Is the Internet simply an irresistible “outside context” event for traditional book publishers?
Two interesting articles make it clear that it may be, if wielded aggressively.
The “outside context problem” was described in Iain M. Bank’s book “Excession,” in which a perfect black orb (the Excession) appears suddenly. It is judged to be older than the universe itself. What follows is akin to the outside context problem the Mayans and Aztecs faced when Spanish explorers appeared with ships, guns, and new diseases. Such is the outside context problem — the precipitating event is unforeseen, response isn’t possible, and the outcome is often fatal.
It brings to mind the standard form of introduction the Borg used in Star Trek: The Next Generation:
We are the Borg. Lower your shields and surrender your ships. We will add your biological and technological distinctiveness to our own. Your culture will adapt to service us. Resistance is futile.
In an article in the Nation by Steve Wasserman entitled, “The Amazon Effect,” the outside context problem goes unnamed but clearly at play in his history of the Web retailer’s march across the book publishing landscape:
The death toll tells the tale. Two decades ago, there were about 4,000 independent bookstores in the United States; only about 1,900 remain. And now, even the victors are imperiled. The fate of the two largest US chain bookstores—themselves partly responsible for putting smaller stores to the sword—is instructive: Borders declared bankruptcy in 2011 and closed its several hundred stores across the country, its demise benefiting over the short term its rival Barnes & Noble, which is nonetheless desperately trying to figure out ways to pay the mortgage on the considerable real estate occupied by its 1,332 stores across the nation. It is removing thousands of physical books from stores in order to create nifty digital zones to persuade customers to embrace the Nook e-book readers, the company’s alternative to Amazon’s Kindle. Persistent rumors that B&N’s owners wish to sell regularly sweep the corridors of publishing. . . . The bookstore wars are over. Independents are battered, Borders is dead, Barnes & Noble weakened but still standing and Amazon triumphant.
The outside context problem also involves e-books, the fastest growing part of the book industry these days. It is called out specifically by Eoin Purcell in an excellent cogitation of what Irish bookstores and publishers are facing as e-publishers set their sights on that small island nation:
The Irish publishing industry is fast running into what might be described as some fashion of an ‘Outside Context Problem’ wherein the new arrivals on the scene are vastly superior in terms of abilities, vastly superior in terms of resources and possessed of superior technology. While some of the participants in the market might grasp the nature of the problem and respond as effectively as they can, the truth is that the disparity in attributes makes success unlikely and the new threat is very much an existential one.
Purcell rightly points out that even if e-books — mainly sold via Amazon, but also by Apple, Kobo, and Barnes & Noble — grab only one-third of the market, the effects on everyone else vying for success in a small market will be profound.
The outside context effect is akin in my mind to the Nassim Nicholas Taleb’s “black swan theory,” which postulates that an unforeseen event can occur, have significant effects, and only make sense through rationalizations later. However, the outside context notion has a clearer storyline — something superior arrives, naturally dominates, and absorbs or annihilates.
The music industry faced the outside context problem posed by Apple, and failed to respond well. It tried to remain what it was, and that doesn’t address the fact that the context has changed. Hints of response can be seen with “American Idol” and using show business glamor to move songs rather than albums. It’s only a start, but it’s a good start.
Book publishers are facing the outside context problem posed by Amazon. Tremors are frequent and worrisome. Does the presence of an outside context problem mean the game’s up? Perhaps. Maybe the most efficient response is to assimilate. Resistance may be futile after all.
15 Thoughts on "The Outside Context Effect and Book Publishing Dominance"
Now I just want to but this Excession book – sounds intriguiung, but where will I go to get it? Hello cheapest price option, found online and probably through Amazon… They’ve certainly cornered the market in terms of individual buying behaviour (especially since I was gifted a Kindle, so have an easy e-option to throw into the format mix!).
And what does “assimilation” look like for the independent bookstore? Or the small scholarly book publisher?
I think it looks like what happens when I am hungry and eat a carrot — from the carrot’s view.
A few things have struck me in using my local bookstore (which I haven’t done for a year, I hate to admit but rationally know why):
1. Stop using Baker & Taylor to look up books! Use Amazon.com, and even offer to order them for your customers. Buy a Prime account, fergawdsake, and get free shipping, and fulfill the order in two days, and guarantee customers come back.
2. Post Amazon stars on books on the shelf to catch people’s eyes, and drive sales (they’re in your store, they will buy if interested).
3. Make sure your clerks aren’t just clueless teens or drippy slackers. Invest in people who love books and know them. They drive sales and interest. Out-smart Amazon, just as Locutus did (Borg reference, no charge).
It’s a Scapsile Vault Craft.
PS If Kent was a Culture Ship, I’d vote for the Very Fast Picket ‘Resistance is Character Forming’
Question: in my post earlier this week, I included a William Gibson quote, where he essentially points out that the phenomenon of being a well-rewarded pop star was entirely determined by technology. Technology had to hit a point where music could be recorded and sold for the Beatles to do what they did. But the end of that window is also technologically determined. Once we moved into the digital era and reproduction no longer required physical media, the phenomenon ceased to exist.
