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‘They Own the System’: Amazon Rewrites Book Industry by Marching into Publishing

16 January 2019

From The Wall Street Journal:

Amazon.com Inc., which over more than two decades made itself the world’s largest book retailer, has created an unrivaled display window that can catapult titles from obscurity to must-reads.

More recently it has built something else: Its own line of published books.

The novel was released in 2017 and featured on Amazon First Reads. The online promotion also is emailed each month to more than 7 million U.S. subscribers and exclusively showcases titles from Amazon Publishing.

“Wham, we get 300,000 downloads,” said Mr. Sullivan, whose title has sold more than 1.5 million print books, e-books and audio books. It was ranked No. 56 on USA Today’s top 100 best-seller list for all of 2018.

The Seattle-based giant houses 15 imprints in the U.S. under the Amazon Publishing banner, turning out everything from thrillers to romance novels to books translated from other languages. Amazon published 1,231 titles in the U.S. in 2017, up from 373 in 2009, the year it entered the $16 billion-a-year consumer book publishing business.

To promote these works, it has tools other publishers can only dream about owning, including Amazon First Reads and Kindle Unlimited, Amazon’s e-book subscription service. Together, they reach an estimated 10 million or more customers who can read offered titles with a few keystrokes.

“They aren’t gaming the system,” literary agent Rick Pascocello said. “They own the system.”

The promotional levers that Amazon has built to lure consumers can boost the opportunities of little-known writers and recharge the careers of experienced authors such as Mr. Sullivan. Amazon Publishing, the company’s book-publishing unit, together with its self-published authors, has made it a fierce competitor in lucrative genres including romance.

To some in the industry, it is an inherently conflicted structure, in which the most powerful retailer has a competing incentive to favor books it publishes and those from authors using its self-publishing technology.

On Wednesday, 16 of the top 20 books on Amazon’s romance best-seller list were titles from its book-publishing arm or were self-published on Amazon’s platform.

Amazon said its marketing and retail programs don’t give its books an unfair advantage, and that it offers all publishers a chance to use them.

“Our focus is on making sure that our customers get great content,” said Jeff Belle, vice president of Amazon Publishing. “The feedback from authors, customers and agents has all been positive.”

Amazon commands some 72% of adult new book sales online, and 49% of all new book sales by units, according to book-industry research firm Codex Group LLC.

. . . .

For authors, the company offers a huge potential audience, especially given the decline in large bricks-and-mortar bookstores. Amazon has more than 100 million Amazon Prime members world-wide, and its U.S. subscribers can pick one title from Amazon First Reads free each month. Non-Prime members pay $1.99.

On Jan. 2, Amazon First Reads sent an email to members about six new titles from Amazon Publishing. By early evening, those books were the top six on Amazon’s Kindle store e-book best-seller list.

. . . .

The scale of Amazon Publishing isn’t readily apparent because many rival booksellers decline to carry Amazon Publishing titles on their shelves.

“They get enough support on their own,” said Lori Fazio, chief operating officer of R.J. Julia Booksellers in Madison, Conn., which doesn’t stock them.

. . . .

Industry trackers say Amazon is shrinking publishing revenue in adult fiction by releasing so many low-price books from Amazon imprints and its self-published authors. Publisher revenue from adult fiction fell 16% to $4.4 billion in 2017 from 2013, the Association of American Publishers said.

“My suspicion is the cumulative impact of Amazon’s highly integrated retail and content programs is cannibalizing traditional publisher fiction sales.” said Peter Hildick-Smith, chief executive of Codex Group, the research firm.

Mr. Hildick-Smith said the decline in revenue for fiction issued by traditional publishers coincided with the Kindle e-book store’s growing share of the overall adult book market—up 43% between 2013 and 2017—to a bit more than a quarter of the total market. E-books skew heavily to fiction, and much of that increase comes from books self-published on Amazon.

Publishers that specialize in genre fiction, especially romance—a fount of publishing profits—are feeling the biggest impact.

. . . .

Independent romance publisher Entangled Publishing LLC offers a small number of erotic titles on Kindle Unlimited. For many titles, the small publishing house uses the distribution arm of a larger publisher to get its books into retail stores, a distributor that doesn’t participate in Kindle Unlimited.

