Tag Archives: publisher

Amazon!

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When I started this blog, my purpose was to keep a diary of my writing. So far, I have resisted the temptation to attach pictures of kittens doing very cute things, commentary on politicians doing very stupid things or screeds on the degradation of the moral fiber of the world.

I bet you’re relieved.  OK, just one kitten picture.Kittens

Now, I beg your indulgence.

Writing has two parts: the creative journey that I set out to document, and the part about getting someone to read the end result, aka Publishing.

The part of me that spent a number of years in business analyzing companies like Amazon is nervous.

Right now, Amazon is eviscerating its competition the old-fashioned way, by offering great service at low cost in order to gain market share. As former executives say proudly in a documentary (CNBC’s Amazon Rising), Amazon targets the already weak, because they’re easiest to knock off. A very 19th Century business strategy. (Think Teddy Roosevelt, J.P Morgan and the Trust Busters.)

If you don’t think Amazon’s products aAmazon logore cheap at the price, look at their financials: strong growth at the sales line and tiny, tiny profit. 2/3 of a percent, way below subsistence. The market should punish Amazon, denying them capital and thus snuffing their growth.

Guess what? The market is willing to pay 500 times current earnings for Amazon shares when most retailers’ stock prices are 15-20 times earnings. Is the market crazy? (Stock analysts disagree with each other, as usual.) Maybe. More likely, the market looks at Amazon’s very successful operations and stated business plan and believes that Amazon will be able to raise profits substantially in the future. Which brings us to books, where Amazon started.

I can see why a business wanting to chart new ground in retail distribution would start with books: The technology that has changed music and newspapers is threatening publishing, and it looks as if publishing is not handling the challenge very well … so, it’s a good place to start, particularly if your strategy is to knock off the weaker players. To date, Amazon has extinguished a big piece of the publishers’ retail distribution system, starting with the local stores we loved, then Borders. Is Barnes and Noble next?

When Amazon owns the whole distribution system, there will be pressure to raise profits. The market won’t give anyone a pass forever. There are two ways to do that: Raise prices or reduce costs. Those of us in the writing business are part of the cost side of the ledger. Based on the predatory nature of Amazon’s business plan, it’s not too hard to see that costs will be squeezed.  And prices? Well, you already know that Amazon pricing for books is partly your call and partly Amazon’s.

Maybe we’d better pray for another trust buster.

(The Economist for June 21-27 discusses Amazon in some depth. CNBC’s documentary Amazon Rising was broadcast recently and may be available on Internet/TV reruns.)

Publishing, a Disturbing Article, and The Maginot Line

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This morning, I’ve been thinking about platform (oops … Platform), the Maginot Line and an article I just read by Michael Wolff, “How book biz dug its own Amazon grave.”

If you’re a writer like I am, you probably fall into one of two camps: (1) Published, or at least agented; or (2) still hopeful. I am in the still hopeful group, and I am watching the evolution of the publishing industry closely. Of course, I’m on the outside, guessing at what’s going on, trying to decide whether to continue to bust my hump trying for representation or just self-publish. The scary part is that it’s clear that publishing is changing, but it’s not clear how a writer is going survive and prosper in the brave new world of heightened technology.

Business strategists intone the phrase ‘creative destruction’ to describe radical change to an industry, often driven by technology. They say it with such relish and optimism. Fine, if you’re a business strategist … but as a person at the nexus of the destruction wondering what to do, not so much fun.

Wolff’s article reminded me, a former coattail member of the community of business strategists, of Michael Porter, who began writing brilliantly about competitive strategy thirty years ago. In a competitive environment (this is loosely paraphrasing Porter from memory, always dangerous), businesses attempt to erect barriers to entry … tools of the trade and well-kept trucks for tradesmen, patents and software for tech companies, the enormous capital investment in a power plant for utilities … to compete effectively and protect their bottom line. A corollary is that the bigger the barriers to entry a business erects, the more invested it gets in maintaining those barriers.

Even a few years ago, publishing businesses controlled the production and distribution of books, pretty much from inception through production to the retail seller. That control has been taken away at both ends of the chain of production and distribution … many retail sellers have been driven out of business, and the publishing mechanics that formerly meant only publishers could print the end product have changed dramatically. It would take brilliant perspicacity and firm resolve to drive out of the ditch the industry is in. With that thought in The Maginot linemind, consider the Maginot Line, that WWII barrier erected by France to make absolutely sure Germans would never march onto French soil again. That was the line the Luftwaffe flew over. The scary takeaway for the publishing industry is that the noise in the sky is Amazon and Print on Demand technology flying over (soon, apparently, with drones). My question is: What happens to the lowly writer drudge? Yes, I hear the warm air being blown on The New Internet Marketing, but it’s not clear to me what a writer is to do the reach his potential readers.

I’d love to hear others’ thoughts on this.