Mar 6, 2014
The Amazon Effect
Posted on Jun 2, 2012
How the Digital Age might alter attention spans and perhaps even how we tell one another stories is a subject of considerable angst. The history of writing, however, gives us every reason to be confident that new forms of literary excellence will emerge, every bit as rigorous, pleasurable and enduring as the vaunted forms of yesteryear. Perhaps the discipline of tapping 140 characters on Twitter will one day give rise to a form as admirable and elegant as haiku was in its day. Perhaps the interactive features of graphic display and video interpolation, hyperlinks and the simultaneous display of multiple panels made possible by the World Wide Web will prompt new and compelling ways of telling one another the stories our species seems biologically programmed to tell. Perhaps all this will add to the rich storehouse of an evolving literature whose contours we have only begun to glimpse, much less to imagine.
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One thing, however, is certain, and about it publishers agree: e-book sales as a percentage of overall revenue are skyrocketing. Initially such sales were a tiny proportion of overall revenue; in 2008, for instance, they were under 1 percent. No more. The head of one major publisher told me that in 2010 e-book sales accounted for 11 percent of his house’s revenue. By the end of 2011 it had more than tripled to 36 percent for the year. As John Thompson reports in the revised 2012 edition of his authoritative Merchants of Culture, in 2011 e-book sales for most publishers were “between 18 and 22 percent (possibly even higher for some houses).” Hardcover sales, the foundation of the business, continue to decline, plunging 13 percent in 2008 and suffering similar declines in the years since. According to the Pew Research Center’s most recent e-reading survey, 21 percent of American adults report reading an e-book in the past year. Soon one out of every three sales of adult trade titles will be in the form of an e-book. Readers of e-books are especially drawn to escapist and overtly commercial genres (romance, mysteries and thrillers, science fiction), and in these categories e-book sales have bulked up to as large as 60 percent. E-book sales are making inroads even with so-called literary fiction. Thompson cites Jonathan Franzen’s Freedom, published in 2010 by Farrar, Straus & Giroux, one of America’s most distinguished houses and one of several American imprints now owned by the German conglomerate Holtzbrinck. Franzen’s novel sold three-quarters of a million hardcover copies and a quarter-million e-books in the first twelve months of publication. (Franzen, by the way, detests electronic books, and is also the guy who dissed Oprah when she had the gumption to pick his earlier novel, The Corrections, for her popular book club.) Did Franzen’s e-book sales depress his hardcover sales, or did the e-book iteration introduce new readers to his work? It’s hard to know, but it’s likely a bit of both.
The inexorable shift in the United States from physical to digital books poses a palpable threat to the ways publishers have gone about their business. Jason Epstein got it right two years ago when he wrote, “The resistance today by publishers to the onrushing digital future does not arise from fear of disruptive literacy, but from the understandable fear of their own obsolescence and the complexity of the digital transformation that awaits them, one in which much of their traditional infrastructure and perhaps they too will be redundant.” Traditional publishers, he argued, have only themselves to blame, many (perhaps even most) of their wounds having been self-inflicted. They have been too often complacent, allergic to new ideas, even incompetent. Their dogged and likely doomed defense of traditional pricing strategies has left them vulnerable to Amazon’s predatory pricing practices. Peter Mayer, former CEO of Viking/Penguin and now owner and publisher of the independent Overlook Press, agrees: “Publishers clearly need to newly prove to readers and authors the value that publishers add.” That value, he concedes, is no longer a given.
The inability of most traditional publishers to successfully adapt to technological change may be rooted in the retrograde editorial and marketing culture that has long characterized the publishing industry. As one prominent literary agent told me, “This is a business run by English majors, not business majors.” A surpassing irony: for years many of us worried that the increasing conglomeration of publishers would reduce diversity. (We were wrong.) We also feared bloated overheads would hold editors hostage to an unsustainable commercial imperative. (We were right.) But little did we imagine that the blunderbuss for change would arrive in the form of an avaricious imperium called Amazon. It is something of a surprise to see so many now defending the practices of corporate publishers who, just yesterday, were excoriated as philistines out to coarsen the general culture.
Epstein, for one, doesn’t fear Amazon, writing recently that the company’s “strategy, if successful, might force publishers to shrink or even abandon their old infrastructure.” Thus will publishing collapse into the cottage industry it was “in the glory days before conglomeration.” Epstein insists that the dialectic Amazon exemplifies is irreversible, “a vivid expression of how the logic of a radical new and more efficient technology impels institutional change.”
Not very long ago it was thought no one would read a book on a computer screen. That assumption is now demonstrably wrong. Today, whether writers will continue to publish the old-fashioned way or go over to direct online publishing is an open question. How it will be answered is at the heart of the struggle taking place between Amazon and traditional publishers.
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Jeff Bezos got what he wanted: Amazon got big fast and is getting bigger, dwarfing all rivals. To fully appreciate the fear that is sucking the oxygen out of publishers’ suites, it is important to understand what a steamroller Amazon has become. Last year it had $48 billion in revenue, more than all six of the major American publishing conglomerates combined, with a cash reserve of $5 billion. The company is valued at nearly $100 billion and employs more than 65,000 workers (all nonunion); Bezos, according to Forbes, is the thirtieth wealthiest man in America. Amazon may be identified in the public mind with books, but the reality is that book sales account for a diminishing share of its overall business; the company is no longer principally a bookseller. Amazon is now an online Walmart, and while 50 percent of its revenues are derived from music, TV shows, movies and, yes, books, another 50 percent comes from a diverse array of products and services. In the late 1990s Bezos bought IMDb.com, the authoritative movie website. In 2009 he went gunning for bigger game, spending nearly $900 million to acquire Zappos.com, a shoe retailer. He also owns Diapers.com, a baby products website. Now he seeks to colonize high-end fashion as well. “Bezos may well be the premier technologist in America,” said Wired, “a figure who casts as big a shadow as legends like Bill Gates and the late Steve Jobs.”
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