i _love_ his comments!

-bowerbird

In the past 20 years we’ve had *three* revolutions in book retailing and their only response has been to cut *back* on the value the add to the product chain.

In the early 90’s, the megabookstores came in and decimated the traditional bookstores and the publishers did nothing.

In the late 90’s online booksellers squeezed the major chains and even started hurting the megastores. The publishers did nothing.

And now we’re seeing the mainstreaming of ebooks and the publishers only reaction is to complain the prices aren’t high enough to support them in the style to which they become accustomed to. There’s a storm approaching the publishers are worried about rearranging the deck chairs on the titanic. I find it hard to offer them any sympathy whatsoever.

Con-artists rationalize their crimes by saying “you can’t con an honest person.” Me, I say you can’t dis-intermediate a competent middleman.

Considering how the major publishing houses screw over both authors and readers, maybe its time to let somebody else be the gatekeeper.

They could hardly do a worse job.

Likewise, authors may, in theory, be able to sell works independent of any middle men, but in practice, those who work through large middle men, either publishers or retailers, will probably be more likely to attract the readership needed for their works to achieve the widest possible distribution. Granted, guys like Steve can be fairly successful self-publishing and selling through their website, but ultimately, individual author sites lack the marketing savy of the larger publishers and retailers.

Essentially, Amazon is trying to do for books (in both traditional and electronic formats) what Apple has done for digital music. They want to provide a service that is so easy to use that only stubborn contrarians (like myself) will avoid using it.

This is why they are trying to tie e-books to a physical device. It is the only way they can establish relevance in a digital content industry.

Remove the proprietary physical device, and you have digital content that can be distributed by anyone, from anywhere, independent of any or all middlemen as desired. Authors will be in the position of ultimate control (as opposed to publishers or middlemen like Amazon), and the face of the books industry will finally change.

The sooner authors figure this out, the better.

In the meantime, Amazon’s attempted dominance in the e-book industry will be short-lived.

When it comes to publishing, there are only *two* indispensable elements: an author and a reader. (Duh! Right?) Everything else is optional, negotiable…
In business terms this means everything else has to justify its existence by adding value to the supply chain or be cut out of the chain.

Now, for way too long now, the big publishing houses have acted as gatekeepers between authors and readers and they’ve grown complacent–fat, dumb, and lazy–and they’ve actually come to see themselves as *producers* rather than intermediaries. They are acting as if the traditional top-down production-distribution-retail chain of the 19th century still rules. They are very, very wrong.

Several industries now have found themselves literally upside down as the internet and digital distribution–along with the explosion of information generation capability that has come with the microcomputer revolution–where the balance of power has swung from producers to consumers and the gatekeepers are no longer those who control access to the product but rather those that control access to the consumer. (C.F., Cablecos, Apple iTunes, Google, etc).

Enter Amazon.
Amazon is a retailer.
They’re not a bookstore; they’re not an online Barnes and Noble (or Borders or Chapters or whatever) though many people have never gone past that part of their operation. Those people should take a long and detailed look through the Amazon online mall to better appreciate that Amazon is playing a very different game, a game predicated on understanding consumers and making sure they can find what they need to buy at Amazon. Instead of looking for customers for specific products as traditional push-distribution industrial model of the past expects, Amazon is playing the 21st century game of keeping track of its customers and finding products (a pull-model) that will bring them back over and over.
And if the products don’t exist, Amazon has shown they are not shy about creating the products.
Amazon is a direct descendant of the original Sears Catalog, but updated for the 21st century.
Their core competencies are logistics, infrastructure, services, and account control.
And they are very, very, very good at identifying *unnecessary costs* that can be squeezed out of the process.

Not saying this is good or bad; this is what they are, what they do.

Anybody who aspires to compete with them has to understand this or be left like a deer staring in the headlights of an oncoming truck.
If the publishing houses are concerned that Amazon has too much power over pricing they should look in the mirror and ask themselves why *they* gave them that power to start with by stunting the competition in the first place.
If Amazon is cutting them out of the loop by bringing capabilities in-house (POD, Encore, etc) it is because they can carry out the same functions cheaper.
After all, if it were cheaper to buy the stuff, mark it up, and then retail it, they would. That is what they do with most of the products they sell to start with.

In other words, if Amazon is cutting publishers out of the loop the first question the publishers need to ask is how they can afford to. And the answer they’ll get is that the value they add is *not* conmensurate with the price they are charging. And if Amazon starts to sign up authors (the next logical step to Encore) it will be because the publishing hopuses are *not* serving the authors properly and are not earning their share of the sale price.

In the age of internet dis-intermediation there is no room for unnecessary costs.
Business goes to the lean, the swift, the awake…
Because consumers aren’t just sheep waiting to be sheered; educated consumers have gotten very very good at identifying value.
(Some have gotten way too stingy in their assessment of value, in fact).
This means there is a constant pressure for price cutting (I know; Internet 101, circa 1995. So why don’t the publishers accept the fact?) and sales are going to go to the low-cost bidder.

The only protection from dis-intermediation is value-add.
Either the publishers start to earn their keep or they will be cut out of the loop.
Nothing says that Amazon has to dominate the publishing business; odds are they won’t.
Nothing says that the publishing houses have to survive, though, if they keep their current practices.
Odds are, they won’t.

Simple test: name one publishing house that doesn’t care what Amazon does.
Try Baen.
Ten years now they’ve been doing ebooks right. Their authors seem happy, their readers seem happy, their business seems healthy.
They’re certainly not whining about Amazon lock-in or Kindle.
‘Cause they actually support Kindle directly.
No middleman there; *they* dis-intermediate Amazon.

Methinks there’s a life lesson there somewhere.

Why is it that “conventional” publishers can’t meet the Amazon $9.99 price point? I will grant that the current business model of the big publishing houses requires them to charge as much as they do for books. But the fact is that many publishers have and continue to publish novels straight to paperback; these novels, written by mid-list authors, having relatively short shelf lives and usually existing in genres like romance, fantasy and science fiction, ought to be harder to make a profit on, yet their publishing companies have survived. So it is obvious that it is possible to make a profit at a retail price of less than $20 per book.

The simple fact of the matter is that the top end publishing houses have never really been forced to compete for customers. They compete for producers of product (i.e. authors), but the products are distinct enough that top level publishers are really not competing against other books; certainly not on price.

Amazon ultimately might be the first time many of these publishing houses were seriously forced to look at how inefficient their business models really are. In this sense, Amazon’s power is a good thing.

The other point that I feel the article missed is that Amazon’s power is not just a risk to publishers, but a risk to readers as well. Granted, there is very little danger of Amazon ever trying to gouge the readers (They figure they can always make more money by keeping the books relatively inexpensive), but ultimately their power is based purely around the information they capture about what the customer buys. Ultimately, are we, the readers, served by having publishing built around the same sort of marketing driven model as television and movies are?