Amazon: There is only one certainty.

Is Amazon becoming too influential? Jamie Davidson, graduate of the MA Publishing course considers the impact of Amazon on publishing and their recent fallout with Hachette

Whatever one’s opinion, there is one truth that no one in trade publishing can deny:

Amazon is too important to be ignored.

Amazon is the biggest retailer and remains the biggest partner for most trade publishers, being responsible for 41% of the sales of all new books, two-thirds of those of new ebooks, and a large portion of publishers’ profits.  Amazon almost singlehandedly dragged publishing into the digital age by introducing the Kindle in 2007 and has become almost indispensable to publishers.

And therein lies the problem.

Publishers need Amazon a whole lot more than Amazon needs publishers. Thanks to incredible business diversity, Amazon is no longer dependant on book sales. In February, George Packer wrote in The New Yorker that:

“Amazon is a global superstore, like Walmart. It’s also a hardware manufacturer, like Apple, and a utility, like Con Edison, and a video distributor, like Netflix, and a book publisher, like Random House, and a production studio, like Paramount, and a literary magazine, like The Paris Review, and a grocery deliverer, like FreshDirect, and someday it might be a package service, like U.P.S. Its founder and chief executive, Jeff Bezos, also owns a major newspaper, the Washington Post. All these streams and tributaries make Amazon something radically new in the history of American business… Amazon’s identity and goals are never clear and always fluid, which makes the company destabilizing and intimidating.”

Thanks to its great success as a retailer, and its diverse services, Amazon’s policies have become hugely influential and set industry-wide prices and practices.

Jeremy Greenfield reports that many publishers he has spoken to privately have informed him that from year to year it is becoming harder to negotiate new agreements favourable to both Amazon and publishers, as the retailer gets more powerful and starts to lean on publishers.

This is exactly what happened with Hachette recently. Hachette and Amazon failed to reach satisfactory terms on their next ebook sales-deal. Amazon responded to these difficulties with a show of strength and aggression. The pre-order buttons were removed from forthcoming Hachette titles and current titles were either listed as not for sale or out of stock for several weeks, effectively cutting off Hachette from its customers.

Although the argument between Hachette and Amazon concerns ebooks, Amazon attacked Hachette’s physical book sales, showing just how reliant on Amazon publishers are to sell their books. This is why Amazon holds so much influence.

The founder of Smashwords, Mark Coker, explains that the boldest of Hachette’s options would be to withdraw all of their books from Amazon and direct customers to more publisher-friendly platforms and stores, and to make a concerted effort to develop new channels of distribution. However, the problem with this approach is Digital Rights Management (DRM).

Hachette has been so successful in selling its ebooks through Amazon that it cannot afford to walk away. The only people who can withdraw the DRM from an ebook are the ones who put it there; in this case, Amazon.

However, in the long term, backing down and accepting Amazon’s terms is also harmful. Mark Coker calls it “akin to Hachette accepting a long term death sentence.” With Amazon building its own publishing arm and demanding greater cuts of publisher’s margins, it is clear that Amazon intends to increase its hold on the global book market, which inevitably means conflict with the companies that already hold stakes in the market.

Piers Blofeld wrote in a recent Futurebooks blog that the fight with Amazon has always been a fight for survival.  He predicts that preconceptions of what a publishing company does will need to be challenged if they are to survive.

The struggle between Hachette and Amazon has caught the public’s attention, and how this matter is resolved will have lasting ramifications not only for how Amazon interacts with publishers in the future, but possibly on future of the entire industry.

We’re in a major battle right now for the future of the industry,” says Brian Napack, the former CEO of Macmillan at the recent Publishers Launch conference. That battle will be against Amazon. Either publishers will wrestle with the behemoth or they will adapt and find new ways to compete. The online retailer has destabilised the entire industry, and the future is still uncertain.

There is only one certainty.

Amazon is too important to ignore.

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Graduating from MA Publishing in 2013, Jamie now works at Austin Macauley Publishing as the Marketing Assistant. He is under strict instruction to inform you all that he prefers to wander around barefoot.