9 ms·

What Amazon's ebook strategy really means

122 points by cstross 15y ago

andrewflnr 15y ago
So does this mean that the major publishers have to re-disrupt Amazon's disruptive business model? That seems ironic.
- cstross 15y ago
  They're still reacting. But they've finally woken up and smelled the smoke from their burning walled gardens, and they're trying to form a bucket chain. 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.)
danmaz74 15y ago
This was a interesting read and the OP makes a good point. But couldn't the publishers just make a deal with e-book reader makers (which are struggling against Amazon too) and create a DRM "open" standard? By the way, I'm almost only buying ebooks from Amazon lately and, despite the convenience, this does make me pretty uneasy.
- cstross 15y ago
  I suspect if they tried such a gambit, AMZN could -- justifiably -- call for a DoJ investigation into unfair restraint of trade. (Or just ignore it altogether, insofar as AMZN has still got over 60% of the US ebook market.) 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 ...
  - danmaz74 15y ago
    I think the main point of DRM, for publishers, is to impede copy, not portability (of the same copy among different devices). As for the DoJ, I don't see how creating an open standard for DRM ebooks would restraint trade; quite the contrary, I guess!
  - ralfd 15y ago
    In one important aspect music differed from movies and books: Music was never in a copy protected format. The point of digital songs with DRM was absurd, because you could just rip & burn an original CD. But movies were copy protected even on VHS cassettes. DVD and BluRay are easy to rip/burn, but pro forma they have a DRM. And ORC scanning of books is inconvenient. It makes sense to at least try to establish a DRM for digital books. 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).
- moultano 15y ago
  That effectively already exists. Adobe digital editions books are supported on a range of devices including the nook.
- lmm 15y ago
  That's already happened - the Adobe DRM "standard", and readers like the Kobo. It's going nowhere, because the selection of ebooks is much smaller than Amazon's, so few people want to buy one of their readers, and you can't read those ebooks on the kindle, so no-one buys the books either. If they sold DRM-free ebooks then there might be a chance for other ebook stores to get established selling to kindle owners (though given how well integrated the kindle and its store are, I'm not sure), and then amazon might be forced to sell DRM-free ebooks too and at that point the market in readers could open up, and it'd be music all over again (where iTunes is still the 800lb gorilla, but no longer in a monopoly position). You'd think book publishers would learn from history...
  - danmaz74 15y ago
    I'll be glad if the publishing industry chooses DRM-free as their standard. But that's unlikely. And if the standard will be pushed by the editors - or if they adopt Adobe's one - I guess there will be a lot of content...
kkwok 15y ago
I agree largely with this--especially about removing DRM. What complicates it for me is that it's very hard for me to have any sympathy for the publishers as they brought this upon themselves. They can't play victim as long as they keep DRM.
- dhimes 15y ago
  And what's to keep Amazon from keeping the DRM even if the publishers don't require it?
  - 0bit 15y ago
    Just like they did with Audible. And according to this[1] article on BoingBoing, they promised to do away with DRM, but have still not done it in FOUR years! Link[1]: http://boingboing.net/2008/01/31/amazon-buys-audible.html http://boingboing.net/2008/01/31/amazon-buys-audible.html edit: they = Amazon
bambax 15y ago
But how is Amazon "disintermediating" anything? It's simply taking the place of a previous intermediary (bookshops). 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.
- cstross 15y ago
  Au contraire: the reason it won't happen is that most folks are not tech-savvy geeks. Most writers want to write, not deal with the minutiae of self-publishing (which is not the same thing at all), and most readers who buy ebooks aren't savvy enough about downloading files and shoving them onto a peripheral device. Oh, and reading books is already a marginal activity: anything that reduces the size of the market by even the 10% who are least tech-savvy is going to hit the producers in the wallet. (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.)
  - dhimes 15y ago
    That's a problem technology will solve. Maybe a startup will move into the space.
    - Avshalom 15y ago
      Some new company acting as publisher/middleman isn't solving the problem, it's replacing the old answer.
      - Estragon 15y ago
        There's enough ideological fervor about reading that someone is likely to provide this service for free.
      - dhimes 15y ago
        Of course. I was thinking of a startup that helps authors self-publish, as (I presume- I've never done it) some blogging software is dead-simple for non-tech bloggers to use. 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.
noelwelsh 15y ago
I largely agree with the analysis in this essay, but I believe the book market can be more significantly disrupted than is currently being suggested. Here are the significant changes I see: - 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 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?
- marquis 15y ago
  I'm looking forward to a world where some books return to their 1800s newspaper-style formats: short chapters published weekly, like we get some graphic novels on the web now. I WANT to pay the author, and look forward to this happening. It's definitely a great space to look into. It may exist already and I don't know about it? (again, leaving it open for some startup to make waves..)
  - alanfalcon 15y ago
