Amazon-Hachette Battle: Another Turning Point?

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

38ensoThe Amazon-Hachette feud has been on going for over a month. Everyone has an opinion. Most of the press and book industry pundits take Hachette’s side; even Stephen Colbert has weighed in. The usual Amazon defenders have stepped up with their commentary. I see both sides of the argument.

This discussion reminds me of some recent history and a “what if” things had been different:

Barnes and Noble Buys Ingram for $600-million but Withdraws After Pressure from the FTC:  In 1998, B&N was at its peak as the biggest and most powerful bookseller in the nation. Publishers both feared and respected them. Many beat a path to 122 Fifth Avenue and spent millions to get their support. If a publisher could get Sessalee or Bob to back their make-book or debut novel, the chances of success were much higher.

At the same time, Ingram was the dominant wholesaler to the book industry. They owned warehouses throughout the country, were the most efficient shipper and owned the best logistics systems. Ingram guaranteed books delivered anywhere in the continental USA within two days. No one else could do that as consistently. Plus Ingram was the main supplier to independent bookstores and had a lot of data on their buying habits. One other thing – Ingram fulfilled 58% of all of Amazon’s book orders.

Outrage from the ABA representing independent booksellers, publishers and Amazon finally forced B&N to withdraw when it appeared the FTC was going to disallow this vertical merger. Amazon stated, “The combination of the country’s biggest book retailer with its biggest publisher group, undoubtedly will raise industry-wide concerns.” Jeff Bezos was also quoted in opposition, “Those who make choices that are genuinely good for customers, authors, and publishers will prevail. Goliath is always in range of a good slingshot.” Bezos played the underdog card.

What would the industry look today if B&N and Ingram had been allowed to merge? Would B&N have been able to compete better with Amazon? Especially since they would control almost 60% of their shipments plus access to the customer behavior. Would that information helped B&N get their website off the ground? As a side note, at this time, Bertelsmann (soon to purchase Random House) owned 50% of…

Waldenbooks Mass Market Battle with Publishers and the Creation of Preferred Reader Clubs:  In the late 1980’s, Waldenbooks had grown to over 1300 locations, 25% of the book-retail business and possibly 40% of all genre mass market sales. Along with the other mall-based bookstore, BDalton’s, they dominated mass market and genre fiction sales.

Under CEO Harry Hoffman, Waldenbooks opened up two distribution centers. They rapidly expanded the store count and also pushed genre mass-market fiction. At one time, Waldenbooks requested additional 4% in discount (and got it) in mass market paperbacks from publishers because of their size, warehouses and influence in the sales of books. They were too important to ignore and the disruption of the access to the consumers hurt publishers.

Waldenbooks used market strength and created reading clubs for Romance; Mystery; Children’s and Science Fiction-Fantasy. These clubs had an annual fee of $5.00. There was a newsletter, coupons off and other club perks. At their peak, Waldenbooks had over 5-million readers signed into their clubs. Part of the plan was to eventually create a big book club, exclusive offers and start to create proprietary titles for these heavy readers. WB created their own line of Romance novels and looking to work “around” publishers. Waldenbooks had the best consumer data in the industry and a very loyal fan base.

But the industry changed and mall based retail dried up for bookstores. Waldenbooks was absorbed into Borders and lost their identity. Eventually they died as Borders went under. One of the critical missteps was when Borders contracted their Internet business to a then-less-dominant Amazon. Essentially giving many of the core readers to Amazon as the genre categories migrated to the on-line purchasing and eventually ebooks.

What might have happened if Waldenbooks had continued to build on the Preferred Reader Clubs first mover advantage and didn’t give their best customers to Amazon? Would the selling environment be different today? Or would Amazon be dominant regardless?

The battle between Amazon and Hachette is another chapter in the ongoing history of the book industry. Will Amazon come out stronger again? Or will this be their peak?


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