Moderator’s note: For another perspective—on the economics of the iPhone platform, which some see as a Kindle rival for e-publishing—check out Bill Janssen’s essay. – D.R.
It may not be everybody’s idea of summer reading, but I am engrossed in Michael Dobbs’s One Minute to Midnight: Kennedy, Khrushchev, and Castro on the Brink of Nuclear War (Knopf). After reading excellent reviews in the New York Times and the Washington Post, I flipped the switch on my Amazon Kindle, and within a minute for $9.99, the book was mine to read at leisure.
Appeals to top-end shoppers
The Kindle was launched last fall and is priced at $359. Amazon is still coy about revenues from the device and the 125,000 titles available for purchase. In a recent appearance at Book Expo, CEO Jeff Bezos said Kindle sales now account for six percent of the total revenues of those books.
The anecdotal evidence of friends—and our experience at PublicAffairs of two Kindle bestsellers (books by George Soros and Scott McClellan)—supports the notion that Kindle (and to a lesser extent the comparable Sony Reader) is gaining acceptance among a category of top-end consumers. The main appeal of the Kindle seems to be that you can buy books through wireless, which makes downloading a breeze. The availability of newspapers and magazines is, surprisingly, also a significant plus, with subscription costs well below the print versions.
Kindle a winner for books like this
The upshot is that the Kindle is convenient, compact, and for travel, an attractive alternative to the traditional bundle of print products (okay, not for the beach). When I last looked, the Dobbs book was on the New York Times bestseller list and is clearly established as a summer book for a certain kind of reader, proving again that all is not lost in the annals of quality nonfiction.
There is another side to the Amazon story that the success of Kindle tends to underscore. The online bookseller and all-around shopping behemoth has become a dominant force in the publishing world. From its launch in 1995, the Amazon model transformed the way books are sold. For the first time, consumers had a vast selection of titles at their fingertips at great prices and with the assurance that, once ordered, they would be delivered to your door. For all the appeal of bookstore browsing and the community service that the best stores provide, buying a book can be a pokey experience: a clerk tells you the book is out of stock and that to obtain it you have to put expectation on hold until it can be located, which may be never.
Convenience vs. guilt
What Amazon has done for the book business is make the buying of books a transaction so convenient and gratifying that you can almost sublimate the guilt about not supporting the brick and mortar stores, especially the cozy independents that give bookselling its sense of commercial virtue.
Yet the better Amazon is for the customers, the tougher it is becoming on the publishers, especially those below the corporate giants like Random House and HarperCollins. As the director of a leading university press observed recently, “Amazon has the best customer relations and the worst publisher relations of any company I’ve ever dealt with.” The more formidable Amazon becomes as a retailer of books, the more pressure it puts on suppliers to get terms that increase its margins, which, given its discounts to consumers and capital costs, are very narrow.
Hit among readers but scary to publishers
In March, Amazon declared that all books to be sold in print-on-demand (POD) formats, an increasingly important source of backlist and hard-to-find titles, would have to be provided by its POD subsidiary rather than any outside vendors. In Britain, Amazon has been in a feud with Hachette, which owns the Little Brown imprint, and apparently has disabled the “buy” button from the company’s titles on Amazon’s site. The net effect of what amounts to corporate swaggering is that Amazon is becoming as fearsome to publishers as it is popular with readers. Presumably, arrogance is a benefit of power and through its brilliant strategies of pricing and performance, Amazon has claimed the right to be prideful.
But the extraordinary thing about the developments in technology and marketing in the years since Amazon was founded is that it has also created opportunities for entrepreneurs to develop their own means for reaching consumers, including someday doing everything Amazon can and more. This is roughly what happened to the record store and music companies when the iPod was invented. The video chains with annoying late fees were undone by NetFlix and video on demand.
The positives: Boost for Dobbs’s book at a promotionable price
A generation ago, the new force in bookselling was the mall stores (Crown, Walden, and B. Dalton) that seemed to favor a small selection of titles, threatening the availability of the vast catalogue of less commercial books. Because of their limited inventory, among other reasons, the mall stores are now in inexorable decline (Crown is gone) and books have never been more available, at least online. Amazon was a breakthrough. The Kindle appears to be another. I am very glad that Michael Dobbs’s book is for sale in the format I wanted and at a promotional price.
