for why they do so.

I don’t — do so, that is. With almost all of the books that I publish, I sell wide — that is, at as many retail and distribution outlets as possible, in addition to the ‘Zon.

. . . .

Before we discuss the relative merits of selling wide or sticking exclusively to Amazon, we need to look at what the KDP Select exclusive program actually entails.

First of all, it’s a fully voluntary, opt-in program — just because you’re selling on Amazon doesn’t mean that they get exclusive rights to sell your ebook. You have to enroll each title — just because you’ve got one ebook exclusively at the Kindle Store doesn’t mean you can’t sell another on the iBooks Store, the Nook Store, Kobo, Google Play, and hundreds of other retail sites.

. . . .

Once you’ve signed up, whether at publication time or after, the title is locked in for a term of 90 days. In order to have the title remain enrolled, you have to keep that box checked — which it will until you go in there and change something.

In order to remove your title, on the other hand, you have to uncheck the box, and then wait until the term expires.

. . . .

By the way, just in case I haven’t made it clear, unless you sign up your book for KDP Select, you get no benefit at all out of selling exclusively on Amazon.

. . . .

Back when I first started selling ebooks, eight years ago, there were some nice benefits to enrolling in KDP Select. Although Amazon has added and subtracted over the years, there still are.

The current list of benefits includes:

  • Making your title available through the KindleUnlimited (KU) subscription service
  • Offering promotions:
    • Free
    • Countdown
  • Increased royalties in some non-US markets

That’s about it.

. . . .

KindleUnlimited

This is Amazon’s ebook subscription service — a “Netflix for ebooks” setup.

The reader can “borrow” up to ten KindleUnlimited titles at a time, all for the low, low price of $9.99/month. For folks who read in bulk — the folks who are our bread and butter — this is a very nifty deal.

From the publisher point of view, here’s how it works:

  1. Amazon estimates the number of “pages” based on the wordcount of your book. (They call this count the title’s Kindle Estimated Normal Pages or KENP.)
  2. When a reader checks out the book, Amazon keeps track of the highest-numbered page that the reader has reached. — You can keep track of “page reads” on your KDP sales reports.
  3. Each month, Amazon announces how much money all of the KU-enrolled books will share. (It’s usually a bit over $20 million.)
  4. That war chest gets divided by the total number of KENP “read” during the month — that’s the share each KENP earns that month.
  5. Amazon multiplies your total number of KENP for all titles that month by the share, and adds that to your royalties.

. . . .

Because the total amount of money that Amazon splits for a particular month is fixed, this has made it particularly vulnerable to scamming, and particularly maddening for the honest publisher — your only recourse in order to earn more is to raise the total number of pages read, which means either marketing the heck out of every title you’ve got enrolled in the program (which you were hopefully doing already), offering more titles (possibly pulling them off of other retailers to qualify them for KU), or offering longer books. But as more and more and longer and longer titles go up on KU, the value of each KENP share goes down.

. . . .

There are two types of promotions — Free and Countdown. In either case, you can offer the title for up to five days in a 90-day enrollment period, though during that period you can only offer one or the other of these promotions — not both.

Also, you can only offer them (at the moment) on Amazon.com and Amazon.co.uk (the US and British sites). These won’t help you on Amazon’s sites in Canada, Australia, or India, for example.

. . . .

The countdown promo is fun; it offers you one or more promotional price over the period of the promo — and keeps a countdown timer going that announces just how much time readers have before the price goes up. This is a classic marketing ploy to take advantage of customers’ fear of missing out (the famous FOMO effect).

One other nice thing about the countdown promo: it’s the only way you can get a full 70% royalty for a title priced (temporarily) under $2.99.

. . . .

The Benefits of Going Wide

Back in 2014, when Amazon instituted the new KENP system for calculating KU earnings, I had about 50% of my titles enrolled in KDP Select — most of them short stories that earned incredibly well per borrow, and that served as “loss leaders” that lost me, in fact, nothing. Folks would read a short story by one of my authors (earning us both a royalty), then read one of the longer works, netting us more. Nice.

