Photograph by Hugh Kretschmer
With his aggressive push into e-books, Bezos has traditional publishers running scared. Apple may be a different story. | Photograph by Joe Pugliese/Corbis Outline
To explain the present and divine the future, Amazon's founder and prognosticator-in-chief, Jeff Bezos, often turns to the past. Fond of historical analogies, Bezos has compared the dotcom boom and bust to the 1849 gold rush, the advent of electricity to today's broadband-infused Web, the printed book to a horse, and the Kindle reader to a car. Perhaps his trippiest simile likens the impact of the Internet on business to the Cambrian period approximately 550 million years ago, after the first multicellular creatures crawled out of the primordial ooze. That's when we experienced an evolutionary big bang, which engendered both the greatest rate of speciation the world has ever seen and its greatest rate of extinction. "What's very dangerous," Bezos summed up, "is not to evolve."
Evolution is not merely a theory for Amazon; it's part of its intelligent design. Originating as a single-cell online bookseller in July 1995, Amazon has, over its 14-year history, developed into a monstrous cybermall, offering millions of products and accumulating a market capitalization north of $34 billion. It peddles everything from music, movies, and video games to apparel, gadgets, gardening tools, lab equipment, health and beauty aids, even sex toys and the bonglike "mini hookah." Along the way, Amazon incorporated unvarnished user feedback into product pages, instituted a "look inside" function so readers can sample books, and launched Marketplace, which allows third-party sellers to list new and used products next to Amazon's.
Nothing, however, has piqued the public imagination quite like the Kindle, Amazon's e-book reader, now in its second iteration. While not the first gadget to offer an entire library in the palm of your hand or to deploy e-ink in mimicking the look of a printed page, the Kindle is the first literary hit of its kind, selling hundreds of thousands of units since its introduction in November 2007. It's also the first with built-in wireless 3G connectivity, making it possible to download whole volumes in less than a minute -- more than 1,500 books can fit on a single machine -- with titles costing usually less than half the price of a conventional hardcover. To further its e-reach, Amazon has announced a larger, more expensive Kindle DX for textbooks and periodicals, which it will test-market to college students.
Recently, Bezos claimed that Kindle e-books add 35% to a physical book's sales on Amazon whenever Kindle editions are available. Put another way, for every three print copies of, say, Malcolm Gladwell's The Outliers the site sells, it also sells one Kindle e-book -- or about 25% of total sales. Citigroup analyst Mark Mahaney estimates that Amazon sold a half-million Kindles last year and projects its total e-book revenue, which includes sales of books and devices, to reach $1.2 billion by 2010. The company reports that 275,000 titles are available in the Kindle format, including nearly all 112 books on The New York Times best-seller list. Amazon, for its part, makes no pretense of its plans. On its Kindle page, it states, "Our vision is to have every book ever printed, in any language, all available in under 60 seconds."
In Bezos's mind, the Kindle is the logical evolution of a 500-year-old analog technology, and this frightens those in the $24 billion book-publishing industry already skittish about Amazon's growing clout. In his Cambrian example, they fear they may be playing the part of a trilobite, one of the first creatures with eyes but which, like most other species from this period, faced mass extinction when it couldn't adapt to its changing environment. But there's no need to peer back a half-billion years for an apt analogy. There's a far more contemporary lesson: Bezos, the former hedge-fund manager with the shiny pate and amphibious build, may be cribbing from another techno titan.
Jeff Bezos is trying to do to book publishers what Steve Jobs of Apple did to the music industry. With its iPod and iTunes Store, Apple carved out a largely virgin market so fast that it was able to wrest control of the digital-music distribution system and thus dictate what the record labels could do. With Amazon jamming (its latest earnings are sky-high even as other online retailers are in a state of malaise), Bezos may sense similar opportunity, a moment when he, in true Jobs-like fashion, could colonize this growing niche for the Amazon ecosystem. Should that happen, book publishers would have more to fear than just being squeezed. Amazon could phase them out completely, treating them as the ultimate middlemen orphaned by a new technology.