As a result, most Entangled books aren’t likely to reach Amazon’s list of best-selling romance titles, which favors Kindle Unlimited titles. While Amazon has opened a lot of doors for authors and publishers, said Liz Pelletier, Entangled’s chief executive, the extra boost given to Kindle Unlimited titles makes Amazon’s best-seller list less applicable for publishers that don’t participate.

. . . .

Romance writer Lisa Renee Jones pulled her titles out of Kindle Unlimited in 2018 after her income fell by about one-third over a few months.

“I jumped on the bandwagon, but I later regretted it because it devalued me as an author,” said Ms. Jones, whose books have been published by St. Martin’s Press’s Griffin imprint and others.

An Amazon spokesman said thousands of self-published authors in 2018 “earned more than $50,000, with more than a thousand surpassing $100,000 in royalties.” The spokesman declined to say how many self-published books using Amazon technology were published last year. “Hundreds of thousands of authors have self-published millions of book since 2007,” he said.

Some have hit it big. Laurie Ann Starkey, a certified public accountant, quit her job in 2014 to become a full-time writer. She now owns a small independent press and employs 10 people as editors, managers and social-media staff. She generated $1.15 million last year in gross revenue, she said, mostly from her own books. About 89% of her sales were from Kindle Unlimited.

. . . .

Romance writer Inglath Cooper’s self-published novel, “Down a Country Road,” was ranked No. 52 on Amazon’s digital romance list on Jan. 15. She said Amazon has changed publishing, much like Netflix changed the movie and TV business, by making a large inventory of books immediately available to readers.

“Rather than resent the changes,” Ms. Cooper said, “I prefer to choose the opportunities available.”

Amazon Publishing helped resurrect the career of Mr. Sullivan, whose World War II novel found little traction among New York publishers. Previously, he had written more than a dozen novels, including with author James Patterson.

“My son urged me to try Amazon,” he said.

In March 2017, the influential trade publication Publishers Weekly reviewed “Beneath a Scarlet Sky,” saying Mr. Sullivan “lays on history with a trowel in this overstuffed tale of derring-do set in Italy during WWII.”

Amazon told Mr. Sullivan not to worry. “It was such a compulsive read that I knew it had the potential to be a big book,” said Danielle Marshall, editorial director of Lake Union Publishing, the Amazon Publishing imprint.

Link to the rest at The Wall Street Journal

“My suspicion is the cumulative impact of Amazon’s highly integrated retail and content programs is cannibalizing traditional publisher fiction sales.”

Of course, in a well-ordered world, traditional publishers and guys named Leonard would have continued to own the system and handled all the cannibalizing in a far more refined fashion.

We know how Leonard has changed (or not), but PG wonders how such publishers have changed in light of the impact of Amazon.

Of course, (returning to that well-ordered world), Amazon wouldn’t impact anything and nobody who is anybody would live in Seattle.

But order is not to be found in the 21st Century. In its own untidy and ill-kempt manner, change happens.

Or does it? PG hasn’t noticed much change in the cloistered halls of New York publishers. For them, the old ways are the best ways. Are they even capable of change?

Heaven forfend that Big Publishing would ever examine its treatment of all but a tiny slice of its authors or revisit its royalty structure or (gasp!) test whether reducing prices would increase sales on a commodity that, in the case of ebooks, has absolutely no additional incremental cost of goods for each additional copy sold after the first.

In a rational world, publishers would embrace the business of selling organized groups of electrons. After all, Bill Gates got rich selling electrons.

They wouldn’t even have to gather their own electrons. Amazon would collect gobs of electrons and sell them to people who liked to read while destroying nary a tree and then large bank transfers (more electrons!) would decamp from Seattle to Manhattan.

It’s so much easier to hang out with other publishers, whine about Amazon and reassure one another that, any day now, people will come to their senses and flock back to real bookstores to buy dead-tree books from impoverished clerk/drones, just you wait and see.


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

19 Comments to “‘They Own the System’: Amazon Rewrites Book Industry by Marching into Publishing”

  1. In a rational world, publishers would embrace the business of selling organized groups of electrons. After all, Bill Gates got rich selling electrons.

    In an alternative rational world, publishers would wonder how much paper business would be cannibalized by their reduced eBooks. Then they would ask how much cross-promotion from paper their eBooks would lose.

