Monday, April 13, 2009

A Closer Look at Amazon

My Amazon rankings are back up on Bad Girl and Bad Boy tonight. Apparently their "glitch" is fixed.

I promised to talk more about Amazon today. We're going to quickly trace Amazon's strategy for growth in the publishing world and then talk about its growing willingness to throw its weight around.

Amazon has moved to position itself vertically in the publishing market. 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 clout to gain further advantages. This is a case where the sum of all parts is worth far more than the individual parts alone.

Amazon 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.

  • In 2001, Amazon launched its Marketplace, a service that let customers sell used books, CDs, and DVDs alongside new items.
  • In March, 2005, Amazon purchased BookSurge, a print-on-demand company along with Mobipocket, an e-book software company
  • In July, 2005, Amazon purchased CreateSpace, a distributor of on-demand DVDs. CreateSpace has since expanded its service to include on-demand books
  • In May, 2007, Amazon acquired Brilliance Audio, an independent producer of audiobooks based in Grand Haven, Michigan
  • In November, 2007, Amazon launched the Kindle, e-book reader with wireless capacity
  • In February, 2008, Amazon announced it would purchase, another producer of audiobooks
  • In August, 2008, Amazon announced it would purchase AbeBooks, a used bookseller, which also gave it a piece of LibraryThing, a social networking website for books. AbeBooks also gave Amazon ownership of, a new and used bookseller;, a rare and out-of-print bookseller; and FillZ, a listing management service.
  • Also in August, 2008, Amazon announced it would acquire Shelfari, another social networking site for readers
  • In March, 2009, Amazon began offering a free Kindle application for the iPhone and iTouch.

Amazon owns a print-on-demand operation, a distributor, an online retail operation for both p-books and e-books, several important retail sites for used or rare books, two audio book operations, produces a wireless e-book reader, and operates several important social networking sites for books.

In late March of last year, Amazon first began to show its willingness to throw its weight around. The Wall Street Journal reported: Inc., flexing its muscles as a major book retailer, notified publishers who print books on demand that they will have to use its on-demand printing facilities if they want their books directly sold on Amazon's Web site.

The move signals that Amazon is intent on using its position as the premier online bookseller to strengthen its presence in other phases of bookselling and manufacturing.
Two months after Amazon began pushing small U.S. POD publishers around, a battle erupted in the U.K. when Amazon began removing the sell buttons for publishers from its website if the publisher refused to give more favorable terms to the online retailer. Hachette Livre UK, Britain's largest publisher, went public with the fight.The Bookseller reported on it here:
Amazon conducts yearly negotiations with publishers over the discounts it receives. The Hachette tussle comes in the wake of a similar dispute in January, when a number of Bloomsbury titles were temporarily removed from sale through Amazon's main channel.
The negotiations went back into the closet, and Hachette's sell buttons re-appeared.

Three months ago, I posted this from Publishers Weekly: has notified its publisher and author clients that it plans to cease offering e-books in the Microsoft Reader and Adobe e-book formats. In the future, the online retailer says it plans to offer only e-books in the Kindle format (for wireless download to its Kindle reading device) and the Mobipocket format, both of which are owned by Amazon . . .

Amazon did not specify how long the Adobe PDF and Microsoft formats will continue to be available. . . The company said it will now be urging customers to buy e-books through Mobipocket.
And then, of course, two months ago, the release of the Kindle 2 raised that fuss about the text-to-speech feature. Amazon backed down from that fight.

Last month, Amazon made the news in the UK again. Publishers Weekly reported: is offering publishers participating in its Advantage scheme an "early payment" option of 15 days, in exchange for an extra 2% on top of the current discount given by publishers.

The catch is that publishers who do not offer the extra discount will see their payments made on Amazon's "standard terms"--effectively 60 days. This means a publisher who sells a book through Amazon in April would not be paid until the end of June. Under the revised terms, a publisher would be paid on 15th May--a full 45 days earlier . . .
Then we come to Easter Week.

Like most bloggers, I don't buy the computer glitch story. And here's why. There's a writer named Craig Seymour who is journalism professor with a PhD. His book on Amazon is All I Could Bare: My Life in the Strip Clubs of Washington, D.C.
His blog is here.

Craig says his sales rankings disappeared back in early February and, when he did a search on Amazon's site, it failed to pull up his book. The only way a reader could locate it was by having URL link. When he pressed Amazon for an explanation, he received the following email message:
"the sales rank was not displayed for the following reasons: The ISBN #1416542051 was classified as an Adult product."
Seymour complained about this on the Internet throughout March without attracting much attention.

My fantasy theory suggests that some fool at Amazon made the individual decision to implement a censorship policy. The idiot first practiced with a few cases like Seymour and then decided to celebrate Holy Week by going hogwild on all kinds of books s/he deemed inappropriate.

I'll admit I'm much more comfortable picturing an individual censor than an entire company focused on corporate comstockery. It frightens me to imagine a corporation with as much power as Amazon attempting to shape the reading habits of its customers.

As I post this, the petition has over 21,000 signatures. Collected in 48 hours. That's a powerful message to a company like Amazon. You may be moving to dominate the publishing industry, but never forget who pays the bills.


Gina Black said...

I agree with your glitch theory. Amazon seems too shrewd to have done anything that blatantly stupid on purpose.

Jane Kennedy Sutton said...

Interesting post - and scary!

Jane Kennedy Sutton