An American Editor

January 16, 2012

Why Won’t Amazon Compete in the ePub Market?

Since the beginning of the “modern” ebook era, when Amazon entered the marketplace with its Kindle, I’ve wondered why Amazon chose to follow its own path as regards format and DRM rather than adopting the ePub standard and a more benign or universal form of DRM. I’ve wondered because by choosing its own path, Amazon has decided that readers who are not Kindlers (by which I mean consumers who read on dedicated e-ink devices that are incompatible with Amazon and thus cannot buy ebooks at Amazon unless they are willing to strip the DRM and convert the file, which the majority are either unwilling or unable to do) is not a demographic to woo.

What is it about ebooks that makes them different from virtually every other market that Amazon is in? Amazon sells, either directly or indirectly, all kinds of universally usable electronic equipment and entertainment. It does not sell, for example, digital music or movie DVDs that are incompatible with the devices consumers already own or buy at Amazon or elsewhere. Only in ebooks has Amazon struck a different path.

In every other category of goods for sale at Amazon, Amazon tries to woo every consumer it can. Only in ebooks does it deliberately exclude millions of potential customers. Why? What is it about ebooks that warrants this divergence by Amazon from its very successful business plan? Granted that Amazon would prefer to sell you a Kindle and lock you into its eco system, but that, at least on the surface, makes no sense as a reason to exclude millions of other ebook consumers from being able to buy ebooks at Amazon. One would think that Amazon’s priority is to sell ebooks on which it makes a profit, not reading devices on which it is said to lose money.

Try as I might, I see no obvious reason for this discrepancy. Amazon could sell its Kindles and also sell ebooks in a Kindle-specific format alongside an ePub format. Or it could sell its Kindles and simply make Kindles ePub compatible. Yet it does neither. It prefers to exclude millions of ebookers who are using devices that require the ePub format.

So I ask again: What makes the ebook market different from the other entertainment markets in which Amazon competes?

It surely can’t be because Amazon doesn’t think it can have a winning hand. Amazon has competed and continues to compete in the hardcover and paperback market on equal terms with all competitors, yet it is the dominant bookseller in those markets. I would expect Amazon to dominate in the ePub ebook market as well, simply because of its marketing prowess, its reputation for value and low prices, and its willingness to operate at a loss fiscal quarter after fiscal quarter.

Although no one has accurate numbers, I think it is reasonable to speculate that Sony, Kobo, and Barnes & Noble have sold millions of ereading devices, not one of which is compatible with the Amazon ebook store. Yet every B&N-branded device is compatible with the Sony and Kobo ebookstores (and every ePub ebookstore except Apple’s) — buy a book at Sony, download it to your computer, and sideload it onto your Nook. No questions asked. Similarly, Kobo and Sony devices work the same with any ePub ebookstore except B&N and Apple.

Why is Amazon willing to ignore the millions of readers in the ePub market? Strategically, Amazon has always tried to make people want to shop at Amazon because of price, selection, and ease of buying. Isn’t that the rationale behind the patenting of the 1-click system? And this is the strategy Amazon follows in everything it sells — except ebooks. Why?

I wonder about this but have no answer. I’m certainly open to suggestions, but I struggle to see how ebooks are different from movie DVDs, digital music, televisions, baby diapers, or any other commodity within Amazon’s sales world. The rationale for establishing an exclusionary system for ebooks when all else is inclusionary eludes me.

What else also eludes me is why Amazon thinks this is good policy for Amazon. Amazon has always worked on the principle that if a person buys their hardcover or paperback books from Amazon, they will also buy their TV from Amazon. So if a person won’t or can’t buy their ebooks from Amazon, are they likely to buy their TV from Amazon? Does this exclusionary policy on ebooks have a snowball effect on other items Amazon sells and on the other markets in which it competes?

Consider this difference as well: Amazon has gone to great effort to create the Kindle, its own dedicated reading device using a proprietary format and DRM scheme. But it hasn’t gone to that effort for other devices such as a DVD player. Why? What makes ebooks and the ebook market different from every other commodity that Amazon sells and every other market in which Amazon competes?

The only answer I have come up with, and I don’t find it a satisfactory answer, is that of all the industries represented by the goods that Amazon sells, the weakest in every sense of the word is the publishing industry, making it the one industry that is highly vulnerable to a direct attack by Amazon. Amazon can become a major publisher because of the industry’s weakness and thus be a vertically integrated enterprise — something that would be much more difficult and costly if attempted in the movie or TV production industries.

Of course, the same question can be asked about B&N’s choice of a DRM scheme, but at least B&N has made it freely available to all other device makers. That it hasn’t been adopted by Kobo or Sony, for example, does make me wonder if B&N hasn’t made a major error in not changing its DRM scheme to be compatible with Sony and Kobo. I think given a choice between the Sony, Kobo, and B&N ebookstores, most ebookers would shop at B&N, even if they prefer the Sony or Kobo device over the Nook.

What do you think?

