Thursday, April 03, 2008

A Publishing Industry Expert Speaks

I stayed at the university until midnight last night so I could have the next five days off.

There are any number of things I want to blog about today, but I'm going to put them aside to return to the Amazon situation.

First, I want to direct you to an interview with Jerry Simmons, a former VP at the Time Warner Book Group, who talked about Amazon's strategic move.

Simmons was asked the question: "How do you predict the long-term effects of this as it relates to the small author and publisher?"

His answer: "The long-term effects for the author and publisher are devastating. With Amazon strengthening and securing their place in the distribution and sales channel, they can do anything they want. The next move will be to squeeze these small authors and publishers for placement fees, advertising fees, and eventually higher discounts. When you give in once, it never stops, this is the way of the publishing world and booksellers. It will get to the point where they start to lose money on each book sold. Only then will Amazon back off, but you can bet they are going to push authors and publishers to the wall and take every possible nickel out of the equation."

I posted a comment on Dear Author this morning that I am going reproduce here:

I've said repeatedly on my blog that the large publishers are at enormous risk in a digital world. They are no longer the sole owners of the means of production, which means they are no longer the only game in town. And Amazon is very cleverly moving to take over that game.

I think this whole thing is about Amazon positioning itself vertically, making it the dominant power in the publishing industry.

Vertical integration means owning pieces of all parts of the chain. Amazon started out as a retailer. Then it moved into wholesaling others' products. And finally into manufacturing (BookSurge). Not content to own a part of the manufacturing business, it is now using its retail clout to make its publishing arm more dominant. This is a case where the sum of all parts is worth far more than the individual parts alone.

Amazon now owns pieces of all parts of the chain leading to the consumer:

Manufacturer => Wholesaler => Retailer => Consumer

Vertical integration is about cost and control. Companies who vertically integrate are trying to assert greater control over their business. The obvious benefit is that they can capture the profit margins at each step along the chain. They can also make it harder for competitors if they can gain access to a scarce resource.

If we stand by and let Amazon do this, it is just the first step.

I've been so frustrated by the willful blindness of writers, who brush this off as "a POD issue." The smug contempt and indifference of some writers made me want to scream. Sure, they are not impacted today. But, give Amazon a bit more time and then see what happens.

To hear one expert's view, read the entire interview with Jerry Simmons here. Thanks to my brilliant friend, critique partner and graphic artist Maria Zannini for the link.

1 comment:

Adaora A. said...

I said this on Nathan's blog, but honestly, the devils are inside the walls.

This is a 'survial of the fittest' tactic at its best. They are performing a little arms race of their own and they are having a lot of fun doing it. They are trying to overtake the market on books. This is an attempted 'small' step for Amazon, and if they suceed, it will place the foundations for them to make a bigger leap. Thank goodness you, Nathan, and others are covering this. I'm not published (and I don't know how much power I have in cases such as these), but I'm happy to sign that petition.