An American Editor

February 8, 2012

Amazon vs. Big Publishing: 800 lbs vs. 798 lbs.

Last week’s issue of Bloomberg’s Businessweek included an article titled Amazon’s Hitman. If you haven’t read it, you should. It is enlightening.

The gist of the article is that Amazon is gearing up to challenge the publishing world on its own turf: the signing of and creation of big-name authors who sell hundreds of thousands, if not millions, of books. And this assault worries the Big 6 publishers — Hachette, Macmillan, Simon & Schuster, Penguin, Random House, and Harper-Collins – with good reason: Amazon has more market value and disposable cash than they do combined.

The article discusses the history of the relationship between the Amazon and the publishers, along with what Businessweek thinks is Amazon’s thinking. But with all of their crying the blues, the Big 6 currently are in the driver’s seat; all they have to do is be willing to drive.

There is no reason why the Big 6 can’t offer exclusive deals to Kobo and B&N. Give them a 3-month exclusive selling period for expected ebook best-sellers and do away with the agency pricing during that period. After 3 months, make the ebooks available to everyone and reinstate agency pricing. This would boost competition and play against Amazon’s exclusivity program.

I suspect that this scenario won’t occur because the Big 6 simply do not have the spine. I don’t see any antitrust violation — if Amazon can do it each of the Big 6 can do it, too — but even if there were a possibility of antitrust violation, do it anyway and keep the program going while you hash out with the government the antitrust issues. That hashing out could take years, which would give Amazon’s competitors an opportunity to become real competitors. More importantly, it might well be an effective weapon in the crusade to keep competition in publishing alive.

Instead of wringing their hands and acting as if there is little to nothing they can do, publishers need to creatively fight Amazon’s onslaught while they are in a position to do so. Right now Amazon has no Stephen King-level authors in its stable. Amazon still needs the resources of the Big 6 to fill out its ebookstore. Remember that it was Amazon that caved in the dispute with Macmillan and brought agency pricing to ebooks. But the day isn’t far off when the advantage will shift to Amazon and the Big 6 will be able to spend their days writing their own obituaries.

The difference between Amazon and the publishers is that Amazon is willing to continue to lose money on its book operations for as long as it takes to control the field, relying on its other business to shore up its balance sheet. In contrast, the Big 6 are unwilling to lose money even for one day, even if it means their ultimate survival. Jeff Bezos is capable of thinking years ahead, like a great chess player who can think dozens of moves ahead; in contrast, the Big 6 CEOs are like the starting chess player, unable to think strategically even one move ahead, let alone several. Bezos has the spine to tell shareholders no payout this quarter or next; the Big 6 CEOs do not.

Yet the Big 6 have an opportunity to shakeup the ebook market and turn it, at least temporarily, until Bezos’ next countermove, in their favor while simultaneously shoring up Amazon’s biggest competitors, Barnes & Noble and Kobo.

Right now exclusivity is working a one-way street. Although the Big 6 declined to participate in Amazon’s current experiment, it is worth noting that Bezos had no compunction about asking them to do so. If the Big 6 won’t offer exclusivity to B&N and Kobo, perhaps B&N and Kobo should approach the Big 6. This is the one area in which Amazon is vulnerable. It is one thing to have exclusive rights to a self-published author’s books, but quite another to have them to a Stephen King’s writings.

The ball is now in the court of the Big 6. What will they do to counter Amazon? If I were a gambler, I’d say the odds were that all they will do is complain but do nothing substantive. There wasn’t much at stake in the agency pricing showdown on either side. An exclusivity arrangement with B&N and Kobo, however, puts a lot at stake. It will be interesting to see how this plays out.

10 Comments »

  1. [...] puts a lot at stake. It will be interesting to see how this plays out.reposted with permission from An American Editor /**/ Tags:No Comments so far ↓There are no comments yet…Kick things off by filling out the [...]

    Pingback by Amazon vs. Big Publishing: 800 lbs vs. 798 lbs. - The Digital Reader — February 8, 2012 @ 8:04 am | Reply

  2. publishers need to play hardball since that’s what Bezos plays.

    Comment by Winston P — February 8, 2012 @ 3:22 pm | Reply

  3. [...] chains have decided not to carry Amazon books; now publishers need to show similar mettle, as the American Editor blog argued persuasively earlier this [...]

