TeleRead: Bring the E-Books Home

Amazon’s e-book push: Good for other retailers, writers—or a ‘company store’ scenario?

By Michael Banks

When I first heard that Amazon wanted to push e-books hard, I thought, “Great! If anyone can move e-books into the mainstream, it’s Amazon!”

This big, trendy company is capable of mainstreaming almost anything. Wealth and will are there. Market cap on Wall Street is $11 billion; revenue, $9 billion. CEO Jeff Bezos is an e-commerce icon hailed as a genius—he’s reportedly worth $4.3 billion. Now, how will writers and publishers fare?

Amazon’s possibilities

His empire’s e-book initiative actually could be very good not just for established authors but also for the unpublished and self-published varieties. I’ve sold hundreds of thousands of hardcopy books over the past 25 years, on occasion achieving a six-figure income. But the potential e-book market is so much larger, and worldwide in scope. What might come of exposure to tens of millions of new buyers, as opposed to a few hundred thousand?

It sounded encouraging. Here was Amazon offering its very own e-book creation software to help with the publishing process, adding to the choices the potential author/publisher has—or so I thought.

“Owe my soul to the company store”?

But when I started checking into the setup, my enthusiasm waned. What I learned convinces me that Amazon will be about as helpful to e-book writer/publishers as the 19th-century coal companies were to West Virginia and Kentucky landowners, company stores and all, right out of the Sixteen Tons lyrics.

Why the dreary prediction? Because Amazon has the potential to become a monopoly. Because writers will pay to be published. And because Amazon would make money whether or not a given author’s titles sell well, giving the company little incentive to help build sales.

Let’s examine each of these elements, bearing in mind that a lot of what I say here is not guaranteed to happen. But the possibilities are bothersome, and not in the best interests of writers.

Monopoly?

Word is that Amazon will sell only e-books created with its software, Mobipocket. Setting aside any technical considerations (though the consensus is that the user front-end is good), this might be okay except for the fact that Amazon is the world’s largest bookstore. What it chooses to offer has a big effect on the publishing world.

If Amazon builds it, they will come

Amazon will legitimize e-books. (Not that e-books are illegitimate–but consumers have to learn to trust some products. It’s like the early days of radio, when most people avoided buying radio receivers because they didn’t understand radio and thought it was some sort of trick.) Readers will flock to Amazon e-books because Amazon is a trusted brand name, has a terrific selection, and has earned a reputation for value. Independent and e-book-only writers will go along with the plan in order to get the world’s largest bookseller behind their product. (Trust me; there are few writers who will pass up the opportunity to put their work in front of tens of millions of readers, no matter whether their motivation is money, a cause, or just getting “in print.”)

What about publishers? Large or small, they’re not going to pass up this market.

The market being what it is, I think most bestsellers, average sellers, poor sellers, and non-sellers will eventually make it into Mobipocket format on Amazon, increasing the reader draw and reinforcing Mobipocket’s position. (There are very, very few writers who control all of their digital rights, by the way; the overwhelming majority of bestsellers will be Amazon in Mobipocket format at the publisher’s option, not that of the writer.)

So, big-name writers and their bestsellers will draw e-book buyers. The vast selection will also be a draw, as will the free Mobipocket reader, which I expect to see glammed up in promotion if not otherwise. Advertising and marketing will help create a feeling of standardization and comfort with Amazon’s e-book brand. Amazon will make searching, browsing, buying, receiving, and reading e-books as simple and pleasant a process as possible—all of which could go a long way toward making Mobipocket the de facto standard.

“I can get it for you wholesale …”

Given all that, it’s likely that Amazon will become the largest retailer of e-books. Its very presence in the marketplace will influence some readers to look no farther for e-books.

Readers who do look elsewhere may well find more Mobipocket books, because Amazon can easily become the largest e-book distributor in the world. The structure is already in place: Mobipocket acts as a wholesaler for e-books in its format, offering over 26,000 titles to an unknown number of retailers.

Unless Amazon decides it doesn’t want anyone else to sell its e-books, the distribution model will be carried over to the stock of hundreds of thousands of Mobipocket e-books that Amazon will doubtless accumulate. I fully expect Amazon to continue distributing e-books to other retailers, if for no other reason than to avoid accusations of monopolizing its own format. Cutting off distribution would also annoy publishers, and probably draw lawsuits based on agreements already in place, while allowing other sellers to offer Mobipocket titles will help entrench the Mobipocket standard.

Exclusive sales?

What if Amazon wanted to push Mobipocket by requiring retailers to carry only titles in Mobipocket format? The current Mobipocket agreement does not prohibit retailers from carrying e-books in other formats. If a new agreement were to only Mobipocket on retailers’ virtual shelves (which would be a bad decision on Amazon’s part), it’s almost guaranteed that some retailers would drop e-books in other formats. With Amazon behind it, Mobipocket will have an inside track to bestsellers. Have a look at the Mobipocket site and check out the titles they’re already offering, and you’ll see what I mean.