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Recent Comments | 14 Total
June 24, 2009 at 6:15pm by Mark Sigal
A quickie side-note is that the list of companies that warrant serious consideration in the discussion pretty much are three at this point (Amazon, Apple, Google).
Your article focused on those three as well, but it says something about the state of the market that folks like Sony, HP, Microsoft, Disney don't jump out as the obvious game-changers in the discussion, something that I blogged about in:
Built-to-Thrive - The Standard Bearers: Apple, Google, Amazon
http://bit.ly/info/3BhUq
Check it out if interested.
Mark
June 25, 2009 at 4:58pm by Mark Coker
Excellent article, Adam. Amazon has done a brilliant job of vertically integrating its business and stands ready to disintermediate multiple participants in the book industry supply chain.
Interesting data point: AMZN's market cap is 27 times larger than the combined market caps of Borders and Barnes & Noble.
In ebooks, while AMZN is likely to remain a dominant distribution channel for quite some time to come, publishers do have the opportunity today to receive that magical 80% Mr. Curtis alluded to. At Smashwords, we pay publishers and authors 85% of the net, and we make our books available in multiple ebook formats, readable on virtually any ebook reading device.
--
Mark Coker
Founder
Smashwords
www.smashwords.com
"Ebook publishing and distribution"
June 26, 2009 at 12:33am by Mark Sigal
Btw, if interested, here is an article that I wrote for O'Reilly ruminating on Apple's (rumored) assault on the tablet market, and its impact on Amazon Kindle and Google Android:
Apple, the Boomer Tablet and the Matrix
http://bit.ly/46CtH
Check it out.
Mark
June 27, 2009 at 2:56pm by Lisa Wellman
I'm an ex-Apple exec. I just got my Kindle. It's a good news/bad news story ...for Amazon. Good design. Obvious marketing/sales opportunity. Really falls short in out of the box experience. There's no joy. No WOW factor. And very little jump in and have fun. I get a dictionary and documentation? Why not start me off with the book of my choice?
There's a real opportunity for Apple to jump in and become the "hot" book choice if that's their play. Bezos has left the door open.
June 28, 2009 at 11:13pm by Andrys Basten
Fascinating article. One thing - the biggest draw of the Kindle seems to be the 'always on' Sprint EV-DO wireless which allows not only immediate book downloads from the store but also adventures (with lots of obstacles) getting around the rest of the Net, at no further cost. I bought my DX using my K2 to navigate the way (because my cablemodem network was down), including a stop to get some gmail info I needed to fill in to get discounts for the purchase. One thing about Jobs and Apple (judging from the $70/mo. AT&T iPhone Basic Unlimited plan (that has no text messages included) with the $200 iPhone 3GS), that 24/7 wireless will not come free of monthly cost.
And it could be the Amazon crowd does like to read and isn't disappointed to see, upon opening the Kindle box, no whiz-bang features to hold the attention and does not want monthly wireless charges.
--
- Andrys
http://kindleworld.blogspot.com
June 30, 2009 at 12:17am by Leo Kuba
Great article. Just waiting to see the next chapters of the e-book/content revolution. Amazon, Apple and Google are surely the players to watch for.
July 1, 2009 at 2:56pm by Amy Alkon
Like many bloggers, I have Amazon Associates on my site, meaning I send Amazon customers through links to their products I recommend and they give me a kickback -- 6.5 or 7 percent. Last month, I sold almost $3,000 worth of Amazon products through my links, but amazingly, there's one area where Amazon has chosen to screw over bloggers like me, and that's on Kindle books. Yes, they're supposed to be the future of books -- and with zero shipping costs and no paper or cardboard to sell -- but Amazon gives bloggers ZERO commission when they sell a Kindle book. I talked to the Kindle team at LA Times Festival of Books and they apparently can do nothing about this. And I even wrote a snail mail letter to Bezos. A PR lady called me and gave me no explanation. Two possibilities that occur to me: Greed. Stupidity.