Is Amazon’s dominance here a similar phenomenon? They couldn’t exist before the internet, and it required a broad enough uptake of the internet for them to reach the behemoth aggregator state that they now occupy. Interestingly for publishers it’s more of an intermediation than a disintermediation so far, adding a middleman rather than replacing a source. But as technology continues to develop, are Amazon and other similar aggregators doomed? Once technology hits a point where the ease of having everything aggregated from one seller ceases, then why would Amazon (as it currently exists) continue? Will we instead funnel all purchases through Facebook or Google (or their successor) rather than going to an individual online store, if even a megastore? Why would any manufacturer sell to Amazon at a wholesale price when they could instead reach customers directly (even if it meant giving a Google-Ad sized percentage to a facilitator)?
That to me is why you see Amazon moving into content creation, both books and video and so keen on the Kindle file format lock-in. They perhaps understand that they’re ripe for disintermediation, and so are engaged in a race: can they drive all the current manufacturers out of business and take over that aspect of the business, or at least lock consumers into their proprietary technologies before manufacturers can easily route around them?
Once technology hits a point where the ease of having everything aggregated from one seller ceases, then why would Amazon (as it currently exists) continue? Will we instead funnel all purchases through Facebook or Google (or their successor) rather than going to an individual online store, if even a megastore? Why would any manufacturer sell to Amazon at a wholesale price when they could instead reach customers directly (even if it meant giving a Google-Ad sized percentage to a facilitator)?
I definitely see what you’re getting at here as far as digital, infinitely reproducible goods are concerned. However, I’m not sure I see this happening for tangible goods. We shouldn’t forget that listing items on their website isn’t the only service Amazon provides for their wholesalers; they also have an extensive warehousing and fulfillment operation. I suspect there will always be a market for these services from manufacturers that don’t want to do it themselves.
For the publisher though, if we assume a predominantly digital product, then does Amazon become moot? I do think you’re right though, that Amazon would still offer a superb fulfillment service for companies, much as their Amazon S3 server service would thrive beyond a loss of their retail sales business.
It’s interesting this notion that if something is digital, it doesn’t require warehousing or distribution — that somehow these things are intrinsic. Warehousing is a bundle of services — orderly storage, reliable storage, locatability, retrievability, safety, and integrity — whether physical goods or digital goods (remember, digital goods are still physical goods, just on a small scale). Why do you have a hard drive, a local backup, and a cloud backup? Because you have to store digital goods. Why do some search engines perform better than others? Because they plumb digital warehouses more efficiently. Why do we have metadata, the SKUs of digital goods? Because metadata help us retrieve things from the warehouse.
Amazon has built a vast and efficient physical warehousing and distribution system. They have also built a vast and efficient digital distribution system. Try scaling one yourself this weekend. You’ll see that warehousing and distribution are not intrinsic qualities of digital goods, nor are they trivial to build and maintain.
Amazon’s S3 server service is using excess warehousing and distribution capacity as a white-label service it can sell. Even white-label storage and distribution has value in the digital age.
The “small scale” you mention is a key difference though. The entire output for most book publishers could be stored in a small hard drive on a desk, rather than requiring renting an entire warehouse. The same goes for many other parts of the distribution chain, server capacity being cheaper than a fleet of trucks and a warehouse staff. Costs still exist, but they continue to drop and are ultimately more affordable than for physical goods. Both can be outsourced, but there’s a difference between having a bigger, more efficient company handle your distribution and in letting that company insert itself as a middleman between you and your customer.
Amazon does have a superb distribution network for digital goods (though likely Apple’s is superior, if only from the standpoint of popularity and usage). Here’s my question though–if you could rent server space from either and distribute your books directly to your customers (without sacrificing discoverability), why would you instead choose to act as a wholesaler and let Amazon/Apple make that sale?
I think this one deserves a post, so I’ve started working on one. Small scale gives digital goods peculiar characteristics, but being digital gives them other peculiar characteristics that makes distribution and storage specialized and expensive. For instance, they are somewhat perishable (formats change, integration points change), and warehousing fresh produce is different from warehousing stacks of aluminum rods. A lot to think about here.
I agree completely, and there’s the question of where all that hard work and expense comes into the chain. Is it something that requires you give up the ability to make direct sales, that the company supplying those services must be between you and your customer? If so, is that something likely to change over time as technology improves? Is there a parallel situation like that for physical goods, where a larger company like OUP does the warehousing and fulfillment for other publishers but doesn’t sell their books to the public or anyone else?
Perhaps more importantly, it’s one of the invisible costs of publishing, something the end user doesn’t see and thus assumes doesn’t exist, part of the message about what publishers actually do.
Kent, you’re right, of course, that digital goods also need “warehouse” and “fulfillment.” I didn’t mention it because I thought it was implicit in David’s comment that if Google or Facebook took over from Amazon as the go-to place for people to buy and sell digital goods that hosting/serving the digital goods would be part of that.
I merely wanted to point out that Amazon also has extensive tangible-good warehousing and fulfillment operations with which Google and Facebook are not competing, and because of this I don’t see it going away due to competition from Google or Facebook. I actually suspect that Amazon has done so much to diversify into selling non-media tangible goods in large part to hedge against competition in the digital realm.
For bookstores, I’d agree; the Internet and what Amazon did with it, is a big black sphere-type of outside context event.
For publishers, particularly academic publishers, it could be a geometrically separate kind of outside context event, a big black rectangular solid (i.e., a monolith). And you’re right; response/resistance is needed to profit from their example. Or soon, “MyHabit.com (new from Amazon) will be followed by myresearch.com or myscholarship.com, and the chances to profit (for folks other than Amazon) will become fewer, less profound, and further in between.