What’s Amazon up to?

December 14th, 2009

Dealing with corporate clients, handling their last minute rush requirements that absolutely have to be done by Christmas (happens every year!) got me thinking about the megacorps of publishing. The megacorp of publishing – Amazon. Ok, so bear with me. I’m have a suspicious mind. It comes from reading and writing all those thrillers.

When I first considered self-publication a year ago, BookSurge was the candidate. In the meantime, it has been subsumed into the great belly of the Amazon beast. Not long after, Amazon stated that the only vanity press they would list on their site was … BookSurge (CreateSpace as it has recently been renamed).

There’s the rub. And a portent of the future. That was a clear case of Amazon leveraging it’s online market dominance to push out other vanity presses, and so maximize its profits from that sector of the market. It is a common strategy of all megacorps, like Tesco and Walmart. Suppliers are so glad to get into chainstores like those, that they will take a financial hit for the sake of wide exposure. And the megacorp will squeeze them financially, because they know they will take it.

In the Internet age, if we are not vigilant, we will live in an age of monopolization of the distribution channels. The companies who control the distribution channels set the rules of the game, and can squeeze suppliers.

So who are Amazon’s book suppliers? The publishers? Yes and no. Mostly no. Because it is the authors who actually make the product. Amazon knows this. This is why CreateSpace makes such sense for them, especially in the long term, as I will explain shortly. If they capture the huge volume of vanity published authors, it doesn’t matter if they sell only a few books on each. Amazon aren’t fussy, because one person’s buck is as good as any other. Multiply a few book sales out by the volume of vanity authors they can capture (remember, they control the main distribution channel). And they can charge the author for the privilege of using their vanity services too (the willing supplier will be squeezed gladly for access to the distribution channel).

Publishers aren’t really the suppliers. They are the middle men in Amazon’s paradigm. Amazon need publishers for now, of course, because Dan Brown’s latest will drive browsers to Amazon in droves. But in the future … who knows. Apart from squeezing supplier’s profit margins, the other strategy megacorps use to maximise profits is shortening the supply chain. On the Internet, this is known as disintermediation. The middle men are kicked out, because the distribution costs are kept low, and the Internet company can connect supplier directly to customer. Authors linked directly to customer, by Amazon alone. Internet companies will use and tolerate any intermediary only so long as it makes financial sense for them. With Borders bookstores closing daily, will Amazon grab some high street pick-up points for their consignments on the cheap in a recession? If Amazon become the distribution channel for books, what’s to stop them signing contracts with Dan Brown once his contract with his publisher expires? What’s to stop them from setting up an X-Factor book site to crowd-source the next Dan Brown from the ranks of all the CreateSpace authors?

Publishers beware. And watch what Amazon is up to. Gradually, Amazon’s interests may be to push the publishers out of the chain and deal with authors directly. Small shifts, inexhorably, over time. Too suspicious for you? It’s not just me: Publishers need Amazon – but do Amazon need publishers?

The big worry, in such a doomsday scenario for publishing, is who would be left to fight back against the megacorp in the author’s interest?

But, for now, we’ll all happily use them. They’ve got the biggest, best distribution on the Internet. Right?

Entry Filed under: Indie-Publishing,Observation & Musing,Publishing Industry,Writing

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