January 19, 2012

Will Amazon kill the “big six” publishers?


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 former executive editor of Melville House.