The Future of Publishing: Should Publishers Be Afraid of Amazon?? Welcome New Hires! Welcome New Hires! (Photo credit: Will Merydith)
Has Amazon really grown into a dangerous book-selling colossus and is that why traditional publishers should merge to defend themselves? Some people argue that the Penguin and Random House merger is coming too late. Apple's "agency model", following price fixing investigations, has gone out the window, or at least it has "softened". As a result, they argue, it's game over, Amazon has won.

Too late? Game over? Yes, surely mergers could have started happening sooner but Time in legacy publishing is famously slow (it takes publishers on average 2 years to come out with a new book...) But I would argue that it's a physiologically sound move, one long awaited perhaps, but the right move all the same.

As soon as the Digital Revolution got going, there was talk that the Big Six would start merging and that you'd soon get the Big Five, then the Big Four etc ending perhaps with only the Big Three or Big Two. All facing Amazon, like small Davids facing Goliath, because Amazon is about three times bigger than Random House and Penguin combined (and they're slated to be the biggest publishing house in the industry).

This said, we should start by noting a very simple thing about Amazon: it's NOT just a publishing house. They've got a limited number of imprints (essentially 5) and some of them sound rather small with a relatively modest number of titles, at least so far... Amazon is deliberately vague about its Kindle sales figures, though it's likely that digital sales outpace printed. So the total sales figures for Amazon (over $48 billion in 2011), while impressive, don't concern just the book trade but everything else it sells, from electronic gadgets to clothes. For example,  Amazon reports that in the last quarter of 2011 the number of Appstore for Android customers has nearly tripled from the previous quarter (with them downloading more apps in Q4 than all of the previous quarters combined), and that the number of Instant Video customers has more than doubled year-over-year (with the number of streams increasing 300 percent from the previous quarter).

Now what is the proportion of books in its overall sales, nobody knows. But what that does is downsize the difference between Random House/Penguin's combined sales projected at some $4 billion. Amazon is not likely to be 10 or 12 times larger since, as a publisher, it's much smaller than the total sales figure suggests...

Because Amazon, more than a publisher, is actually an e-trader: it's a platform to sell books, both digital and printed. But even here Amazon's future is not necessarily all that rosy. There's even talk that Amazon is running into a brick wall, quite literally, for example with that release on 20 November of best-selling author Tim Ferris's book  The 4 Hour Chef (see article below). Everyone's talking about it: how Amazon gave Ferris a 6-digit advance and now the author can't even place his new book anywhere in brick and mortar stores not to mention Barnes and Noble that flatly refused to carry the book, or so goes the gossip...
Image representing Timothy Ferriss as depicted...
Tim Ferris Image by Scott Beale / Laughing Squid via CrunchBase

But there's more to it. On the e-reader front, competition has increased, Kobo , a Canadian upstart recently acquired by a Japanese e-tailer, is now spreading everywhere in the world and Barnes and Noble's Nook, for long restricted to the American market, has grown by leaps and bounds. Following a recent $605 million cash injection by Microsoft, it is set to expand in the UK this autumn. At this point, it would seem that Amazon controls some 60% of the digital market, admittedly a huge portion, but a lot less than the 90% with which it had started some four years ago.
English: Logo for the Barnes & Noble Nook
English: Logo for the Barnes & Noble Nook (Photo credit: Wikipedia)

Then there's another worrisome bit of news for e-reader producers: a recent survey showed that a third of e-readers were used only once by their new owners! And fully 25% of the people who were interviewed to explain their rejection of e-readers flatly stated that they preferred printed books. The Digital Revolution may be hitting a brick wall! In any case, it's not as pervasive as most of us think and it certainly calls into question Amazon's business model (which consists in selling e-reading devices at or below cost to gain market shares and then make up for the loss or lack of profit through content, i.e. book sales).