I had a whole Kindle store planned on my site, and I scrapped the whole thing. And when my book on the collapse of manners comes out in the fall, I'm sure not going to tell people to read it on Kindle. Why sell something that cuts down my income on my site - which I sorely need, as I'm a newspaper columnist, and my blog commenters have been keeping me afloat by buying stuff on Amazon so I get the commission, which helps me weather the downturn in newspapers.
July 1, 2009 at 9:46pm by Steven Seegmiller
Henry Ford felt it important that his Model T should be affordable to the masses. I think Jeff Bezos missed the lesson here. Plus, by pricing the Kindle at $359.00 he opened the financial door to competition. But that isn't all....
Consider your book buying patterns and compute how many books you would have to buy to break even at Kindle costs. Remember to include the tax benefit of giving once read books to a charity.
The article discussed the problems publisher have with returned books. The book store I visit often has these books for less then $10. At that rate it would take a lifetime to recover my Kindle cost.
I would love to have one, but would someone help me understand how I can justify it from a financial perspective.
Advice to Bezos: Congrats on such a wonderful and well reviewed product. Be careful the boomerang (Kindle overcharge) doesn't hit you in the face when it comes back to visit you when the lights go out and your customers dummy up.
July 3, 2009 at 6:22pm by Craig Miller
Great article and nice analogy of amazon evolution process. I guess amazon is not far to see an increase of Kindle e-books from its analog buddy the analog/physical book. Something's gonna change and future will be here sooner than we expected and book industry and economy will see a new dawn. Kudos.
Craig--->forex blog
July 6, 2009 at 12:57pm by Darren Wacker
I think the future and potential of Kindle and similar products is impressive. However, I am curious what-if anything-Amazon is doing to relative to the issues of accessibility. There is a big blow up right now relative to a pilot program at Arizona State (http://chronicle.com/wiredcampus/article/3864/advocates-for-the-blind-su...)
I would hate to see something like this derail a promising technology for college students if this fails to be addresed.
July 8, 2009 at 7:26am by Hans Brons
Great assessment of how Amazon is creating a sticky price in consumers’ minds. This price point would not make life for the publishers much easier, but having competition arriving in the market in general is a good thing. It will certainly contribute to squeezing out the inefficiencies in the current value chains, while also stimulating innovation across these value chains. It will also increase awareness at the publishers’ end, forcing them to rethink their current business models and move toward a business model where price is not dictated to them. At IREX we do not support forcing a certain price, and we do not want to interfere with the relationship between the publisher and consumer.
--
Hans Brons
CEO
IREX Technologies
www.irextechnologies.com
July 20, 2009 at 11:56am by Aric Friesen
You say:
Nothing, however, has piqued the public imagination quite like the Kindle
Hmmm, while I think the Kindle has merit, I know only two people who own one and a few others who are considering buying one. However, almost everyone I know owns one or more HDTVs, iPods, iPhones, XBOX 360s, Wiis, and PS3s. I would say all of those items have captured the public's imagination more then the Kindle.
July 25, 2009 at 11:40am by Victor Grund
Great article. I'm excited to see what Apple might do here.
August 1, 2009 at 9:13pm by Joanna Penn
Thanks, I really enjoyed this article. I wait for Fast Company to arrive in Australia every month, and it does arrive (eventually!)
Unlike the Kindle or the Sony E-Reader or most other ebook reading devices actually. Perhaps you could do an article on the stupidity of ebook copyright issues at some point?
I can order a print book from Amazon.com and have it shipped to Australia (cheaper than buying the same book here), but I cannot have the ebook version because of territorial rights. I also cannot publish my ebook on Amazon Kindle if I am not a US citizen, nor can I even buy an ebook from Scribd.com , let alone publish there.
I don't get this because ebooks are by nature without borders. They should be available globally and bought from wherever and read wherever. This MUST be part of the ebook and publishing future. Global rights, not territorial and the right to publish, sell and read ebooks globally.
I would have bought a Kindle if it was available here in Oz.
Now I am holding out for the Apple tablet!
http://www.thecreativepenn.com/2009/07/28/im-an-ebook-consumer-and-i-wan...
Thanks, Joanna