This lovely symbiosis disappeared with the KENP setup and its emphasis on longer KU titles.

Since then, I’ve stopped enrolling titles in the program, and over the past year I’ve slowly been letting the enrolled titles lapse. At this point I have just one KDP Select title.

The rest of my titles — about eighty by twenty authors — are offered wide. That is, they’re available on Amazon, but also on Apple, Kobo, B&N, Google, Overdrive, ScribD and many, many more.

. . . .

Unlike the KDP Select program, the three benefits here are really simple:

  1. I can earn more money.
  2. I can please more of my readers.
  3. I’m not encouraging monopolistic behavior.

. . . .

Most “wide” indie and self-publishers report that sales on Amazon represent 60%–85% of their ebook revenue. Myself, last year, I earned 62% of my ebook royalties through Kindle sales. In my most Amazon-slanted years I’ve earned about 80% of my ebook income from Jeff Bezos’s company.

That’s a lot.

However, I do wish to point out that that leaves 20%–38% of my income that wasn’t earned through Kindle sales.

I’d also like to point out that, while Amazon holds all but a monopoly on US ebook sales, outside the country it is a far, far less dominant market. The more my sales have gone international, the more I rely on channels like Kobo and Apple, and on distributors like Smashwords, PublishDrive, and Draft2Digital.

Link to the rest by David Kudler at The Book Designer

PG excerpted more than he usually does from the OP because he suspects Mr. Kudler operates in a different manner than a lot of indie authors do.

That said, PG thinks it’s a good idea not to run any business on autopilot, so he will be interested in the comments of others about the decision between Amazon with additional benefits vs. using everyone.

Banned From Amazon: The Shoppers Who Make Too Many Returns

22 May 2018

From The Wall Street Journal:

Even Amazon.com Inc. has its limits.

The e-commerce giant bans shoppers from the site for infractions such as returning too many items, sometimes without telling them what they did wrong.

Amazon has cultivated an image as a customer-friendly company in part by making it easy for shoppers to send back items they don’t want. The site’s lax return policies have conditioned consumers to expect the same treatment from other retailers, adding to pressure on brick-and-mortar chains. But shoppers are finding out there are some customers Amazon has determined aren’t worth keeping.

Nir Nissim received an email in March notifying him that his account had been closed because he violated the company’s conditions of use agreement. “You cannot open a new account or use another account to place orders on our site,” Amazon wrote.

. . . .

The 20-year-old, who works at an ice cream shop in Israel, said he had a $450 gift card balance that he could no longer use. “I contacted them almost every day for a week or two,” he said.

. . . .

“We want everyone to be able to use Amazon, but there are rare occasions where someone abuses our service over an extended period of time,” an Amazon spokesman said. “We never take these decisions lightly, but with over 300 million customers around the world, we take action when appropriate to protect the experience for all our customers.”

. . . .

Shira Golan, 23, said she spends thousands of dollars a year on Amazon, buying everything from clothes and shoes to groceries and toiletries. She said she has asked for refunds in the past on clothing and shoe orders, some of which she says were damaged or the wrong items. “I didn’t think it was so significant especially considering how much I buy,” she said.

Earlier this month her account was shut down without explanation, she said. The actuary, who lives in New York City, said she called and emailed the company to learn a reason for the closure. On May 10, she received a response saying she was terminated permanently because she “reported an unusual number of problems” with her orders. “I didn’t get any warning,” she said. “If I knew this would happen, I wouldn’t buy clothes and shoes on Amazon.”

. . . .

Retailers lose billions of dollars annually because of return abuse or fraud, which includes behavior such as requesting a refund for items that are used, stolen or bought somewhere else. The Wall Street Journal previously reported that chains such as Best Buy Co. and J.C. Penney Inc., have hired a third-party firm called Retail Equation to develop a “risk score” on each customer for the purpose of policing returns.

According to former Amazon managers, the company terminates accounts for behaviors including requesting too many refunds, sending back the wrong items or violating other rules, such as receiving compensation for writing reviews. Cases are typically evaluated by a human after algorithms surface the account as suspicious, they said.

