(Editor’s Note: This is the second entry in a three-part series on the topic of how digital players in the consumer space — especially Amazon — may factor into the future of STM publishers.)
A recent article in Fast Company explores the power of Amazon‘s position in the book market. Entitled “Amazon Taps Its Inner Apple,” the author does a good job outlining how Amazon has used the Kindle, its storefront, print-on-demand, and hardball dealings with publishers to threaten publishers with a major form of dominance in the industry:
. . . book publishers would have more to fear than just being squeezed. Amazon could phase them out completely, treating them as the ultimate middlemen orphaned by a new technology.
The scenario described seems plausible, and should be keeping book publishers up at night from now on, if it hasn’t been for the past few years. In fact, when you combine Amazon’s print-on-demand facilities through BookSurge, the reliance book publishers have on a few authors, and how the rising costs of warehousing and shipping books is eating into royalties, a feeling of inevitability steals over the scene.
Then the author of the Fast Company piece says something totally bewildering, in what appears to be an effort to sustain the drama of the article:
But in a plot twist worthy of the latest Dan Brown novel, there’s one man who could save [publishers]. And that man is Steve Jobs.
After this empty rhetorical flourish and a little Jobs worship, the author expands into the business model Jobs has foisted on the music industry through his innovations:
Apple famously forced its flat 99-cents-per-song pricing on the music industry. . . . Jobs . . . established a virtual monopoly over digital distribution of music online, and to this day, maintains an 87% share in downloads.
The article then details how Apple might make a color touchscreen tablet to rival and undercut the Kindle, beating Amazon in the e-book space.
And where does this leave our poor publisher? Not with Apple arriving as a White Knight, but rather with Apple and Amazon battling one another to own the market they’ve wrested away from publishers.
With the convergence of distribution improvements, device accessibility, pricing advantages, and content disposibility, that feeling of inevitability only grows stronger — as Apple and Amazon both attack the inefficiencies and hubris of modern publishers. And what do these two bring to the battle? Multi-billion-dollar warchests, incredible technical and design capabilities, clear and contemporary strategies, and smooth, well-established e-commerce systems — much of the firepower today’s publishers lack.
Publishers used to think they would drift slowly and naturally into a digital future, slowly adapting to a new medium of distribution. What they might not have realized is that large, well-funded, and highly skilled digital invaders would lie on the outskirts of their kingdoms, ready to storm their castles and plunder their lands.
2 Thoughts on "Amazon or Apple: Choose Your Invader"
It’s clear to most publishers that handing over control of the market to someone outside of the industry would be a mistake. The problem is that in general, we’re publishers, not electronics manufacturers, not e-commerce retailers. Our expertise lies in content creation, not in building computers and operating systems. Most of us can’t afford the massive infrastructure necessary to create an entirely new enterprise like building the iPod/iTunes of books would entail. Those companies that could do so, mostly huge corporations, would probably be just as ruthless a taskmaster as someone like Apple or Amazon. Do you really trust Reed/Elsevier to take better care of you than Steve Jobs/Jeff Bezos?
That said, there are clear lessons that can be learned from the music industry, and clear advantages that the publishing industry holds. First, we should remember that we control the content. It took the music industry a long time to figure this out, to be willing to possibly cut off revenue sources in order to get the level of control they wanted. We’re in a better position, because unlike the use of mp3’s, the e-book market is not yet established. There’s nothing concrete in place to overcome.
Apple came to dominate the online music market because of their superior hardware, and the close integration between the iPod and their iTunes store. Amazon is attempting to do the same with the Kindle, but it has yet to take off in a significant manner. The music industry let Apple build this advantage by not insisting on common file formats available to all. Yes, AAC and mp3 are openly licensed, but the music industry insisted on the inclusion of DRM (which was a huge failure), and they let each individual store choose their own flavor of DRM. Had they instead gone with files that were identical, could be played on all devices and could be sold by anyone (with or without a commonly licensed form of DRM), you’d see a thriving, open market. Instead, they allowed Apple to create a consumer lock-in and achieve near-monopoly levels of marketshare.
To avoid the pitfalls, publishers must create that open market. Let all sellers offer the same e-books, let them compete on price and service. We need to avoid allowing anyone to create a locked-in system that leads to overwhelming market dominance. Most importantly, we must not be afraid to pull our products from sellers who refuse to offer us favorable terms. If Amazon won’t allow the Kindle to use the types of files we want to sell, then the Kindle store should be empty. e-Book sales aren’t significant enough for most publishers yet to make this untenable. If we wait too long and become dependent on one retailer, well, we’ll get what we deserve.
This was harder for the music industry to do because of the presence of rampant piracy (there are still something like 10 illegal downloads for every one iTunes purchase). If the music companies cut off Apple, consumers would get their songs from filesharing sites. We don’t have that same dilemma yet, because our product is still analog. Right now, it’s very difficulty to “rip” a book to electronic form. Some people make the enormous effort, but it’s still a lot rarer and more difficult than ripping an mp3 from a digital cd.
So we can still control this market, if we’re smart. I don’t expect us to be the creators of computing devices, but that doesn’t mean we have to follow, rather than lead. It just requires a willingness to sacrifice very small short term revenues for greater long term revenues.
I think there still is a role for the publisher, even if Google (the other giant not mentioned in the post), Apple or Amazon took more control of distribution.
After all can you really see the technology giants doing the editorial work, sifting through manuscripts on the trade side, or commissioning on the STM side? They don’t have the expertise or inclination to do this type of work.
Marketing and sales are also important components of the publisher’s role – each book title does not have an equal chance of success after all based on their inherent quality. Publishers push what they believe they can sell harder and create sales. Technology giants want to get a larger cut of this, but they aren’t going to select the titles to be pushed.
It might be the case that the publisher’s role changes radically, but they still have an important role to play.