05 June 2014

stratechery: “Publishers’ Deal with the Devil”

On the Internet, though, words are much more like the mythical story of Faust, available to anyone and everyone for zero marginal cost. Each of you reading this article is creating a new version of this site on your computer, and it’s not costing anyone a cent1. Unfortunately for those accruing those fixed costs, it’s much more difficult to convince customers to move from $0 to even $0.01 than it is to go move from $1 to $2 (or $10 to $20).

This reality, unsurprisingly, terrifies the publishers, which is where we return to Faust: just as the doctor made a deal with the devil, so have publishers, but in this case the devil is Amazon, and Mephistophilis, the devil’s agent, is DRM.

Ben Thompson

The Internet is in uproar over the recent battle between Amazon and a large publisher over e-book selling rights. While it’s easy to point the finger at Amazon and blame their tactics, let’s keep in mind that publishers are far from ‘innocent victims’, but instead large corporations with their own interests and profits to defend. This article presents a more balanced opinion on this troubled relationship and, I think, one much closer to the truth. The way out of this feud is straightforward for an outside observer, but it would cause huge disruptions for the business model of large publishing houses, essentially the same situation they were trying to avoid in the first place by handing over distribution to Amazon, and later Apple. Unfortunately for them, their Faustian deal with the Amazon ‘devil’ only delays the inevitable…

I also think a larger issue here revolves around discovery. Suppose the majority of authors go independent, replacing the double-step distribution through publishers and Amazon with self-publishing; they would find it difficult to reach the same (essentially global) audience. As the amount of information available online grows exponentially each year, finding out about a newly published book seems more hopeless than the proverbial needle in the haystack. search may be very good, but it still can’t answer questions like ‘what book should I read next?’, although they are striving to achieve something like that. For famous authors, people will naturally follow their sites, blogs or social media posts, but new writers will not have that advantage and will need to build awareness from scratch. The biggest specialized platform for book discovery is currently Amazon, even more so after acquiring Goodreads; new authors will have to be present there to have a better chance at reaching readers and actually selling their work. Even if the current big publishers change beyond recognition or disappear in the process, Amazon is likely here to stay.

Update: An alternative explanation for Amazon’s recent ‘evil’ actions: it’s simply to optimize stocks in case they can’t renew the contract with Hachette!

Think about it. A pre-order is a guarantee of a future transaction. It would be remiss for Amazon to offer pre-orders for items it won’t legally be able to sell when they eventually become available. It would also be remiss for Amazon to stock millions of dollars worth of inventory it won’t legally be able to sell in the near future and would have to return at great expense. The moment Amazon realized negotiations were breaking down (as their press release recently intimated), they had to reduce their exposure to Hachette inventory. That means reducing future sales, which is what pre-orders and predicted warehouse quantities represent.

Hugh C. Howey

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