    They would ask exactly what they do better than anyone else in eBooks. In paper they are better than anyone else in moving paper product to consumers. Look around at a world of paper books. Publishers did that.

    And then they would ask if they could compete in an eBook world where nobody has any incremental cost of goods for each additional copy sold after the first, and zillions of other producers have much lower costs for the first.

    And finally they would ask what strategy takes the greatest number of dollars out of a declining fiction market in which they have no competitive advantage. Guys named Leonard have answered that question.

    • What publishers could and should have done was actually make their talking points about how they nurtured worthy authors a reality.
      Essentially, snagging anybody with any actual writing talent and then putting them in eBook format, then using ePub as a farm team for paper. That would have allowed them to maintain their stranglehold.
      Instead, they decided to pretend that disintermediation would never reach them, and they are suffering from it. I feel no pity.

    • Indeed, the problem that publishers saw immediately was that there was no payola table in an ebookstore. (Although I’m not so sure that’s the case now.) Up until that point, “what they had done better than anyone else” was to enforce a cartel-led lock on the retail channel. With that gone, they lose a huge advantage over anyone who wants to compete with their cartel. The rational thing to do is to try to keep the cartel effective.

      • The retail channel is built around shelf space slots.
        Those are finite. Controlling those slots by payola or flooding the shelf space with DOA content offers a competitive advantage to the bigger players which is why corporate publishing has consolidated from hundreds of imprints to five BPHs.

        Online, whether print or digital, “shelf space” is not a limiting factor and a new release has the exact same visibility as a fifty year old used book. Suddenly, consumers aren’t limited to what publishers choose to promote that month but whatever catches their fancy.

        Power moved from the glass tower the pyramid to the consumers at the base. Amazon built their empire off catering to consumers and the bookstores hanging on do the same. The ones more interested in promoting the owner’s agenda or the publishers’ payola slate seem to be doing a bit worse.

        One thing to consider: the real news isn’t the modest gains shown but the total volume of sales in that channel. (Hint: very small.) Amazon is obviously tops but a lot more books move through newsstands and drugstores than the Independent bookstores. And those aren’t channels open to midlisters and newcomers. That right there reduces the value of signing with tradpub. If they can’t get you anywhere you can’t get in on your own…

        • “a new release has the exact same visibility as a fifty year old used book”

          That is not my Amazon experience, and is actually the point of the OP as well. Amazon’s “here’s what’s for sale” presentation does skew towards their own books (big surprise) and new Tpubs. There might be some variety in the “based on your purchases” list, but only some. If you want a 50 year old book you are going to have to know about it go hunt it down, not that that’s a bad thing. At least it’s possible.

          • I was thinking of how we got here: unlike the OP I don’t pretend the world started in 2013. Or 2007.
            The present is molded by the past.

            Even today, theres the search options.
            The category filters and the sorting factors.
            Pkys, Amazon isn’t the only channel to consider.
            ABE books and other online players matter.

            None of those favor tradpub over Indie or used.

  2. Notice how they keep conflating APub titles with indies, over and over, as if Amazon controlled those titles the way they control Apub.

    Heaven forbid they admit the indies are succeeding on their own.

    Also, I noticed they refer to ebooks’ share growth as if it started in 2013 rather than 2007. Presumably to pretend the conspiracy and the destruction of the independent ebook stores never happened. (By 2013 Nook was already in its death spiral.)

    They also gloss over the boycott of APub titles. Otherwise they’d have to explain that the boycott forces all buyers of those books to Amazon, which concentrates sales and visibility there. Finally, a bit of math: if Apub puts out 1200-plus titles a year and First reads promotes 73 titles a year, that means the other 94% are being discovered and sold on their own. The boycott doesn’t seem to be hurting APub none.

    • BTW, what Amazon shrinking “industry revenues” really means is less money for middlemen. That is hardly a negative for consumers or Indie authors embracing change.

      Everybody else seems to prefer to whine and refuse to accept readers are in control now.

  3. They ‘own’ the system because they ‘built’ the system. Publishers had a century long head start, and sat on their fat rear ends while a Wall Street guy beat them to their own punch. Boo hoo.

