What Amazon is Up To

Friday, August 19, 2011


This week, Amazon Publishing announced its first marquee hire, bestselling self-help guru Timothy Ferris. Amazon's foray into publishing actual books has unnerved some in the publishing industry, who fear that the company's size (it has more money than all the major publishing houses combined) could lead to a vertical monopoly over the book world. Publishing industry watcher Mike Shatzkin talks to Brooke about the publishing landscape Amazon is entering and how the company may reshape it.

Comments [3]

Peter Glassman from New York, NY

An interesting and generally accurate account of the current situation. Two errors I'd like to correct, though not essential to the points Mike was making, are important distinctions.

1) Mike says that brick and mortar (as well as click and mortar) booksellers charge sales tax. We do not. States charge sales tax and booksellers, as well as all other retailers in that state, collect the sales tax for the state as required by law. Amazon is seeking to get exceptions for them so they can have an unfair financial advantage over their competition, especially in a state like New York, where our sales tax is nearly 9%.

2) Independent booksellers are not just upset with Amazon over its attempt to avoid collecting sales tax like other retailers, but also over their attempt to devalue the book. Even in ebooks. Independent booksellers, unlike Amazon, depends upon books for our income. Amazon mostly uses books as loss leaders to attract customers for the myriad other products they sell or to get customers to purchase from affiliates who pay Amazon a fee for selling their item on the Amazon website (which spares Amazon from purchasing, paying for, or shipping the item sold).

Something would love to know more about is how the costs of creating a book are allocated between hardcover and ebook. I know in the beginning, the ebook was treated as a secondary format, as were paperback reprints, so all the costs of acquisition, editing, proof reading, corrections, cover design, etc. were allocated to the hard cover. But with ebooks being released simultaneously to the hardcover, that no longer seems fair. Would ebooks be priced as attractively as they currently are if they had to bear the costs associated with bringing a book to market?

I'd also like to know who pays for adapting the ebook to each format -- Google, Kindle, Nook, Kobo, etc. Is it the publisher or the vendor who owns that particular platform?

So far, everyone I've asked in the industry has either not known or dodged these questions.

Aug. 22 2011 09:39 AM
Andy Funk from Atlanta

What was missing from this story was the difference between what one gets when buying a physical book versus "buying" an ebook. I put "buying" in quotes when referring to ebooks because what one is actually buying is a license to view the book. While one can give away or resell a physical book, one cannot do that with an ebook.

Also, the cost to the publisher of an ebook is far less per copy than the cost to the publisher of a physical book.

The publisher-determined costs of ebook seem to me to be ridiculously high.

If the authors were receiving a greater share of the purchase price of ebooks versus physical book I wouldn't feel this way about the cost of ebooks, but my understanding is that this is usually not the case.

I almost wish there were freelance book editors out there, willing to take a percentage of an ebook's sales, with authors using these editors and then "publishing" directly via the web.

One bright exception to these overpriced ebooks are those from Baen books. Not only are they reasonably priced, they are DRM-free. I can read them on any device without difficulty. And they've come up with a value-added form of ebook for those who want to read particular books as early as possible - electronic advance reader copies. These are electronic copies of books prior to final copy editing, and they cost more than the final ebook will when it is released.

I wish all publishers dealt with ebooks the way Baen does!

Aug. 21 2011 03:34 PM
Gene Schwartz from New York

Mike -

This is a great interview expressed with precise clarity and harrative accuracy.

My question, however, is that as far as I can tell, Amazon will not accept agency arrangements with any but the major publishers - thereby placing smaller publishers at a revenue disadvantage since if they price their books over 9.99, Amazon will take a 70% discount as against the 35% discount they grant to the agency publishers.

Is this a non-collusive free competitive market or am I misinformed or missing something?

Aug. 21 2011 02:28 AM

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