The eBook Wars: Amazon vs. Apple

risk.jpgThe hot topic in ebookland in recent days has been the battle over pricing. The first gauntlet was thrown by Apple when it offered an agency model to publishers for its new bookstore to support its iPad. The battle began in earnest when Macmillan demanded Amazon accept the agency model. Now it is all-out war. There are a lot of shaky assumptions underlying this war, the shakiest being that Apple will be as big a player in ebooks as Amazon. Publishers signing on with Apple and who are willing to imperil their relationship with Amazon are gambling that the Amazon’s glory days as a dominant bookseller are past. If I owned stock in Macmillan, I’d be thinking change the leadership because this gamble is much too risky.

Let me confess that I am not a fan of Amazon. I don’t buy from Amazon, preferring to pay more to buy the same book elsewhere. I think Jeff Bezos and company — the whole arrogant lot of them – need to be taken down a whole bunch of pegs. But Steve Jobs and Apple aren’t any better. The two CEOs and companies could be identical twins. If either or both crumbled, I wouldn’t shed a single tear.

Similarly, there is something amiss in the big publishing houses; not one can claim having taken the high road in ebookland without causing a loud chorus of snickers. But what truly is amiss is the reliance on Apple to topple Amazon. What happens if Apple turns out to be a bit player? Or if after the initial rush to buy the iPad, sales fizzle? Or if it Apple becomes dominant and decides that ebook DRM is hindering sales and demands that it be removed? Or if… [fill-in your own question here]?

Amazon is a fighter; we’ve witnessed that over the years. Bookselling is its core business and like a lioness who will fight against all odds to protect her cubs, Amazon will fight to protect its core business. Books are not a core business for Apple. The iPad can be successful and never sell a single ebook because Apple’s core business is not bookselling.

When publishers look at Amazon sales they need to look beyond ebooks, which is still an infant market. Most book sales through Amazon are of pbooks, the books that publishers claim are their profit centers. Not having seen the Apple bookstore yet, I can’t say with 100% certainty that Apple will sell only ebooks, but I’d be willing to bet that will be the case. So publishers are gambling as follows:

1. that Apple can gain the lion’s share of the 5% ebook market; that Apple can reduce Amazon’s alleged current 90% share of that market so significantly that publishers win, albeit only in the ebook market

2. that it is better to have access to Apple’s share of the ebook market than it is to have Amazon’s share of the ebook and pbook markets, even if Apple’s total book market share is less than 50% of the 5% ebook market whereas Amazon’s total book market share is 20% (or higher) of the combined pbook and ebook markets

3. that iPad buyers are buying the iPad to use as an ebook reading device rather than for other reasons and purposes

4. that all of the ebookers who currently have invested in Kindles will suddenly drop their Kindles and their Amazon accounts to adopt the wholly incompatible iPad and Apple bookstore

There are many other gambles that publishers are taking, including the risk that Amazon might retaliate by reducing visibility on its website of offending publishers p and e books, but the biggest gamble, to my mind, is that Apple will become a sufficiently significant player in the whole book market — both p and e — to offset Amazon’s market clout.

As much as I dislike Amazon, I think that is a fool’s gamble.

If the ebook market share was close to 20% of all book sales, the gamble might be worth taking; but at 5%, the risk of losing one of the major, if not the major, movers of pbooks — the publishers’ claimed profit center — makes the gamble too risky. This risk is compounded by the other mistakes the publishers are making, primarily by

* not convincing ebookers of the value of the publishers’ products — publishers cannot simply declare they are valuable and leave it at that; they must convince ebookers that it is worth $14.99 for a leased book that cannot be shared among relatives or devices

* raising pricing but not raising the quality of the product

* not insisting on a single, universal format and DRM scheme for ebooks so that people could shop at any ebookstore regardless of their reading device
placing all their hopes for combatting Amazon’s dominance in the single, unproven basket of Apple

* not recognizing that Apple is likely to be as problematic a partner as Amazon should Apple have success with ebooks (just ask the music industry)

So now Amazon is counterstriking by demanding no more agency-style agreements and 3-years of no lower price guarantees from the 5 agency-model publishers. Who do you think has the upper hand? I think the publishers who sign with Apple are digging themselves a hole that could well turn into their grave. There is no way to ensure that Apple’s ebookstore succeeds on a large enough scale in a rapid enough manner to survive the economic losses that will occur should Amazon carry through on its retaliation. Apple is simply an unproven quantity and no one really yet knows even how good the iPad is for book reading. Plus Steve Jobs has a reputation for vindictiveness — imagine the position of publishers who sign on with Apple and who anger Jobs after having already snubbed Bezos.

I recommend New Orleans for the funeral. At least you will be buried with panache.