It tends to happen when “you’re creating a lot of headaches for Amazon,” said Chris McCabe, a former policy enforcement investigator at Amazon and now a consultant at EcommerceChris LLC.

. . . .

“If your behavior is consistently outside the norm, you’re not really the kind of customer they want,” said James Thomson, a former senior manager at Amazon and now partner at brand consultancy Buy Box Experts.

Link to the rest at The Wall Street Journal

Traditional publishers’ ebook sales drop as indie authors and Amazon take off

20 May 2018

From GeekWire:

Ebook sales are dying. Ebooks are insanely popular.

If the short definition of cognitive dissonance is holding two contradictory ideas to be true, ebooks are about as dissonant as digital content gets.

Yet ebooks may also represent a chapter in the still-being-written story of how keeping track of what’s happening with content hasn’t always kept pace with the technology that’s transformed it.

Let’s start with the bad news. Two new sets of numbers covering 2017 show ebook sales are on the decline, both in terms of unit and dollar sales.

The first, released in April by market research firm NPD’s PubTrack Digital, saw the unit sales of ebooks fall 10 percent in 2017 compared to 2016. In absolute numbers, that meant the roughly 450 publishers represented saw ebook sales drop from 180 million units to 162 million over a year’s time.

The second, just released by the American Association of Publishers, reported a decline in overall revenue for ebooks, a year-to-year decrease of 4.7 percent in 2017. AAP tracks sales data from more than 1,200 publishers.

This ebook decline occurred in an overall publisher revenue environment that AAP said was essentially flat in 2017. So some other kinds of book formats that AAP watches, like hardback books, went up as ebooks went down. For its part, NPD says when combining print and ebook unit sales, ebooks’ percentage of the total dropped from 21 percent in 2016 to 19 percent in 2017.

. . . .

On the surface it would seem like all of this is going to come as a surprise to boosters who thought ebooks would replace traditional paper book publishing completely.

But there are three key words to keep in mind: “traditional book publishing.” And that’s the good ebook news.

Because the very same technology that allowed traditional publishers to create and sell ebooks also allowed authors to do the same — directly to readers.

NPD and AAP don’t measure those indie sales. Centralized reporting of direct-from-author sales is tougher to come by, but by all anecdotal measures the independent market has taken off, notably in the also-still-large category of adult fiction.

. . . .

One source of numbers for online book sales, including for indie ebooks, is the website Author Earnings. It recently estimated that traditional publisher reporting is, “now missing two-thirds of U.S. consumer ebook purchases, and nearly half of all ebook dollars those consumers spend.”

. . . .

For all categories of ebooks, Author Earnings figures purely “indie” publishing accounted for at least 38 percent of ebook units and 22 percent of ebook dollars in the last nine months of 2017. And that doesn’t include micro presses, Amazon’s imprints, and what it calls “single-author mega imprints” (think J.K. Rowling’s Pottermore).

. . . .

[M]ore than half of SFWA’s membership has done some kind of independent publishing. Importantly, SFWA said, there was no apparent difference in range of income between indie and traditionally published members.

Jeff Bezos, whose Amazon distributes a lot of independently published ebooks, made it a point to note in his annual letter to shareholders that, “Over a thousand independent authors surpassed $100,000 in royalties in 2017 through Kindle Direct Publishing.”

. . . .

Part of the apparently increasing shift of authors to indie status may be about that money. “In traditional publishing, the writer sees a sliver of the profits — 5-15 percent,” SFWA President Cat Rambo, herself a hybrid author, told me. “In small press publishing, that number goes up significantly, and indie writers get to keep the biggest portion of the pie.”

. . . .

But Rambo also suspected the decline in traditional publishers’ ebook sales may due to pricing, a potentially Titanic-sized problem of publishers’ own making.

“When I see an ebook that sells for twice the price of the paperback version, either someone has lost their mind, is asleep at the wheel, or is deliberately steering the ship towards an iceberg,” she said.

Link to the rest at GeekWire

Look Out Amazon, Here Comes Google

20 May 2018

From Forbes:

I’m a huge Amazon fan. It is one of my very favorite companies to write about and buy from. It is arguably the most convenient and easiest company on the planet to do business with.

