What Amazon's ebook strategy really means
antipope.org
antipope.org
The DeBeers artificial scarcity model of publishing doesn't work any more. I won't miss it.
Note that there will still be plenty of work for editors, cover artists, and other creative professionals. There's just no longer a need for a "publisher" that essentially does nothing but sit in the middle and siphon off 80% of the revenue. Art, printing, even copyediting are already largely outsourced by the publishers, and have been for years.
The difference between the old-school publishers and Amazon is that Bezos knows the ebook business can be disintermediated if he starts screwing authors and consumers. It could happen in a matter of months. Maybe weeks. All it would take would be for one Stephen King to hire some guys to set up a server farm and start providing ebook distribution for his fellow authors under better terms than Amazon ("Stephen King" used as a placeholder here for "author with excellent name recognition and some spare capital hanging around" -- I doubt King himself would be interested).
"I had to run my own self-publishing op I'd lose half my writing time to what is essentially a peripheral activity"
Nonsense. He could put his books up for sale with little more effort than it took to put up that blog post.
If he's talking about covers, copyediting, and so forth, you can hire that done. There are even people now who will take care of the whole book package for you for an up-front fee (rather than raking 80% off the top in perpetuity) -- quite possibly involving some of the same people that the publisher is already using.
I really can't think of anyone who's been as consistently wrong about ebooks as Stross (I do like his fiction, though :-)).
Note this post from 2007, where he basically pooh-poohs the whole idea of ebooks becoming a significant player:
http://www.antipope.org/charlie/blog-static/2007/03/why-the-...
As Clay Shirky put it recently, publishing is no longer a job, it's a button.
Classic publishing is already dead. It just hasn't stopped twitching yet.
In case you've forgotten:
- In March 2007, most book titles from the big six were not available as ebooks at all.
- Kindle did not exist. (Launched November 2007)
- Those ebooks that were available were usually priced at the same, or higher than the equivalent paper edition "in order to avoid cannibalizing sales".
- We had a systematic problem with proliferating, rival ebook file formats: ePub wasn't a standard yet (not until September 2007 - that blog entry was from March '07), Mobipocket was still out there and competing with weird shit like Aportis Doc and iSilo for the PalmOS market, Microsoft was still performing CPR on .LIT format, and so on.
- Sales of ebooks amounted to less than 0.5% of the total sales of books. The big six were ignoring them, basically.
- The iPhone as an app platform did not exist. (The original iPhone was announced on January 9th, 2007, but was to only run web apps. The app store lay in the future.) Android didn't launch for another year, and the multitouch big-screen smartphone (capable of running an ebook reader app) simply did not exist.
- Cheap ebook reader devices ... are still a minority pursuit today, even though the price has pushed down to just under $99; the real breakthrough has been the [free] ebook apps for Android and iOS which turn every smartphone into a potential ebook reader. Back in March 2007, a typical e-ink ebook reader cost around $399 (something like the Sony PRS-505 or the Irex Iliad) and the nearest thing to a smartphone you could buy had buttons and a stylus. Not to mention an eye-stabbingly bad screen (anyone else remember having a Treo 650 with a 320x320 pixel display and being so happy because it was an improvement over what they had before?).
I will plead guilty to not having predicted the disruptive effect of iPhone apps in March 2007, sold from an app store that Steve Jobs had pretty much ruled out. How about you?
Amazon sold over 4 million Kindles in December alone, and now sells more ebooks than paperback and hardcover combined.
With one or two exceptions, every serious reader I know has a Kindle, an iPad, or both.
The rate of change in publishing today is like the web circa 1992-97.
As, I should add, have O'Reilly.
Yes, O'Reilly. Yes also Baen (via Webscription.net). But there wouldn't be a mass ebook market at this point if the big publishing conglomerates -- who produce 80% of the books sold -- weren't on board with ebook publishing.
Seriously? Standard author contracts have clauses that a) acknowledge that the author owns all copyrights & is only granting the publisher a limited right to publish, b) said publishing rights revert to the author if the publishers ceases to publish the work (admittedly a more difficult concept in these days of permanently available e-books, anyone know how this is being handled these days?) and c) the publishing industry is structured so that (sane) authors are represented by agents who are not employed by the publishers.
