Thanks to Roger Knights for these two interesting links –
- Seeking Alpha discussion about a startup combination trying to compete with Amazon.
- Article at Paid Content that covers this same Startup Partnership.
To fully understand what is going on here, we need to step back and look at (really look at) what it is that Amazon is trying to do with the Kindle.
What the Kindle seemed to be
When the Kindle first came out, it seemed to be a Gutenberg level transformation in Books and Publishing –
- Anyone could publish.
- Readers could get any book in the world, instantly.
- All your books on one device.
- A direct connection between authors and readers.
- Costs of printing and storage and shipping and stores gone.
- Instant and Quick Editing and Updating of Books.
- No more problems with supply and demand – As many ebooks can be made as needed.
- The chance for a more open market. More independent authors. More Publishers. More bookstores.
Of course, that’s not really how things are turning out. It’s becoming clearer that this was an illusion that readers and authors envisioned and dreamt up. Perhaps it’s time for reality.
What Amazon’s moves seemed to suggest
Amazon said all the right things –
- A device made for reading, with no compromises.
- The Fight against the Agency Model.
- Allowing Indie Authors to publish.
- Not getting in the way.
- Any book within 60 seconds.
- Wireless Delivery.
- Readers want a device made for reading books.
Amazon, quite smartly, never really said much about how AMAZON would benefit from the shift in Books and Publishing. It suggested, implicitly, that becoming the de-facto bookstore was the goal. It just talked about how things would be better for readers.
That should have been a clue. As should have been Amazon’s attempts to give authors just 35% of book sales (changed to 70% once Apple entered the market).
What the Kindle really is
This is really hard to say. However, here are a few things the Kindle really is.
- The gateway device to Amazon.
- A device made for readers, and then ignored as Amazon shifted its focus to Tablets and Phones. A device for readers, with no compromises – Oh, wait a minute, we see a bigger market.
- The practice device and the device manufacturing and selling ‘experience’ which helps Lab 126 build Kindle Tablets and Kindle Phones.
- A lock-in device to keep readers in the Kindle ecosystem.
- A mini-Amazon store.
- The beginning of the attempt to take over for Publishers.
- Control for Amazon.
It’s becoming very clear that Amazon doesn’t see the Kindle as a great liberator, but as a usurper. It’s a coup, not a revolution.
What Amazon’s real intent seems to be
While everyone assumed Amazon wanted to usher in a revolution in books and a transformation in publishing, it merely wants to redirect the profits and control to itself. Instead of a system controlled by ‘The Big 6 Publishers, The Big Distributors, The Big Bookstores’, Amazon wants to create a system controlled by Amazon.
Amazon sees things very clearly –
- Authors pay Amazon for services like CreateSpace.
- Authors sell via Amazon.
- Amazon has its own Publishing imprints. It picks the best indie authors and the best backlist titles.
- Eventually Amazon starts signing up the best authors.
- Amazon gets lots of exclusives. It drives more people to the Kindle ecosystem.
- Amazon creates more and more lock-in.
- Amazon owns and controls the store and the listings and the reviews and the review sites and the social networks (witness the acquisition of both Shelfari and GoodReads).
- Amazon controls everything.
- Someone really has control issues.
Amazon wants to REPLACE the Gatekeepers (Publishers, Distributors, Retailers) and not Destroy Them. It wants to replace the Gates and Barriers with its own Gates and Barriers.
Amazon wants to create a system where it gets 10 to 50 cents out of every dollar made from book sales. 10 to 50 cents out of every dollar made by selling services to authors. 10 to 50 cents out of every dollar made from device sales.
It wants to be the Government of Books and Publishing and tax every little step.
Amazon is Usurping Publishers (and Bookstores and Distributors)
The aim was never a revolution. It was just REPLACEMENT.
Amazon actually likes the way things are set up in Publishing. It just wants to replace all the Gatekeepers.
The most important part is to destroy Publishers and replace them. Amazon is doing this in a very smart way –
- Firstly, it’s trying to create more and more power in the Bestseller lists and the Recommendations from the Kindle Store. So people get trained to trust Amazon completely when deciding what to buy next.
