Yesterday I wrote a post that was generally favourable to the deal between Amazon and Waterstones:

If I was to think of one single reason for the move being a good though I would say it is this, it allows Waterstones to stand still and observe for a little longer. The value of inaction is often underestimated and right now when the ebook retail and distribution space is changing rapidly and requires such a huge investment, this move brings revenue, options but most crucially of all, time to just see what happens while rebuilding the core bookselling business.

I still think the above holds true. One major issue has begun to loom larger in my thinking though, and that is the impact of Waterstones dedicated heavy readers converting to dedicated digital readers on Amazon’s platform. The sales those dedicated heavy readers drove will be lost to Waterstones.

That brings me to the issue of lock in and whether, in the new ebook world, it exists in any real sense. The truth is that it does in a modest form, but without doubt it is relatively easy to move away from any individual content silo or platform to any other platform because unlike music, which we listen to repeatedly, we only occasionally re-read the books we buy once we have have read them for a first time.

So the fear of lock in is a misplaced one in my view. As publishers see sense (which I think they will) and move away from DRM systems an ever greater interplay of retailers and devices in the ebook space will be enabled and lock-in will be even less important.

That means it might even be possible for Waterstones to re-gain its lost heavy readers at some point in the future. No doubt the company hopes that the short- to medium-term play it has gambled on with Amazon pays off and enables them to refurbish and revitalise their physical estate and in doing so regain customers, rebuild profitability and take charge of their own future when they have done that.

I still think the logic of this move works, if they CAN make the print side of the business more profitable, more slimline and more flexible. Otherwise, we will look back in five years and it will look like a huge mistake. It’s a big gamble, but I think it’s worth it.


(Via Eoin Purcell’s Blog.)


  1. I’m sorry but I see this in an absolutely different light than Eoin.

    Waterstones is a huge multinational street pBook seller. It is facing a transition from paper to digital. Where will Waterstones future lie in 15 years and what is it doing to prepare ?

    Does it think it is still going to be making the same profits from paper in 15 years time ? if so …. they are surely optimists… If they don’t, then where are they going to make money ? and how is selling Amazon Kindles going to make them money ?

    Eoin you talk about ‘time’ and ‘cojones’.

    I suggest that this deal demonstrates that Waterstones don’t grasp what is happening in the market and don’t have the cojones to compete.

    Time ? They have had years of clear warning about what is happening. There is no uncertainty. Digital is the future and print’s future is in the margins. End of. No mystery. The only uncertainty is the time factor. Can anyone really doubt that ?

    Why are they not attacking the market with a hot web site and hot customer support with good prices ? They can easily afford it! for them it is small money ! Why aren’t they getting together with WHSmith and a group of other pBook retailers to develop a joint venture site ? a joint venture app ? a joint venture …. anything ? (and there is NOTHING anti competitive about those actions!) Why are they not offering any innovation in how they sell to digital readers ? promoting DRM free where they can ? generating some positive buzz ?

    The truth is evident from their inaction. They don’t have the nous or the cojones to try. They are just lying back and surrendering to selling a product that a) promotes the acceleration of the digital transition b) alerts its customers to the digital world and tells them it’s good c) attracts it’s customers to the Amazon web site for eBooks and pBooks d) makes more profits for Amazon.

    What is going on in the brains of these CEOs ?

  2. A few days ago, the expectation was that Waterstone’s was going to sign up with Nook, thereby promoting the acceeration of the digital transition, alerting its customers to the digital world and telling them it is good, and attracting its customers to the B&N website for ebooks and pBooks. And nobody objected that it would result in more profits for B&N and Microsoft.
    So, the main objection here appears to be that this might result in profits for Amazon.
    As long as we’re clear there. 🙂

    Waterstone’s *knows* what their situation is; we can only guess.
    But there are certain facts and trends about the ebook business that are well established by now:

    1- The last time for Waterstone’s (or any other ebook vendor) to develop a *viable* alternative to the existing walled-garden ebookstores in the UK was two years ago. Once Amazon and Kobo jumped in, that option went from merely hard to well-nigh impossible. (In the US, the window of opportunity ended three years ago.)

    2- Waterstone’s has already been selling ebooks on their own for years. By all reports, to no great result. Which is why they were open to partnership. They already had experienced the reality of what their market is *really* like. Especially now that Sony opened up their UK ebookstore, further fragmenting the already small ADEPT epub market that Waterstone’s was selling into. A market that already featured KOBO, with its own B&M retailer partnership.

    3- Even in other, less mature european markets (France, Germany) than the UK, B&M retailers trying to build their own walled garden ebookstores with private label readers, the results (FNAC, for one) have been underwhelming-to-catastrophic. And those results came *before* Amazon hit the local markets. So, all indications are that Waterstone’s experience was typical and that “trying harder” (i.e., “Throw more money at it.”) was not likely to yield better results.

    4- The UK ebook retailing market is at present divided into two camps: a big market centered on the Kindle readers (80-plus percent) and a much smaller market built around epub (20% at most). Waterstones already tried going it alone in the epub market and found life among the small fish not to its liking. So they chose to attach themselves to the big shark, figuring there may be more money in a cheap piece of the Kindle market than in an expensive fight for a piece of the UK epub market.

    For all we know, Waterstone’s may simply be working on an orderly transition out of bookselling as their core business. Their issues are the same as those of B&N in the US and Indigo in Canada–how to generate enough revenue and growth, in a declining pbook market, to justify their expensive storefronts. Their conclusion is not really all that different from Indigo’s: Indigo had invested early in a standalone ebook solution and found it an expensive venture, even when successful, so they chose to cash in their Kobo equity to raise capital for their storefront business. Waterstone’s standalone business was not particularly succesful so the only thing they could cash in is their brand and customer traffic. Which they did.

    Going it alone obviously held no great appeal.
    Having decided to partner with *somebody*, Waterstone’s wisely held an auction and chose the high bidder. (BTW, one thing they had to offer Amazon: 300 storefronts to carry Amazon Publishing pbooks. That made them more valuable to Amazon than to B&N, who are looking to sell off *their* pbook publishing subsidiary.)

    Obviously a decision based on monetary issues, not ideology.

    After all, they’re not in business as a public service;; they’re business to make their russian owner money. They know exactly what they’re doing and why. They have a plan. The only question is whether or not the plan will come together or not.

  3. Felix – “So, the main objection here appears to be that this might result in profits for Amazon. Ohhh-kaayyy…”

    In case you’re referring to my comment … I didn’t know about the Nook talks and I am a supporter and admirer of Amazon 🙂 So Amazon making profits is no issue for me.

  4. @Howard; No, I wasn’t directly referring to you. 🙂
    I’ve seen a lot of people all over saying the same thing; as if it were a crime for Amazon to make money. It takes two to tango and Waterstone’s is getting something it wants out of the deal or they woyld have gone with Nook instead of Kindle.
    The Nook talks have been discussed prominently over the past few weeks, to near universal acclaim, and just last Sunday Waterstone’s was bad-mouthing Amazon. The same people who were looking forward to the Nook partnership on Sunday were screaming the loudest on Monday.
    Did you see this? A reverse ferret, they called it:

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