    This is happening to some degree in audiobook form with Podiobooks.com - many authors release episodes weekly, as they write and record them. This is likely happening in text form too, but I find that I listen to rather than read books these days. Also, Amazon bought the dominant digital audiobook distribution platform in Audible.com for what that's worth.
Turing_Machine 15y ago
I'd have more sympathy for this point of view if the Big 6 publishers hadn't been running a de facto cartel since, well... forever, and basing their relationship with authors on a business model that could be compared, unfavorably, with a payday loan operation. 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-commercial-ebook-marke.html 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.
- cstross 15y ago
  Ahem: apropos that 2007 post of mine, I will stand right behind it. Back in March 2007, it was right on the nail. 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?
sgentle 15y ago
Har. Nice article and a well-made argument. However I suspect that the big 6 are going to accept a world without DRM the same way as the MPAA and RIAA before them: kicking, screaming and fighting until the last breath to prevent anyone from staunching the massive gaping wounds they've inflicted on themselves. 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.
- tren 15y ago
  "However I suspect that the big 6 are going to accept a world without DRM the same way as the MPAA and RIAA before them: kicking, screaming and fighting until the last breath to prevent anyone from staunching the massive gaping wounds they've inflicted on themselves." 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.
revelation 15y ago
Some clarifications, I guess? I don't think Amazon is loss-leading the ebook market to secure a monopoly; you do that in an already established market. Instead, what I think they are doing is trying to bootstrap the ebook market. And successfully, at growth rates far exceeding 100% every quarter. 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.
aresant 15y ago
We recently purchased patio furniture and elected to buy Amazon's brand. 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-products-and-is-hiding-them.html http://www.launch.co/blog/amazon-has-a-ton-of-white-label-pr...
russell 15y ago
I'm curious about the economics of self-publishing. 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.
- jseliger 15y ago
  It depends. Most seem to hover in the neighborhood of around $.01 – .02 per word; take someone like this guy, who I've thought about hiring: http://www.mikesirota.com/fees.htm http://www.mikesirota.com/fees.htm . A typical novel will run about 85,000 words, so he'll probably charge about $1500. I think these guys: http://www.bookdocs.com/ http://www.bookdocs.com/ charge similar prices. If you want to publish a 250,000-word epic fantasy novel, that's obviously going to cost more. How about cover art? About $500: http://www.extendedimagery.com/info.html 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.
guard-of-terra 15y ago
"Amazon has the potential to be like that predatory big box retailer on a global scale." Amazon is not so good at global (compared to other big internet businesses anyway) It only really works in a selected few countries/languages (US + Canada China France Germany Italy Japan Spain United Kingdom, as the site tells us) 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.
iRobot 15y ago
Not everyone lives in cities surrounded by mega bookshop/cafes, prior to Amazon, if I wanted a book I had to order it from the library, pay $2 and pick it up after a 50 minute drive to town. ditto if I wanted to buy a book it was $15-$30 and a 50 minute drive and a really small choice unless I ordered and waited another 2 weeks. (Prices converted from NZ$ to US$) - Amazon delivered actual real books from the US to NZ for less than that and the kindle moves me now to a level playing field with the rest of the world and no trees cut down or gas guzzled in the process. 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!
malay 15y ago
The history lesson on Amazon's business model is important, but the OP has it a bit wrong. The business model innovation was about inverting the cash flow and holding cash instead of inventory. Amazon actually pays suppliers much faster than traditional book retailers, making it better for the suppliers. 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.
nextparadigms 15y ago
I'm with Amazon in this battle, and this battle alone, because I want e-books to become cheaper, but in the same time we need to see what we can do about Amazon later on to make them adopt an open e-pub format. I say open e-pub format because others use e-pub, too, and it's still closed (like Apple with iBooks). 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.
jcurbo 15y ago
So with all this I wonder if Apple will eventually go non-DRM on iBooks much like they eventually did with music on the iTMS.
mark_l_watson 15y ago
Charlie, while I basically agree with your article, from my perspective Amazon has been good for you: I bought one of your books for the Kindle platform after reading a comment you wrote on HN, liked it, and have bought several more. If the whole process was not so quick and easy, I might not have done the impulse buy and bought the first book. Sounds like a nice town to live in.
fleitz 15y ago
Faced with the prospect of removing DRM or watching their business die most businesses would rather watch it die.
kbronson 15y ago
Don't miss the comments in the article, as they are as worth as the article itself.
Atropos 15y ago
What would the world be like, if you could instantly buy every book as an ebook anywhere in the world, if ereaders were clearly more convenient to use than paperbooks and if they were so cheap, that everybody who now owns 1 book would own 1 ereader? 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.