By comparison with the music industry the publishing world is populated by saints! (Personally, I wonder if the fact that authors tend to be represented by agents instead of the music industry model where musicians are usually signed up by industry representatives is an accident of history that explains the relative difference in the normative contracts between the two. Thoughts?)
If the best you can say about an industry is that it's not as bad as the music business, well...
In an ideal world, a world where media companies do what's best for themselves and their customers, I think publishers would act as you've predicted, for the reasons you've said. But instead I'd wager they'll standardise on some other format, or maybe a few (incompatible, of course) formats, announce some token partnerships with uninspiring hardware manufacturers, and generally mill about without any kind of strategy.
Meanwhile Amazon starts quietly disintermediating its way through the publishers themselves with its self-publishing programme. It starts to look pretty compelling, especially with mushrooming ebook sales. A few medium-big authors make the jump and start crowing about their awesome royalty rates. Publishers freak the hell out. The standard ebook price drops to $5. Repeat until everyone else is out of business.
Frankly, I think the only hope is an indie renaissance a la Bandcamp and the recent wave of DRM-free comedy. A compelling online publishing startup that knows how to appropriately wield its "we're not Amazon" cred could get some serious traction. Most authors I know are pretty savvy, and extremely wary of an Amazon monopsony. Unfortunately, they have to go where the money is, and the available options seem to be dwindling.
The crux of Stross's argument for why we should fear Amazon's low prices is that it's "predatory pricing"--that Amazon was selling e-books below cost so they could jack up the prices later after they had their monopoly (or, equivalently, lower payments to authors after they were a monopsonist).
But apparently Stross didn't read the DOJ complaint, because it turns out Amazon's e-bookstore was consistently profitable! 9.99 bestsellers were just the equivalent of cheap milk at grocery stores--loss leaders.
The DRM prediction in the article is pretty good, but both you and Stross misunderstand why Amazon is winning. It's not because they're cheating--it's because they're more efficient and so can make money at lower price points.
It's important to consider that Amazon has always behaved quite consistently. Even when it had 90% of the ebook market, it was the one pushing to keep prices down. In its other markets (cloud services, physical books, other goods), evidence suggests that it tries to cut prices as much as possible. I'd go so far as to say it's part of Amazon's culture. I don't think they know how to have a big fat margin on something. It'd make them itchy, like their very own fat middleman waiting to be crushed.
So my issue isn't that Amazon is waiting patiently to pump up their prices once they have enough market share. It's more that having no competition is dangerous in itself. Google and Valve, for example, are two companies that I like immensely, and I think they do a great job in their respective markets. Yet Google can arbitrarily cut off access to my email, and Valve can do the same with my games. Both have been known to use these powers when it makes sense to them. I'd change providers, but everyone else, frankly, sucks.
I want there to be robust competition in e-readers, but the Kindle is too good. I want there to be robust competition for e-bookstores but Amazon always has the best prices. There's a kind of bittersweet ambivalence in knowing that the industry leader is there because they're a clever company doing it right, but still wishing that someone else was there to challenge them. Nobody's right always, or forever.
Especially in terms of cloud email, isn't that going to be true of any service provider you choose? That has nothing to do with monopolies, it's just the nature of the beast. People you buy services from can stop providing those services.
If there was another cloud email provider that was as good as Gmail, but additionally had a reputation for never disabling accounts, I would switch to them. Gmail would lose my business, and I wouldn't have to worry about my account disappearing if some bayesnet decides I'm a bad guy.
(Sorry for second response to same message.)
It seems like your beef shouldn't be with Amazon. It should be with the rest of the industry for failing to compete. Otherwise it's like complaining that Apple is dominating the smartphone industry by delivering better products -- that's what they're supposed to do.
This is completely true. As someone has worked in the ebook sector for close to 10 years, the publishers (with a few notable exceptions) continue to dig a deeper hole for themselves. The three main problems in the ebook sector are:
- DRM, Territoriality, The Agency Model introduced in 2010
The problems of DRM have already been covered in detail.
Regarding territoriality, we have ridiculous set of restrictions about who we, as a retailer, can sell an ebook to. A large publishing house will have separate entities setup in the US, Candada, the UK and Australia. Each one of these produces the same ebook that can be sold in a restricted set of countries at different prices. This causes all kinds of complications. Take for example a US citizen who in the army who is trying to purchase an ebook in Afghanistan. Do we rely on their IP address or credit card when determining whether they're allowed the book? The is a litany of other examples where territoriality complicates things helping no one, not even the people imposing it.
