January 19, 2012
Will Amazon kill the “big six” publishers?
by Kelly Burdick
An anonymous insider at one of New York’s big six publishers thinks so. According to a letter posted on pandodaily, and headlined a “confession,” the biggest issue is not that Amazon has made publishing margins razor-thin, it’s that Amazon is now attempting to publish the bestsellers that “cover our fixed costs” itself.
In recent years, as book sales have declined, the advances for the biggest books have gone down proportionally, too. What used to be a $1 million book is now a $400,000 book. Publishers are thinking, “OK, we’ll move less copies but we’ll pay less for them, so we’ll survive.” Enter Amazon’s print publishing arm. They hired this guy Larry Kirshbaum to run it—he’s a savvy vet with 30+ years of publishing experience—and they have some editors, too. And they’ve been paying a ton of money for books.
I saw this [redacted] proposal a few weeks back. It was okay—[same redacted author] is an asshole but [redacted] has a certain following and it would probably be a bestseller. Bestseller now means selling 20,000 copies, so I was thinking of offering like [hundreds of thousand] for it. But Amazon had already bid $1 million for it. A similar thing happened with a [redacted] memoir a few months back. Traditional publishers are snickering, “Look at stupid Amazon—overpaying for books!”
But Amazon isn’t stupid. They’re overpaying intentionally to keep advances high (and high advances will bankrupt publishers). And they’re also taking away all the authors who actually move units. They gave Seth Godin really favorable terms on a deal. Only a matter of time before they snag a James Patterson or some other big genre fiction name.
We can’t pay $1 million for books anymore. Amazon could probably afford to lose $20 million/year in their publishing arm just to put the other publishers out of business. I think that’s what they’re trying to do—throw money around in an industry that doesn’t have any, until Amazon becomes not only the only place where you buy books, but the only place that publishes books, too.
Sarah Lacy, the founder of pandodaily (and a TechCrunch veteran) who posted the piece, has no sympathy for publishers: “I have no insight into whether Amazon has planned this out, or it’s just a happy accident… Amazon didn’t create publishing’s woes, any more than blogging created the challenges of newspapers. The company is just cleverly exploiting them.”
Kelly Burdick is the executive editor of Melville House.
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8 Comments
I’m all for Amazon! But it worries me that they could become the only game in town. They won’t be so generous then. Monopoly is not healthy for anyone.
It continues to be fascinating that every competitor of Amazon’s keeps blaming them for the woes the competitor has brought upon itself. Here’s the reality — Amazon is customer-centric. Period. There’s no mystery here. They focus more purely on the customer than nearly any other business and have done so for nearly 20 years. And they never stop coming up with great ways to serve their customers.
Contrast that to the major publishers — seriously, what have they done lately? What’s been their innovation? What have they done to improve the customer experience? Nothing. At least nothing that they didn’t start doing in response to Amazon. The major publishers have arrived at the party way late and are complaining all the good food has been eaten.
And from my perspective as an author, both self-published and traditionally published, it’s plain and simple — when my readers can get my books on Kindle for only $2.99 and I get $2.00 of that, why in the world do I need a traditional publisher?
I know many self-published authors that were rejected by big publishing houses. One in particular that is in the top 100 on Amazon and is now bringing in more money than she could have with a big house publishing company. She’s received a call back from the large publisher and she quickly declined. It was their loss. Amazon gives self-publishers/wanna be new authors a chance to shine. Big publishing houses don’t give you that chance and don’t want you until they see you are making some money and then all of a sudden they can work with you, it’s sad. I’m just happy that Amazon has opened both double doors and gives everyone a chance, yeah they make money behind it all, but self-publishers make more as well. It seems like a win win in my opinion.
If bertelsmann (who owns random house) can’t pay a $1M advance, and can’t figure out how to make that money back if they did, they have no business being in the publishing world.
For the last 100 years, the big six have in fact, had a monopoly. They offer the same royalties, similar advances, and are indistinguishable from one another from a brand perspective. Amazon is the first competition they’ve had in a century and they are suddenly faced with the challenges of what it takes to run a business: something they’ve basically managed to avoid for a very long time.
Amazon is paying a million dollars because they know they’ll make a profit off that advance. If the big six put their heads together, I bet they could figure out how to go about selling books again.
That said, one editor complaining is not the whole of the publishing world. I know many editors and publishers who are thrilled at how much money they’re making these days, especially when it comes to e-books.
Thank goodness. These “big six” have not been a monopoly for a hundred years, contra the earlier comment. They are a development of the last 30-40 years, when publishing went from being a sleepy, low profit, genteel industry to one dominated by media conglomerates and finance types. The “big six” are the result of the enormous amount of consolidation that took place, out of dozens of earlier houses, and they are an aberration in the longer history of publishing. They were the ones who turned it into a cutthroat world in the first place – glad to see them getting what they deserve, beaten at their own game.
Thanks for the correction. I definitely had my timeline off on that. Can we chalk it up to simple exaggeration (and or laziness)?
A shake up seems to be just what the doctor ordered!
No: Amazon focuses on exploiting sales tax laws. Customers are useful tools toward that end.
Yep. As a customer* I just LOVE it when amazon randomly pulls titles from its site to blackmail publishers or to make political points. I sure do enjoy being a pawn in their constant powerplays.
*Hypothetically.