122 points by cstross 15y ago

andrewflnr 15y ago

So does this mean that the major publishers have to re-disrupt Amazon's disruptive business model? That seems ironic.

cstross 15y ago
They're still reacting. But they've finally woken up and smelled the smoke from their burning walled gardens, and they're trying to form a bucket chain. 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.)

danmaz74 15y ago

This was a interesting read and the OP makes a good point. But couldn't the publishers just make a deal with e-book reader makers (which are struggling against Amazon too) and create a DRM "open" standard? By the way, I'm almost only buying ebooks from Amazon lately and, despite the convenience, this does make me pretty uneasy.

cstross 15y ago
I suspect if they tried such a gambit, AMZN could -- justifiably -- call for a DoJ investigation into unfair restraint of trade. (Or just ignore it altogether, insofar as AMZN has still got over 60% of the US ebook market.) 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 ...
- danmaz74 15y ago
  I think the main point of DRM, for publishers, is to impede copy, not portability (of the same copy among different devices). As for the DoJ, I don't see how creating an open standard for DRM ebooks would restraint trade; quite the contrary, I guess!
- ralfd 15y ago
  In one important aspect music differed from movies and books: Music was never in a copy protected format. The point of digital songs with DRM was absurd, because you could just rip & burn an original CD. But movies were copy protected even on VHS cassettes. DVD and BluRay are easy to rip/burn, but pro forma they have a DRM. And ORC scanning of books is inconvenient. It makes sense to at least try to establish a DRM for digital books. 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).
moultano 15y ago
That effectively already exists. Adobe digital editions books are supported on a range of devices including the nook.
lmm 15y ago
That's already happened - the Adobe DRM "standard", and readers like the Kobo. It's going nowhere, because the selection of ebooks is much smaller than Amazon's, so few people want to buy one of their readers, and you can't read those ebooks on the kindle, so no-one buys the books either. If they sold DRM-free ebooks then there might be a chance for other ebook stores to get established selling to kindle owners (though given how well integrated the kindle and its store are, I'm not sure), and then amazon might be forced to sell DRM-free ebooks too and at that point the market in readers could open up, and it'd be music all over again (where iTunes is still the 800lb gorilla, but no longer in a monopoly position). You'd think book publishers would learn from history...
- danmaz74 15y ago
  I'll be glad if the publishing industry chooses DRM-free as their standard. But that's unlikely. And if the standard will be pushed by the editors - or if they adopt Adobe's one - I guess there will be a lot of content...

kkwok 15y ago

I agree largely with this--especially about removing DRM. What complicates it for me is that it's very hard for me to have any sympathy for the publishers as they brought this upon themselves. They can't play victim as long as they keep DRM.

dhimes 15y ago
And what's to keep Amazon from keeping the DRM even if the publishers don't require it?
- 0bit 15y ago
  Just like they did with Audible. And according to this[1] article on BoingBoing, they promised to do away with DRM, but have still not done it in FOUR years! Link[1]: http://boingboing.net/2008/01/31/amazon-buys-audible.html http://boingboing.net/2008/01/31/amazon-buys-audible.html edit: they = Amazon

bambax 15y ago

But how is Amazon "disintermediating" anything? It's simply taking the place of a previous intermediary (bookshops). 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.

cstross 15y ago
Au contraire: the reason it won't happen is that most folks are not tech-savvy geeks. Most writers want to write, not deal with the minutiae of self-publishing (which is not the same thing at all), and most readers who buy ebooks aren't savvy enough about downloading files and shoving them onto a peripheral device. Oh, and reading books is already a marginal activity: anything that reduces the size of the market by even the 10% who are least tech-savvy is going to hit the producers in the wallet. (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.)
- dhimes 15y ago
  That's a problem technology will solve. Maybe a startup will move into the space.
  - Avshalom 15y ago
    Some new company acting as publisher/middleman isn't solving the problem, it's replacing the old answer.
    - Estragon 15y ago
      There's enough ideological fervor about reading that someone is likely to provide this service for free.
    - dhimes 15y ago
      Of course. I was thinking of a startup that helps authors self-publish, as (I presume- I've never done it) some blogging software is dead-simple for non-tech bloggers to use. 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.

noelwelsh 15y ago

I largely agree with the analysis in this essay, but I believe the book market can be more significantly disrupted than is currently being suggested. Here are the significant changes I see: - 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 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?

marquis 15y ago
I'm looking forward to a world where some books return to their 1800s newspaper-style formats: short chapters published weekly, like we get some graphic novels on the web now. I WANT to pay the author, and look forward to this happening. It's definitely a great space to look into. It may exist already and I don't know about it? (again, leaving it open for some startup to make waves..)
- alanfalcon 15y ago
  This is happening to some degree in audiobook form with Podiobooks.com - many authors release episodes weekly, as they write and record them. This is likely happening in text form too, but I find that I listen to rather than read books these days. Also, Amazon bought the dominant digital audiobook distribution platform in Audible.com for what that's worth.