. . . .

A couple of questions have been on my mind. First, who can take on Amazon? Being the leader in business, or anything, makes you a target. Everyone wants to be No. 1, so if you hold the top spot, every competitor would love to take your place. And my second question is, how long can Amazon sustain its momentum of growth and innovation?

If you look beyond other major online competitors, such as Walmart or Target, who can compete against Amazon? The answer may be … Google.

Google recently introduced Shopping Actions, an online retail platform that is not unlike the platform customers experience when they search for and buy products from Amazon. The basics of how it works are simple. Any retailer can sign up to be on the platform. When a customer searches Google for a product, links are displayed on the right side of the page that read: “Shop for (searched product) on Google.” The customer clicks and is immediately taken to a page that shows the merchandise, how many vendors are selling it, pricing and more. The customer can choose a vendor to buy from, and rather than its traditional “pay-per-click” model, Google takes a small piece of every transaction.

. . . .

Retailers now have the option of putting their merchandise on Amazon or Google. (Or, why not both?) Amazon still holds the edge, and will for a long time, partially because so many customers are loyal to Amazon and its Prime program. Another big advantage for Amazon is its reputation for amazing customer service. If you buy something and there is a problem, you contact Amazon and its world-class customer service kicks in. That’s the “Amazon difference.” Customers trust Amazon. They know the return policy is easy and convenient.

Link to the rest at Forbes

His Mysterious Lady

18 May 2018

Mrs. PG was happy to see one of her regencies was the Number 1 Amazon Regency Bestseller yesterday – His Mysterious Lady

Living a sheltered life, PG was unaware that Amazon has two Regency bestseller lists – Books > Romance > Historical > Regency and  Kindle Store > Kindle eBooks > Romance > Historical Romance > Regency. Mrs. PG’s book ranked #1 in both. It was #2 when PG put up this post.

Mrs. PG entered this book into the Kindle Scout program and Kindle Press picked it up in mid-2017.

 

Are ebooks dying or thriving? The answer is yes

14 May 2018

From Quartz:

It is a heartwarming story: In spite of the endless onslaught of digital content, American readers have collectively put down their screens and decided to embrace once more that beloved tactile rectangular prism that reminds us, with its weight at the bottom of our bags, of its immeasurable heft. Since 2015, major news outlets, including this one, have reported the triumphant return of print: that “real” books are back, and ebooks have lost their gleam.

Of course, it’s not entirely true. Yes, ebooks are doing just fine: Americans consume hundreds of millions of them a year. But many of their authors are writing and publishing books, and finding massive audiences, without being actively tracked by the publishing industry. In fact, the company through which they publish and distribute their books, a tech behemoth disguised as a benevolent, content-agnostic retailer, is the only entity with any real idea of what’s going on in publishing as a whole.

Amazon’s power over self-publishing, a shadow industry running outside the traditional publishing houses and imprints, is insidiously invisible. As a result, the publishing industry has a data problem, and it doesn’t look like Amazon will be loosening its grip any time soon.

. . . .

They don’t often get nominated for huge book prizes, noticed by the New York Times book review, or endorsed by the president. But over the past seven years, self-published books—predominantly sold as ebooks–have offered a rare avenue through which writers can make a living just from writing, as opposed to speaking, teaching, and/or consulting. By cutting out publishers, writers sidestep print and distribution costs, increase their revenue, and are beholden to readers and algorithms, not critics, editors, marketers, or sales people. A decent writer with a flair for self-promotion, or a decent entrepreneur with writing chops, can earn serious cash.

. . . .

Self-publishing has since exploded, particularly in romance, fantasy, and science fiction. Though an average is impossible to estimate, top-selling authors can sell hundreds of thousands of self-published books on Amazon, which, with revenue of $2 per book, can generate millions of dollars. For the past few years, mega-selling romance writer H.M. Ward has been making a seven-figure salary across self-publishing platforms, more than half of which came through Amazon. At one point,she cracked double-digit millions in sales. According to one estimate, last year 2,500 self-published authors made at least $50,000 in book sales across self-publishing platforms, before the platforms’ cuts.

