Amazon and eBooks

July 31, 2014

Amazon is really concerned about ebook prices. And its not hard to see why. As a company, Amazon has a really tough time recording profits, despite steady growth in overall revenue. In fact, considered as part of Amazon’s sales, media (including books) represents a shrinking share of their overall numbers. More and more, Amazon’s revenue growth is taking place in consumer electronics, but these products will never have the same margin as ebooks, for which Amazon essentially gets to charge digital rent. Nevertheless, their insistence on controlling the price of ebooks seems immediately counterintuitive as they are pushing to keep them as low as possible. The real question is why?

Amazon Drone

Does no one else find this just a little creepy?

According to a recent release by the company, profits and overall sales are the answer. The claim is that sales of lower priced ebooks are consistently higher than more expensive ones. Moreover, says Amazon, ebooks lack any production overhead, such as printing and binding, to demand offsetting by higher prices. At first blush, Amazon is working to protect the interests of readers against price gouging, especially by publishers whom they have long viewed as enemies of progress. This also helps to explain Amazon’s ongoing efforts to drive a wedge between publishers, readers, and authors by proposing a slew of pricing models and percentage guarantees to different parties. In other words, Amazon has been trying to dictate the sort of relationship that publishers and authors should have in order to eliminate publishers completely.

To some, this might come across as a great and wonderful thing. After all, cheaper ebooks mean easier access to content. Getting rid of publishers means no more rejection letters and profit sharing. The truth seems a little bit more muddled.

Amazon is the single most dominant seller of ebooks in the world; boasting almost 65% of the market share. They have never made a secret of their desire to drive publishers out of the business of ebook sales and to consolidate their own control over the market. After all, publishers have the resources to run their own production lines and maintain their own sales channels. To a publisher, Amazon is just “another bookstore” (albeit an important one). But publishers are not, and will never be as dependent on Amazon to get books to customers as self-publishing writers will be. Self-publishers need the retail giant to sell anything, and are almost totally dependent on this single company for all of their sales. And that makes Amazon more akin to a feudal land-owner rather than a simple sales outlet.

Seen this way, the motivation is simple: once Amazon has eliminated as many other sales channels as possible, they would be able to start dictating whatever terms they wish to authors and publishers that sell on their site, after all, the self-publisher would (hopefully) have no place else to sell. In other words, Amazon is seeking to undermine the ability of its producers to determine their own profit margins by forcing the into models that maximize Amazon’s retail reach, and they are more than happy to use whatever mean available to do so. This latest incredibly public effort to determine pricing models in the market for books starts to stink a little more when you consider that Amazon has already played games with price fixing and sales blackmail with other publishers and writers. You need look no further than the Gazelle Project back in the early 2000s for evidence of this strategy at work.

Guess who's who?

Guess who’s who?

The practical upshot of all this is pretty simple. The rise of the ebook should have enabled writers and readers to connect on a whole new level because Amazon is right about one thing: distribution channels are now increasing open and publishers and physical infrastructure no longer need be barriers to reaching an audience. But that doesn’t mean that any writer should be excited about a firm like Amazon, whose attitude towards small producers can be best described as predatory, when the company assures us they are on the side of the angels. After all writers, you are those small producers, and Amazon is eying you like a piece of meat. They don’t seek to eliminate gate keepers and usher in an era of openness – they want to be the sole gatekeeper and to do so by controlling prices, and by extension content.

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