Amazon: A Cheetah Hunting Gazelles (Publishers)
Echoing a haunting analogy from his book about the world’s biggest e-tailer, The Everything Store, Brad Stone reminded the publishers sitting in the audience at Digital Book World 2014 that Amazon views publishers as “sickly” gazelles and itself as a cheetah.
In seeking to sign more favorable deals with publishers in the past decade, Amazon’s book retail team was ordered to go after publishers like they were meat to be killed, tearing away margins and concessions, often using highly aggressive tactics to do so. For instance, Amazon has been known to take publishers’ and authors’ titles out of its recommendation engine, waiting for sales to drop, which would be followed quickly by the “gazelle” dropping to its knees, too.
Many publishers will be familiar with these tactics, including some of the largest publishers, like Macmillan, which saw Amazon remove the “buy” buttons from all of its books during a tense standoff in 2010.
With the pace of growth of ebook sales abating, Amazon’s New York publishing business not taking off the way the company may have hoped, the “gazelles” may think it’s a good time to rest, said Stone. But Amazon, the Cheetah, doesn’t have the same point of view.
“Jeff Bezos and his colleagues do not believe that the pace of change in any media business is stagnating,” said Stone. “If ebook sales are flattening, Amazon will find a way to spark them.”
Stone speculated that Amazon might do so in books by further lowering ebook prices or bundling ebooks creatively with other products. Amazon, and other tech companies like Google, will also experiment with physical locations to entice yet more customers to buy its products, like the line of Kindle e-readers and tablets, said Stone.
Further elucidating what Amazon might do next, Stone outlined the companies “horizontal” strategy, to surround each of its categories, books being a principal one, with related goods and services that combine the companies advantages in unique ways. Kindle Direct Publishing, Amazon’s self-publishing service, is one way, but there are dozens of others in just the book publishing industry.
To give publishers an example of just how creative and experimental Amazon might get, Stone speculated that Amazon could launch a “self-publishing” service for less-established fashion designers struggling to get their designs into stores. Amazon is currently embarked on building its apparel retail business. The company is also currently constructing a 44,000-square-foot facility in Brooklyn, NY to produce photo and video content for its fashion category.
Publishers should expect the innovations to keep coming and at an ever increasing pace. Amazon CEO Jeff Bezos is no longer the sole source of innovation at the company. Amazon has created a “culture of innovation” and comes out with new features every day, said Stone.
While, per MacKenzie Bezos’s famous one-star review on Amazon of Stone’s book about the company, The Everything Store, Stone doesn’t know what Bezos is thinking, he may be the world’s foremost “Bezos-ologist.” When Stone told Bezos, during his last meeting with the CEO, that he intended to lead that field, “a look of concern passed over his face,” Stone said.
Still, nobody knows the future of the company, even Bezos himself. As for a positive outlook for firms interested in seeing Amazon slow its breakneck pace of growth, Stone had few thoughts.
“What slows Amazon down? I’m not sure. It might be antitrust scrutiny at some point,” he said.
Real Competition From Barnes & Noble?
Industry consultant Joseph Esposito has also been studying Amazon and its competitors and shared the Digital Book World stage with Brad Stone. In talking about Amazon’s competition, calling the Yonkers, NY branch of Barnes & Noble a “disgrace.”
For those publishers worried that continued poor results at the nation’s largest bricks-and-mortar book retailer might mean its demise, Esposito speculated a way out.
“I fully expect Wal-Mart to buy Barnes & Noble,” he said.
He reasoned that companies like Wal-Mart, H-P and others that Amazon is increasingly competing with will not forever tolerate the e-tailer’s encroaching on to their territory and will fight back. In this case, Wal-Mart would be fighting back by acquiring a major Amazon competitor and propping it up.