Shatzkin: Why Competing With Amazon Is So Difficult

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

Recently, I sat down with Mike Shatzkin, book publishing consultant and Digital Book World 2014 conference chair, to talk about a wide range of topics, including many that will be covered at DBW 2014. Over the next few months, I will be bringing you some of his insights, many of which will be expounded upon and made into practical, applicable takeaways at the conference itself. Learn more on how you can attend

Amazon is most publishers’ biggest client — and the company they fear most. In the globalized era of digital content businesses, firms likely have to do business with companies that are both partners and potential competitors.

In the following condensed interview, Mike Shatzkin talks about what’s really going on at Amazon, what publishers need to know and how they can use that knowledge to improve their relationship with their most important customer.

Jeremy Greenfield: Amazon is most publishers’ biggest customer. It’s also a feared competitor. How can publishers work with and compete with such a large, successful company?

Mike Shatzkin: One of the reasons that it’s so hard to compete with Amazon is because they’re got their fingers in so many pies. They own, so when they’re doing a childcare book, they’ve got access to people in the marketplace through a completely different means than publishers do. They’re likely to wake up to these opportunities through books they do themselves.

Publishers are now thinking about verticals and when they get into the verticals they think about not just selling content in those verticals but being in business in those verticals and Amazon already is. Understanding the complexity of their businesses gives publishers something when negotiating when working with amazon.


JG: Amazon owns a dominant position in the books and ebooks markets in the U.S. What does that mean for publishers in the future?

MS: There is a lot of reality about Amazon that has not been faced up to. There’s a great danger that Amazon is going to start squeezing publishers for margin and there’s very little that publishers are going to be able to do about it.


JG: Will Amazon always be Amazon? Barnes & Noble no longer represents the dominant market force in the book publishing industry it once did even 10 years ago.

MS: Barnes & Noble is not the Barnes & Noble it was 15 years ago because it experienced disruptive change. The question with Amazon is whether the store that sells everything loses its power because people want more specialized stores. Vertical publishers need to try to figure out how to own the audience so they come to you first.

The other thing that other people are trying to get to is, will Google with universal search replace Amazon? As the world changes and people look for information and not for books and books are just one way information is rendered, will that mean that people will spend more time searching on Google for information rather than for Amazon on books?

For Amazon to not be Amazon, it means that there needs to be some disruptive change to slow Amazon down.


JG: What about working with other retailers? Trying to diversity distribution streams?

MS: I think that every publisher should be doing the best they can to sell as many books outside of Amazon as they possibly can. Depends on who you are how easy that is to do. If you’re F+W Media [disclosure: owner of Digital Book World and publisher of this website] and you publish in enthusiast markets then there are stores that can sell your books that are not part of the book trade where you can get some traction that’s not Amazon. But if you’re Penguin Random House or Simon & Schuster and what you primarily sell is novels and biographies, then you’re pretty challenged to come up with alternate venues that you don’t already know about.

For an English-language publisher, one of the opportunities is to sell more abroad, which digital marketing and distribution would enable you to do.

You’re job is is to reduce the percentage of your business that is Amazon without reducing your overall sales – if you possibly can.


JG: At DBW 2014, you’ve planned nearly half day on Amazon. What will publishers learn about Amazon that they don’t already know?

MS: Brad Stone [author of recent release about the company, The Everything Store, who will be speaking] shows two or three places in their history where they might have sunk — but that’s not like to happen now.

Ben Evans [a consultant at Enders Analysis and Amazon expert, who is also speaking] is going to do is unpack the complex network of businesses that Amazon has. Ben’s view is that looking at Amazon as a business that is breaking even misses the whole point. He thinks Amazon is hundreds of businesses with common resource space; but some of those businesses, like books, are very mature and very profitable, and some of those businesses – and I’m not sure which ones – are brand new and still very much in an investment phase. Not everything amazon does or has done works. But most things do.

Ben Evans is going to improve everyone’s understanding in how to look at Amazon to understand it as a multitude of businesses and not one.

And Joe Esposito [a book publishing consultant who is also speaking] is going to discuss Amazon in the institutional market. Esposito believes that libraries are doing a lot of sourcing directly from Amazon. We know that amazon has bought some educational software companies and there is a further threat they will get in the Kindergarten-12 market. They came up with a way for schools to load content on many kindles and take it off. That suggests they are going to get into that market and be a force in that market.

These guys are going ot be a panel afterwards and I’m going to ask them, “when does Amazon share growth stop?”

Audience members will also be able to ask questions of the panel.

