Amazon’s e-book position ‘weak’ but customer focus too strong for disruption
August 11, 2014 | 4:35 am
Here’s a couple of interesting takes on the Amazon/Hachette affair. It’s kind of refreshing, actually, after all this back and forth he-said/she-said of authors in favor of Amazon or Hachette and Amazon and Hachette themselves to look at what more neutral parties are saying.
For starters, here’s Jake Kerr on Medium.com suggesting that Amazon is fighting so hard for lower prices on e-books because, far from being the monopolistic behemoth others accuse it of, its position in the e-book trade is actually fairly weak. This seems a little counterintuitive at first, but Kerr points out that e-book stores have an “absurdly low” barrier to entry—Microsoft, Apple, and Google are already there—and Apple and Google have more popular tablet devices than Amazon. (Kerr doesn’t mention the Kindle e-ink reader, which is still basically the dominant e-ink reader device—but then again, perhaps he feels the importance of e-ink devices is waning as tablets’ influence rises?)
For Amazon to make any progress at all they would have to either make the ebook space not worth pursuing for those companies or to flat out beat them. But the reality is so much harsher than making progress. The assets that Apple, Google, and Microsoft bring to the table mean that Amazon’s market share is inherently tenuous. The result is that Amazon isn’t thinking offense, it is thinking defense, and this is the thinking behind their “not worth pursuing strategy.”
Keeping e-book margins low, Kerr suggests, is Amazon’s way of playing defensively—make e-books simply not worth the trouble of getting into. (Like the proverbial land war in Asia, I imagine.) This has the side effect of giving publishers and authors a lot of money, so if you’re Hachette, you’d just as soon that status quo not change—anything that results in more margin going to Amazon means less margin to you. So Hachette basically has no incentive to give even an inch.
On the other hand, if Amazon cuts back its discounting to make more profits, suddenly the big tech companies have a lot easier time competing—and they’ve got considerably more money to burn than Amazon, if they really wanted to go that route.
Unlike a lot of people (including me) who have said that Amazon holds all the cards, Kerr thinks Amazon actually doesn’t have a whole lot of leverage. About all it can do is appeal to authors and readers, or stop discounting Hachette’s books. He suspects that the way the dispute will end is that Amazon will end up cutting Hachette’s discounts because that’s about the only thing it can do if Hachette isn’t willing to give ground. This will mean more money for Amazon from what sales it does make, but will also make it easier for other companies to come in and undercut it.
Then, on the other hand, we have Porter Anderson discussing the recent two-day workshop in which publishing-industry insiders got together to try to brainstorm how to compete with Amazon. The problem they ran into is that the perfect bookstore pretty much ends up looking just like Amazon, and you can’t out-Amazon Amazon because Amazon already is Amazon. The problem with trying to pick holes in Amazon’s “walled garden” approach is that their garden is so very lush and hospitable that most people “stuck” in it are actually quite happy there.
Anderson cites an essay by Bowkers’s Laura Dawson noting that the things authors and publishers want out of a bookstore (more money, more control) are essentially at direct odds with what customers want (lower costs, more freedom), and hence Amazon’s focus on customers naturally puts it in an adversarial relationship with its suppliers.
What Dawson is saying is that however angry the publishing establishment may be at Amazon for “taking” its reader/consumers — with low prices, staggering inventory, seriously effective technology, and world-beating customer service — those reader/consumers are happy. Attempts to build a “perfect e-bookstore,” like the whole “discoverability” debate, are about publishing, not about readers. I’ve found myself writing lately that our authors can be caught in this teary gratitude-fest for “you, the reader,” when, in fact, the reader is doing just fine and the authors need to work on their own problems. Readers have more content than they can even fathom is out there, and much of it at bargain-basement prices.
And they’re buying it? From Amazon.
And Dawson notes that for all the industry’s “hand-wringing over the Hachette negotiations,” and no matter how big a company Hachette is, the average Amazon customer experience “is just not that horribly affected” by the squabble. If even a major corporate publisher is unable to have much of an effect, what could anyone else hope to accomplish?
The industry insiders participating in that “perfect bookstore” workshop just kept running into the fact that things they thought should help others compete with Amazon—“concierge” type recommender services, for example—were already out there but weren’t setting the world on fire. It’s hard to disrupt with a “new” idea when the idea is already out there but not doing much for the people who already had it.
In the end, they wondered if Amazon was enough a part of the industry now that the next great disruption would have to come from outside the industry and would end up disrupting all of it, including Amazon.
And so the industry upheaval continues…