Amazon.com And You're Done

I remember in the late 90s siting in a strategy board meeting, where one director predicted that Bertlesmann would ‘crush ‘ Amazon and that the company would not last at the level of losses is was making. I tried to explain global branding, customer service, and how retail operations can work on positive cash flow, but I only got a glazed look in return. The outcome is now history.

It is hardly surprising to find that the media that Amazon started with, books, is one that they cover so well. It is the width and depth of Amazon’s book vision and commitment that makes it different. They proved themselves adept in understanding the market’s weaknesses and seizing on opportunities. As a result Amazon is truly vertical.

Who else has a significant if not major share of:

Physical books - Sales over the internet now includes The Book Depository and ABE acquisitions. Amazon remain one of a few who openly sell new books alongside, bargain, second hand and rare. They understand that to a consumer, a book is a book and that bookselling is about selling all books, not just front list.

Ebooks - Amazon not only rekick started the ebook market, but drove the consumer adoption of eink readers and later platforms. Although they still own Mobi, it is somewhat languishing in the background and we are not sure what happened to that other acquisition, Lexcycle’s Stanza reader. They have however created a market leading and global Kindle brand, which now transcends the device itself.

POD – Amazon acquired Booksurge. Although POD never fulfilled its potential to change the model from print and distribute, to distribute and print, Amazon still acquire content through this channel and it has also established their appeal to many authors.

Audiobooks – Amazon has this base covered with market leading and aptly named Audible.

Marketplace – Amazon’s service pulls in retailers, wholesalers and publishers and creates a place where Amazon may not be the cheapest but they still gets a healthy slice of the takings from each sale. A very clever move to create a service which everyone has to be in.

Singles - Amazon Singles may still be a bit lost but could easily find a home in their new Washington Post offer.

Digital Library – The Amazon owner lending library creates a new lending model which offers the consumer a new service and the author additional new income.

This is all without KDP and its successful self-publishing arm and also Amazon’s now serious and potentially disruptive moves into being a publisher. Did we forget that Kindle brand? Did we forget that umbrella subscription service, Prime?

To achieve the above in less than 20 years and do so across the globe is significant. Together it shows a clinical understanding of the value chain, book sectors and its supply chain that has to be admired. Amazon is truly a category killer.

Now add LoveFilm video streaming and DVD rentals, a very healthy CD Rom music retail offer and music downloads, the Washington Post, Amazon’s new Art offer and we see a media conglomerate that has subtly moved in and picked the industry’s ‘low hanging fruit’.

We must not forget all the other Amazon businesses. The range of goods it now sells is diverse and generates significant revenues. Here it services the same consumers through a single marketplace portal, offering a true one stop shop, or ‘Walmart on the internet’.

Then we have the technology that underpins all their services and like their cloud and web services are now being retailed in its own right. 

Amazon is here and is here to stay.

As long as they continue to provide that comprehensive cover, service and one stop shop, they will not be dislodged. Some may want to be number two or three, but it’s like chasing rabbits and their future will be determined more by Amazon’s actions and their ability to merely track them. We now need to learn to survive in an Amazon world. To do so we must innovate and do things differently and smarter and in doing so recognise that only the agile survive a category killer.  

For Book Depository Read Amazon

The UK OFT (Office of Fair Trading) has today cleared Amazon’s proposed acquisition UK Internet retailer The Book Depository. Many objections were submitted by the UK trade who were mindful of the growth of Amazon and the leverage that The Book Depository potentially gives it.

The ruling was not unexpected and was based on UK trading today and found that The Book Depository's share of UK sales was relatively small, accounting for between two to four per cent of online retailing of hard-copy books. They state that 'we are satisfied that this small increment to Amazon's position does not raise competition issues. The evidence showed limited competitive constraint from The Book Depository which, in fact, has shown most growth and expansion in overseas markets rather than the UK.’

Whilst the decision is sound today the merger does knock out a viable alternative to Amazon who has clearly demonstrate its ability to be both innovative and grow rapidly. The question now is who is the viable alternative and what levels of growth have they been able to achieve? Comparing a raising star to today’s market to many who are not exactly setting the world alight is valid but hardly fair trading.