By 2010 Amazon had cut prices on ebooks to a level where they were losing money on each sale. Their strategy was fairly clear, build a large user base locked into their platform, bankrupt the competition then strong-arm the publishers to get a larger cut of the profits. The publishers freaked out and imposed a new model in the US where all ebook retailers were considered agents and couldn't discount their books; fixed prices across all retailers.
This move means that the publishers have complicated their own business model to the extent where they can't handle it. Taxes down to the city level must be applied to any ebook sales made with the US. The publishers are struggling to ensure all their distributors are complying with fixed prices and Amazon is monitoring this situation closely. How come retailer X is not complying with your fixed pricing but we have to? The publishers are fearing lawsuits with good reason.
I don't know what the answer is. Our only options as an indie retailer is to pursue a mobile based reading experience on either android, wp7 or through the browser (DRM problems come into play here). Everyone has been pushed off IOS since August last year when Apple imposed a 30% commission on any purchases made through an app. This 30% is exactly the same percentage that retailers receive as an agent.
Traditional book retailers pay suppliers 90 days after the book enters inventory whereas Amazon averaged about 58 days. The problem for traditional retailers is they held books in inventory (i.e. the book went unsold) for an average of 167 days versus Amazon's 16 days. This resulted in retailers carrying the cost of the book for ~78 days while Amazon was able to hold the float for ~41 days.
The end result of that type of inversion is that Amazon can accept a much lower margin, earn the float on the cash and live off much faster inventory turns than a traditional retailer. This was much more brilliant than "disintermediation" - as another poster has correctly noted, Amazon was an aggregator/replacement, not a true disintermediator.
- Screen technology will improve so that the distinction between e-paper and conventional displays becomes irrelevant. I really think the retina display on the iPad is good enough for most people in most situations, and that the iPad will be a significant rival to the Kindle in the ebook market.
- Currently ebook readers are very limited in what they can display, due to their display technology and limited processing power. This limitation will disappear (see above -- the iPad)
- When the above occur there is no need for a special ebook format. An ebook is just a website. We have a huge investment already in creating websites which makes the cost of doing so virtually zero. Creating a book will require far fewer people (maybe an editor, some marketing assistance, and a few days of a graphic designer's time).
- Once we realise that an ebook is just a website, we can get away from the idea that a book is a single homogenous entity. Why not sell a chapter at a time, and use the feedback to improve subsequent chapters, in the same way we use A/B testing (or hopefully, bandit algorithms [http://mynaweb.com -- my startup]) to improve sites? Why not sell multimedia packages of text, screencasts, etc for technical books? (This already happens.) This gets away from the stupid model of paying advances that publishers currently use.
- People will need a discovery mechanism, but we already many of these for the Internet in general. Maybe new ones specialised to books will emerge. In this more open world it will be harder for anyone to get a monopoly.
So, what have I missed?
[1] - http://leanpub.com/
Sounds something like a return to the magazine sales nodel of Dicken's time. I think there's probably room for this kind of "soap opera" type sales: you've only got to look at the way people follow long form fan-fic authors, commenting on chapters as they're released & interacting with the author as they write to see that this kind of model could be possible.
I doubt it will work for all forms of writing, some works just don't suit the episodic format, but I'm sure it will work for some.
It might happen that the LCD prevails - if its true that people place a huge premium on integrated solutions. Thats one theory behind the explosion of the smartphone market.
I'm in LOVE with my Kindle eInk display and, while it isn't nearly as 'all around good' as a Retina display for anything other than reading, I can't read for nearly as long on a retina screen as I can on eInk. The only complaint I would posit for eInk is that page turns are fairly slow, but that's on my older model Kindle. My wife's newer Kindle is much faster, though still noticeably slower than an iPad.
Regarding the 'chapter-by-chapter' publishing, Leanpub[1] is doing this today to some degree. Not 100% sure on the chapter-by-chapter functionality, but at the very least, updates to leanpub books are pushed out automatically to anybody who has purchased a copy.
Raganwald is publishing his new book[2] there as well, which was the first I'd heard of them.
[1] - http://leanpub.com/
I have several Android devices (phones, tablet) and an iPod Touch. They are all useless for reading outside (in the shade) because the screens are too reflective. Indoors they are all fine. I do most of my reading outside so this turns out to be a big problem.