    Pingback by Amazon to save the high street! (Unverified) « Front of Store — February 9, 2012 @ 6:11 am | Reply

  4. This is a stupid idea, and, again, another of your anti-Amazon diatribes. Why give an exclusive to B & N/Kobo? You’ll sell FAR more ebooks through Amazon since they own the iion’s share of the market. And, if you window it on Amazon, you risk pissing off your customers/readers and selling less. ALSO, (why windowing is such a stupid idea in the first place) all the publicity you receive when first launching a book is lost several months later (book tour over, reviews now old and hard to find, etc), and your potential readers and have forgotten/moved on to other, newer books.

    Bad idea.

    Comment by Rick Askenase — February 9, 2012 @ 10:24 am | Reply

    • I guess, Rick, your notion of a good idea is to kiss Jeff Bezos’ feet and thank the deities for everything he does, leaving it at that. The trouble with views such as yours is that they encourage Amazon to say to publishers “if you want us to sell your books, you cannot let anyone else sell them” (which is the thrust of exclusivity). Why you think it is alright for Amazon to insist on exclusivity for 90 days or longer but not for anyone else to do the same eludes me.

      Although Amazon is the largest single retailer, it is not the controller of the market — yet. It is working to that. Amazon has 70% of the U.S. ebook market, but less than 30% of the book market as a whole.

      And as to why B&N and Kobo should be given exclusive deals, I should think the answer obvious: To help them battle Amazon, to keep the publishers relevant, and to keep competition in the book market alive.

      Comment by americaneditor — February 10, 2012 @ 2:51 am | Reply

      • I am not suggesting (or advocating) an Amazon exclusive. Just that it is foolish to give a B & N/Kobo exclusive for the very simple reason that you won’t sell as much through them as through Amazon, and, AFTER the exclusivity window lapses, no one will remember your book or then buy it from Amazon- you will have lost the initial publicity push to sell books, and won’t get it back. So you will have lost 70% of the potential market AND the pibulicity. Doesn’t make sense to me.

        Comment by Rick Askenase — February 10, 2012 @ 9:55 am | Reply

  5. Frankly I think that the anti-trust, price-fixing lawsuit that should be brought to court is against the big 6. They have set the price across the board for all their the e-books not allowing the normal discounts provided in-store. I really hate having to wait for the paperback and then find it not discounted at all.

    I used to go to my local BN store to by the hard backs of my fav authors on the release date. I can no longer afford to do this even at 50% off because I no longer have the funds or the room to store them. Having said that, most of my fav authors are not on the best selling list, so I only get 20% off. I read on both a Kindle and a Nook Color. I have downloaded almost 900 books for free on my Kindle. There are not nearly as many for the Nook. But — these free books are not the ones I want to be reading as they are not by my fav authors and I do not want to forgo the pleasure of their company.

    The actually purpose of this rant is – I want my discounted books online! I don’t care who I buy them from – either BN or Amazon – but I want my discount! I can’t believe that the authors are getting any more money from this and they are the ones who should be. I would not complain if that were so. The Big 6 are the ones who need to get a clue and a new business model. I am also of the opinion that Amazon is trying to be the Google of the publishing world. Then there will be war — Google versus Amazon.

    Comment by Jacqueline Wilson — February 10, 2012 @ 7:27 am | Reply

  6. First, Amazon accounts for about 60% of all paper books sold in the US, not 30%. That right there should terrify publishers. But back to your point, all Amazon has to do to crush this boycott is make the kindle non-exclusive. Once they do that, they will be able to sell their ebooks on the NOOK, and B&N won’t have any reason not to stock the Amazon Imprint books on their shelves.

    This war was lost a while ago, and all B&N, ABA, and the independent stores are doing is showing their true colors. They obviously don’t care about books or authors, they only care about the bottom line. Amazon cares about Books, readers, and authors, what they don’t care about is the bad business model the traditional publishers are grasping onto while the entire industry sinks.

    The boycott is really cute, but it’s waste of time.

    Comment by Veronica — February 10, 2012 @ 4:20 pm | Reply

  7. Perhaps you would rather a publisher handle the production and distribution of your book. The secret is to match your manuscript to the publisher. Better publishers specialize in one or two niche markets. They know their subjects and do not have to send your manuscript out to a reader for evaluation. They also know how to reach the potential buyer and can jump-start your sales by plugging your book into their existing distribution system to specialty shops.

    Comment by Jacob Rishalu — March 3, 2012 @ 12:15 am | Reply

  8. Great information! Was very refreshing.

    Comment by James — March 20, 2012 @ 7:13 am | Reply


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