Also, of late, Amazon has run into problems with customers regarding book reviews. It has understandably tried to "clean up" the system that had become corrupted by cozy reviews from family and friends. But its algorithm to flush out the corrupted reviews ended angering a lot of people, especially writers (who tend to write reviews more easily and more of them than average readers). Many writers have found to their surprise that Amazon was taking down perfectly bona fidae reviews and hurting honest people, most famously Joe Konrath who posted about this on his blog. 

So Amazon's not doing quite so well these days...

Indeed, by opening its doors to self-published authors without putting up any gate keeping or quality control systems, it has been flooded with poorly edited books, full of typos, ill-structured and badly written - not to mention semi-pirated books using content widely available on Internet that are brazenly passed for something new. As a result, in some quarters, Amazon is viewed as a slush pile publisher - not a reputation to be envied. I have no doubts that at some point Amazon will rectify the situation. In the meantime, to be published on Amazon is just not the same as being published by a traditional house. 

To be sure, the stigma attached to self-publishing has been largely removed. It's certainly one of the major achievements of the Digital Revolution, marked by the amazing successes of authors like Amanda Hocking, John Locke, Joe Konrath and Bella Andre, but the fact remains that indies do not enjoy the same reputation as traditionally published authors. 

There are really two possible game changers that could dramatically change the future of publishing: discoverability and distribution. Let's look at them in turn:

(1) Discoverability:  It is a problem for publishers (it was recently discussed in a very interesting conference in New York) but for an indie, it is a nearly unsurmountable challenge. A self-published author simply does not have access to the publishing industry's major literary critics, papers and magazines, nor for that matter, to the industry's major competitions and prizes, like, for example, the National Book Awards, the Pulitzer or the Man Booker Prize. Amazon is well aware of this, so it's no surprise that it has set up regular imprints modeled on traditional publishing and hired experienced professionals to run them.

Screw (Photo credit: ucicsboy)
(2) Distribution: Here traditional publishers are laboring under a constraint that does not affect Amazon: they have traditionally set up a system with bookstores and other distributions points that allows the stores to return all unsold books, without however controlling how much stores order on the new title list. As a result they tend to order too much and the returns eat up the profits of the publishers (and royalties of authors). 

This is not a viable model. Why is Amazon not affected? Simple, they have their Create Space division that prints books on demand (so-called POD technology) - no storage problem, no distribution problem.

The big question (and the surprise) is that publishers have not taken on Amazon on its own ground: why not move to POD publishing? 

Why not set up POD machines in book stores, machines that would be dedicated to publishing their titles, with copies of the printed books nicely displayed around the machine and online terminals to "leaf through" their books in a virtual manner, the way one does on the Kindle store. And while your book is printed, you could sip a tea or coffee or munch on a pastry, since it takes a little time to be printed - too much perhaps, the POD machines are still clunky but surely they could be improved: never underestimate the advances of technology... In short, successful bookstores would be the ones with POD machines and the capacity to turn themselves into attractive coffee houses and community centers for events to meet authors etc. 

Under the circumstances, if Big Publishers merge, and even medium ones merge too, thus acquiring more financial means and the capacity to move into new directions - like POD publishing - their future could look a lot better than we all have been led to believe up to now. 

Of course, how innovative Big Publishers are likely to be is anyone's guess.

Still, I don't believe we should view Amazon as a Big Black Wolf or even as a Colossus in publishing. As I've blogged before, Amazon is certainly the Next Big Publisher. But it's more than that, or rather it's something slightly different: it's primarily a book trading e-platform and secondarily a POD publisher (with CreateSpace). 

To conclude: there is space for Amazon AND the Big Six, sorry I mean the Big Five. Consider this: if instead of viewing Amazon as a rival (which it is and isn't at the same time), publishers could start using it for what it is (an e-platform) and why not, collaborate and even ally themselves with Amazon in particular areas, like, for example, assist in cleaning up the book review system? If a book quality gatekeeping sytem was set up, and if it were made reliable and efficient in helping readers search for the kind of material they like to read, I think everyone would gain, publishers and readers alike!

What is your opinion? Do you think that the move to merge forces is coming too late for the publishing industry? That Amazon will remain alone as the Big Winner of the Digital Revolution?
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