Related: DBW 2014 Speakers | Schedule

To learn more about Digital Book World 2014, visit the website here


11 thoughts on “Shatzkin: Why Competing With Amazon Is So Difficult

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  3. Philip Downer

    The diaper comment above is interesting and relevant to publishers – Amazon understoods far more about the retail customers for the publishers’ products than the publishers themselves. However, this in itself is not new. Supermarkets have had excellent predictive data for many years – they can follow a customer’s progress from the initial purchase of pregnancy testers until the child goes to college – but, like Amazon, will have felt no requirement to share that data with their suppliers.
    Funnily enough, while the data management may be less sophisticated, bookshops, from Barnes & Noble down to local indies, also have powerful insights into consumer behaviour – who buys what with what; when, and why. Some of that insight is data driven, some is more observational, but it is still valuable. However (and I apologise if I’m doing anyone a disservice) I don’t recall any publisher ever raising with my bookstore employers (Waterstones or Borders) any questions about consumer behaviour, which we would probably have been happy to share. Perhaps that would have been naive, in the modern retail world, but it wouldn’t have been unthinkable in the more collegiate relationship between publisher and bookseller, assuming both parties had understood the benefits they might accrue.
    The default position for publishers – in common with a great many manufacturers and distributors – has historically been that the retailer is their customer, and the retail buyer is the person to understand. Now that Amazon is disintermediating all the steps between producer and customer, that absence of curiosity leaves producers very poorly off, lacking the consumer insights that they might have developed in the past.

  4. Jo Henry

    Without disputing Amazon’s extraordinary access to and information about consumers, publishers in both the UK and the US do have available – through both Nielsen BookScan’s EPOS data and Books & Consumers’ continuous tracking of purchasing behaviour – very sophisticated information not just about what books are being bought but also about book buyers – how they buy, what they buy, where they buy and, perhaps most importantly in the current digital world, how they discover the books that they buy. The most successful publishers are using this information to target their marketing, inform their publishing strategies and ensure that their businesses continue to be successful.

  5. Philip Downer

    Jo is right, the “in-universe” data available to publishers is excellent, and a great many smart insights can be derived from its use. But the big retailers control the “rest of the retailing world” data, and it’s this that Amazon, Tesco etc own and can exploit, and which could otherwise drive some very interesting and very profitable publishing decision-making!

  6. Michael W. Perry

    There’s an interesting lesson from history that publishers might learn a lesson from. It happen during the early days of the New Deal when FDR tried to denounce the previous Hoover administration for an alleged conspiracy with some airline companies in then still-new air passenger business. FDR’s attack, motivated by little more than political spite, quickly fell apart.

    What the Hoover administration had been trying to do was help jumpstart a healthy and competitive cross-country airline passenger business using its lucrative (for the airlines) airmail business. At the time, airmail was being handled by numerous small companies that didn’t have the resources to move into the passenger business or transport people far enough that travel by air made more sense than travel by train. Hoover’s administration did that by demanding that these air mail companies merge into firms large enough to take mail and passengers cross-country, firms well-enough funded to buy the latest aircraft. The stick and the carrot were those air-mail contracts. Merge and you got them.

    There was nothing sneaky or conspiratorial about what the Hoover administration was doing. It got Congress to pass legislation with that as a goal. It held meetings in DC with air mail companies that were publicly announced and open to anyone including the press. In short, it deflected any claims of an evil conspiracy by making sure what it was doing was legal and in the open.

    Amazon’s recent moves, specifically getting the Obama administration’s DOJ to go after major publishers and Apple (its chief competitor) are a bit like FDR’s charges of conspiracy. Amazon’s goal is obvious: To weaken Apple and keep publishers from working together to counter Amazon’s growing power. Remember, Amazon is smart and has some quite clever lawyers. If you’re stupid or laggardly, you loose.

    The counter to that is like the Hoover administration was doing. If it’s open, with the press and everyone (including the DOJ) invited, it’s not a conspiracy. And if publishers worked to get Congress to do something, even if were just a resolution, stating that it was in the interests of the nation to have an open and competitive retail book market dominated by no one business, then what those open meetings would be doing would not only be legal but commendable. Obama’s crooked, Chicago-machine DOJ would become toothless. Amazon could no longer use them as its tool.

    Publishers would do well to read Robert Coram’s Boyd: The Fighter Pilot Who Changed the Art of War. Boyd changed warfare by making those who fight it aware of how important it is to think quickly and take the initiative. If there’s something the big publisher’s haven’t been doing in the shift to digital, that’s it. They sat on their hands, taking no risks, waiting for the market to settle, and left all the initiative to Amazon. As a result, it dominates the ebook market and determines what direction it takes.

    Publishers aren’t simply playing a catch-up game, unless they change how they play the game, they’ll always be playing catchup. They’ll aways be losing.

    They need to come up with alternatives to Amazon that suit what the public wants. Amazon isn’t God. It is making mistakes and will make still more mistakes. Publishers need to take advantage of that.

    I’ll can give one rather obvious advantage publishers could have. They could create a retail bookstore that really sells ebooks, not just the current muddled blend of a rent and a lease. Those who buy an ebook would own it. It would be in an online library they control. They’d be promised that the ebooks they own would always be available in popular new formats. They could sell it on a used market. They could gift it to others. It could be passed along in probate to their heirs. The only limitation would be a few things such as a delay of say six months between each transfer.

