Storytime Is Over: How Amazon Is Out-Goliathing The Publishing Industry

How Amazon Is Out-Goliathing The Publishing Industry

\ Jan 22, 2015

6 min read

A recent corporate brawl between publishing company Hachette and online retailer Amazon.com was not so much David vs. Goliath; it was more like Goliath vs. Super-Ultra Colossotron Rex. For this was a battle between two multi-billion-dollar corporations (though one is more multi than the other—the market capitalization of Hachette’s parent conglomerate stands around $3 billion compared to Amazon’s $133 billion).

At issue was that publishers wanted control of ebook prices to prevent cannibalizing their paper sales (many of which still come from brick and mortar establishments). They hadn’t anticipated Amazon would be so set on growing the new market that they would take a $3-$4 loss on each ebook sold. Bad for publishers and competing retailers, but good for consumers.

If books were generic merchandise, that would be the end of the debate for most people, or at least it would become boring enough that they would stop caring. But books aren’t widgets. They hold a central place in our culture, and if they all have to pass by one monolithic gatekeeper, this has implications beyond the purely economic.

In bringing Hachette to bay, Amazon revealed its numerous avenues of attack: They removed the pre-order button from Hachette titles, stopped their customary discounting, delayed shipment times and suggested cheaper alternatives. (In what is hopefully not a harbinger of things to come, they exempted the books of certain powerful politicians, however.) The Hachette bottom line took an 18-percent hit.

Not that book publishers are any saints themselves. The Justice Department found that five of the big six, plus Apple, were guilty of colluding to raise ebook prices. Amazon claims the old gatekeepers aren’t keeping up with the times and compares their resistance to cheap ebooks with their onetime snobbery against the paperback.

At a recent Intelligence Squared debate on this topic between four published authors, even Franklin Foer, former editor of The New Republic and a fierce critic of Amazon, admitted that basically, “yeah, book publishers suck.” The point was not contested. But despite their imperfections they at least provide a bundle of services for a book to go from the writer’s laptop to the reader’s hands. The publishers finance authors with advances, edit their work, assist with design and then work their marketing magic. Monetization for this vast apparatus comes at the very end via sales.

Amazon squeezes these profits from the publishers and passes on large savings to consumers. In the process it makes only very low profit margins for itself, but the modern world of internet finance is based more on users, expansion, brand, consumer data and scale.

Amazon founder and CEO Jeff Bezos told Charlie Rose, “Amazon is not happening to book selling, the future is happening to book selling.” Regardless of Amazon’s fate, not even Goliath can fight the tide.

But the future in the form of Amazon is a particularly ferocious adversary. With the backing and blessing of Wall Street capital, they are willing to make little to no profits in order to relentlessly expand and dominate. In fact, the initial domain name purchased by Bezos was relentless.com, and that URL still leads to Amazon’s site today. (No joke. Try it.)

To compound the existential threat to the old order, Amazon is attempting to create a new era of self-publishing. Traditionally, between writer and reader lay two distinct layers of intermediary, the publisher and the seller, each further fragmented into numerous companies, thus giving various ways for books to flow to market. Now these different streams are being choked off or turned into tributaries to the one mighty river Amazon. The web retailer’s defense: The publishing industry is a bunch of anachronistic middlemen that the new model can and should chuck to the wayside; “antediluvian losers with rotary phones” in the words of a former Amazon executive in George Packer’s New Yorker article.

In the artist-as-creative-entrepreneur model that Amazon is ushering in, every author has to be or hire their own editor, designer and marketer. It tends to work well enough for genre fiction, but is less successful at producing works of serious literature or nonfiction. A well-researched biography or books like Donna Tartt’s The Goldfinch, which took more than 10 years to write, usually require advances to be feasible. At risk is an entire system for creating, finding and promoting good books. Does Amazon cut out the need for a middleman, or just a way for the middleman to make money?

No one doubts that Amazon is good for readers in remote areas without easy access to a bookstore. They are also good for anyone trying to track down an obscure title, and it is undeniably nifty that anyone with a Kindle can download the complete works of Jane Austen for free.

But while this may be a story of the Goliaths and their adversary in the cloud, it is not without its Davids either. Indeed, independent bookstores have actually been making a comeback in recent years. While chains like Barnes & Noble try to compete with Amazon by having their own eReaders and efficiencies of scale, the indies have carved out a fragile niche based on community and charm.

Even as I write this, I open a tab and poke over to Amazon to read reviews for a novel I’m interested in. “Save 34%,” the website invites enticingly. I ex out, but see Amazon ads for that particular book four times throughout the day, and each time I feel a twinge of wanting to read (and therefore buy) it. These guys know their stuff.

And if there seems a mismatch between the qualitative value of the treasures they control and the data-driven approach to their stewardship, well, the future doesn’t stop coming and the relentless don’t rest. Let’s just hope we as readers have more to show for it than bargain bin prices and free two-day shipping.