Amazon Strongarms Small Publishers

Bookselling giant Amazon has thrown the self-publishing world into turmoil by imposing its significant influence, announcing a new, hardline policy for publishers: if you want a print-on-demand book to be stocked on Amazon.com, you need to leave your current printer and sign up with the Amazon-owned printer Booksurge. In other words, all those publishers who currently have a large catalogue of books being printed by other sources - such as Lightning Source Inc. - must break ties with their current printer, and reformat (as necessary) and resubmit their entire back catalogue to Booksurge (no small feat).

Explaining Print on Demand

For those who haven't kept up to date with the latest developments in Print on Demand (PoD) technology, it's worth pointing out how it is transforming the writing and publishing industries, and therefore why everyone should be concerned about Amazon's strategy (if you're up to date, skip to the next section). A decade ago, the only way to be published was either to be signed by a 'real' publishing company (at around $1 per copy sold royalty), or to print around 1000 books minimum (a several thousand dollars outlay, and therefore, risk) and try to sell them yourself (via direct sales, or into bookshops). The road into bookshops wasn't a friendly one either, as typical terms were to sell the book to them at 60-70% of retail price, and accept returns of the book if it didn't sell. So, for a book priced at $10 retail, you the publisher would receive approximately $3.50, from which you have to cover printing costs, author royalties, losses from returns and all other expenses. Hardly an exciting proposition...and a good reason why the book industry - like the music industry - was developing into risk-free zone, concentrating on producing mindless pap that sold, rather than artistic gems. The economies of scale dictated that smaller selling books really weren't worth the effort.

However, the development of PoD, in combination with the growth of the Internet, suddenly enabled the smaller publishers. A book could be printed for around the same price per unit as it would from an offset print run of 1000 copies - but one at a time. Additionally, a company called Lightning Source - owned by book distribution giant Ingram - offered distribution into online outlets such as Barnes and Noble, and Amazon, at a "short discount": much less than the 65% of retail demanded by bookshops, sometimes as low as 20 to 25% (because of the middle-men skipped, and the low margins of the giant online retailers). Plus no returns - all of a sudden, the risk in publishing was gone. And books could be updated whenever they needed it, rather than waiting until the print run had sold out.

This resulted in some great things - it enabled some excellent projects. I like to think my own self-published Darklore anthology is one of them - the benefits of PoD allowed me to pay all contributors a high royalty, so that everyone benefited: readers, contributors, publisher and retailer all received good things. Nobody had to be "stiffed" in the process. Obviously, PoD also has a downside - not everyone is cut out to be an author, or designer, and there some horrific looking PoD titles. Also, many "subsidy publishing houses" profited on people's wish to be published, by taking their money but offering little else (it is important to note that 'print on demand' is not the same thing as 'subsidy publishing').

Amazon's "Offer You Can't Refuse"

Now, however, the conducive conditions to utilising PoD have been stifled by Amazon's new, brazen move. It started controversially - some publishers reported receiving "strong-arm" phone calls from Booksurge (Amazon) reps, allegedly along the lines of "switch to Booksurge, or we will switch off the 'Buy' button on your Amazon page.) These rumours soon became a reality though - titles from subsidy publishing house Publish America all of sudden had their 'Buy' buttons removed. Other publishers reported the same thing happening. News spread quickly about this move, with Slashdot, the Wall Street Journal, Publisher's Weekly and TechCrunch all posting stories about it.

So why is it news? Aren't Amazon allowed to look after their own business, supporting their own PoD supplier Booksurge, rather than other companies? At first glance, it's hard to disagree. But a deeper look shows why this is a concern. Largely, these worries revolve around the new "vertical" business structure that Amazon are pursuing. Booksurge is a relatively new acquisition by Amazon, and it is all to do with moving towards this vertical structure - becoming not only the retailer, but also fulfilling other parts of the chain. In this case, Booksurge makes Amazon the manufacturer, the distributor and the retailer, all in one. (Incidentally, Amazon also have another PoD 'subsidy' operation called Createspace, which also makes them the publisher in that chain). Amazon have also done similar things in the eBook industry - a few years ago they made all their eBooks conform to the Mobipocket format, and then introduced the Kindle for viewing that format.

So here's where the problem lies: most PoD publishers don't like Booksurge. Lighting Source Inc. (LSI) hold the market share, because they offer a better profit margin, and from the opinions I've seen, offer better quality control and service. However, the most important outlet in PoD is Amazon - no publisher can do without it, and self-publishers in particular are reliant on Amazon for sales. So, despite offering an inferior service, Amazon are using their leverage to make publishers change over. Publishers are being forced into the (time and money) expense of reformatting and resubmitting their titles, for less profit and possibly worse quality books. And I don't apologise for using the word "forced".