11 Comments »

  1. […] [Via An American Editor] […]

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    Pingback by Why Won’t Amazon Compete in the ePub Market? | Ebooks on Crack — January 16, 2012 @ 9:52 am | Reply

  2. I’ve been wondering the same thing. It’s strange, really… You’d think money is the best motivator, but no, something else must be going on their. Maybe because Kindle ain’t as perfect a gadget as we are told, and compatibility is a huge technical problem for Amazon? On the other hand, some time ago Amazon realized they are missing out because non-Kindle owners pass Amazon stores empty handed – so they came up with Kindle for PC (free!) and Kindle for Android (free as well). Which is great. But the elephant is still in the room.

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    Comment by Camilla Stein — January 16, 2012 @ 12:58 pm | Reply

    • The problem with Kindle for PC is that you have to be willing to read your books on your computer. I already sit in from of my computer all day, every day for work. The last thing I want to do is sit at my desk and read for pleasure on my computer.

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      Comment by americaneditor — January 16, 2012 @ 4:10 pm | Reply

      • Yes, same here, I am breaking my back sitting all day behind the desk, and I’d love to relax with a good book on my lap. I guess what I was trying to say is that Amazon ain’t stupid people and I am sure they are fully aware of the situation, but their solution isn’t client friendly.

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        Comment by Camilla Stein — January 18, 2012 @ 12:06 pm | Reply

  3. I wonder if it isn’t a matter of control. Amazon knew/knows they have to woo traditional publishing companies to work with them. Perhaps part of that sales pitch is a tighter control of their ebooks and readers. For example, my wife and I have books on both of our Kindles. When we give them away or sell them, the Kindle has to be re-registered and connect to Amazon’s servers. When it does this, it – I assume – is to wipe all the ebooks not owned by the new owner. Amazon needed to guarantee control of their ebook sales to publishers. Just as MP3’s universal use opened the door for digital piracy, skeptical publishers had to be convinced that these digital files of their books wouldn’t simply be tossed around the e-universe on bit torrent or some other peer-to-peer server. I really think it was a level of control and security that Amazon knew they had to be able to show big publishing houses….but that’s just my own thoughts and observations.

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    Comment by dostendorff — January 16, 2012 @ 1:04 pm | Reply

  4. I guess it’s this combination:
    1. Publishers want DRM.
    2. DRM on ePub must be Adobe Digital Editions (the only DRM is supported on the other ereaders).
    3. Amazon doesn’t want to be dependent on Adobe. Similar as Apple.

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    Comment by Piet van Oostrum (@pietvo) — January 16, 2012 @ 1:34 pm | Reply

    • Amazon could solve the DRM problem by making its DRM scheme available for free to all comers. It hasn’t done that.

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      Comment by americaneditor — January 16, 2012 @ 4:13 pm | Reply

  5. I have an Android OS tablet (Toshiba Thrive) and buy and read all of my books from the Kindle/Amazon store. There is a free app from Kindle that makes this easy and seamless. When I choose to buy an ebook, I select the device I want it delivered to: My wife’s Kindle, my Android OS tablet, my PC, or my Android phone. Whichever I choose, my selection is downloaded at purchase and delivered to the device of my choice.

    So I don’t think Amazon has left too many stones unturned to make it easy to buy ebooks and read them on the platform of your choice. It is a non-issue today.

    Good Reading!

    Joe

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    Comment by jpreynolds7J — January 16, 2012 @ 3:40 pm | Reply

    • Joe, see my reply to Camilla. I don’t want to lug around a computer just to read for pleasure nor do I want to buy a tablet, which is just another computer, just so I can read a book for pleasure. That Amazon covers most bases doesn’t really address the issue.

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      Comment by americaneditor — January 16, 2012 @ 4:12 pm | Reply

  6. I think that no matter what DRM is in place, DRM won’t win in the long run. I have a Kobo and while I do enjoy it, I think that Kobo’s use of Adobe’s DRM is still problematic, even it it does use ePub format.

    Most importantly, books that have Adobe DRM can’t be sideloaded onto a micro SD card and then inserted into the micro SD slot that can be used to expand the library on my Kobo. Thus, if I buy anything from the Kobo store, it can’t be stored anywhere else except within the Kobo’s native hard drive, and I find that Kobo’s ePubs tend to be bulkier than DRM-free ones. I made a deliberate choice on Saturday to buy more expensive ePub files from an independent publisher and from an independent bookstore precisely because their files were DRM-free.

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    Comment by Christina — February 7, 2012 @ 4:30 pm | Reply

  7. I think that any author considering publishing an ebook should ditch the idea of DRM, most people who buy eBooks are, I believe, honest enough to simply pay for and read an eBook, especially given how much less they cost versus hard copy alternatives. Using DRM prevents most people from converting the files to a different preferred format so they can read it on any device of choice. The protection DRM provides isn’t worth it for the number of potential customers it alienates, far better to trust your customers and let them have the flexibility they need to manage their eBooks. Dishonest people that will not respect the copyright are in a minority and if they were determined to rip a book off would do it anyway, with or without DRM.

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    Comment by Brian — March 23, 2013 @ 10:30 am | Reply


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