Tuesday, September 16, 2014

Amazon vs Big Publishing

Clay Shirky characterizes Big Publishing's beef with Amazon in class terms:
The threat Amazon poses to our collective self-regard is the usual American one: The market is optimized for availability rather than respect. The surface argument is about price, but the deep argument is about prestige. If Amazon gets its way, saying, “I published a book” will generate no more cultural capital than saying “I spoke into a microphone.”
Big Publishing responds, by saying no, it's about the money:
6. Amazon was partly enabled to give the big discounts to consumers because publishers gave discounts too big to them, foolishly aping the print book business model even though a retailer’s costs drop much more than a publisher’s do with the change to digital. Stock turn is the key profitability metric for retailers. Stock turn on digital books is “infinity”. (I’d note that these are small points in this piece but are really really big points that go ignored in most of the discussions about ebook economics, which are almost always “fails” at understanding the core economics of publishers or retailers.)
8. It is misleading to attribute the publishers’ desire to keep “hardbacks” (really, all print) alive as a desire to protect “first editions”. It was primarily a desire to protect the brick-and-mortar bookstores. It should be said that way for accuracy but also to make the motivations of the sides clear. Publishers want to strengthen or maintain bookstores because their ability to reach them is a core competence that keeps them in business. Amazon wants to weaken or eliminate bookstores because it is clearly established that many customers of each bookstore that closes come to them. Another motivation for the publishers was to maintain a diverse ebook ecosystem, which at that time had just added Nook to its ranks and was about to add Apple. It is likely that Amazon’s discounting — thanks to the DoJ’s and court’s actions weakening agency — did as much to weaken Nook as any mistakes made by Barnes & Noble. And let’s not forget that Kobo has also abandoned active marketing in the US ebook market since then as well.
Amazon is the only publicly traded company I know of whose valuation is way in excess of profit and this is justified by arguing (out loud) that, once Amazon has cornered the market it will raise prices. This is called dumping and it is illegal.

Note that I'm not saying Amazon is guilty of dumping, or that if it is dumping, it is alone, or even that dumping should be illegal at all. I am saying that the mechanism by which people say Amazon justifies its share price is, on it's face, illegal. Regardless of how true it is, it should give one pause to take economic arguments by those poor souls on the receiving end with a sympathetic ear.

Amazon primarily is a transactions engine. If you know what you want, it will get it to your door for a lower price more quickly than pretty much anyone else. What it will not do is marketing, and by that I mean generate downstream demand.

If you look at the product chain for books, each stage of the chain both competes with and complements the subsequent step. This is not unique for books, pretty much every complex, multi-step product has this. Publishers claim that their policies enable the co-investment needed between them and booksellers to generate demand for books, and that Amazon is utterly uninterested in this, and that this is important.

I honestly have no idea to what degree publishers and booksellers work together to generate demand, but I do believe that Amazon is uninterested in this, and it is this lack of interest which is at the heart of the antipathy towards the company from that community.

Shirky is being obtuse when the mocks Packer saying "[T]he big question is not just whether Amazon is bad for the book industry; it’s whether Amazon is bad for books." Amazon doesn't care about books, and yet their actions will profoundly impact that industry, and by extension tradition, which stretches back over 2000 years. This lack of concern portends a carelessness, the same sort of carelessness the tech industry seems to display whenever it stumbles upon some segment of society with deep roots, strong social norms, and any sort of long standing tradition that's generated value over time. Tech stopped being the scrappy underdog about 10 years ago, and now needs to grow into an elder statesman role to help demonstrate that it is ready to lead in these human, social arenas just as it has lead in protocols, application stacks, and hardware.


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