. . . .

The information asymmetry between Amazon and the rest of the book industry—publishers, brick-and-mortar stores, industry analysts, aspiring writers—means that only the Seattle company has deeply detailed information, down to the page, on what people want to read. So an industry that’s never been particularly data-savvy increasingly works in the dark: Authors lose negotiating power, and publishers lose the ability to compete on pricing or even, on a basic level, to understand what’s selling.

. . . .

But ebook sales are anybody’s guess. Amazon doesn’t report its ebook sales to any of the major industry data sources, and it doesn’t give authors more than their own personal slice of data. A spokesperson from Amazon writes by email that “hundreds of thousands of authors self-publish their books today with Kindle Direct Publishing,” but declined to provide a number, or any sales data.

. . . .

Without good data, there’s no complete picture of the industry. News stories say digital fatigue is sounding the death knell of ebooks, as readers across the country devour $700 million dollars of untracked digital files. Publishers are less able to see what’s selling in certain commercial genres, and less able to take risks on debut authors. Bookstore attendance becomes lopsided, and a large swath of American readers get algorithm-driven book creation. As authors move to self-publishing, the creativity pool becomes bifurcated.

“I think it hurts everyone,” says publishing consultant Jane Friedman. “Because everyone gets to put forward the narrative they would personally like to believe in.” Publishers believe ebooks were a failed experiment, bookstore owners can cheer the triumph of their raison d’être, print lovers get to gloat that screens will never kill the old-school ways. Self-published authors can keep making money, and trying to light lamps to cut through the data darkness.

Link to the rest at Quartz

Barnes & Noble: why it could soon be the bookshop’s final chapter

12 May 2018

From The Guardian:

America’s biggest bookstore chain has seen its sales slide for 11 years. With its stock price falling 8%, is the writing on the wall?

. . . .

To the casual observer Barnes & Noble in Manhattan’s Union Square seemed to be doing everything right last Thursday lunchtime: displays heaving with books; customers milling around; every table at the Starbucks on the third floor taken by customers; a creche full of excited children; magazine racks browsed.

But appearances can be deceptive. America’s largest bookseller is in trouble. A quick chat with the “customers” suggests one reason why.

“I get a coffee, take a seat, read the latest magazines,” said a man who gave his name as Buddy. Asked if he planned to purchase the car and engineering titles he was holding, Buddy replied flatly: “No.”

Perhaps this is what it means to be a bricks-and-mortar retailer in 2018. It’s a feelgood customer experience and a showcase for online purchasing – but the sound of cash registers ringing? Not so much.

Last week, Barnes & Noble, the largest book retailer in the US, saw its stock price plunge nearly 8% just days after the New York Times published an editorial calling for the chain to be saved. “It’s depressing to imagine that more than 600 Barnes & Noble stores might simply disappear,” wrote columnist David Leonhardt. “But the death of Barnes & Noble is now plausible.”

. . . .

Sales have been on the slide for 11 years; even online sales have fallen. Over the past five years, the company has lost more than $1bn in value. Dozens of stores have closed. A shake-up in February resulted in the loss of 1,800 full-time jobs.

. . . .

But arguably innovation is where Barnes & Noble went wrong. Other big booksellers have tackled Amazon’s onslaught by doing precisely the opposite – going back to basics and putting the books first.

. . . .

Analyst Neil Saunders of GlobalData Retail said one difference between Waterstones and Barnes & Noble is that the UK chain is centered on high streets whereas the US chain tends to be centered on malls. It’s one thing, he says, to attract high street foot-traffic, another to get customers to drive to a mall for a book. Especially when America’s malls too are being swept away by the Amazon effect.

“People may drop in for a browse but they won’t make a dedicated trip to a bookstore,” Saunders says. “They don’t have the need and they don’t have the time. The way people shop changed, and that’s been detrimental for Barnes & Noble.”

. . . .

“The stores just look like an enormous Aladdin’s cave of all sorts of random products, including departments selling CDs and DVDs that are never crowded. The stores themselves are too large for what they need and in the wrong locations.”