Editor’s Note: Rich Adin is an editor and owner of Freelance Editorial Services, a provider of editorial and production services to publishers and authors. This is reprinted, with permission, from his An American Editor blog. PB

8 Comments on The eBook Wars: Amazon vs. Apple

  1. Please make sure to attribute your RSS feed articles correctly. This showed up as by Paul Biba — but when I started reading, I knew it was by Rich Adin — whose articles I prefer to ignore (nothing personal, I have simply found I disagree with 90% of what he says and don’t find our differences particularly thought-provoking or enlightening.

    Thanks.

  2. I keep getting the feeling that publishers are hanging desperately onto a rock that’s trying to drag them into the abyss, strictly because it’s familiar to them. It’s about time to take advantage of the benefits of 21st century technology, and cut the cord.

    As Apple and Amazon fight it out, the pubs, caught in the crossfire, should be looking for alternatives to the e-book distribution model that Amazon/Apple are forcing upon them, and which is clearly losing its value to them.

    The pubs should be looking hard at ad- or portal-promoted direct sales as their primary e-book delivery mechanism. It will ultimately give them more control over sales and profits, and once that happens, Amazon and Apple will discover they have to alter their business models to be part of the e-book selling chain… the reins will be held by the driver, not the horse.

    With all of the other financial problems the pubs have, hanging on to distribution programs that cost them money and do not benefit them makes little sense.

  3. Interesting stuff and your logic is sound. I’m not sure if you meant this to apply mainly to smaller publishers and not the “Big Six,” but I feel like you need to broaden your lens, pull out of the close-up on ebooks and look at all publishing.

    Major book publishers are using Apple here the same way record labels used Amazon in the MP3 pricing wars. MacMillan showed exactly how this is done and got Amazon to give up on its pro-consumer pricing rather quickly. It doesn’t matter if Apple becomes a big ebook player or a bit ebook player. The major player – Amazon – has been forced to change. And in the grand scheme of publishing, the changes publishers want slow the overall adoption of ebooks.

  4. I don’t know that you can call the iPad “wholly incompatible”, given that Amazon will be releasing a Kindle Reader app for it. (And unless Apple is brain-dead, they’ll welcome it to the iPad with open arms. Why would they not want to make it easy for the Kindle crowd to come on over?)

  5. @BillW: You may want to have a look at http://www.ufollow.com which enables you to follow particular authors on blogs and newspapers without having to follow the whole source. You can create a personal steam of your preferred authors and read them as if they were writing in the same blog.

  6. Chris Martin // March 23, 2010 at 8:25 pm //

    As Chris Meadows has already stated, the iPad is not “wholly incompatible” with Amazon given that Amazon just this week displayed a Kindle for iPad app. Amazon’s posed in my opinion to end up the big winner here as they’ve got Kindle everywhere, the Kindle, PC, Mac, iPhone/iTouch, Blackberry and now iPad.

    Furthermore, Mr. Pressman if you think MacMillan really “won” their war with Amazon, you’re wrong. They lost. Many top selling MacMillan books are currently listed for $9.99. Mitt Romney’s book No Apology is currently at $9.99 and so is Andrew Young’s book The Politician. MacMillan’s top fiction seller (according to their own web site), Sarah’s Key is actually priced at $7.96 for the Kindle. The reason for this? Consumer demand. If MacMillian books initially appear at $11-12 or higher, or don’t appear on the same day as their paper versions, that’s simply going to cost the publisher money. As the row over the Amazon reviews on Game Change, and currently Michael Lewis’ book The Big Short illustrate, consumers will not purchase a book unless it is in the form they want at the price they deem acceptable. The only thing that the publisher gained in delaying the ebook versions of those books is bad publicity and making a couple of, apparently, good books look worse because consumers displayed their outrage by writing poor reviews on the book’s product page.

    According to many analysts, as many as 5-6 million ebook readers will be sold during 2010. That figure may go higher than that with the iPad on the market beginning in April. Publishers can either adapt to the new ebook market, and consumer demand for lower prices, or die. I’m fine with the latter because Amazon and Apple will simply step in and allow authors to sell their books directly to consumers in electronic form.

  7. If the big six publishers had a clue they would set up a joint retailing storefront where all their books could be had at 30% less than anywhere else. D’oh.

    They should also be offering them without DRM, but I’ll take that first step as a sign of progress.

    Hire some good software people and figure out how to make the books usable on Kindle and iPad. If you have to remove DRM to do it … um … Do It.

    The Kindle and the iPad are Hardware Products. The big six are selling Software. They should take a deep breath and consider what this really means.

  8. As a small publisher who makes ebooks for sale on my own, the only third party publisher I am relying on for sales is Amazon, and only selling ebooks for Kindle. If people want to buy my ebooks DRM free all they have to do is visit my site. I am in competition with both Amazon and Apple for both formats of books, so I am quite put out when people only focus on what the big guys are doing and not the rest of us. There are plenty of ebooks available from many independent publishers. All you have to do is type “ebooks” in any search engine and you will find them. Ignore Amazon and Apple and keep going down the list. Antellus is there.

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