Turing_Machine 15y ago

I'd have more sympathy for this point of view if the Big 6 publishers hadn't been running a de facto cartel since, well... forever, and basing their relationship with authors on a business model that could be compared, unfavorably, with a payday loan operation. 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-commercial-ebook-marke.html 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.

cstross 15y ago
Ahem: apropos that 2007 post of mine, I will stand right behind it. Back in March 2007, it was right on the nail. 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?

sgentle 15y ago

Har. Nice article and a well-made argument. However I suspect that the big 6 are going to accept a world without DRM the same way as the MPAA and RIAA before them: kicking, screaming and fighting until the last breath to prevent anyone from staunching the massive gaping wounds they've inflicted on themselves. 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.

tren 15y ago
"However I suspect that the big 6 are going to accept a world without DRM the same way as the MPAA and RIAA before them: kicking, screaming and fighting until the last breath to prevent anyone from staunching the massive gaping wounds they've inflicted on themselves." 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.

revelation 15y ago

Some clarifications, I guess? I don't think Amazon is loss-leading the ebook market to secure a monopoly; you do that in an already established market. Instead, what I think they are doing is trying to bootstrap the ebook market. And successfully, at growth rates far exceeding 100% every quarter. 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.

aresant 15y ago

We recently purchased patio furniture and elected to buy Amazon's brand. 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-products-and-is-hiding-them.html http://www.launch.co/blog/amazon-has-a-ton-of-white-label-pr...

russell 15y ago

I'm curious about the economics of self-publishing. 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.

jseliger 15y ago
It depends. Most seem to hover in the neighborhood of around $.01 – .02 per word; take someone like this guy, who I've thought about hiring: http://www.mikesirota.com/fees.htm http://www.mikesirota.com/fees.htm . A typical novel will run about 85,000 words, so he'll probably charge about $1500. I think these guys: http://www.bookdocs.com/ http://www.bookdocs.com/ charge similar prices. If you want to publish a 250,000-word epic fantasy novel, that's obviously going to cost more. How about cover art? About $500: http://www.extendedimagery.com/info.html 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.

guard-of-terra 15y ago

"Amazon has the potential to be like that predatory big box retailer on a global scale." Amazon is not so good at global (compared to other big internet businesses anyway) It only really works in a selected few countries/languages (US + Canada China France Germany Italy Japan Spain United Kingdom, as the site tells us) 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.

iRobot 15y ago

Not everyone lives in cities surrounded by mega bookshop/cafes, prior to Amazon, if I wanted a book I had to order it from the library, pay $2 and pick it up after a 50 minute drive to town. ditto if I wanted to buy a book it was $15-$30 and a 50 minute drive and a really small choice unless I ordered and waited another 2 weeks. (Prices converted from NZ$ to US$) - Amazon delivered actual real books from the US to NZ for less than that and the kindle moves me now to a level playing field with the rest of the world and no trees cut down or gas guzzled in the process. 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!

malay 15y ago

The history lesson on Amazon's business model is important, but the OP has it a bit wrong. The business model innovation was about inverting the cash flow and holding cash instead of inventory. Amazon actually pays suppliers much faster than traditional book retailers, making it better for the suppliers. 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.

nextparadigms 15y ago

I'm with Amazon in this battle, and this battle alone, because I want e-books to become cheaper, but in the same time we need to see what we can do about Amazon later on to make them adopt an open e-pub format. I say open e-pub format because others use e-pub, too, and it's still closed (like Apple with iBooks). 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.

jcurbo 15y ago

So with all this I wonder if Apple will eventually go non-DRM on iBooks much like they eventually did with music on the iTMS.

mark_l_watson 15y ago

Charlie, while I basically agree with your article, from my perspective Amazon has been good for you: I bought one of your books for the Kindle platform after reading a comment you wrote on HN, liked it, and have bought several more. If the whole process was not so quick and easy, I might not have done the impulse buy and bought the first book. Sounds like a nice town to live in.

fleitz 15y ago

Faced with the prospect of removing DRM or watching their business die most businesses would rather watch it die.

kbronson 15y ago

Don't miss the comments in the article, as they are as worth as the article itself.

Atropos 15y ago

What would the world be like, if you could instantly buy every book as an ebook anywhere in the world, if ereaders were clearly more convenient to use than paperbooks and if they were so cheap, that everybody who now owns 1 book would own 1 ereader? 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.