Link to the rest at The Guardian

H&M Has a Plan to Save Itself

11 May 2018

From Slate:

H&M is good at making amazing frocks for the Met ball, but it’s less good at making money: The company’s profits for the first quarter of this year were down 69 percent, and it effectively ran out of cash in 2017. Cue the “pivot” headlines!

The latest pitch from the fast-fashion retailer, covered as a “pivot” in the Wall Street Journal earlier this week, uses lots of trendy buzzwords like A.I. and big data. The general idea is that by “using algorithms to analyze store receipts, returns and loyalty-card data,” H&M will be able to “tailor merchandise in each store to local tastes, rather than take a cookie-cutter approach.”

Stripped of its techno buzzwords, this is the old idea of localization, as laid out in a 2006 Harvard Business Review article by Vijay Vishwanath and Darrell K. Rigby. “The era of standardization is ending,” they wrote. “Smart retailers and consumer goods companies are starting to customize their offerings,” as part of a broader move “from standardization to localization.”

This is a formula that can work. Look at Waterstones, in the U.K., a bookseller that faces just as much competition from Amazon as Barnes & Noble does in the U.S. But while B&N is struggling, Waterstones is thriving. The difference: B&N is trying to compete by offering wine and big windows; Waterstones, by contrast, brought in a dusty old-fashioned book guy, James Daunt, whose first order of business was to empower store managers and give them almost total freedom in terms of which books they displayed where. No two stores would look or feel the same; all of them would reflect local tastes and mores. In 2017, its profits soared 80 percentfrom the year before.

. . . .

Daphne Howland, a contributing editor at Retail Dive, uses the example of a shopper who buys two jars of imported French honey every year—honey almost no one else wants. If she’s an important customer, or if the fact you stock that honey makes her love your store and keeps her coming back even when she isn’t buying it, then it makes sense to keep on carrying that honey. That’s the kind of decision that humans can make easily but that A.I. still finds very difficult.

Localization is a real thing and has been for as long as there have been shops: Shopkeepers know their customers and stock what those customers want. The difficulty comes when it’s attempted by global chains like H&M that rely on huge economies of scale and the ability to distribute identical goods to thousands of stores around the world. The bigger that a chain becomes, the more its sales are going to be a function of its global brand, rather than its idiosyncratic local stock keeping decisions. A.I. is not going to change that.

In the long run, local retail, imbued with deep local knowledge, is actually very well placed to thrive in a connected digital economy. Despite the rise of Amazon, most shopping is local and always will be. And for all of big data’s power, there’s something deeply inefficient about companies like Amazon or Unilever shipping razor blades hundreds of miles to my door, when they’re easily available at the drugstore across the street.

. . . .

In other words, local retail has the ability to disrupt Amazon more than Amazon has the ability to disrupt local retail. The “retail apocalypse” is not a function of Amazon, it’s a function of America having built vastly more retail square footage per person than any other country in the world. In shopping malls, a lot of that retail is doomed. But in neighborhoods, retail will always be profitable at a reasonable rent.

Link to the rest at Slate

The dominance of Amazon needs to be addressed but it is far more attributable to natural circumstances than it is anybody’s fault

8 May 2018

From veteran publishing consultant Mike Shatzkin:

As things evolve in an era of rapid change, it is human nature to assign credit or blame for any drastic alterations in circumstances. And so we have the book business, with its last remaining chain store behemoth, Barnes & Noble, in a period of obvious decline and presenting the clear possibility that the book publishers’ single biggest brick-and-mortar account might suddenly disappear.

This is a very unpleasant notion to contemplate for all publishers and, perhaps surprisingly, to Barnes & Noble’s erstwhile competitors among independent bookstores. Today, the head of the trade association that represents bookstores (mostly independents), Oren Teicher of the American Booksellers Association, is quoted in The New York Times saying, “It’s in the interest of the book business for Barnes & Noble not just to survive but to thrive.”

