How Amazon is changing the book publishing business

January 25, 2016 09:48
The Kindle Singles program curates work and lets Amazon be the publisher and not just the retailer. Photo: Internet

Books are still around, and will continue to be around in the future. But books will evolve, just as they always have ever since Gutenberg invented the movable type in 1450.

Paper books will continue to exist in the next few years. Eventually, with some exceptions, they will be reserved mostly for the popular books.

The concept of a bookstore is slowly evolving. While the much vaunted demise has to some extent happened with the closure of Borders in the United States, across Asia, people still rely on paperbooks even though smartphones, e-readers and tablets (especially the ones made in China) are flooding the marketplace.

But one may notice that some bookstores are now relying less on book sales and more on their traditional office supply business. They are also retailing other merchandise that are not necessarily the domain of booksellers.

Lately, a new trend, the adult coloring book, has propped up sales of printed material in bookstores. Think of it as a revolt against screens, and a return to the appeal of the printed page and of things past.

No one really predicted this trend - it just arrived.

There's a saying in the publishing world: "Hoist up the flag and see if they salute." 

One doesn't really know if something - be it a book, a record, or a film - will be a hit unless you publish it and release it to the world.

There is an anecdote bandied about in the industry about a well-known consulting firm who advised a publisher to "only publish bestsellers", to which the publisher replied, "That's good, but we don't know which ones will become bestsellers."

For all the technology in the world, predicting what will be bestsellers is just akin to a wet finger in the air to tell which way the wind is blowing.

But the ebook front is moving as well. One harbinger of change in the book world is, of course, Amazon. The e-commerce giant's dispute with Hachette, one of the world's leading publishers, over pricing is just one example of the disruption technology is causing.

Personally, Amazon's actions remind me of someone who clears the stuffy air in the room by opening the windows. Without Amazon, the publishing industry would still be tightly controlled by small groups centered in New York and London. There are the "Big Six" publishers (Hachette, HarperCollins, Macmillan, Penguin, Simon & Schuster, and Random House).

Slowly, Amazon in Seattle is doing to the publishing industry what Los Angeles did to New York and London in the early '70s. Then, it was the transfer of the music industry's center of might to LA. Now, it is the slow transfer from New York and London to Seattle.

Amazon is slowly expanding from its traditional retail strength and encroaching on publishing's traditional turf - which is curating and editing works of authors, and properly publishing them. While most people who publish on the Kindle ebook platform are self-publishers or small ones, the Kindle Singles program, now run by experienced NY publishing executive David Blum, actually curates work and lets Amazon be the publisher and not just the retailer.

Big name authors like Stephen King are now starting to realize they can bypass the Big Six for some of their shorter work and go directly to Amazon, often with much better financial terms.

Another way that Amazon has used its retail might to change the business model of publishing is its new Amazon Unlimited service for its popular Kindle e-readers.

For around US$9.99/month, a Kindle user subscribed to the service can borrow (not own) several books enrolled in the program. Like a school library, one can borrow most books, but the maximum number is currently set at 10 books.

If you want to read another title, you need to "return" a title to the Kindle store. Most of the books enrolled here are not the top New York Times bestsellers, but it does feature some interesting reads. Other companies such as Scribd, Oyster and Entitle also offer the same service.

One impact of this is that, at least for ebook reader users (Kindle, in particular), they will now read more books because it will be cheaper to do so.

This is like reading an entire book in a bookstore without paying for it, although in this case the subscriber does plunk down a reasonable amount.

There are libraries in schools, of course, but for professionals and office workers, a trip to the library is no longer part of the daily routine. With Amazon's Kindle Unlimited program, it does bring it back to that.

It's also interesting, on the revenue end, how they now pay authors and publishers subscribed to this service. Previously, most book sellers relied on the retail price minus consignment or publisher price for their gross revenue. Then the publisher and the author split the revenue from the bookstore sale.

Normally, the author gets around 6-8 percent for paperback (it actually varies per author and publisher) or more for ebooks. But that has been the traditional way profit has trickled down from bookseller to publisher and author.

Amazon has upended the game for these books enrolled in Kindle Unlimited by setting a pot of money, presumably based on its estimate of revenue from the subscriptions. It now pays the enrolled books roughly a dime (10 US cents) per page, for the first time that page is read.

So in theory, if the book retails for US$4.99, but it has 100 pages, at a dime each, that works out to around US$10 once the book is read fully for the first time. So the loan price is actually bigger than the purchase price for the book.

What Amazon has done, in effect, is to totally undermine the price the publisher has set. They have upended the old traditional model, at least for this loan program.

The publisher and the author will now think twice. Maybe it is better to loan out a book than sell it, because of this new way Amazon pays ebooks loaned under this model.

The catch here is that Amazon wants the publisher and the author, at least for that enrolled title, to be exclusive to Amazon.

So where does that leave Barnes & Noble, Scribd, and the other ebook retailers and formats, and especially the Apple store? Is this a case of monopoly abuse? Hard to say.

No one can really say for certain what the future holds for books, who dictates what we get to read and in what format, and if this model will be sustainable over time.

But this method of transferring a writer's thoughts to the masses has been with us since 1450 and will continue to be there in the coming years.

We're just not sure what form it will be in, given Amazon's disruptive moves to this cobweb-filled industry.

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The writer is a Filipino crypto and blockchain advocate.