I can't get a Kindle for technical reasons (I do not support Amazon and their DRM) and for financial ones - they do not charge sales tax, so I would have to do so on my tax returns which incurs large CPA fees as well as an audit trigger (California hates self employed people).
I also do not want a single purpose portable device. I prefer my portable devices to be multi-function - gps, games, web, movies, music, books etc all in one rather than carrying one device for each purpose.
Once someone figures out how to make general purpose Android tablets and phones with usable outdoor screens then things will really be better!
I have a Sony PRS-350 solely for reading and I love it. The Kobo and Nook readers are also nice and tend to have more features.
Then I got one for a gift. I didn't want it, per se, but I figured I had to at least pretend to like it. In doing so, I purchased a book, and then I read it, and then I was in love with it.
> The thing about being a single-purpose device is, at least in my opinion, nearly perfect, as a reading device. I routinely recommend it to people who are looking for an e-reader, and I routinely recommend against it for anyone looking for anything more. It's as close to perfect as I've seen, though its only direct competition is perhaps the Nook (which sucks, all around, in my opinion.)
I won't dare to question your principles on DRM, but I can say that at least in practice, they've never affected me. I have three active Kindles belonging to separate members of my family -- all tied to the same account. In addition to that, I occasionally use the Android and desktop clients, and it's never once given me any flack.
The Amazon Music DRM bit me once, and I boycotted it, but never with the Kindle stuff.
Edit: added the blocked paragraph.
Also, Amazon is not replacing warehouses with on-demand just yet. They are rapidly expanding with many new warehouses opened every year. What they are doing is much more ingenious: they setup marketplace to allow other companies to sell products lacking in Amazons portfolio through their website. Then they offer the vendors to do shipping and storage through Amazon warehouses. Then they ultimately add products generating lots of revenue (and profit) to their own portfolio, cutting out the vendor completely.
As with "amazon basic" products, sometimes their scheme extends as far as to completely replace the producer.
We need to get to a point where people can easily leave the Amazon bookstore if they wanted, and they wouldn't feel "locked in" within the Amazon ecosystem.
The next step will be that authors will sell to readers directly; that will disintermediate both publishers and Amazon, and there's no reason it should not happen.
(It's easy to lose sight of, but the entire world does not consist of people similar to HN readers gearing up to launch a new startup. Not even close.)
The new generations of authors will be very tech-savvy, to a point that may sound incredible now but is very real.
And even if some, or the majority, of authors don't want to do this themselves, why can't they hire a bunch of folks to do it for them? Why would they hand over 70 to 85% of potential returns to a publisher or to Amazon when they can pay someone a fixed price for editing, proofing and page layout, and keep 100% of the returns after that?
Publishers are clearly doomed since they don't provide enough values for the fees they demand; but I doubt Amazon's position is a lot more secure.
So your example for something that could replace Amazon... is Amazon?
Amazon is doing at least two things really well that is going to be completely impractical for individual self-publishing authors to do on their own: Providing a go-to place for customers looking for books, and payment processing.
Yes! ;-) The example was used to refute the fact that authors are technically incompetent. In the next generation most people will be able to put together an ebook.
I think the threat to Amazon will come first from best-selling authors, who already have a faithful following of their own. For everybody else, Amazon is great, for now.
But imagine a future where a search engine can help you find great ebooks, and where a simple payment system can let you buy them directly from authors (charging 2-3% to authors) -- why would you need Amazon then?
You just described Amazon. On top of that, they have the recommendation engine, public wishlist, affiliate program, and allow you to buy all kinds of other products via the same UI.
It's going to be very, very hard for any competitor to become attractive enough for customers to matter. I don't think even best-selling authors can just ignore that factor.
When it follows the rules, disruption starts at the low end, competing with non consumption and its near margin. Lots of books can't be viably published via the old system but might still be viable fo self publishing. For example, a book that can expect 2000 sales.
The question is not necessarily will the established authors & publishers prefer "to write, not deal with the minutiae of self-publishing." The question is will future authors prefer to try and find someone willing to publish their books or will they just self publish? I think a lot of them will self publish.
The second reason is cost. The traditional publishing process is expensive. It's an all exclusive package that includes financing, editing, promoting and all sorts of other stuff that authors probably want to avoid but it costs. Authors earn a small percentage of the price of a book. From what I understand, it can be between 1% & 25%. That is a lot of room for improvement.