The op-ed in which Teicher’s quote appears is a piece by columnist David Leonhardt basically blaming the US Department of Justice for Amazon’s growth and the consequent reduction of market share available to all other retailing competitors. There is a lot of history and context not discussed in this piece but I have a nominee for the single most glaring omission. At just about the turn of the century, Barnes & Noble made a deal to buy Ingram, the biggest book wholesaler and distributor in the world, which was shot down by an activist Department of Justice. This is not mentioned.

And, in 1998, when the purchase was announced and B&N specifically cited its need to strengthen its ability to sell online as part of the reason for the purchase, the American Booksellers Association was vigorously opposed!

. . . .

It has long appeared from here (here’s a piece from 2012) that the existential issue in the book business in the 21st century has been “when does Amazon’s share growth stop, and who will be left standing when it does?”

Although definitional and data ambiguities make this an imprecise statement, it is likely that we’ve reached a day when more than half of the printed books sold through retailers are sold online, not in stores. Ebooks added into the mix for the narrative reading portion of the published material constitute a further erosion of the brick-and-mortar store sales base.

The shift of habits from buying in stores to buying online is not restricted to books, of course. Because of Amazon, it largely started with books. But books also have other characteristics that make them better than most things for online purchase, from a consumer point of view.

. . . .

So buying a specific book that you know you want online just makes sense to most people. Of course, Barnes & Noble has had its own online bookstore operation since the 1990s. They have steadily lost online purchasing share to Amazon for decades.

It is true that Amazon cut prices below what many brick retailers charge. And I even think I identified the moment when that strategy kicked in. See the same piece linked above. If I’m right, then they did it specifically to discourage independent stores from using the same Ingram capabilities they used to launch an online sales effort. (In fact, discussing the “low price” challenge that exists for publishers in 2018 without mentioning the self-publishing world which is the primary price restraint mechanism in the market, assuming no disingenuousness, displays serious ignorance of the marketplace realities.)

But the way things looked in then 1990s, with online retail in its infancy, was that it didn’t constitute a threat to brick-and-mortar. Many physical retailers ignored the opportunities and threats of online competitors. Borders, at about the same time that the Department of Justice was killing the deal by which B&N bought Ingram, was partnering with Amazon to deliver its online offering!

With those realities, does it make sense to be blaming the DOJ for not seeing the threat?

Much is made of Amazon’s pricing practices and the possible fallacy inherent in looking at consumer prices as the be-all and end-all indicator of whether a marketplace is working right. But even that argument is just not so simple. More than a decade before Amazon was launched, the retailing chain Crown Books (not to be confused with the then-indie publisher now an imprint of PRH) was aggressively discounting bestsellers. They grew fast in the 1980s. Until the superstore era began in the late 1980s, and the massive selection in the big Borders and B&N stores became the “killer” consumer attraction, this variation of the Amazon strategy (using bestselling books as loss leaders to pull in customers, to whom Crown sold remainders and bargain books to generate the margin to operate) was upsetting the old order.

. . . .

It is not hard to support Leonhardt’s idea that Internet monopolies, even if they result at least partly from the natural power law forces of Internet economics, will have to be regulated, as I suggested in another forum recently. (I publish the stuff that is not mostly about books in other places.) Perhaps the first step with Amazon is to ban them from the publishing function. And because they are a vital path to the consumer for all publishers, it would be helpful for the government to be sure that their sales terms are fair among the publishers competing for their customers (a concept that wll get increasingly tricky as Amazon’s physical store footprint expands).

. . . .

So while it is absolutely true that Amazon is gaining a level of market share, and therefore a level of power and control, over the book business that is frightening for those of us in it and not a good thing for society, this does not make them evil or make everybody who failed to stop them stupid. Through a remarkable series of brilliant moves — the first ones putting books online with a huge master catalog and providing “promise dates” for each individual title so the customer knew when to expect delivery but then continuing onto Prime and Kindle and harnessing their own print-on-demand and, most of all, enabling self-publishing by individual authors that delivered meaningful revenue — they have achieved what sometimes looks like imminent hegemony.

Link to the rest at The Shatzkin Files

Large market share and dominance is something Amazon is developing in a variety of different fields besides books.