- Secondly, it’s building up an exclusive library of indie authors. So that the next generation of Good Authors are locked-in to Amazon’s Kindle Store.
- Thirdly, it’s signing up the best of the indie authors. The Amazon imprints aren’t experiments – they are the beginning of the replacement of Publishers. Publishers perhaps don’t fully see this yet. If Amazon starts getting the 10-100 best indie authors each year, then there’ll be NOTHING left for Publishers.
- Fourthly, it’s signing up back list books of famous authors and acquiring rights for international authors with potential in the US market. These are exclusives.
- Fifthly, it’s expanding the number of Kindles and Kindle Fires and thus increasing the percentage of ebook sales it gets. This part will become less important once it’s gained control of the authors (the content supply).
The aim is simple – Make more and more of the books sold in the Kindle Store, books that are controlled by Amazon. Make the transition smooth so Publishers don’t realize what’s happening (No, Dear Frog, the water isn’t hot). Keep the prices of books sold high, so the end reward will be worth it for Amazon.
Publishers don’t really get this. They’re playing checkers while Amazon is playing chess.
Amazon is setting itself up to be Played
The most delicious part of all of this is that Amazon, in the process of making Publishers replaceable, is weakening its own time at the top.
What’s the fundamental pipeline? It’s a pipeline connecting Readers with Authors.
Earlier we had a whole army of intermediaries – Publishers, Distributors, Book Retailers. They had HUGE, unavoidable Gates and Barriers. Printing physical books, financial investments, shipping, storage, renting stores, hiring people to man the stores.
As Amazon breaks down the various intermediaries, and places itself as the Sole Intermediary, it’s creating a system where we have:
Readers -> AMAZON -> Publishers -> Authors
Which Amazon will eventually modify to be:
Readers -> AMAZON -> Authors
However, there’s one big problem here.
Where are the Gates? Are there ANY real Barriers?
What Gates does Amazon have?
None. No real gates.
DRM is a very strong virtual gate. However, Tor is already showing that DRM can be forsaken. Sooner or later Publishers will realize that it’s better to drop DRM than to let Amazon whittle away their control and ownership of the most desired books and the most read authors.
All the other Gates are virtual.
Furthermore, by destroying the old model of physical books, Amazon has opened itself up to Battles on four fronts –
- Hardware. Amazon isn’t best in hardware. Apple and Microsoft and even Samsung and B&N are ahead. Lots of companies can beat Amazon in hardware.
- Software. Amazon is far from the best in software. There is an almost infinite army of developers willing to innovate and refine and polish and create something very beautiful. Amazon simply can’t compete. The one mitigating factor might be that the intersection of people who love books and those who love coding is relatively small. Furthermore, books are hardly a ‘glamorous’ business like music or movies.
- Infrastructure. Amazon is very strong here. Perhaps unbeatable by anyone other than Microsoft (and even that isn’t a given).
- The Default (Path of Least Resistance). Amazon is very strong here. However, there are a lot of iPads and iPhones and Samsung Galaxy Phones out in the wild. Windows is another monster. So, while Amazon has gathered up a very significant number of hard-core readers with eInk Kindles and Kindle Tablets, it is still very vulnerable.
Notice how these are all areas that Amazon doesn’t really control. They aren’t defensible. That’s the whole problem with going digital – There’s hardly anything left that’s defensible.
Amazon doesn’t have a Defensible Position
Contrast Amazon’s defence (default website, DRM, Kindles) with what Publishers have – Contracts with Authors, Agreements and Business Relationships with Book Retailers and Distributors, Book Publishing Expertise, Infrastructure.
Publishers control the ACTUAL product. Amazon just controls parts of the pipeline.
Publishers control ACTUAL PHYSICAL Barriers and Gates. All of Amazon’s Gates are imaginary.
Amazon is building up all the ‘content ownership’ advantages Publishers have. Its long-term aim is to control the actual books that people buy. However, the Kindle and Nook and Kobo and ebooks have destroyed the actual physical Barriers and Gates.