Chillier climate ahead for Amazon?
Still, I wonder, and so perhaps should Amazon, whether the power it has accumulated can evaporate. Publishers are giving in to Amazon’s demands for selling terms because they have little choice. Then, needing to show additional profit, Amazon will turn to the customers, raising prices, insisting that they buy proprietary formats such as Kindle and charging for other services. That’s when the climate for Amazon could get a lot chiller than it is now.
Moderator: Peter Osnos is founder and editor-at-large of Public Affairs Books and executive director of the Caravan Project. Reproduced with permission from a regular Osnos column called The Platform. – D.R.
Amazon’s approach to the Kindle only works because publishers require DRM. Any publisher can sell a DRM-free Kindle (MOBI) ebook, and it is readable on practically every device out there – from cell phones to Desktops. Amazon’s market power and Whispernet downloads would still be a factor without DRM, but Kindle owners could then use publisher sites and FictionWise (say) as alternatives.
Does anyone still buy books from Amazon anymore (P or E)? I’m asking seriously. Half.com has cheaper used prices, and everyday discounts for new books are available not only at amazon. I’m planning to purchase a travel ebook next month, and my Cybook doesn’t support Kindle’s DRM, so I certainly won’t buy it from amazon.com
I buy a lot from amazon, but rarely books. Amazon has great community features and good reviewing software, but does that imply they can sustain their market dominance?
The last thing I bought from Amazon.com is a printer.
I think publishers are still afraid of e-book because they represents change, and they don’t like it. The publishing industry hasn’t changed in century’s so naturally they are reluctant to change and embrace new technologies.
I think once publishers get on board and truly embrace e-books as a viable (and profitable) model of content distribution that’s when we will see the power shift back towards the publishers.
I don’t understand why one would describe amazon’s behavior in its dealings with suppliers as “arrogance”. Amazon has joined the ranks of major league retailers and all major league retailers squeeze their suppliers in order to gain concessions in price and other concerns. That is a normal part of the retail business.
Perhaps publishers aren’t used to being subjected to this sort of pressure until recently but they should now certainly realize that the days of themselves squeezing little bookshops are gone.
Kudos to amazon for flexing those muscles. I have been an amazon customer since 1996 and due to them I have been able to buy far more books than if I had been left to the traditional brick and mortar stores – whether chains or independent bookstores. I’m sure publishers have also made far more money off me than they would have had amazon not existed.
I also don’t believe it will be as easy for others to knock amazon off their pedestal as Peter suggests. Amazon has literally spent billions of dollars creating its warehouse/distribution operations in order to provide the sort of smooth customer experience they now provide. It’s not too likely there would be the same commitment on the part of shareholders to go thru that same number of years of profitless existence to recreate what amazon has built. But, retail is a funny game and you never can be sure what is going to happen.
I’m with Allan on the whole amazon/DRM thing. Despite all the talk you see on this blog and others that seem to blame amazon for driving the DRM mess and how it is a ploy to tie consumers to the Kindle the reality is that the publishers are almost assuredly the ones that require amazon to sell their titles with DRM.
To answer Roger – I still buy lots of books (and other stuff) from amazon. Both P and E. I don’t remember the last time I bought a new book anywhere else. When buying new books most other outlets seldom have prices cheaper than amazon when the free shipping I get as a Prime member is factored in. Given amazons wonderful distribution system I can get many of my books essentially overnight without having to pay extra for overnight shipping.
Used books I can occasionally find elsewhere for less – and usually Book Burro shows me that place is half.com/ebay. However, I will admit that I am a sucker for amazons 1-Click so I usually won’t bother unless the savings are significant.
Is there a chance that amazon may get “too big for its britches”? Sure, but I think people used to have the same concern about Wal-Mart. Both are retail giants and they understand that if they ignore the competitive pressures of the marketplace that somebody else very likely will try to at least skim away a chunk of their customer base.