Yup! It’s another book lover with a blog writing about why Amazon should creep you out a little bit. And, even better, it’s gonna be a three-part series! You love the idea, don’t you? Oh, no? Well, whatever, sometimes a dude just needs to write about the things that have been bugging him. I don’t intend to preach to you or condemn your choices, but I think it is a good idea that everyone know what Amazon is doing in the book market. And as G.I. Joe would tell you, knowing is half the battle.
Some of my friends (or twitter followers, or acquaintances, or people in the vicinity when I learn about the latest news coming out of Amazon) won’t be surprised to hear that I’m not a huge fan of the A to Z smiling packages that continue to devour the publishing industry. And I’m writing this, more or less, as a public service announcement to explain why, even if you like Amazon, you should be a little wary of pledging your undying loyalty to this behemoth. Chances are, if you’re reading this blog, you hold some affinity for books and/or bookstores. If either of those assertions are true, then it’s important that you understand Amazon’s relationship to publishers, authors, and bookstores.
I know why you flock to Amazon for your book purchases. They have an incredible database of books. They deliver books directly to your home. And, if that’s not enough, they also have ridiculously low prices that you won’t find at any physical bookstores. Basically, they are ultra-convenient. I should also clarify that I used to include myself in that “you” category. I go through a lot of books that aren’t necessarily mainstream titles and can’t always be found at local bookstores. Although my unpaid internships and hourly wages provide me with a lifestyle of grandeur and untold riches, I somehow don’t find myself with a lot of money to spend on my book addiction. I even have a Kindle that I’ve used to buy books before (it was a Christmas gift, and I now only use it for library loans and pdf documents), so I’m well acquainted with Amazon’s powerful clutches. They’re great for consumers. Unfortunately, they are also doing everything they can to monopolize the book industry.
When Amazon first showed up, they seemed like a great outlet for publishers. Another way to get books to readers without having to build a complex extension to their own websites? How perfect! But, all of a sudden Amazon grabbed a huge share of the market, had quite a bit of negotiating power, and was muscling other competitors out by selling books basically at cost. Then they unveiled the Kindle and really changed the game. As one of the first and most progressive e-readers, Amazon immediately gobbled up the huge majority of the e-book market (which they still control today). And, as such, they began dictating the prices of their new product. Now, you probably think that e-books should be exceedingly cheap. I mean, after all, it’s digital. Publishers don’t have to create physical books and get them into physical bookstores. But, in reality, most of the cost of producing books comes up front in the form of author advances, editing, design, publicity, and marketing. Only a small portion of a book’s price comes from the creation and shipment of the physical books. So, while I understand the perception that e-books should be bargain-barrel cheap, the reality is that most of what you pay for in a book is the content, not the paper. With that knowledge, you can probably see why publishers are nervous that the price-lowering machine that is Amazon has a large market share in both physical and electronic books. Simply put, Amazon is developing the negotiating power to drive down prices and squeeze publisher’s profit margins. Even more troubling is Amazon’s willingness to sell e-books at or below cost.
Yes, that’s a real thing. Amazon will lose money selling e-books (and sometimes physical books, too) in order to gain market share and drive everyone else out of business (consider, for example, the fact that, while Amazon’s yearly revenue is greater than Google’s, Google made over $13 billion in earnings this past year and Amazon reported a loss of about $39 million). Since e-books are a relatively new product, their value to consumers has yet to be determined. So when Amazon sells e-books at a loss, they not only strong-arm their competitors, but they also set consumers’ expectations for e-book prices at unsustainably low levels. So, what was once a perfect online platform for publishers to move their books has turned into a domineering force with a major market share, ready to push over anyone who gets in its way and willing to suffer loses for the foreseeable future in order to create an eventual monopoly. And if you imagine that Amazon’s low prices will persist into eternity, don’t get your hopes up. Amazon has survived this long by forsaking profits in return for market share and revenue growth. But, eventually, their stockholders will demand to see some actual profits. It’s possible that Amazon can make these profits from advertisements, but the far more likely scenario is that, after their major competitors are gone, the online giant will decide to jack up its prices. There’s no way to tell if this business model will work out or hold up for Amazon, but their plan should be frightening enough to make you raise an eyebrow.
Coming up in Part 2, Amazon’s relationship to bookstores and authors. More opinionated articles, hooray!!