So we have three very interesting things –
- Amazon is in pole position to usurp Publishers. It is building up as much defensibility as it can.
- Without the real Gates and Barriers, Amazon’s position isn’t very defensible. It can be taken down. There are also lots of vectors of attack – Hardware, Software, and Path of Least Resistance are three particularly dangerous ones.
- Books have moved to a place where anyone can compete. As there is more competition the margins go down. This is true on both fronts – Anyone can publish and sell books. Anyone can set up a store and retail books. So not only will we have infinite authors, we’ll have hundreds of ebook retailers.
Infinite Competition almost always kills profits.
If there is no actual scarcity of product, how do you make a profit? How do you even sell the product?
Amazon is really, really setting itself up to be Played
There’s a 75% chance we’ll look back and laugh at all these companies that are investing heavily in devices to read books. Companies that are setting up magnificent forts and castles and trying to become the Titans of the eBook World.
If what you’re selling isn’t defensible, then all your investment is for nothing.
This isn’t oil or gold or diamonds. There are no oil wells or pipelines. There are no mines or armored carriers. It is digital content. It’s in the ether.
You aren’t the creators, the authors are.
You aren’t the buyers, the readers are.
These elaborate castles with their alligator infested moats – these aren’t deterrents at all. These, in reality, are sand castles on the beach. Sooner or later the tide is going to wash them away. Then the architects will realize it was just fantasy.
The 25% chance. Well, perhaps people will forever remain stuck in the old mindsets. In that case Amazon and B&N will be laughing all the way to the bank.
Their position will still remain very tenuous. How do you defend digital books? How do you defend them in a world where the Internet connects everyone to anyone and everyone? How do you get readers to pay $10 for books when authors’ desire to be read (supply of books) is greater than readers’ desire to read books (demand)?
Things change so fast. 10 years ago we didn’t have Smartphones or iPhone or Facebook or Twitter or Instagram or iPad or Tablets. In 10 years who knows what new devices and technologies are going to arrive. What do Amazon and B&N have to defend themselves?
We have a completely made-up situation. Everyone’s trying to pretend there’s some great scarcity in books. It was easy to pull it off when there were REAL limitations on who could get published and who could get visibility. When it cost money to print books and ship them and stock them in shelves. Now, there are no restrictions.
Yes, there are lots of ARTIFICIAL barriers and lots of IMAGINARY roadblocks. However, those are for the weak of spirit and for the naïve. If you see things as they really are, then as an author you can see that all your readers are freely available. The Internet, Google Search, Facebook, Twitter, Blogs, Review Sites, Email Lists, Pinterest, Instagram, Message Boards. The number of channels is ever increasing.
Authors willing to strike out and reach readers will prosper and gain independence (both financial and creative). More and more authors will realize this over time. That they don’t need the blessings of a Publisher for their book to get bought and read. That they certainly don’t need Amazon’s blessings.
This is why indie authors who find success almost always share their secrets and their figures. It’s not in their best interests. They get ridiculed by the unbelievers. Yet they still share. Why? Because this is bigger than any author or any reader. This is a bigger revolution than Gutenberg’s. Not only are we getting cheaper books and more people being able to read them, we are also getting anyone in the world being able to publish. This revolution in books is at least TWICE as impactful as Gutenberg’s revolution.
PROVIDED readers and authors snap out of their collective misconception that we’re still stuck in the Old World of Physical Books and Old World Publishing.
It’s going to be just authors and readers now. There’s room for enablers and platforms, but none for dictators and gatekeepers.
Where will that leave Amazon? With a very fancy infrastructure and a very controlled pipeline which, oddly enough, will be just one out of millions of pipelines that connect readers with authors. Even convenience or largest selection won’t save Amazon, unless it’s willing to cut margins to 5% or less. Perhaps not even then. You can’t compete against the Internet.
Amazon has served its purpose. Now the question is – Who is going to carry forward the Biggest Revolution in Books the world has ever seen?