Amazon clearly made a wise move in buying The Book Depository and got it under the OFT radar on today’s measures. If we were to extrapolate the growth and sales to see position that The Book Depository may have achieved in the coming years without Amazon and the power that the consolidation could deliver then the decision may have been tighter.

Just like they did some 13 years ago, some today are pointing to Amazon’s dip in profits and raising questions about further growth and returns. After all, accountants will often only see one goose and are unable to account in the books for the goose that lays the golden egg.

The full ruling can be read on the OFT site.

Paws in The Proceedings

Some would suggest that 12 weeks is a long time during a period of rapid change, others that it is a mere blink of an eye. For the last 12 weeks we haven’t written a line about technology, digitisation or publishing. The reasons for this paws in the proceedings were many. It wasn’t that we felt we had little to say, or that things weren’t happening, or we felt that that publishing was now digital, nor did we have writer’s block.

So what have we missed during this last 12 weeks?

Legally things have continued much as before. The Goodle Book Settlement continues to go on and on. Although Judge Chin has at least set a legal agenda and timetable the parties have now moved on from snippets to distribution and it is worse than watching paint dry. One can almost guarantee that by the time they finally settle the agenda would have some new twist, will mostly be irrelevant and the only ones to profit would be the lawyers. The Office of Fair Trading still can’t seem to get its head around agency pricing, but we must recognise this is the same body who once thought CD pricing in the UK was fair. The Authors Guild’s have lodged a case against the HaitiTrust’s digitisation of orphans, which would seem to suggest to some that the lawyers in the AG are steering the ship and making hay whilst the sun shines. Also we now have the extension of music copyright to accommodate those aging musicians and the ever youthful Cliff Richard.

As we have often said, publishing is a rights business without a rights registry and apparently trying to migrate into the digital world, using at best paper and worst telepathy.

Should we have expected any different in 12 weeks on the legal front?

Market developments however never stop and Amazon certainly keeps announcing acquisitions, partnerships and new services. Any venture that raises its head above the parapet is fair game on Amazon’s radar and if it isn’t then its probably failed. The potential acquisition by Amazon of The Book Depository would appear to be good for consumers but potentially bad for the traditional channel. However some would suggest that the traditional channel has so far failed to compete online. Amazon have also pushed forward with their Overdrive library partnership which potentially is a game changer and they are also quietly pushing their Prime service offer to underpin their services. The only cloud on their horizon continues to be US sales tax issue.

The only other market news to grab our attention was the establishment, or ‘Disneyfication’ of Harry Potter into Pottermore.com. Despite Rowling’s previous position on the digital revolution, the move was logical, but the model is somewhat limited for others and who would want to be an agent in these changing times!
Technology has been relatively quiet during the quarter. Perhaps it was summer or perhaps they are all queued up awaiting Frankfurt. Sony did continue to huff and puff with a new model based on the old same story and its hardly surprising that they are even stalling in their own backyard. They may be lifted if Waterstones once again adopt them as their ereader answer, but for now look a spent force.

Rumours of an Amazon tablet have started to firm up with some even reporting on its testing. Its hard to say whether it is a Nook beater or a iPad rival today, but it is certainly one to watch especially if tethered to Whispernet and offered on the same connection terms as the Kindle. Sorry Amazon brand managers, that should read ‘Kindle’ not the ‘the Kindle’. What is clear is that apart from THE Kindle reader black and white eink is going out of fashion.

Finally, it was interesting to see Google acquiring Motorola. This says much about the continued rise of mobile technology and could offer some very interesting options for Android and Google integration.

During the period we lost Michael Hart the founder of Wikipedia and ebook visionary and also Steve Jobs finally stepped down at Apple. Both have left a significant digital legacy and have changed publishing from the outside.

The one thing that is now starting to gain column inches and much speculation is what some call ‘Netflix for ebooks’ or in Europe ‘Spotify for ebooks’. This is a change in the consumer model, from outright purchase and ownership, to rental and subscription models. We have long argued this and Amazon well poised to move both on the consumer and now library fronts . However, the industry seems reluctant to embrace the change and is bogged down with yesterday’s contracts, terms and model.

Perhaps digital publishing is just like herding cats