Exclusive publishing rights?

Of greater moment is the question of whether the Amazon/Mobipocket agreement might prohibit e-book authors and publishers from publishing their e-books in other formats. If the answer is “yes,” Mobipocket will have a lock on thousands of the best titles as publishers are not going to chance losing a shot at the Amazon market.

Mobipocket’s current author/publisher agreement doesn’t prohibit publishing in competing formats. Hopefully, Amazon won’t go that way. If it does, e-book publishers who don’t use Mobipocket will have difficulty finding new books to publish. And this could effectively snuff out any competition for Mobipocket.

What about writers?

If Amazon adheres to the Mobipocket business model, it will make a fair profit on each e-book it sells—50 percent of the cover price. That’s not out of line, as most brick-and-mortar bookstores make 40 to 50 percent of a book’s cover price. For authors who are also publishers, it’s a bigger piece of the pie than they get from conventional publishers.

Under the current Mobipocket/eBookBase contract, author/publishers may receive an additional 10 percent “affiliate fee” for each book that sells as a result of their driving business to Mobipocket. So, there’s the potential for the author/publisher to make 60 percent on some of the books.

“You have to spend money to make money…”

And now we come to the part that really bothers me: You have to pay to be published. While the Mobipocket reader is free, anyone who wants to see their e-book on Amazon.com has to buy Mobipocket Creator Publisher Edition, currently priced at $149. (There’s a cheaper personal version, but it doesn’t offer security or DRM features—which turn out to be very important.) That gets you a license to use it on one computer. I assume commercial publishers will get some sort of site-license deal.

The hard part

Once you put your book into Mobipocket format, there will be a submission process to go through with Amazon. It will probably involve providing some promotional material about you and the book, and maybe breaking out a sample. Hopefully it won’t involve a fee. Then you’ll sit back and wait for the royalties to roll in.

But those royalties may not roll in for quite a while. Mobipocket pays quarterly, but retains royalties until they reach $150. Mobipocket also holds all proceeds from retailer sales until the amount reaches $150. This means that Amazon could hold 100 percent of the proceeds from every book for months or years. (Note the similarity to the deal Amazon Associates have, although the Amazon Associates pay-point is $10.)

Combine this model with Amazon’s scale and the company is guaranteed to make money whether or not books sell well. If an e-book sells a lot of copies, Amazon makes out with its 50 percent share. Plus, it gets to hold your money for a few months before releasing it to you (this is called “float”). If a book sells only one or two or five copies every month or quarter or year, the gross proceeds go into the float, money the company can invest or use for operations.

With the number of books Amazon is likely to have in stock, the float will add up to serious money. And Amazon will attract a lot of writers. The potential exposure will inspire people who never thought about writing a book to put together e-books to offer on Amazon.

What are you worth?

All this money going to Amazon, and we haven’t even considered what kind of money writers might make. You probably already know that e-books are not going to bring in the kind of money paper books bring.

What, then, might you get?

Right now you can buy The Da Vinci Code in e-book format for $6.99. The book has probably sold a goodly number of copies. Whether they’ve read it or not, most people will feel it’s worth the price. But what about The Odysseus Solution, by midlist writer Michael A. Banks, or Ghosts of Futures Past, Anton Katzenskeller’s first novel? Are you, the average reader, willing to take a gamble on one of these for seven bucks? Not likely. But you might go for one at $3. If you buy Anton’s book, he will net $1.50—actually more than he’d get as a royalty on a paperback novel.

Still, this means Anton has to sell 84 copies of his novel before he gets paid–assuming Amazon retains the Mobipocket/eBookBase setup.

Now, how likely is unknown writer Anton Katzenskeller to sell 84 copies in a quarter, with tens of thousands of competing titles fighting for readers’ attention? Not very. And as long as Anton sells fewer than 84 copies, Amazon is using his money for nothing—as much as $124.50. Multiply that by thousands of author/publishers and the money gets significant.

Hmm … this sounds almost as bleak as conventional publishing. At least the publishers don’t make us pay to get into print. Not real publishers, anyway.

About Michael Banks: He has followed the online world since the early 1980s, reporting on it for a variety of magazines and in books such as Web Psychos, Stalkers and Pranksters. Among his recent titles are The eBay Survival Guide (No Starch Press, 2005), and CROSLEY: Two Brothers and a Business Empire that Transformed the Nation (Emmis Books, October 2006). Visit Michael’s Web site.

Photo credit: Amazon picture by Accidental Hedonist, via Flickr. CC-licensed.

Related (moderator’s note): Bezos the future e-book monopolist? Amazon drops ‘e-Documents’ to favor Mobipocket. Meanwhile, if you’re nostalgic for old-time monopolies, check out King Coal (Upton Sinclair) and The Octopus (Frank Norris).

Update from moderator: Amazon is telling publishers it will not charge them for the $149 software if they sign up.