The Amazon Effect

Posted on Jun 2, 2012

Photo by (CC-BY)

By Steve Wasserman

(Page 4)

With the introduction last fall of the Kindle Fire, Bezos is pushing an advanced mobile portal to Amazon’s cloud universe, which hosts Web operations for a wide variety of companies and institutions, including Netflix, the New York Times, NASA’s Jet Propulsion Laboratory, Tina Brown’s Newsweek/Daily Beast, PBS, Virgin Atlantic and the Harvard Medical School, among others. As Wired put it, when you buy the Kindle Fire, “you’re not buying a gadget—you’re filing citizen papers for the digital duchy of Amazonia.” For his part, Daniel Ellsberg of Pentagon Papers fame recently renounced his “citizenship,” pulling the plug on his Amazon Prime membership and calling for a boycott of Amazon after he discovered that the company had buckled under pressure from Washington and scrubbed WikiLeaks from its Web servers. Not unlike small independent bookstores, bricks-and-mortar retailers such as Walmart, Home Depot and Best Buy are feeling the ground give way beneath them. Target is fighting back, declaring that it will no longer sell Kindles, clearly dismayed by Amazon’s brazen promotion of a price-checking app as a means of competing with many of the goods that Target sells.

Amazon has sixty-nine data and fulfillment centers, seventeen of which were built in the past year alone, with more to come. For the thousands of often older migratory baby boomers living out of RVs, who work furiously at the centers filling customer orders at almost literally a breakneck pace, it is, by all accounts, a high-stress job. These workers are the Morlocks who make possible Amazon’s vaunted customer service. Last fall, the Morning Call investigated their plight in one of Amazon’s main fulfillment warehouses in Allentown, Pennsylvania. It found that some employees risked stroke and heat exhaustion while running themselves ragged trying to fulfill quotas that resemble the onerous conditions so indelibly satirized by Charlie Chaplin in Modern Times. Ambulances were routinely stationed in the facility’s giant parking lot to rush stricken workers to nearby hospitals. Amazon, for its part, says such problems are exceptional, and indeed by OSHA’s standards incidents of this kind are not the norm. Pursuing greater efficiencies, Amazon in March bought Kiva Systems Inc., a robot manufacturer, for $775 million. Kiva, founded in 2003 and backed by, among others, Bain Capital Ventures, claims that three to four times as many orders per hour can be packed up by a worker using its robots. For Bezos the Martian, the human factor is pesky. Now a more automated solution looms.

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In spring 2011 Amazon announced that it was hiring publishing veteran Larry Kirshbaum, former CEO of the Time-Warner Book Group, to head Amazon Publishing in New York. Kirshbaum was all but condemned by many of his publishing comrades as an apostate. Others were puzzled: Why, they wondered, would Amazon, having so spectacularly led the e-book revolution and done so much, in the words of one of its spokesmen, to “re-invent reading,” seek to become a player in the rearview world of publishing books on paper? Doing so would require building an entire infrastructure of editors, publicists and even sales representatives who would be charged with convincing America’s booksellers—by now allergic to the very idea of aiding their most agile adversary—to carry its books. Indeed, Barnes & Noble, among other booksellers, promptly said it would not sell any book published by Amazon. (It should be remembered that B&N had once tried to become a publisher itself through its purchase of Sterling Publishing, raising howls of “conflict of interest” from publishers. The perennial question of whose ox is being gored fairly begs to be asked here.) For its part, Amazon swiftly struck an alliance with Houghton Mifflin Harcourt to handle placing its books in physical stores. In a transparent subterfuge aimed at protecting its tax-avoidance strategies, Amazon intends to publish many of its books under a subsidiary imprint of Houghton’s called New Harvest, thus keeping alive the increasingly threadbare fiction that it has no physical presence in states where it does business online.

Nine months after Kirshbaum’s hire, judging by the number of deals concluded, his nascent operation rivals two of publishing’s largest companies, the French-owned Hachette and the Murdoch-owned HarperCollins. Like his boss, Kirshbaum wants to get big fast. It remains to be seen, however, whether spending a reported $800,000 to acquire Penny Marshall’s Hollywood memoirs is ultimately profitable; a number of the publishers I spoke with thought not and professed little anxiety at Amazon’s big-foot approach. They are not inclined to join the hysteria that largely greeted Kirshbaum’s defection, feeling that a recent Bloomberg Businessweek cover story depicting a book enveloped by flames had exaggerated by several orders of magnitude the actual threat posed by Amazon’s new venture. If Amazon wants to burn the book business, as the magazine’s headline blared, publishing books the old-fashioned way struck them as a peculiar way of going about it. Was there really a “secret plot to destroy literature,” as the magazine alleged? It seemed far-fetched, to say the least.

At the same time, Amazon’s New York foray might be seen as an effort to lure “legacy writers,” assuring them of a hardcover trophy and a state-of-the-art digital edition, and as such part of an overall strategy to overcome resistance among established bestselling authors to publish with the online retail giant. As one senior publishing executive said, 40 to 60 percent of the sales for the Stephen Kings, Lee Childs and John Grishams are still derived from Barnes & Noble, Walmart and Costco. Such authors, he said, “were they to walk away from their traditional publishers, would be leaving a considerable fortune on the table.” But as Amazon’s six other publishing imprints (Montlake Romance, AmazonCrossing, Thomas & Mercer, 47North, Amazon Encore, The Domino Project) have discovered, in certain genres (romance, science fiction and fantasy) formerly relegated to the moribund mass-market paperback, readers care not a whit about cover design or even good writing, and have no attachment at all to the book as object. Like addicts, they just want their fix at the lowest possible price, and Amazon is happy to be their online dealer.

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