By getting rid of the middleman, the authors will be taking on the new challenge of marketing their books- by no means an easy task, especially if you are unknown and not tech-savvy.
Note that while I work at Lulu, I don't officially speak for them.
I might be wrong, but in my imagination this would be awesome, offering nearly limitless possibilities for disruption. For example the adoption of open-source textbooks in schools would be much easier, academic research in some countries would really benefit from easier access to materials.
I think there is no question that this will be technologically feasible at some point in the future. The question is, if it happens and when. I hope it happens as fast as possible and judging by the development of the ebook world from 1990-2007 and 2007-Now, Amazon is by far more beneficial than the traditional publishers in this regard.
Certainly a monopoly is never optimal, but let's worry about that once the future has arrived. There is always antitrust law. Until then, I hope Amazon (or Google or Apple or ...) achieves as much marketshare as possible and pushes the development onward.
What does it cost for an editor to edit a 300-400 page novel written by a decent author?
How about cover art?
Marketing is an entirely different animal. I dont think you do book tours for ebooks.
How about cover art?
About $500: http://www.extendedimagery.com/info.html . You can probably find people charging more money or less.
This is a topic of great interest to me because I'm probably going to take the plunge in the next six months, if not sooner.
edit: they = Amazon
Another interesting question arising from that is: What are countries/languages which has no Amazon are going to do? They don't have monopoly, but they perhaps also lag behind in e-book sales, suffering from the lack of synergy and convenience provided by amazon website + readers + applications + 3rd party support.
By the way, I'm almost only buying ebooks from Amazon lately and, despite the convenience, this does make me pretty uneasy.
Besides, the whole point of DRM is to impede portability. What's got the publishers into this mess is being more concerned about piracy (and therefore opposing portability) than about empowering a hostile monopsony. The quickest way out of the quagmire is to open up.
We saw this before, with music in the iTunes Store: 2003, everything is DRM'd up the wazoo. 2010: suddenly Warner Music are happy for Apple to sell you un-encrypted downloads. Luckily for the music cos, Apple are primarily interested in selling hardware. Amazon's priorities are different, and much more dangerous ...
But it is true: "All this has happened before. All this will happen again." (So say we all)
iTunes DRM helped not the big labels, but turned out to be a (small?) competitive advantage of Apple. Steve Jobs just didn't care, because Apple is in the business to sell the razor (iPod). This is a compelling analogy what happens now in the eBook disruption. With the difference that Amazon is in the business to subsidize the Kindle plattform to sell more blades (books).
As for the DoJ, I don't see how creating an open standard for DRM ebooks would restraint trade; quite the contrary, I guess!
It's cleverly branded "Strathwood" because it was (a) Rated well (b) About 60% as expensive as other, lower rated choices.
The benefit to ME, the consumer, in this case is substantial - better quality, cheaper and - oh yah - shipped in 2 days to my home for free (Prime).
That convenience and quality factor is going to be damned hard to defend yourself against in retail, and clearly this is where the future of consumer retail is going.
The author seems to be arguing against letting this play out in the free market.
Yet in the past decade we've watched AAPL serve consumers with innovation and quality, and vertically integrate themselves into the world's largest company.
We are living through an unbelievable change in consumer purchasing and commerce.
The full impact of this change is hard to overstate, and trying to regulate it properly would be like a sandcastle against the sea at this point.
edit - Calacanis has an interesting article on this as well, further suggesting retail stores, etc -> http://www.launch.co/blog/amazon-has-a-ton-of-white-label-pr...
The trouble seems to be that 19th/early 20th century anti-trust law, from the era of the coal and steel and oil monopolies, is a really bad fit for modern service industries. Not to mention moving too slowly. And taking aim in the wrong direction. (Such as the DoJ ignoring the $48Bn goliath with 85% market share and taking aim on the half-dozen $1-4Bn corporations trying not to get squashed by AMZN by sucking up to AAPL.)
Seriously I've been stuffed ridged on price for the past 30 years by book sellers and publishers, and as much as I hate corporate evil, I dont consider amazon has done anything evil (yet), and if anything they have delivered payback in the form of a large kick in the nuts to the big publishing houses. If these people envy Amazons business model then make a better one and stop fucking whinging!