Amazon’s Ambitious Agenda

The US Justice Department’s recent antitrust actions against the six largest book publishers for allegedly colluding in setting e-book prices comes as a nice boost for Amazon, whose pricing policies have long worried the publishers. Amazon, of course, doesn’t need any help, given its dominant, 60% share of the e-book market, not to mention a very strong position in print bookselling, and a growing presence in book publishing. These and other aspects of Amazon’s past, present, and potential future impact on the book industry are well-explained in Steve Wasserman’s “Amazon and the Conquest of Publishing” in the June 18 edition of The Nation. Though not necessarily presenting any new information, the article deftly weaves together a range of information and perspectives about Amazon’s multi-pronged moves to dominate book publishing. Wasserman lays out the history of Amazon’s moves, from its earliest days trying to become the world’s biggest bookstore, to its revolutionizing e-book publishing with the introduction of the Kindle in 2007 (21% of Americans have read an e-book in the last year and Amazon now sells more e-books than print books), to its more recent entry into the role of publisher by hiring industry veterans and starting several imprints. Among Amazon’s potentially problematic moves for traditional publishers is Kindle Single, a program that could change time-worn author-publisher economics. Authors can publish short essays at a highly-advantageous 70% royalty, but agree to a retail price of no more than $2.99 and receive no advance. A number of prominent writers have participated in this program, some reportedly earning more money than magazines would have paid. The potential for disruptive impact by extending this model to book publishing seems pretty clear from Wasserman’s narrative. While books are no longer the central focus of Amazon’s business, it can use its vast resources to enter and dominate any aspect of publishing over time (Amazon has $48 billion in revenues, more than the size largest publishing companies combined and a $5 billion cash reserve).

As a contrast to the Wild West of the US book publishing market, the same issue of The Nation also carries a fascinating article, “How Germany Keeps Amazon at Bay and Literary Culture Alive,” explaining how German laws prohibiting discounting have protected publishers and independent booksellers. Statistics here tell an interesting story: Germany publishes four times as many new books per-capita than the US each year, and with a population just one-quarter that of the US, Germany has 80% more independent bookstores. According to the author, former publishing executive and culture minister Michael Naumann, the difference is due to more than Germany being a “kulturnation” of largely well-educated people. The protection of book publishing margins enables publishers to invest in titles that are not likely to make money, such as those of a scholarly or narrow focus. German publishers also benefit by being allowed to write off unsold book inventories, a privilege not allowed by US tax laws. Whereas US antitrust law aims to let competition and innovation proceed as long as it benefits consumers (i.e. in lower book prices), Germany’s laws seek to protect book publishers and sellers under the argument that a stable, healthy publishing industry ultimately guarantees that the public will have access to a wide range of books, regardless of price.

About Lee Greenhouse

Longtime strategy consultant focused on the business of information content, applications, and services.
This entry was posted in Uncategorized. Bookmark the permalink.

Comments are closed.