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The Amazon Effect

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Posted on Jun 2, 2012
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By Steve Wasserman

(Page 2)

As the editor of the Los Angeles Times Book Review, I had watched Bezos’ early rise with admiration, believing that whatever complications he was bringing to the world of bookselling were more than compensated for by the many ways he was extending reader access to a greater diversity of books. After all, even the larger 60,000-square-foot emporiums of Barnes & Noble and Borders could carry no more than 175,000 titles. Amazon, by contrast, was virtually limitless in its offerings. Bezos was then, as he has been ever since, at pains to assure independent bookstores that his new business was no threat to them. He claimed that Amazon simply provided a different service and wasn’t trying to snuff bricks-and-mortar stores. Independent booksellers weren’t so sure.

* * *

In the mid- to late 1990s, when online bookselling was in its infancy, Barnes & Noble and Borders were busy expanding their empires, often opening stores adjacent to long-established community bookstores. The independents were alarmed by these and other aggressive strategies. The chain stores could give customers deeply discounted offerings on a depth of stock made possible by favorable publishers’ terms not extended to independents. Clerks at the chains might not intimately know the tastes and predilections of the surrounding neighborhood, but the price was right: lower was better, lowest was best.

The death toll tells the tale. Two decades ago, there were about 4,000 independent bookstores in the United States; only about 1,900 remain. And now, even the victors are imperiled. The fate of the two largest US chain bookstores—themselves partly responsible for putting smaller stores to the sword—is instructive: Borders declared bankruptcy in 2011 and closed its several hundred stores across the country, its demise benefiting over the short term its rival Barnes & Noble, which is nonetheless desperately trying to figure out ways to pay the mortgage on the considerable real estate occupied by its 1,332 stores across the nation. It is removing thousands of physical books from stores in order to create nifty digital zones to persuade customers to embrace the Nook e-book readers, the company’s alternative to Amazon’s Kindle. Persistent rumors that B&N’s owners wish to sell regularly sweep the corridors of publishing. But the very idea of owning a bookstore strikes most savvy investors as forlorn. In recent weeks, Microsoft Corp. decided to challenge Amazon by investing $605 million in B&N’s digital-book business, an arrangement that calls for sharing revenue from e-book sales and other content.

For many of us, the notion that bricks-and-mortar bookstores might one day disappear was unthinkable. Jason Epstein put it best in Book Business, his incisive 2001 book on publishing’s past, present and future, when he offered what now looks to be, given his characteristic unsentimental sobriety, an atypical dollop of unwarranted optimism: “A civilization without retail bookstores is unimaginable. Like shrines and other sacred meeting places, bookstores are essential artifacts of human nature. The feel of a book taken from the shelf and held in the hand is a magical experience, linking writer to reader.”

That sentiment is likely to strike today’s younger readers as nostalgia bordering on fetish. Reality is elsewhere. Consider the millions who are buying those modern Aladdin’s lamps called e-readers. These magical devices, ever more beautiful and nimble in design, have only to be lightly rubbed for the genie of literature to be summoned. Appetite for these idols, especially among the young, is insatiable. For these readers, what counts is whether and how books will be made available to the greatest number of people at the cheapest possible price. Whether readers find books in bookstores or a digital device matters not at all; what matters is cost and ease of access. Walk into any Apple store (temples of the latest fad) and you’ll be engulfed by the near frenzy of folks from all walks of life who seemingly can’t wait to surrender their hard-earned dollars for the latest iPad, Apple’s tablet reader, no matter the constraints of a faltering economy. Then try to find a bookstore. Good luck. If you do, you’ll notice that fewer books are on offer, the aisles wider, customers scarce. Bookstores have lost their mojo.

* * *

The bookstore wars are over. Independents are battered, Borders is dead, Barnes & Noble weakened but still standing and Amazon triumphant. Yet still there is no peace; a new war rages for the future of publishing. The recent Justice Department lawsuit accusing five of the country’s biggest publishers of illegally colluding with Apple to fix the price of e-books is, arguably, publishing’s Alamo. What angered the government wasn’t the price, but the way the publishers seemed to have secretly arranged to raise it. Many publishers and authors were flabbergasted, accusing the Obama administration of having gone after the wrong culprit. Scott Turow, president of the Authors Guild, denounced the suit, as did David Carr, the media critic of the New York Times, who said it was “the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ‘N’ Groceries on Route 19 instead.” On its face, the suit seemed an antitrust travesty, a failure to go after the “monopolistic monolith” that is, as the Times put it, “publishing’s real nemesis.” In this view, the biggest threat is Amazon’s willingness to sell e-books at a loss in order to seduce millions of unwitting consumers into the leviathan’s cornucopia of online goods and services. What is clear is that “legacy publishing,” like old-fashioned bookselling, is gone. Just as bookselling is increasingly virtual, so is publishing. Technology democratizes both the means of production and distribution. The implications for traditional publishers are acute.

Amazon, not surprisingly, is keen to sharpen its competitive edge, to use every means at its disposal to confound, stymie and overpower its rivals. It is well positioned to do so: the introduction of the Amazon Kindle in 2007 led to a startling surge in e-book sales, which until then had been insignificant. Soon it was not unusual to see e-book sales jump by 400 percent over the previous year. An estimated 3 million e-readers were sold in 2009, the year Amazon began to sell its Kindle 2, the first e-reader available globally. Bezos called the Kindle a response to “the failings of a physical book…. I’m grumpy when I’m forced to read a physical book because it’s not as convenient. Turning the pages…the book is always flopping itself shut at the wrong moment.” Millions of people agreed and millions of Kindles were bought (though Amazon refuses to reveal exact numbers). Competing devices—including the Nook and the iPad, to name but two of the most prominent—began to proliferate and to give Amazon’s Kindle a run for its money, thanks to the e-book pricing arrangement between some publishers and Apple that attracted the ire of the Justice Department. Barely a year after Apple launched the iPad, it had sold more than 15 million worldwide. Just three years ago, only 2 percent of Americans had an e-reader or a tablet; by January of this year, the figure was 28 percent. And Amazon, despite watching its market share drop from 90 percent of the American e-book market in 2010 to about 55–60 percent today, reached a milestone just under three years after the Kindle was introduced. “Amazon.com customers now purchase more Kindle books than hardcover books,” Bezos crowed, “astonishing when you consider that we’ve been selling hardcover books for 15 years, and Kindle books for 33 months.”


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