From MarketWatch:

Amazon.com Inc. may already be the largest apparel retailer and could still grow to sales between $45 billion and $85 billion by fiscal 2020, according to Instinet analysts.

Instinet analysts led by Simeon Siegel estimate overall apparel and accessories sales at above $1 trillion with “above average” online penetration and “leading gross margin” compared with other categories.

“We believe Amazon has the largest [total available market] TAM (ever), doesn’t carry socio-economic retailing stigmas, can stock a limitless number of goods on its virtual shelf and knows customers better than they do,” Instinet wrote. “Amazon’s path to book dominance provides a potential road map for apparel success, with its fiscal 2007 media progress sharing similarities to its fiscal 2017 apparel achievements,” the note said.

PG notes that the “socio-economic retailing stigmas” refer to Walmart, previously the largest apparel retailer and now generally regarded as #2.

PG includes the apparel dominance Amazon has built as evidence Amazon is very good at understanding what customers want and how to deliver it to them at a reasonable price.

Amazon didn’t start selling books online with the goal in mind of becoming a publisher. However, in the face of illegal price-fixing by major publishers and other anti-Amazon activities calculated to bolster an outmoded, inefficient and expensive (for consumers and authors) publishing industry, Amazon innovated.

Prior to KDP, the self-publishing business was dominated by shady operators like Author Solutions and its companions whose business model focused on exploiting would-be authors. Instead of exploiting authors, KDP offered them much higher royalties they could earn in the traditional publishing business – 70% of the amount received by Amazon for KDP ebooks is a prime example.

Unlike traditional publishers that use a long and opaque supply chain which substantially reduces the amounts received by the publisher and thus the amounts received by authors, Amazon sold directly to consumers. Author royalties were quite close to 70% of the amount readers paid for author ebooks. (PG notes that some traditional publishing contracts {although fewer than in former days} calculate author royalties based upon the suggested retail price of the author’s printed book. Ebooks, books sold at a discount to discount retailers like Costco, Sam’s Club, etc.,  and some or all types of paperback sales are typically calculated based on the amount received by the publisher. Royalties calculated on the amounts received by publishers are virtually always much lower than royalties calculated based upon the suggested retail price of a book.)

For readers who really want to support authors they like, buying ebooks or CreateSpace books through Amazon is a much more effective means of doing so than buying books from a bookstore that takes its cut and acquires books from a wholesaler who takes its cut who acquires books from a publisher who takes its cut and passes a relatively small amount of the retail price of a book to the author.

Indeed, if we consider the annual incomes of all the people involved in the traditional publishing supply chain, it is quite likely that the author is the lowest-paid individual working in that business, even including clerks at Barnes & Noble.

PG suspects the traditional publishing practice of paying royalties to authors every six months may subtly influence authors to feel they’re earning more from their writing than they really are. Receiving a $6,000 royalty check in the mail feels psychologically like a larger amount than a $500 salary check every two weeks, particularly after taxes, social security and other deductions.

PG just did some quick calculations and discovered that a worker earning the US minimum wage of $7.25 per hour working 40 hours per week is earning more money than an author who receives a royalty check of $6,000 twice per year. If the author isn’t receiving a royalty check of over $7,500 every six months, the author would be financially better off working in a convenience store.

PG is not going to perform the calculations, but will note that the minimum-wage convenience store employee only pays 6.2% of wages for Social Security and 1.45% for Medicare (with the employer paying the same amount) while a self-employed author pays twice as much because she’s obligated for both the employee’s and the employer’s portions of those taxes.

Quick internet research didn’t disclose the average income of an author in the US, but in 2015, The Guardian calculated that the median earnings of professional authors in the UK fall below the minimum wage.

Do the median earnings of publishing executives fall below the minimum wage? Other employees working for publishers? How about median earnings of employees of book wholesalers? Delivery drivers that bring books to bookstores? Bookstore clerks?

So exactly why should the federal government take action to protect the traditional book publishing and selling industry at the expense of Amazon if that industry consistently fails to pay authors a living wage? Why penalize Amazon when it consistently pays authors more than traditional book publishing does?

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