Under the Cover of "Enhancing the Customer Experience"

Obviously, publishers aren't happy about being strong-armed. And they've been blogging fiercely over the last few days about this (see the story and link list here). So much so, Amazon has gone out of its way to craft a memo explaining the reasons for this move. And it basically comes down to this:

Modern POD printing machines can print and bind a book in less than two hours. If the POD printing machines reside inside our own fulfillment centers, we can more quickly ship the POD book to customers.

Makes sense doesn't it? Of course it does, because Amazon is explaining the Booksurge strong-arm tactics *to its customers*, not to concerned publishers (read the rest of the memo, and note the subtle framing of "Amazon good for customers, publishers bad" on various occasions). It is fascinating to study though, in terms of strategy (and pure manipulation of readers): the pretense of "faster delivery" offers Amazon the much-needed justification for the vertical integration of retail and manufacture. Bezos doesn't note some other pertinent facts - for instance, LSI already ships books to them on 24 hour turnaround, and even sometimes dropships the books on behalf of Amazon, guaranteeing fast delivery regardless of in-house production. Also, LSI publishers converting to the more expensive Booksurge would likely push up their price to cover lost margin. It is also more than possible that the book quality will be worse. The likely outcome of using Booksurge rather than LSI? Delivery in much the same time frame, but higher price and possibly worse quality - exactly how is that "enhancing the customer experience"?

Imagine if Amazon set up their own offset press and demanded that all publishers print through them - this would be seen as entirely unacceptable. But PoD now makes this a possibility, all under the pretense of helping the customer. Customers should instead be worried by this move. We all know the outcome of 'no-bid' contracts - by manufacturing in-house, with no competition, Amazon are on a course for poor quality control - and, perhaps more concerning - have control over the economics of print-on-demand. Booksurge are already a more expensive proposition than LSI, but now they will have no competition...what do you think is the likely impact of that?

If Amazon were truly concerned about fulfillment times, they could always have sub-contracted someone like LSI to 'move in' and produce in-house for them. This would avoid any concerns about Amazon controlling both the manufacturing and retail side of things. Or, simpler, they can just tell customers when something won't ship immediately (though still likely within 24 hours). Perversely, a number of publishers have complained that Booksurge seems to take a long time to print and supply their books - so LSI still might offer a faster supply chain!

These concerns are enough to raise the question of fair trading and antitrust laws. But Amazon have a plan for that already. They are not actually excluding any publishers - they suggest that publishers not using Booksurge can still use the 'Amazon Advantage' program to sell through Amazon. So there is obviously no coercion. Except, you aren't told that the Advantage program offers a minimal profit margin - publishers are back to selling the book at 55% of retail (rather than the short discount), and have to pay for distribution shipping on top of that. Basically, it's back to the bad old days.

Also, Amazon will say that publishers are still free to employ online sellers such as Barnes and Noble - and therefore they are not restricting the publisher's options. However, the truth of the matter is that:

(a) Amazon is a necessity to the majority of PoD publishers, it is where most customers turn to in order to find books.
(b) Advantage does not offer the profit lines short-discounting PoD publishers have built their catalogue around.
(c) Most PoD publishers are not going to run two lines of production, one for Booksurge, one for an 'outside Amazon' PoD printer supplying B&N and the like.

Which all adds up to the simple fact that Amazon is using its massive influence to dictate terms to publishers, and stifling free choice and use of the best PoD printers. However, it's a matter of whether a court would find the above "subtleties" to be enough to challenge Amazon.

*You* are a Publisher - So Be Concerned

Put simply, Amazon is attempting to justify its ruthless business manoeuvres - in pursuing a vertical business model - by saying it is "customer-focused". The problem with a purely customer-focused approach is that it disadvantages the source of the books in the first place, which eventually feeds back down to the customer. Much better would be a holistic approach, making decisions based on the future of the industry as a whole.

Don't let Amazon fool you into thinking this controversy over strong-arming publishers is about helping the customer. Amazon are stifling competition to their own advantage - which generally has the effect of inflating prices and lowering quality industry-wide - and are making things more difficult and expensive for PoD publishers. Is this "good for the customer"?

The enabling facets of Print on Demand technology make us all potential publishers - the dichotomy of 'customer' vs 'publisher' is antiquated. As such, we should *all* be concerned about Amazon's attempt to monopolise the process. The strategy of moving manufacturing and retail into one, vertical business offers only small benefits, but leads overall to less choice for all - whether they approach Amazon as a customer, or as a publisher.

If worse comes to worse, and Amazon don't back down, there is one way to fight back if necessary - and it's a two-word solution.

Shop elsewhere.