  4. I can’t see the whole article, but is this trend of booksellers not carrying Amazon titles a big one? I find it hard to believe that a retailer would refuse to stock the biggest-selling items.

    • Absolutely. Book retailers can tell if a book is self-pub or amazon pub, and they uniformly flatly refuse to stock them or even (in most cases) order them, and they get downright surly if you ask.

      • It is also old.
        B&N organized the boycott in 2011.
        At that time, APub books sold at comparable prices to other tradpubs. After a couple years they started dropping the prices to where they stand, closer to Indies than the BPHs.

        And, of course, the boycott incentivized Amazon doing B&M bookstores.

        Class cutting the nose to spite the face.

  5. I don’t care who publishes the books as long as they are ones I want to read at a price point I’m willing to pay.

    At this time, I mostly read indy stuff because they seem to be the authors producing what I want to read.

    Based on what I read here and elsewhere I don’t seem to be alone.

  6. Amazon controls its own imprints – and they are even more opaque about it than the traditional system of agents and publishers.

    In a business sense, picking up authors who are doing well as indies (or even trad pubbed authors) already – based on their own extensive data – is a reasonable model. They can then offer those authors a lot of push, based on the data they don’t share with advertisers.

    It’s still a behemoth niche indies can’t get into, much as I love Amazon in general. And it still goes for the biggest return (as all businesses do), which leaves a lot of writers out.

  7. i truly wonder what deal amz offers to authors they pub. I only know one indie author who sold to them and that author wont say.

    It would be helpful to know what a typical contract from amz offers/takes..

    • It definitely would be helpful but APub is already despised enough by the publishing establishment. Just one of the many reason to keep even general terms proprietary. Nonetheless, a few things are known.

      – Terms are reasonably assumed to be comparable to the terms of the old KINDLE SCOUT program:

      “Here are the terms of a publishing deal with Kindle Scout:

      * You get a $1,500 advance
      * You earn 50% royalties from your book sales
      * You have a couple escape clauses, wherein you regain the rights to your book if it doesn’t earn enough
      * Kindle Scout gets the rights to your eBook and audiobook, but not your print book. Some authors have gone on to sell their print rights to traditional publishing houses!
      * You get to choose your own cover
      * Your book gets copy edited before publication (how thoroughly it’s edited depends on the book)”

      Unlike KINDLE SCOUT, APUB does get print rights and the advances are generally higher. Reversion clauses, unknown.

      – APub operates at arm’s length from KDP and Prime. KDP charges APub the usual 30% and Prime pays APub for any books in First Reads and Prime Reading. Not full sale price, though. Prime Reading most likely pays KU rates (pure speculation, though) and First Reads it has been said pays a lump sum (decent but not life-changing. I figure something in the low to mid five figures. Again, reading between the lines of the few public comments.)

      – Advances, bonuses, and actual royalties are negotiated book by book but in general it is probably safe to assume ebook royalties run close to 50% of net (35% of retail) which is about double the “industry standard” and pbook royalties are comparable or better than the oft-quoted 15%.

      APub titles have generally settled on retail prices around $4.99 for digital and $9.99-$14.99 for print so I would guess net earnings in the $1.75-3.00 per book range. Mostly Indie, Inc territory, no? The trade off being the usual tradpub benefits: higher sales volume in return for copyright control. Naturally, proven sellers almost certainly get better terms but the floor is definitely higher than at most other tradpubs. And you do get an old-school two-way engagement on editing and covers, by most reports.

      APub is still tradpub and it operates within the constraints of the boycott so the bulk of sales and promotion efforts will be via Amazon.com and AmazonBooks but with Amazon holding such a big share of total book sales that’s not the downside the boycotters think it is.

      Basically APub has grown into a midsized trapub that still operates like a pre-conglomerate publisher, offering slightly better terms and a more respectful relationship than the BPHs but it’s no nirvana for authors.

      Worth considering if offered a chance but not really market breaking, despite the establishment whining. They probably would look like any honest mid-sized traditional publisher if it weren’t for the boycott concentrating their sales on Amazon. (Figure that instead of accounting for maybe 10% of sales at Amazon and zero elsewhere, in a boycott-free parallel universe they might account for 5% everywhere. Pretty good for an outfit putting out “only” 1200 books a year vs the 17-25k of the randy Penguin.)

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