The Amazon Paradox: Coming to Terms With Publishing's Colossus

Despite consumer uncertainty about buying online, and publisher uncertainty in partnering with Amazon, e-books sales are dominating the market

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An anomaly of the extraordinary spread of e-books in recent years is the number of people who say they feel guilty about shopping less in brick and mortar stores. While this feeling has been growing since the advent of online book buying, it has greatly accelerated with the recent surge in e-book usage. The clout of Amazon and the popularity of its Kindle device in particular have resulted in a dramatic shift in overall buying habits, yet many consumers actually seem apologetic about taking advantage of this new convenience.

There is a distinct difference between the browsing habits long associated with book buying in stores -- talking to knowledgeable staff, the chance encounter with a surprise book, the ability to thumb through the pages before purchase -- and the essentially mechanical process of ordering a book online. But there are so many advantages to shopping digitally that it is hardly surprising that consumers are attracted to it. An e-book is never out of stock; you can carry as many books as you want on the snazzy devices, and prices usually are substantially below the print version. Still, there is definitely something unsettling about switching to e-readers or tablets that gives many consumers the sense that they are abandoning venerable reading habits and their neighborhood bookseller (including Barnes & Noble) in favor of the digital upgrade. Listening to music on the iPod instead of CDs, for example, does not seem to generate the same sentiment of tristesse that giving up books in favor of files has done.

William Petrocelli, a prominent San Francisco bookseller, wrote a stirring defense of books for the Huffington Post, dismissing what he considers nonsense obituaries for print:

Take John Biggs, who writes a blog called He seems absolutely certain that by the year 2025 books will be 'at best an artifact and at worst a nuisance.'. . . Books printed on movable type have been around for 573 years ever since Gutenberg printed his famous bible. Arguably, the invention of printed books is the most important invention in history.

To the extent that Petrocelli's view is an attitude ingrained among readers, ambivalence about the surge of digital sales and the indisputable dominance of Amazon in the marketplace is understandable.

A leading distributor of smaller publishers, the Independent Publishers Group, had its inventory of more than 4,000 e-books removed from Amazon in mid-February because it was unable to reach agreement on terms. One major publisher told Shelf Awareness, a widely read book industry blog, that dealing with Amazon is "the single biggest challenge we in the industry have. Making the transition to digital is not as big as challenge as selling to Amazon." And while most bookbuyers have little or no idea about the complexities of reaching an accord with Amazon, there is nonetheless a sense that dealing with the company is a formidable undertaking -- consumers admire Amazon for its efficiency and innovation, and yet somehow they feel uneasy about its power.

Bloomberg BusinessWeek did a cover story in January featuring Larry Kirshbaum, a veteran publisher now at the helm of Amazon's new publishing imprint, which has sent nervous chills through the industry. "And it's easy to see why," the article says; publishers are "trying to protect a century-old business model -- and their role as nurturers of literary culture -- from encroachment by a company that consistently reimagines how industries can be run more efficiently."

Barnes & Noble Inc., the country's only bookseller that features super-stores, a significant dot-com, and the assortment of critically praised Nook readers, is still a major force in book sales, but for now has lost the fearsome aura it had in the 1990s that, as the Wall Street Journal wrote recently, "left smaller booksellers quaking in fear." That position is now held by Amazon.

Despite consumer uncertainty, the statistics show a dramatic increase in e-book and online print purchases, especially at Amazon. The latest results of the Book Industry Study Group's extensive survey of e-book reading showed substantial gains for digital vendors in 2011 at the expense of bookstores, with a third of e-book buyers decreasing their spending at national chains and 29 percent buying fewer books from their local independent booksellers. For the year, the Association of American Publishers showed that e-book sales rose 117 percent, generating revenue of $969 million among all the companies that report to it. Sales in all the print trade book segments were down. Adult hardcover and trade paperback sales were off 17.5 percent and 15.6 percent, respectively. Trade book sales as measured by the AAP totaled $5.215 billion, down from $5.5 billion in 2010 -- a revenue drop of 5.5 percent. The good news is that, when all the categories were combined, the rate of return of unsold inventory dropped from 35 percent to 32.4 percent (largely because e-books don't languish on shelves). The BISG study, which is conducted by Bowker Market Research, tracks what it calls Power Buyers (consumers who acquire e-books at least weekly). The latest installments of the survey, according to the BISG summary, "shows a rosy outlook for publishing with nearly three-quarters of e-book Power Buyers purchasing more titles overall. Further, nearly half of Power Buyers had more total spending on books in all formats."

So, there is the paradox. Amazon is now a  colossus in book publishing. But precisely because it is so imposing, it is also intimidating. That is why so many customers talk about their Kindles as a measure of Amazon's awesome stature -- which, despite the incredible appeal of e-books, still makes them uncomfortable.