Amazon, Penguin, Random House and the state of publishing
- Sophie Cooke
- 12 December 2012
Author Sophie Cooke explains why Amazon is still a bigger worry than the Random House/Penguin merger
The concern over the recent Penguin and Random House merger, and its impact on the diversity of the publishing landscape, is nothing compared to the potential threat posed by Amazon, argues writer Sophie Cooke
Amazon has always presented itself as a consumer champion, decrying the greed of publishers who insist on maintaining high prices for their authors’ e-books. Amazon is all about the customer. Good service, free delivery, low prices and plenty of choice.
Amazon Prime costs £49 per year, for which Kindle-owners get free book and video rental plus a free one-day delivery service on any other items they purchase from Amazon. It must be extremely expensive for Amazon to offer this: they’re paying publishers for the books they’re giving away for free. The book giveaways don’t make sense, except as a loss leader to entice consumers to sign up for the service. Presumably the theory is that they will then buy more and more items from Amazon instead of other retailers – knowing they have already paid for one-day delivery – rather than buy these elsewhere.
This autumn, Amazon posted a $274 million loss. Wall Street doesn’t care about the fact that Amazon hasn’t made huge profits in its 15 years of trading. Even this most recent loss has had scant effect on share price. Share prices stay up because Amazon’s game is not about short-term profit. It’s about growing as fast as possible, undercutting all of its competitors – until – at some point in the near future – it’s the only fish left in the water.
Amazon’s CEO Jeff Bezos wrote in a 1997 letter to shareholders: ‘We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position.’
Fifteen years later, Amazon has noticeably not capitalised on its leadership of the bookselling market. Instead of reaping profits, it’s still keeping the customer as happy as possible with low prices – because the focus is still on growth, still on market domination and the future potential bonanza that will bring for the company and its shareholders. What’s changed is that the market in question is no longer bookselling, but the whole of retail around the world. Once a retail monopoly is established, it’s very easy for that retailer to dictate its terms to suppliers.
The only issue that really matters is whether or not the consumer cares. Amazon seems to have found a winning strategy: give the customer what they want for free, or at a lower price than anyone else, and they really won’t pay attention to how you’re doing it – or more importantly, why. The hand-wringing that accompanied the merger of Penguin and Random House in October is small beer compared to the prospect of living in a world with only one publisher, selling all of its books in its own bookshop, and no other shops left to compete with it. That, my friends, is the parody of ‘consumer choice’ I think we’re clicking on.
Sophie Cooke is the author of The Glass House and Under The Mountain (Random House). She is also a participant in the Edinburgh World Writers’ Conference.