The Author’s Guild has updated their recent post about the state of the publishing industry. This article is reprinted here with permission. To see this post on their site and make comments, click here.
Amazon, Innovation, and the Rewards of the Free Market
Our article from two weeks ago, Publishing’s Ecosystem on the Brink: The Backstory, and similar articles spur frequent comments online that Amazon is simply reaping the rewards of its innovation, that its growing dominance of book publishing is merely a demonstration that the free market is functioning as it should. This isn’t really what’s been happening.
Useful innovation should of course be rewarded, but we’ve long had laws in place (limits on the duration and scope of patent protections, antitrust laws, stricter regulation of industries considered natural monopolies) that aim to prevent innovators and others from capturing a market or an industry. There’s good reason for this: those who capture a market tend to be a bit rough on other participants in the market. They also tend to stop innovating.
Amazon’s first Kindle, released in November 2007, was certainly innovative, but its key breakthrough wasn’t any particular piece of technology. Sony had already commercialized e-ink display screens for handheld e-books in September 2006. (E Ink, a Cambridge company co-founded by MIT Media Lab professor Joseph Jacobson developed the displays used by both companies.) Amazon’s leap was to marry e-ink displays to another existing technology, wireless connectivity, to bring e-book shopping and downloading right to the handheld device.
Amazon’s innovation, in other words, was to untether the Sony device and put a virtual store inside it. This is no small achievement, and Jeff Bezos’s particular genius seems to be his ability to grasp the transformative potential of this sort of thing long before others do, just as he saw the potential of databases and the Internet to facilitate shopping for books and the potential for one-click shopping to ramp up online sales before most others had caught on.
Amazon’s reward for developing the wireless e-reader should have been that it would become a significant vendor of e-books and earn a profit commensurate with the value it added to the publishing ecosystem. Whether it would then continue to be a significant e-book vendor should have depended on whether it continued to innovate and provide good service to its customers. Amazon’s reward should not have included being able to combine its wireless e-reader, deep pockets, and an existing dominant position in a related, but separate, market — the online market for physical books — to prevent other vendors from entering the e-book market. Amazon’s reward as an innovator, in other words, shouldn’t be getting to wall itself off from competition.
By all appearances, this is precisely what Amazon was trying to pull off two years ago, when it removed the buy buttons from nearly every Macmillan book. Amazon removed the buy buttons for both e-books and, stunningly, print books, even though its disagreement with Macmillan was confined to the sales terms for e-books. Amazon had about 90% of the market for e-books at the time, but that market was then quite small: Macmillan could handle Amazon’s e-book blackout indefinitely. Amazon’s
As a member of the Author’s Guild, I receive informative posts from them. Used here by permission, is their new insightful message about the current 2012 state of the publishing ecosystem. Read it on the Author’s Guild site.
Before you read this, or after you read this, you might want to have some other input about the state of YA, Middle grade and children’s writing, in general. Here’s a good place to start: Harold Underdown, Purple Crayon site: “Children’s Books in Hard Times:
Our Industry in 2011″
Publishing’s Ecosystem on the Brink: The Backstory
Subtlety is out. Bloomberg Businessweek’s January 25th cover shows a book engulfed in flames. The book’s title? “Amazon Wants to Burn the Book Business.” A towering pile of books dominates the front page of Sunday’s NYT Business Section. The pile starts well below the fold (print edition), breaks through the section header at the top of the page, and leans precariously. Books are starting to tumble off. “The Bookstore’s Last Stand,” reads the headline.
These stories capture pretty well the state of book publishing: this appears to be no ordinary, cyclical crisis that future authors and publishers will shrug off. To understand how the book industry got into this predicament, however, a broader perspective may be needed. The cover story of February’s Harper’s Magazine provides that, discussing a fundamental shift in the federal approach to antitrust law that’s affected bookselling and countless other industries. It’s a story that hasn’t previously been told in a major periodical, to our knowledge.
We’ll get to that in a moment. First, let’s set the stage with the other two stories.
Burning Down the Houses
Brad Stone’s Businessweek story discusses Amazon’s campaign to prevent other booksellers from securing a foothold in the booming e-book market and the company’s furious reaction to Random House’s decision last March to adopt agency pricing for e-books, just as five of the other “Big Six” trade publishers had the previous year. (Before agency pricing, Amazon could sell e-books from Big Six publishers at deep discounts, taking losses at a rate that Barnes & Noble could never afford to match. See How Apple Saved Barnes & Noble, Probably for more.)
Mr. Stone writes that after Random House’s March 2011 agency-pricing announcement,
Amazon could no longer run the best play out of its playbook – slash prices and sustain losses in the short term to gain market share over the long term. … “For the first time, a level playing field was going to get forced on Amazon,” says James Gray [of UK bookseller John Smith & Son and formerly of Ingram Content Group]. Amazon execs “were basically spitting blood and nails.”
Amazon’s response to Random House’s move was stunning and swift:
The next month, an Amazon recruiter sent an e-mail to several editors at big publishing houses, looking for someone to launch a new New York-based publishing imprint. “The imprint will be supported with a large budget, and its success will directly impact the success of Amazon’s overall business,” read the e-mail, which was
In the recent controversy between Amazon and Macmillan over pricing of ebooks, Amazon took the unusual step of pulling all “buy buttons” from Macmillan books; that is, you couldn’t buy Macmillan books on Amazon.
(This is the text of an Author’s Guild announcement to its members, used by permission.)
The Authors Guild is pleased to announce the launch of WhoMovedMyBuyButton.com, which is now live in fully-functional beta form. Who Moved My Buy Button? allows authors to keep track of whether Amazon has removed the “buy buttons” from any of their books.
Simply register the ISBNs of any books you’d like monitored, and our web tool will check daily to make sure your buy buttons are safe and sound. If there’s a problem, we’ll e-mail you an alert.
Ongoing monitoring. Although we’ve launched WhoMovedMyBuyButton.com in response to Amazon’s wholesale removal of buy buttons from Macmillan titles, we believe Amazon should be monitored for years to come. Amazon’s developed quite a fondness for employing this draconian tactic (there’s a chronology at the website); it’s only grown bolder with its growing market clout.
Vigilance is called for: sounding off is our best collective defense. Register your ISBNs today — it’s free and open to all authors, Guild members and not. (Though we’d prefer you join.)
Kindle 2 Great for Novels, But Still Needs Improvement
Have you been keeping up with the reviews of the Kindle 2, Amazon’s ebook reader? Here are a couple of the most interesting comments I’ve seen:
Jakob Nielsen says the Kindle 2 is great for reading novels, but less successful in reading newspapers or magazines where you must click on an article. Perhaps the most significant conclusion of his report is that he now endorses ebook readers.
Roger Sperberg, however, is enamoured with the Kindle 2’s always connected state.
And thanks to the Author’s Guild promptly raising public awareness of the copyright issues of Kindle 2’s text-to-speech feature! Amazon has taken the first step of announcing that publishers can opt out of the feature.
Anyone tried it? What do YOU think about it?
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Copyright 2009. Darcy Pattison. All Rights Reserved.
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