    If they did that, they’d exploit a major weakness in Amazon’s model. It wants to keep everyone in its Kindle system. Publishers have no reason to favor any ebook system and particular reason to dislike Amazon’s one. And each publisher would get what Amazon denies them, an awareness of which consumer likes which books. And by being open to every publisher, they wouldn’t be a few big firms trying to control a market or fix prices.

    Would publishers take to that? Probably not. It would require speed, it would take innovation, and it involves risk, things they’ve thus far not displayed. But if they want to stay as free and flexible in the ebook market as they have in the print market, they’ll need to radically alter that market by actually, really and truly selling ebooks like print books have always been sold. They still managed to have a business when that was true of print. They can do it with digital.

    –Michael W. Perry, Inkling Books, Auburn, AL

  7. Ellen Goldberg

    As is so common with online communication, there seems to be little or no editing of content, as appears to be the case with this interview. Call me a crank, a stuffed shirt, a curmudgeon, but when I read such a badly edited or completely unedited piece (and I’m talking a light copy edit primarily for spelling and grammar), I find it very distracting, which diverts my attention from the content. Moreover, my faith and trust in the writer’s opinion or reportage or authority on the subject suffers. Call me old fashioned (you can add that to the list of epithets above) but I believe that the presentation/packaging, so to speak, is as important as the content/ideas, presented in the writing. Just saying.

    1. Jeremy Greenfield

      We do have fewer resources here than at print publications, Ellen. Of course, that is no excuse for sloppy copy. That said, the good news is that it can always be fixed. If you see any errors, let me know!

  8. Michael W. Perry

    I should add one more comment about dealing with Amazon, one that would require legislation but that could prove very helpful for publishers, large and small.

    Some independent authors watch every ebook and printed sale like a hawk. When a friend emails them, \I just bought your book on Amazon and it’s great,\ they look for the sale to appear. When it doesn’t, they get their friend to send them their receipt. What follows, they say, is sometimes disturbing.

    With POD books, you can never know about the print/sales link. Amazon does keep an inventory of some POD books but, I suspect, it doesn’t pay authors until that already printed book sells. But an ebook is only created at the time of sale. There should be a close correspondence between purchases and sales data from Amazon. That should be especially evident if an ebook is selling poorly.

    Some of these authors are claiming, right or wrongly, that ebook purchases by friends aren’t showing up in their sales figures from Amazon. Maybe it’s just a glitch and they’ll get paid a few weeks later. If something is happening, I have trouble imaging Amazon’s senior management signing off on it. I’d be more likely to suspect some mid-level employee out to make his department be a bit more profitable,–a rogue in other words, but a nasty rogue still.

    But it is true that I’ve never heard of any checks that Amazon has in place to ensure that some bit of thievery isn’t going on, either employees snitching a printed book under the guise of a test run or some part of Amazon selling 150 copies of an ebook but only paying for 140.

    With Lightning Source’s POD, that’s not a problem. All sales to bookstores go through Ingram, so stealing wouldn’t be easy. It require a high-level conspiracy between the two divisions and the altering of a lot of tracking and sales data. Also, Lightning Source’s systems that print at sites like bookstores are built so that each print job requires a new download from them. Again, there’d have to be collusion between Lightning and that independent bookstore.

    But Amazon is just Amazon. All sorts of dirty tricks could be played on authors with no paper or digital trail generated and no one outside Amazon being the wiser. Keep in mind this is because POD and digital is very, very different from traditional book sales. The author or publisher isn’t suppling the books or ebooks, the retailer is creating them. Only it knows how many are created.

    The solution happens to be one that most publishers would love for other reasons. Require POD and ebook retailers to supply, on request, fairly detailed sales data. That’d make at least the most common forms of cheating difficult, those involving sales to the public.

    An author or publisher in NYC could stage a test. perhaps by getting someone in a small Oregon town to order their book or ebook. If that sale doesn’t show up in the legally required sales data (title, date, time and city of purchase), then ‘something funny’ is going on. They could demand an explanation and have strong evidence to back up their charges–a retailer sales slip that doesn’t match with that retailer’s sales data.

    It’d be best to come up with evidence of actual wrong-doing before calling for legislation. But that wouldn’t be absolutely necessary. Merely that all-too-obvious potential wrongdoing should be enough justification.

    And no, that would not in itself make competing with Amazon less difficult. But it would prevent fraud and give publishers some valuable sales data. They could determine, for instance, if a author makes an appearance in St. Louis, what happens to sales in that city for a week afterward. That’s not as useful as having names and addresses, but it is useful.

    It is something to think about and perhaps something the larger publisher could insist on in their contract negotiations. If they want to be kind-hearted and make Amazon’s day a bit more troubled, they could insist that Amazon supply all publishers with that data. Even the jerks at the DOJ can’t prosecute doing something that benefits other publishers.

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