Open Question: Is it realistic for publishers to cut Amazon out of the equation?

Charlie Stross argued that publishers are cutting their own throats with DRM. But should we drop DRM or just drop Amazon?

DRM is a hotly controversial topic, but most publishers continue to insist on employing it to protect content from piracy. In a recent blog post, author Charlie Stross argued that "the strategy of demanding DRM everywhere is going to boomerang, inflicting horrible damage on the very companies who want it." Stross said Amazon is publishing's next biggest threat after piracy, and employing DRM is like handing Amazon a big stick.

Until 2008, ebooks were a tiny market segment, under 1% and easily overlooked; but in 2009 ebook sales began to rise exponentially, and ebooks now account for over 20% of all fiction sales. In some areas ebooks are up to 40% of the market and rising rapidly. (I am not making that last figure up: I'm speaking from my own sales figures.) And Amazon have got 80% of the ebook retail market ... the Big Six's pig-headed insistence on DRM on ebooks is handing Amazon a stick with which to beat them harder. DRM on ebooks gives Amazon a great tool for locking ebook customers into the Kindle platform.

But what's a publisher to do?

A back-channel discussion started brewing around Stross' post, and suggestions of cutting Amazon out of the equation cropped up as a possible solution to its growing hold on the market. Kassia Krozser, owner of Booksquare.com, made a salient point (included here with permission):

Many in the industry see Amazon as a threat (rightly so, in some regards). However, trying to cut Amazon out of the ebook equation means cutting a large readership out of the equation.

One thing we know with absolute certainty about the ebook market is that we do not have a clue how large it is. If you only factor major US publishers into the mix, you get one set of data points. If you factor the entire ebook publishing spectrum into the mix, the numbers relating to market share will look very different — perhaps a bit broader than we'd expect, despite the fact that Amazon would still dominate.

I pay close attention to authors who discuss their digital sales, and while they give mad props to various retailers, they consistently cite Amazon as their largest, most consistent source of sales. Leaving Amazon "out" means leaving a large and growing number of readers out (based on recent press releases from Amazon — sans real numbers, of course ... but nobody gives up real numbers). Put another way, it means leaving a large percentage of sales on the table. I'm fairly certain this is not the goal of authors and publishers.

Stross' point that Amazon is doing very well at locking readers into its platform can't be denied, but its distribution reach also can't be denied. This begs a couple of questions: Could publishers quit Amazon — all of it — cold turkey? If not, how can publishers take advantage of Amazon's platforms without being undermined by them?

I invited Krozser to open the discussion with her response.

Kassia Krozser: Last week's rather confusing co-op story — in which Amazon is apparently demanding higher amounts for (digital) co-op and publisher-generated media — highlighted a fundamental truth: all is not fair in love and business. Like its bricks and mortar relatives before it, Amazon will squeeze vendors as much as possible.

But that is pretty much beside the point. Amazon's consumer base is too large for publishers to play serious hardball — readers have too many options for publishers to lock themselves out of the Amazon readership. And, frankly, it is the policies of many publishers that have led us to what I like to call retailer lock-in.

As a Kindle owner (happy, happy Kindle owner, I will note), it is near impossible for me to patronize other retailers because publishers insist on DRM. Amazon chose its own DRM flavor. As do other major retailers. Cross-compatibility is a fantasy for readers. I love publishers who eschew DRM (and I'd love a serious study that compares pirating of DRM-only versus DRM-free publishers ... something tells me those numbers are very interesting). Without DRM, I can buy from non-Amazon retailers. With DRM, I am stuck.

So, how not to be undermined by Amazon? Give consumers options. Policies that lock readers into a retailer don't help create a diverse marketplace. This is in the control of publishers.

That's Krozser's take. What's yours? Please weigh in through the comments.

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Great Article.
Meet the new boss, same as the old boss.

Think of the railways of the 1800's. They were the networks of their day. Today's digital consumer is at the end of the digital train tracks and it is the producer who is paying the carriage fees. Whether it be to iTunes, Amazon, Barnes & Noble, 30% off the top is now standard fare.

Contemplating if publishers can by-pass the transportation of their products is like considering why haven't handset makers, made their own phone networks. DRM aside, the cost of developing a B to C platform are significant.

Similarly, television networks and cable networks haven't built their own version of YouTube or Netflix. Instead, given the reach and power of the platform they make the best distribution deal they can.

Everyone knows we are at the cresting of a major disruption that goes beyond hardware and consumption. Publishers have to be willing to engage innovation and look for meaningful, cost-effective ways, to bring value to their product.

The historical caution sign across the road to progress is the CD Plus. Just adding more stuff to your digital packet doesnt make it more valuable. What authors and publisher need to do is to focus on making all of their communication channels contribute to the overall value of the experience.

It's not about leaving the platform, its about innovating value to the consumer.

R L Fink [27 December 2011 03:58 PM]

Until I can read ebooks on any reader, I will not purchase ebooks or readers.

David [29 December 2011 09:21 AM]

Interesting article, I have to agree that there is no way any 1 publisher or author can 'go it alone' with e-books, as a consumer, and happy Kindle Owner, I only look 1 place for my e-books and thats Amazon, either directly on their website or via the kindle, I have a Kindle, like many other consumers, and I dont want to mix this with other sorts of e-books/readers, just look at it this way, if the publisher wants my business they have to use the platform that I use, its your job to bring your product to me in a format that I find acceptible not my job to work at being able to retrieve and read your e-books int eh format you choose to serve it up.
Much as we might all dislike the stranglehold that Amazon has on the words e-book, as well as real book, sales they are here and here to stay.. get your products into Amazon and you will sell them, come up with your own way of selling and no one will get to know about them/you.
The same issue faces those who develop apps for the mobile market, you cant develop apps and ignore Apple, their iPhone still outsells other mobile manufacturers, so their market is the biggest market available to the savvy app developer.

Pete [ 3 January 2012 06:48 AM]

I am sure there are Authors/Agents out there insisting on DRM in their contracts, or digital rights addenda, to avoid piracy. it is not just being driven by publishers.

Open Question: Is it realistic for publishers to cut Amazon out of the equation?

Charlie Stross argued that publishers are cutting their own throats with DRM. But should we drop DRM or just drop Amazon?

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